Deciding What To Offer

house pricesHouses have lots of different prices and values
  • Listing or asking price – Price seller would like to get
  • Buyer’s price range – What buyer can afford.
  • Sale price – Price the house actually sells for.
  • Market Value/ Appraised Value – Established by a certified appraiser.
Balance what you can afford and best guess of what seller will accept.
Submitting the offer and counteroffers
    • Purchase offer is a legally binding contract.
    • Usually done through real estate agents who have standardized forms.
    • Buyer and seller do not negotiate directly.
    • A Sellers Agent cannot help you negotiate, but can fill out contract.
    • Sellers Agent must get the best deal possible for the seller.
    • Transaction Agent cannot help you negotiate, but can fill out contract.
    • Transaction Agent acts as a mediator.
    • Buyers Agent works to get the best deal for you, the buyer and can help you negotiate.
Purchase offers include the following:

Contingency clauses describe conditions that must be met for sale,common contingencies include:

    1. Buyer obtaining financing
    2. Inspections that must be done
    3. Agreements about who will pay for problems found in inspections
    4. Sale contingency – if buyer has a house that must sell to pay for the deal
    5. Kick-out clause – (Sale contingency) applies if seller gets another offer on the house, then first buyer has a certain number of days to remove sale contingency and go forward with the purchase.
    6. Move-in Dates if different than closing date
    7. Response time – the seller must answer the offer by a specified time
    8. Earnest Money – An amount of money from the buyer that goes with the purchase offer
      • Sign of good faith that the buyer is serious.
      • Is a deposit that will be applied to the closing costs.
      • Is returned to the buyer if the contingencies cannot be met and the deal dies.
      • Is kept by the seller if the buyer pulls out of the deal. Customarily $300 – $500
Seller Responses can include the following:
  1. Seller may sign and accept your offer.
  2. Seller may counteroffer:
  • Change the price, or contingencies and return it for approval
  • Buyer has limited time to accept the counteroffer or counterofferagain to the seller.
  • Seller may reject the offer with no counteroffer
  • Best to try to find out why and submit a new offer

Objective market value is the Market or Appraised Value determined by the appraiser. Appraisal will not be done until after you get approved for your loan.

Being a Good Client
  • The agent gets paid only when a purchase is made.
  • As a result, this person must spend time with real buyers .
  • Be considerate of the agent’s time .
  • Make sure you tell your agent any “extra steps” that may be involved.
  • Agents need to know anything that might delay contract signatures
  • There is room for a lot of confusion.
  • Tell any other agent you meet who your agent is .
  • If you see a sign, have your agent call about the property .
  • Stick with your agent unless something happens that is improper or offensive.
Factors That Influence Your Offering Price

Condition of the Property- Does the home need any repairs before you move in?

Home Improvements- Cost of improvements you will need to make to the property.

Market Conditions- Is it a Sellers Market or a Buyers Market?

Seller Motivation-Does the Seller need a quick sale? Is the Seller willing to help pay part of your closing costs? Other motivating factors of the seller.

How Financing Affects Your Offer

Amount of Down Payment

Interest Rates

FHA and VA Financing

  1. FHA and VA loans require the home to meet certain requirements. If the house does not meet program specifications, the Seller must agree to the improvements. The loans take longer to close than conventional loans.

Extra Costs to the Seller

  1. Costs for repairs, pest treatments or Buyers Closing Costs.

Closing Costs

  1. Closing Costs for the Buyer may include the cost of points to buy down the interest rate, mortgage broker fees, various inspections, or a home warranty plan.

Seller Financing

  1. Asking the Seller to provide financing to the Buyer. (Contract for Deed) This type of financing is not very common.

Cash Offers

Important Things To Avoid Before Buying A Home

Don’t Move Money Around
Do Not Change Jobs
    • Salaried Employees: Mak sure to remain in the same line of work
    • Hourly Employees: Make sure to remain in the same line of work
    • Commissioned Employees: Do not change jobs before buying a home. Doing so creates uncertainty about your future earnings. As a result, there would be no track record from which an average of your earnings coud be done. Changing jobs would negatively impact your ability to buy a home
    • Part-Time Employees: Do not change jobs. There would be no way to tell how many hours you will work each week on the new job. By remaining on the old job, the lender can average your earnings.
    • Self-Employed: Do not change before buying a new home. Lenders like to see a two year track record. Even considering a change from a sole proprietorship to a partnership or corporation should be done after the home is bought.
No Major Purchases of any Kind

Don’t Buy a Car: A new car payment reduces your purchase price. Your ability to qualify for a mortgage depends on your debt-to-income ratio. This is the percentage of your gross monthly income that you spend on debt. This includes your housing costs, as well as, credit cards, student loans and car loans.

It’s the House for You, What’s Next?
    • Go back and look a second time
    • Take a list of things the inspector looks for: look critically at all systems
    • Review your wants and needs, and make sure you are meeting enough of them
    • Estimate expenses for repairs, replacements, new appliances and furniture
    • Estimate utilities and maintenance
    • How old are the appliances, furnace, water heater and roof?
    • When will they need replacing?
Double check the neighborhood.
  • Is it well maintained?
  • What are property values doing?
  • Does it have the services you want? Sewer, lights, trash, etc.
  • Go by it at different times of the day

Your Rights When Purchasing A Home

Basic Rights

    • You have the right to shop for financing, real estate agents, insurance, etc. Don’t let anyone discourage you from shopping around. It’s important to shop – a house is probably your biggest purchase. It’s a good idea to a get a second opinion or bid so you can compare costs.
    • Make sure you are given a full accounting of all expenses before you sign anything.

