The Finer Points
In the emotional swirl of negotiating on a home, it’s easy to overlook some of the finer points of the contract. Below are some thoughts to keep in mind during this process.
- While most sales close on time, the closing date is more of a target date. Time is of the essence doesn’t apply here. As long as both parties are making good faith efforts to close, there is no breach of contract.
- Buyers can move into the home right after closing and typically do a walk-thru inspection 24 hrs. prior to closing. This means sellers should be completely moved out prior to the day of closing.
- There is an insurance clause in the contract stating sellers need to keep the home insured including replacement cost coverage until closing.
- Firewood and wood pellets are considered fuel and buyers are expected to reimburse sellers for what is left. Best to address this upfront in the offer with regards to quantity and price.
- TV brackets, bookshelves that look built-in, and Nest thermostats for example, can become points of contention. Again, addressing these items in the contract is prudent.
Contact me if you are looking for an experienced realtor to help you navigate your real estate transaction!
Donna Forest ~ email@example.com ~ 603-731-5151
Real estate markets are local, and we have the real scoop on ours.
What is an Appraisal Gap?
An appraisal gap is when a lender ordered appraisal comes in lower than the contracted sales price. It happens in competitive markets such as ours where buyers typically need to bid over the asking price in order to be successful in purchasing a home. According to the NH Assoc. of Realtors latest data thru June, homes in NH are selling at 102.9% of the listing price. A low appraisal decreases the amount that can be borrowed and buyers are faced with how to make up this difference. For example, if a seller agrees to accept an offer of $410,000 on a home listed at $400,000 but it appraises for $390,000, there will be an appraisal gap of $20,000. There are a few options buyers can try to keep the sale together:
1) Make up the difference in cash (consider gift funds from family or borrowing against a 401K if short on cash)
2) Shift the down payment so you end up borrowing more money and putting less into the down payment - with lender approval
3) Appeal the appraisal if there is incorrect information or bad comps
4) Renegotiate with the seller.
Good agents will discuss the concept of low appraisals with buyers and sellers before offers are even made. Many offers with financing are written to say buyer will pay the difference between the appraised value and contract price up to a certain amount. Contact me to work with someone who will prepare you for the “what ifs” in this competitive market.
Donna Forest ~ firstname.lastname@example.org ~ 603-731-5151
Teamwork from the team that works the hardest for both buyers and sellers!
Every buyer wants to purchase at a great price and a low mortgage rate as that determines the monthly cost. Here’s how today’s buyers are being impacted:
Price – Based on a home price expectation survey released by Pulsenomics on June 10, more than 100 forecasters predict an 8.7% annual gain in home values for 2021. This rate is expected to slow to approx. 5% in 2022 and about 2.5% for the following year. In other words, if you are waiting for prices to go down, it could be a while.
Mortgage Rates – The average fixed 30 yr. rate is near 3% right now. The Mortgage Bankers Assoc. expects the 30-year fixed rate to reach 3.6% by the end of 2021. Greg McBride, chief financial analyst at Bankrate states “the tug of war over whether mortgage rates will move higher or lower from here largely revolves around inflation.” The latest Quarterly Forecast from Freddie Mac predicts the average 30-year fixed-rate mortgage to be 3.1% in 2021 and 3.7% in 2022.
Increases in prices and rates impact you; your housing expense will be more a year from now if you need a mortgage to purchase your home. My advice is to buy now - it could lead to substantial savings as even a small change in interest rates can have a big impact. Contact me if you would like expert advice on buying in today’s challenging market.
Donna Forest ~ email@example.com ~ 603-731-5151
You’ll be moving in the right direction with Better Homes & Gardens Real Estate - The Milestone Team.
With the sizzle of summer, it’s easy to think of owning (or at least renting!) a vacation home this year. In fact, recreational home buyers came out full force in the 2nd half of 2020 thru April 2021 in search of that lakefront home or cabin in the woods. The National Assoc. of Realtors (NAR) just released The Vacation Home Counties 2021 Report analyzing how the pandemic impacted this demand and not surprisingly, vacation home sales jumped 57% year-over-year during Jan-April 2021. “Vacation homes are a hot commodity at the moment,” says Lawrence Yun, NAR’s chief economist. “With many businesses and employers still extending an option to work remotely to workers, vacation housing, and second homes will remain a popular choice among buyers.” We saw it in our area this spring with bidding wars on the smaller ponds like Chalk Pond resulting in prices over $600,000. While our market seems to have settled down from the earlier months of frenzied buying, the second home market is expected to remain strong given the low supply and high demand. Thinking of buying or selling that second home? Contact me and put my 21 years of local expertise to work for you.
