Florida Real Estate Sales – Contract to Close. I think we’ve got it right.

Real estate sales are different from state to state. Procedures are different, how and when we go under contract is different and who closes the sale differs. I am licensed to sell real estate in Florida. I have never sold anywhere else. Based on stories I have heard, observations I have made and experiences REALTORS from other states have shared with me, I believe Florida has gotten it right when it comes to contract to close procedures.

I have contacts with REALTORS across the country. For the sake of brevity, I am going to discuss Massachusetts and New York in comparison to Florida. It is my understanding that these 2 sales handle real estate transactions similarly.

In Florida, title companies are typically used to close/complete the sale. The title company is a neutral party in the sale. They perform lien searches to ensure there are no liens against the property that a buyer may be held responsible for, make sure the chain of title is clean (no one has claim to the property), order payoffs, prepare and record the deed, etc. They basically close out the sale. In Massachusetts and NY, attorneys handle closings. Attorneys also handle contracts.

In Florida, REALTORS handle contracts. In most instances, contracts that have been contractdrafted and approved by The Florida Bar. The steps of a sale in Florida are pretty straight forward. Buyer finds a house they like, they make a written offer on a contract and buyer and seller agree to terms. The terms are spelled out on the contract. Terms include sale price, closing date, escrow deposit and how it is handled in case of buyer or seller default, inspection periods, financing contingencies (including financing type and loan commitment deadlines), repair limits, etc. It is all spelled out and agreed to in writing by all parties prior to moving forward with inspections, appraisals and loan approval. Once the contract is executed by the buyer and sellers, inspections, appraisal, and all steps that lead to closing are completed.

In Massachusetts and New York, buyers and sellers come to a written agreement on price, inspections are performed, then an attorney drafts the contract to purchase. As an agent that works in residential sales in handshakeFlorida and has only worked in Florida, I find this mind blowing.

Here’s why: I have heard stories of buyers and sellers coming to agreed upon purchase price and finding other terms in the contract that both parties haven’t agreed upon. One example of this includes a change in buyer financing (i.e. going from 5% down on conventional financing to 0% down on a USDA loan). For a seller, this could be alarming. The seller agreed to a purchase price based on one set of terms and is presented a different set of terms at the time of entering into contract. Terms that could appear less appealing or “safe” than what was anticipated. Another example I have heard is buyer and seller agreeing to a contract price and when the contract is presented, buyer sees a clause stating they would lose their entire escrow deposit if financing was not in place within 20 days of contract. (most lenders need 30-45). I’m sure most times these items can get ironed out. Sometimes they don’t though. Sometimes weeks can be lost “renegotiating” terms that, in Florida, would have been ironed out up front – before a buyer invests time and energy on the house and more importantly spends hundreds of dollars on inspections.

I am grateful to be able to sell real estate in Florida. It seems to me it is more cut and dry, straightforward, and certain when a buyer and seller have a binding contract with all the terms to the agreement spelled out prior to any actions being taken. I can only think it cuts stress levels, too. If I were selling real estate in MA or NY I may think differently.  As a Florida Realtor, I would be extremely hesitant to allow a buyer to spend monies on inspections prior to being in a fully executed contract. I understand an agreement has been made by the parties in NY and MA, but without having all the terms to the contract laid out and agreed to beforehand seems like a risky endeavor to both parties in the transaction.

I’d be interested to hear from other REALTORS about contract to close procedures in your state, and what I’ve gotten right and what I may have gotten wrong about sales in MA and NY based on the information and examples provided to me by other in the field.

Home Buyer and Credit Survey

Experian recently released their Experian Home Buying and Credit: Survey Report, 2015.
Results are based on answers provided by buyers that purchased a house in the past year or plan to purchase in the next year.

I’m sure everyone who reads/looks at this report will get something different out of it. Here’s what I found most interesting.

The survey found that “more than two in five future buyers are worried that they will not qualify for the best home loan rate and have delayed purchasing to improve their credit.” The survey goes on to say that 55% are working to improve their credit to qualify for a better home loan rate.”

