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is a "due on sale" clause in a mortgage contract? This common phrase,
found in most conventional home loan paperwork, means that when a property is
sold, the entire balance of the loan comes due. Yup, you have to pay off the
sale" clauses are a type of acceleration clause. Acceleration clauses
protect lenders by allowing them to accelerate, or call, a loan if a borrower
takes certain actions.
a mortgage is usually a bad thing: In most
contexts, it means that a borrower has missed payments or violated the terms of
the contract, and the lender is demanding that the full amount of the loan be
paid immediately or be subject to foreclosure.
on sale" acceleration, however, is a normal part of selling a home.
Typically, homeowners will use the proceeds of the sale of their home to pay
off their loan in full, then take out a new loan when they're ready to purchase
another property. (Meanwhile the buyers of the home will get their own home
Why do 'due on sale'
on sale" clauses essentially are put in place to prevent homeowners
from transferring their mortgage to the next buyer along with the
house—or, in turn, taking their loan with them to the next house. Mortgages are
typically tied to particular properties and individuals—and
lenders prefer to vet both thoroughly.
such, most standard mortgages contain a "due on sale" clause to make
sure everybody gets their own loan.
There are some
kinds of mortgages where the contract does not have a "due on sale"
clause. Those include VA, USDA, and FHA loans.
of mortgages lack such clauses because they actually can be transferred
from one individual to another. This is also known as an "assumable" mortgage,
meaning a buyer can take over the seller's existing loan.
someone want to transfer a loan—or take over one?
rates are high, transferring a mortgage might allow the buyer to access the
seller's older, better interest rate. But with today's historically low
interest rates, transferring a loan is probably more trouble than it's worth
for most buyers.
VA, USDA, and FHA loans are assumable, that doesn't mean any
buyer can just take over the loan—the lender still requires the new buyer to
meet certain qualifications. It's also worth noting that mortgages can
typically be transferred in the wake of unexpected life events such as death
For the legal
nitty-gritty, check out the Garn–St. Germain Act of 1982. The main exceptions
include transferring a loan to a relative if a borrower dies, transferring a
loan between ex-spouses after a divorce, transferring a loan between a borrower
and the spouse or children, and transferring a loan to a living trust.
on how to transfer a mortgage and
when it's possible to do so. As for the rest of you, just know that a "due
on sale" clause means you'll have to pay the piper (meaning your lender)
when you sell.
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inventory is low, home prices tend to go up. Attempting to purchase a house in
this type of market can make the already complex process of buying a home even
more overwhelming. To help buyers successfully get through the buying process
in a tight inventory market with as little stress and difficulty as possible,
the National Association of Realtors® has these five suggestions and an
1. Determine and stick to a budget. Before beginning
the house hunting process, prospective homebuyers should receive preapproval
from one or more lenders to verify the amount of money they are qualified to
borrow. Then, after taking into account additional costs of ownership such as
taxes, utilities and insurance, buyers should determine a final budget they can
comfortably afford. When listings are scarce, bidding wars can drive up prices,
so buyers must be prepared to walk away if the asking price surpasses their
2. Identify desired neighborhoods and home wants versus needs. When housing
inventory is tight, buyers may need to compromise on what they believe they
want from a home. Certain wants, such as stainless appliances or hardwood
floors, can be added later. However, if a buyer wants to be in a specific
school district or have a decent sized backyard, those cannot be addressed
later and must be taken into account during the house hunting process.
3. Be ready to make a decision quickly. In a seller’s
market, homes rarely stay on the market long, so when a house that is in their
budget and checks off all of their needs come along, buyers should not
hesitate. Buyers should be ready to submit an offer quickly, or they may risk
missing out on the home altogether.
4. Bid competitively and limit contingencies. It is tempting to
submit a low offer as a starting bid, but in a seller’s market buyers need to
put forward their highest offer from the very beginning or they are likely to
lose out on the home. It is also important to remember that in multiple bidding
situations it is not always the highest offer that is most attractive to the
seller but the one with the fewest contingencies. Removing restrictions related
to the sale of a current home and being flexible with things like the move-in
date can make a bid stand out to a seller.