Home prices in NH as well as the US continue to climb upwards as we still are experiencing a shortage of houses for sale. Multiple offers are driving the median sales price of a home in NH to a high of $375,000 (YTD thru May) while the median sales price for the US is $350,000. The average days on market is 34 days and the selling prices are 102% of the asking price. Looking at our local market, in the 3 towns of Newbury, New London & Sunapee combined, there were a total of 53 homes sold thru May 2021, 56 sold in 2020 and 65 sold in 2019. The median selling price is $495,000 thru May compared to last year at $341,250. The average days on market is 24 days and last year was 91 days.
Lawrence Yun, chief economist for the National Assoc. of Realtors predicts by year end that we will see “less multiple offers, less hurried decisions, less frenzy” as he expects more inventory to come on the market. He anticipates bidding wars would no longer be prevalent by 2022. On the other hand, many articles I’ve read predict it will be years before the housing shortage catches up with demand. My advice – it’s hard to time the market so you should buy or sell when it’s right for you. Contact me to learn more about how the market could impact your plans in this challenging environment!
Buying your first home can feel like both the best of times and the worst of times. Here are 10 facts nobody tells you when you’re buying your first home.
1. Something will go wrong
No move is ever perfect. Something will get broken or there will be something you’ve forgotten to bring or do. With any luck, the setback will be minor, and you can chalk it up to the old adage, “things happen.”
2. Some of your conditions might not be met
One of the least enforceable clauses in offers to purchase is one for cleaning requests. You can stipulate that carpets, refrigerators and ovens be cleaned. However, if they haven’t been, there is often very little that you can do about it.
If a major repair hasn’t been completed as promised, one of two things will happen: you either won’t take possession of the property on the day you planned or your funds will have to be placed in escrow pending resolution of the issue.
3. If you don’t have the closing fees, you don’t get your new home
Legal fees are due on closing, and your funds won’t be released to the seller unless your lawyer is paid. Closing costs usually range from two to five percent of the purchase price, but be sure to verify this information before arriving on closing day. This money is in addition to your down payment.
4. Good schools increase a home’s value
You’ll pay more for a house in a good school district. Of course, the good news is you’ll get more for it when you decide to sell. If the home you’re planning to buy is your “forever” home and you don’t have, or plan to have children, this may not matter. Still, it’s something to think about.
5. Your neighborhood may be about to change drastically
The municipality may be planning a park, a school, or a playground for your area. Depending on your lifestyle, that can mean profound changes in a short period of time. Check with local administration and the area’s local representative. The first can tell you what the plan is. The latter will have a far better grasp of whether outlined timelines are accurate or not. You can base your decision on the information they provide.
6. You need to read all the documents yourself
It’s tempting when you’re paying a lawyer to review HOA or condo documents to simply delegate this task. However, a close reading of the minutes of meetings will teach you a lot about your neighbors-to-be and help you avoid nasty surprises, like planned increases in fees or devolving renovations that used to be the condo board, or HOA’s responsibility to individual owners.
7. Don’t apply for other credit while mortgage shopping
Applying for a loan or another credit card may seem like a good idea when you’re about to take the home ownership plunge and know you’re going to need to buy things like garden tools, a gazebo, and a grill. Don’t do it unless absolutely necessary. It can negatively affect not only the amount of your pre-approved mortgage, but it can also mean you don’t get pre-approval. Wait until after you’ve bought your home to apply for more credit.
8. You’re going to need “earnest” money
Also known as a deposit, you’ll likely need about $1000 per $100,000 worth of house available when you make an offer. This money is required as a show of good faith and will be held in escrow. You’ll get it back if your offer isn’t accepted, or it may be applied to your down payment. You may forfeit this money, though, if you’re the one who withdraws from the deal.
9. Your neighbors-to-be may be your best source of information
Walk around the area you where you want to live. If you see people out gardening or mowing their lawns, talk to them. Strike up a conversation and explain that you’re thinking of buying. Ask receptive individuals what the neighborhood is like, how long they’ve lived there, and how long they’re planning to stay. If you learn that your new home is located next door to some party animals who blast music every single summer evening, you may not enjoy your own backyard, so you may want to reconsider.
10. Check for rebates you may be entitled to
You may qualify for first-time homeowner rebates. There may be other municipal, state, or utility-provider rebates available, too. Start investigating early. It may make more sense to invest in attic insulation than an air conditioner if you’re going to get a rebate that covers some or all the cost of the insulation. Some areas offer rebates on newer, more energy-efficient appliances. You won’t know that unless you do your homework.
A good real estate agent can talk you through the buying process. Now you’re already ahead of the game with these ten facts nobody tells you, and you’ll be able to focus on offer strategy rather than the fundamentals.