Here’s the thing, interest rates are really low – still. They have been for several years now. A 4% or 4.5% mortgage is nothing to squawk about. Interest rates fluctuate and waiting a few months to bump up a credit could cause more harm than good should rates continue to rise (and they will). That great interest rate you are working towards getting today may not be there tomorrow or next month or the month after.

If you find a loan program that can put you in a monthly payment that fits your budget, would that work?

Another factoid I found interesting is that only half of recent buyers reported “checking their credit as soon as they considered purchasing a home.”

Buying a house is scary. It is a big step; one of the biggest steps adults take in life. Delving into credit can be scary as well – especially when you aren’t sure what will be on that report.

Here’s what Experian found though….43% of recent buyers had a better credit score than expected, and 30% were surprised by their credit. So odds are pretty good your credit is not as bad as you think.

You know what they say, we are our own toughest critic….

Checking credit and getting qualified for a mortgage are the first steps in taking the leap to home ownership yet according to this survey 67% of future home buyers are not pre-approved. Here’s the deal, finding a house on Realtor.com or Zillow is not the first step to home ownership. Getting qualified for a mortgage with a lender is your first step. Here’s one thing that could happen: Say you put the cart before the house and find an agent that will take you house hunting without a qualification letter from a lender (this is not likely but it happens from time to time). You could see a house, fall in love with it, want to write and offer, call a lender and find you do not qualify for a house in that price range . Deflating to say the least.

So if you’re considering buying your first home. Do your homework. Pull your credit, and call a mortgage lender before you start scrolling through home sites. Don’t know how to read your report or don’t understand something on it? That’s ok. A good lender can help you understand what’s on your report and help guide you in the right direction if improvements need to be made.

If for some reason your credit score is not where it needs to be to qualify, at least you know and can begin working on correcting the item or items that are holding your score down and you back from purchasing your first home. Building a credit score does take time but not as long as you may think once the repairs are made.
Knowing is half the battle. Taking steps to correct past mistakes leads to victory. But again, Experian found that 43% of recent buyers had a better credit score than expected, and 30% were surprised by their credit. So please, don’t let what you don’t know hold you back from taking a step forward – in home buying or life.

 

Home Buyers: How to Win in a Multiple Offer Situation.

It’s a great time to buy real estate — really.  I know the real estate world was touting that line in their marketing campaigns a couple year back as prices were plummeting and tax credits were being offered to first time home buyers.  I didn’t really buy into it then.  I truly believe it is a great time to buy now.  I’m confident we have seen the bottom of the real estate market and are well into the beginning stage of recovery.

It’s ideal to buy as prices are going up, and with interest rates hanging in the 3s, now is a great time to grab a piece of the pie.market on fire

There are challenges in purchasing in today’s market.  With inventory low and demand high, multiple offers are common place – especially in the Orlando area market.  On top of that, cash is king and as of late nearly half of all real estate sales were cash deals

What does that mean for the average buyer, dependent on financing, and ready to buy?  It means be ready to act, swiftly and with precision.  It means stay positive and keep in mind that everything happens for a reason. It is possible for a first time buyer to beat out the hedge funds, investors and others with deep pockets.  It may take a little more time and the possibility of being out bid a couple of times before securing a home exist.  (This is where staying positive and knowing everything happens for a reason comes into play.  If the winning bid wasn’t yours, then there is a reason that house was not meant to be.  I am a strong believer in this and have seen this theory proven first hand time and again.)

I have had a number of buyers beat out cash offers – strong cash offers.  It is being done, and I am about to tell you how.

First and foremost, make your first offer your strongest offer.  Agents are not required to Lisa Jones Sale Pending Orlando-001disclose whether a property has multiple offers on it.  Don’t assume yours is the only offer, and don’t assume you will be given an opportunity to negotiate.  It’s quite possible you will not be given the chance.