5. Work with a Realtor®. All real estate is local, so it is
important to work with an agent who is a Realtor®, a member of the National
Association of Realtors®, and who is familiar with the areas and neighborhoods
the homebuyers are considering. Realtors® are the most trusted resource for
real estate information and have unparalleled knowledge of their communities;
they can give buyers the competitive advantage needed in a tight market.
For more information on buying a home in a seller’s market,
visit NAR’s comprehensive website for homeowners, www.houselogic.com/buy(link is external).
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After our first 10 weekly HousingWire columns looked at
predicted real estate appreciation in Metropolitan Statistical Areas in the
Northeast, Northwest, Southeast, Southwest and Midwest, we now check in with
the West and the nation's most populous state.
In the March 2018 VeroFORECAST from
Veros Real Estate Solutions, which forecasts changing property values through
March 2019 in 342 of the more than 360 MSAs in the United States, California's San
Diego-Carlsbad-San Marcos MSA was ranked 20th with a
projected rate of 8.3% appreciation over the next 12 months.
that is the same percentage of California's population that lives in America's
most southwestern MSA. According to a U.S. Census Bureau estimate,
39,536,653 people lived in the Golden State in 2017 and more than 3.3 million
of them call the San Diego-Carlsbad-San Marcos MSA home. That makes it California's
fourth largest and the nation's 17th largest.
INVESTING IN QUALITY OF LIFE
contribute to this coastal California MSA. In addition to its near-monotonous
temperate climate, improving economy, point-of-entry position for tourists and
immigrants from Latin and South America as well as Asia, the huge Marine and
Naval installations that are again benefiting from increased military spending,
it has a quality of life that continues to attract homebuyers and push home
Diego County continues to be a highly desirable place to live. Especially the
coastal towns of North County, anchored by Carlsbad, offer the best of all
worlds; beautiful beaches, quaint shopping, excellent schools and relatively
affordable housing," said mellohome CEO and
San Diego-based The Heller
Real Estate Group owner Chris Heller.
aspect behind the San Diego-Carlsbad market's real estate appreciation is
a municipal-promotion of arts and culture appreciation. San Diego
boasts one of the nation's finest arts and culture resources with its Balboa
Park. It not only includes a nationally respected three-theater complex, the
Old Globe, but museums, a space center, and wide expanses of lawn where art
shows and other community events are routinely held.
to the north, a well-staffed cultural arts office is about to launch a 10-year
plan of investing in ways to stimulate and promote both the creation and
appreciation of art and culture. A key part of this yearlong process has been
gathering community input, and empowering homeowners and other residents the
responsibility to buy in to the process.
imperative to hear what community members enjoy,” Cultural Arts Manager Richard
Schultz told local
community buy-in is clearly part of why people will continue to buy in these
areas. While not unique among the 342 metro areas included in the VeroFORECAST
report, this focus is certainly as strong and valuable to future quality of
life than anywhere in the country.
MSAs represent nearly 1,000 counties and over 13,600 ZIP codes. The SFRs,
condos and townhouses in these MSAs are occupied by more than 80% of the U.S.
population. The range of projected appreciation in the March 2018 VeroFORECAST
runs from a high of 11% in the Northwest's Seattle metro to a low of -2.9%
along the Eastern Seaboard in the Atlantic City metro.
indicators used to determine the projected score include each MSA's inflation
and interest rates, the amount of its buildable land, and its affordability
index, as well as the current unemployment rate and available housing
factors contributing to the high rate of projected appreciation for the San
Diego MSA are a low unemployment rate of only 3.5% and a supply of housing at
just over two months. Robust population growth also gives this market good
expected appreciation. A report from the U.S. Department of Commerce's Bureau
of Economic Analysis put this MSA's 2016 per capita personal income at $55,168,
30th among the country's MSAs and 22% higher than the average in California's
three-dozen MSAs, which is $45,399.