You might be wondering if the housing market will crash given the high demand, record prices, and bidding wars. The short answer is “there is no bubble.” It would be natural to assume the same thing is happening that led up to the economic crash in 2008. However, the influences are very different. Below are 3 reasons why you can still sleep at night.
- The limited supply of homes for sale is driving up prices. It is simple economics of supply & demand. Inventory has been declining for years yet buyer interest is increasing.
- Demand has risen as millennials, currently the largest generation in the US, are entering the housing market. Throw in historic low interest rates, the ability to work remotely, and rethinking of housing requirements due to COVID, and now the need exceeds supply.
- Poor lending practices was a big contributor to the housing implosion. If you could breathe you got a loan. Also homeowners used the equity in their homes like an ATM machine and ended up owing more than what their house was worth. As a result, foreclosures & short sales depreciated home values nationwide. Lending guidelines today are much stricter and refinancing over the last 3 years is 1/3 of what it was 3 years before the crash.
Here is a quote in late January from Laurie Goodman, director of Urban Institute’s Housing Finance Policy Center, “I’m feeling very optimistic about the health of the US housing market.” Whether buying or selling, contact me to take advantage of today’s great market!
Donna Forest ~ firstname.lastname@example.org ~ 603-731-5151
In this market where multiple offers are common, buyers are pulling out all the stops to try and successfully compete. Some buyers are resorting to the use of an escalation clause. This works by offering the seller $1000 (for example) more than the highest bid the seller receives from other buyers. The clause may contain a cap to limit the buyer’s price exposure. Below are just some of the reasons why this is not a good idea.
- An accepted offer with an escalation clause may not be an enforceable contract since it does not contain definite terms. Potentially either buyer or seller could later change their mind and claim no legal contract was formed.
- If the escalation clause contains a cap, it basically tells the seller the top price this buyer is willing to pay. A smart seller could reject all offers and counter back to every buyer with a request for new offers not less than the cap.
- Escalation clauses create exposure for buyers since they don’t know what they will actually be paying for the property. Will they qualify? Will the house appraise?
- What if several offers come in with an escalation clause? Who wins the bid?
- If a legal escalation clause were to be written by an attorney, it would probably be a page long of legalese in order to protect the buyers. Not exactly enticing to a seller.
There are many ways to write a compelling offer without an escalation clause. Whether selling or buying, contact me if you want to effectively navigate this complex market. 603-731-5151; email@example.com
January’s market report for NH just hit my inbox and there was no surprise it was highlighting the lack of homes for sale. This has pushed prices up 23% in January compared to the same month last year. Right now, homes are on the market for less than a month. I’m sure many buyers are wondering if it is a good time to buy or if they should just wait. You may think increasing values means homes are less affordable today. While there are many factors that go into affordability, it boils down to the fact it is not just about the price of the home but the overall cost in the long run. Historically low interest rates stretch your spending power and mean you can save significantly over the life of a loan. Additionally, many experts say it is more affordable to own a home than rent. The cost of renting has been relatively high compared to the cost of owning. Here is a startling statistic - the net worth of a homeowner is 40x greater than that of a renter. While the market is a bit challenging at the moment, the expectation is to see more houses hit the market this spring. Contact me if you’d like to know how to best position yourself to build wealth and become a homeowner this year.
Donna Forest, firstname.lastname@example.org, 603-731-5151 (c), 603-526-4116 (o)
Valentine’s Day is around the corner but buyers have been writing love letters long before Feb. 14th. It continues to be a competitive market for buyers as they vie with others to purchase the small number of homes for sale. To help sway sellers, buyers may write a letter to them explaining why they love their house, complete with photos. While the purpose is innocent, love letters can unintentionally lead to bias and housing discrimination. Offers accepted on any basis beyond price, terms, and merit might violate fair housing laws (and it doesn’t matter if there was no discriminatory intent). Letters can convey information resulting in implicit bias favoring one buyer over the other. For example: “The large backyard will be perfect for our 3 children.” “We look forward to being close to our church.” Letters can also backfire by unknowingly offending a seller based on some personal comment.
The Fair Housing Act prohibits the denial of housing based on race, color, religion, national origin, sex, familial status, and disability. The act was created so every American would have an equal opportunity to seek a place to live, without being afraid of discrimination. While love letters are not illegal, they could lead to legal issues. I do understand why letters are written, and that most sellers are very receptive to them; however, given the potential for problems, maybe it’s best to avoid letters all together. Buyers should focus on writing the best offer possible and sellers should review offers based on their terms and conditions.
email@example.com - (603) 731 5151