Often times I have seen buyers disappointed that their offer was not the winning offer.  I have heard the phrases, “I should have gone up $5000” more times than I would like to count.  Honestly, $5000 in the grand scheme of things will not make a whole lot of difference in a mortgage payment (maybe $20- $30).  It could make the difference between an offer being accepted or rejected.  Knowing you gave your all should provide comfort if your bid is not the winning bid.  This was you know you gave your best and don’t keep yourself awake at night wondering “what if” or “would’ve should’ve could’ve.”

Strongest offers also include things like strong escrow.  Your good faith deposit needs to be attractive.  (1-2% of the purchase price is customary in the Orlando area market).  Putting $500 or $1000 down on a $100,000 purchase does not say “I am a serious buyer” to a seller.  Putting $3000-$5000 down speaks a little louder.  (Keep in mind this good faith deposit, your escrow, will be applied to your down payment and closing costs.  It is all going towards your cost to purchase anyway.)

Strongest offers also include things like reasonable closing times.  If the house is vacant, the seller will likely want to close as soon as possible.  If it is a short sale, you have a better chance of the offer being accepted if you agree to wait for short sale approval for an extended period of time, say 100-120 days instead of the customary 60-90.  If the house is occupied and it is a traditional sale, try to find out how much time the seller would like to close.  If you aren’t able but notice there is a lot of stuff in the house, giving 60 days to close 16019 arrowheadcould make the difference since the idea of packing up an entire household in 15-30 days could be a little nerve racking for a seller.  Not everyone likes the idea of a quick close.  Tailor your closing date accordingly.

Strongest offers also include few contingencies or short contingency time lines.  When writing an offer, the less you ask for, the more attractive your offer is.  Get inspections out of the way in 7-10 days.  Do not ask for a Home Warranty just because you can.  Do not ask for the seller to contribute to your closing costs if you don’t need the help.  If you do need the help, don’t ask for more than is necessary.   Keep it simple, keep it clean.

Another way for buyers needing financing to find success in today’s market is to seek out homes where owner-occupants have the first right to purchase.  Being able to cut a big chunk of the competition out of the game is definitely a plus.  Homes with First Look Initiatives and Neighborhood Stabilization Programs (NSP) give owner-occupants (not investors) the first right to purchase within a certain time frame – usually the first week or 2 the property is on the market.  Often times, these homes are in good shape and move in ready.  Granted there will likely still be competition; not nearly as much at there would be if investors were able to bid.

Lisa Jones Realtor at Keller Williams Sells HomesLastly, be prepared to pay a little more than market value.  I would never counsel a client to pay an outrageous amount over market value.  Sometimes the need arises to pay a couple/few thousand more than appraised value.  If you love the house and have the ability to do it, do it.  Often times paying a little more now is worth the time and expense of having to start all over again in the home search (including paying for home inspections and appraisal.)

Allow yourself some wiggle room as well.  If you are qualified up to $150,000, you may want to limit your search to properties up to $130,000 to start.  This could give you the cushion you need to have a little more offering power.

In conclusion, multiple offers can be challenging.  Patience is required.  Having the ability to act fast when the right home is found is crucial.   He who hesitates often times loses in this market.  Be ready to act.  Get qualified with a lender before you look at houses.  Know your budget, keep it in mind.  Do not stretch yourself beyond your limits but be prepared to stretch for the right house.

Forget Renting — It’s Cheaper to Buy, and you don’t have to have golden credit to do it.

ImageIt is still cheaper to own than rent in most of our markets right now.  According to Trulia, it is 51% cheaper to own than rent in the Orlando marketplace.  

Keep in mind, with an FHA mortgage buyers can purchase with as little as 3.5% down.  A 640 minimum credit score required…and folks that were foreclosed on may qualify to purchase FHA in as little as 2 years after the foreclosure date.

Sale prices are on the rise, and demand is steady….Although people can speculate and forecast all they want, there is no real knowing how long this will all last.  Been on the fence?  It truly is time to jump off and buy.  Like they say, get while the getting is good.