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to your Closing on a House Checklist—a rundown of everything home buyers need
to do in the 11th hour before they get their hands on those keys. Because
when you're approaching the finish line in your home-buying journey, you want nothing to
go wrong, right?
we’ve put together a home closing checklist, which outlines your action points
in those few days leading up to settlement. Keep this list handy to know you've
done what you need to in order to close the deal.
agreements have contingencies—things that
buyers must do before this transaction is official, explains Jimmy
Branham, a real estate agent at the Keyes Company, in Fort
Lauderdale, FL. These are the most common contingencies:
When you buy a
home, you “take title” to the property and establish legal ownership—a
process that’s confirmed by local public land records. As part of the closing
process, your mortgage lender will require a title search, and you'll need to
purchase title insurance to protect you from legal claims to the house.
distant relatives—or an ex-spouse—may surface with a claim that they actually
own the home, and that the seller had no right to sell it to you in the first
place. But clearing title will ensure this doesn’t happen, says Marc
Israel, president and chief counsel of MIT National Land
Services, a title company in New York City.
As the home
buyer, you’re entitled to choose the title company. You can get recommendations
from your real estate agent, mortgage lender, and friends—just be sure to check
out the license and reputation of each company online.
can go to the closing table, your home loan must go through the underwriting process.
Underwriters are like real estate detectives—it’s their job to make sure you
have represented yourself and your finances truthfully, and that you haven’t
made any false or misleading claims on your loan application.
underwriter—employed by your mortgage lender—will check your credit score, review your home appraisal, and ensure your
financial portfolio has remained the same since you were pre-approved for the
underwriting typically happens shortly before closing, you don’t want to do
anything while you’re in contract that’s going to hurt your credit score. That includes buying a car, boat, or
any other large purchase that has to be financed.
getting a loan, one of the best ways to prepare is to thoroughly review your closing disclosure, also known as a HUD-1 settlement
statement. This official document outlines your exact mortgage payments, the
loan's terms (e.g., the interest rate and duration), and additional fees you'll
pay, called closing costs (which total anywhere from 2% to 7% of your home's
to compare your closing disclosure to the loan estimate your lender gave you at
the outset. If you spot any discrepancies, ask your lender to explain them.
contracts allow buyers to do a walk-through of the homewithin 24 hours before closing. During
this stage, you're making sure the previous owner has vacated (unless you’ve
allowed a rent-back arrangement in which they can stick around for
a period of time before moving). You’re also double-checking that the home is
in the condition agreed upon in the contract. If your home inspection revealed
problems that the sellers had agreed to fix, you’ll want to make sure those
repairs were made.
Make sure you
have the following items when you head to the closing table:
Plan to sign
a ton of paperwork. An attorney or settlement agent will guide you through the
process. When you’re done, you’ll collect the keys and you're finally home
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Gains for lower-priced homes are seeing significantly higher
increases than more expensive homes, according to the latest CoreLogic Home
Price Index Report.
researchers analyzed four individual home price tiers. The tiers were broken
down into a “low price” tier that reflected homes priced at 75 percent or less
of the median; “low to middle price” homes were between 75 and 100 percent of
the median; “middle to moderate price” were for homes priced between 100 and
125 percent of the median; and the “high price” tier represented homes priced
greater than 125 percent of the median. The lowest price tier rose 9.3 percent
year over year compared with 8.5 percent for the low to middle price tier; 7.1
percent for the middle to moderate price tier; and 5.7 percent for the high
in the low price tier began pulling ahead of the other price tiers in 2013. The
five-year appreciation rate—from April 2013 to April 2018—for the low price
tier was 53 percent compared with the five-year appreciation of 43 percent for
the low to middle price tier; 37 percent for the middle to moderate price tier;
and 29 percent for the high price tier.