Federal Fair Housing Act

 The Federal Fair Housing Act prohibits taking any action or making any decision in the sale of a house based on race, color, national origin, religion, sex, familial status (generally children under 18) or handicap.

Things that are prohibited:
    • Refusing to sell to someone who has made a bona fide offer
    • Refusing to negotiate a sale
    • Making housing unavailable
    • Discriminating in the terms, conditions or privileges of the sale or in providing the services connected with the sale
    • Any notice, statement or advertisement that indicates a preference, limitation or discrimination or the intention to do so
    • Saying the dwelling is unavailable when it is available
    • “Block-busting” inducing, or attempting to induce, owners to sell property quickly or at a reduced price by suggesting a minority is moving in.
    • “Steering” directing certain groups to certain parts of town
    • “Redlining” denying a person who qualifies for a loan or insurance because of the neighborhood in he or she lives.
    • Discriminating in residential real estate transactions or brokerage
    • Discriminating in residential real estate transactions or brokerage services
    • Refusing to make a loan
    • Refusing to provide information on loans
    • Offering different terms or conditions for the loan
    • Discriminating in the appraisal of the property
    • Refusing reasonable accessibility modifications to the property made at purchasers expense (Does not exclude you from negotiating to have seller pay for them.)
    • Refusing to make reasonable accommodations in rules, policies, practices or services that would afford a handicapped person better use or enjoyment of a dwelling.

5 Things Everyone Should Know Before Buying A Home

A few years ago, a home buyer could almost buy the first home they looked at and be assured that it would be worth more when it came time to sell. In today’s real estate market, you have to be a more savvy buyer, you need to be more selective in what you buy, and where. In short, you need to know more now before you jump into a purchase.

Here are five things you need to know, and do, before you purchase your first, or next, home.

1) Know your Options for Financing

Bad financing has burned many a buyer in the last couple of years. Your Realtor can refer you to a number of reputable home loan professionals in the area, home loan companies that have been around for a long time and will be here for years to come.
If you have a loan representative help you determine how much you can afford, it will save you a lot of frustration and wasted time. There are dozens of loan programs available. Discuss your needs and objectives with your loan professional. Review the loans and rates available in your area, and based on your income and existing debt, determine how much you can afford.

You need to make an informed decision about which loan is right for you today, and in the long term. Things to consider include: First Time Buyers programs, Government backed loan programs, Down Payment options, Locking in the Interest Rate, length of escrow, and direct payment options.

2) Understand What A Buyers Agent Does

The buyers agent works for you, and represents your best interests. Your agent should provide you with a Buyers Representation Agreement, which clearly outlines what the agent will do and how you will be represented. In most cases the representation of the buyers agent will not require payment from you, as the buyers agent is paid out of the commission charged to the seller of the house that you buy.

3) Know What Affects the Value of Homes

Real Estate is a major investment. Things change, neighborhoods change. People move more frequently today than they have in the past. You have surely heard it before, but the most important thing affecting the value of a home is LOCATION! Some other things to consider include:

Is the neighborhood being kept up or is it slipping?
How is the home in relation to others in the area? Is the home the smallest home in a neighborhood of big homes, or the most expensive home in a neighborhood of cheaper homes?
How might things change in the future? Those open lots behind your home, are they zoned to become a park, a school, a convenience store, or more homes?
How has the area appreciated? What is the future potential?
Are there any environmental issues with the ground water?
Any history of flooding?

These are the kind of questions you need answered before signing on the dotted line. Which leads us to…….

4) Have a Professional Home Inspection

Sometimes called a “Whole House Inspection”, it can be written into your offer on the home that the offer price is based on the successful results of the home inspection. If the inspector finds a defect, the owner will have to fix it, or you can negotiate a modification to the price. If you can’t work it out with the seller, you do not have to proceed with the transaction. By having a professional “Whole House Inspection” you might save yourself thousands of dollars and many hours of frustration from future problems with the house. There are also available home warranties that a buyer can purchase. These cover the appliances in the home and other items for the first year after you buy the home. This allows you to relax knowing that if anything goes wrong with the house after you move in, it will be taken care of. Ask your Realtor for details.

5) Know How the Purchase Will Affect Your Taxes and your Household Budget

There are many tax benefits to owning a home including deduction of mortgage interest and loan points in certain instances. Check with your tax adviser or accountant to make sure you understand them. You need to know the effects on your taxes and budget before you buy the home to prevent surprises later on. The tax laws change frequently, so get the latest updates. And how will your new monthly mortgage payment impact your overall household budget. You may have to adjust your spending habits in order to adapt.

Don’t go into the home purchase without being armed with the facts. It could cost you thousands of dollars!

This article was republished with the permission of;
Vicki Walker a Coldwell Banker Realtor, working with buyers and sellers of Davis California Real Estate. She has over 20 years of Residential and Commercial Real Estate experience.