All price tiers
combined have risen on an annual basis every month since February 2012,
CoreLogic reports. The company's overall index is now 3.9 percent higher than
its precrisis peak in April 2006. Four states have showed double-digit
year-over-year increases. All of them are in the West: the state of Washington
is up 12.8 percent year over year, Idaho is up 12.4 percent, Nevada increased
12.2 percent, and Utah is up 11.5 percent.
chart shows the 25 highest-appreciating states, along with their highest and
lowest historical price changes, measured year over year:
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Mortgage rates hit their highest point in
seven years last month, and home prices have jumped 6.5% since mid-2017. On the
West Coast, many cities are seeing double-digit gains in home appreciation. But somehow, home buying isn’t slowing down.
In fact, according to the most recent Ellie Mae Origination
Insight Report, purchase loans were at their highest share since 2014 in April,
and builder confidence is strong, with most feeling good about new home sales
for the next six months.
So what gives? With rates high, prices rising and affordability
seemingly on the downslope, what’s keeping today’s home buyers in the game? According to experts, there are lots of factors
Buyers Want to Lock in Rates … Before They Rise Again
Rising mortgage rates worry would-be homebuyers, spurring them to
lock in the current ones—even though they’re less than ideal.
According to Mark Fleming, chief economist at First American, “The
fact that rates are rising actually causes demand—particularly first-time
homebuyer demand—as they try to crowd into the market and lock in a mortgage
rate and price before both go even higher.”
Increasing rates also push uncertain buyers into the market, ones
who may have been on the fence about buying in the first place.
“As rates initially move up, there is an impetus for people that
are thinking about buying a home to get off of the sidelines,” said Daniel
Beckerman, founder of Beckerman Institutional. “If people anticipate higher
interest rates in the future, there is an incentive to buy a property and lock
in today’s interest rate.”
Apparently, these proactive moves are founded.
According to the Housing and Mortgage Market Review from Arch
Mortgage Insurance, interest rates are only expected to increase as the year
goes on. In fact, projected monthly payments to buy the same-priced home could
jump 10 to 15% over the next year.
As Arch’s global chief economist Ralph DeFranco bluntly puts it,
“Interest rates may not be this low again for decades.”
It’s the American Dream—and Renting’s Not Much
At the end of the day, owning a home is still the American Dream,
and some people just want to buy a house. As Gina Ko, agent at Triplemint Real
Estate explains, “Overall, people always want to buy a home to start a family,
build a legacy and move forward in their life.”
Take Tylor Tourville as a prime example. He and his wife, Chelsey,
recently braved the hot Boston market for five months to land their dream
home—and the process wasn’t without its challenges.
“My wife and I got married in 2016 and have rented for the last
two years,” Tourville said. “We decided we were ready to take the next step on
our journey and pursue homeownership.”
Tourville said he and Chelsey “fully acknowledged” that they were
home hunting at a difficult time. “We decided from the start that we weren’t
going to let fear of market timing dictate our lives and deter us from moving
our lives forward and accomplishing our goals,” he said.
Though chasing the American Dream was one factor in the equation,
Tourville said he and his wife also saw buying as an opportunity to get out of
the heated rent race.
“Buying a house is expensive, there’s no other way around it,” he
said. “However, rent prices have been relentlessly rising year after year.
Plus, we saw the added benefit of putting our money into something tangible,
rather than seeing rent money disappear into the abyss of some landlord’s bank
account each month.”
According to the recent Rental Affordability Report from ATTOM
Data Solutions, renting a three-bedroom property is more expensive than buying
a median-priced home in 54% of major markets. The average three-bedroom costs
renters 38.8% of their annual income.
“Even if the percent of income that goes to payments on a home you
own is on par with that number, it’s still money you’re putting toward building
equity in the home, rather than going into someone else’s pocket,” said Sean
Black, cofounder at Knock.com and founding team member at Trulia. “And as a
homeowner, you benefit come tax time when you make some of that money back. As
a renter, once that money is gone, it’s gone forever.”
Rates Actually Aren’t That High- and Buying Power's Still Strong
Though nominal rates and home prices might be higher than in past
years, in the grand scheme of things, experts agree they’re not as bad as it
seems on paper.
“I would say that there is a certain degree of sensationalism when
you’re looking at and discussing these numbers, and how certain cities like
those on the West Coast inflate overall national numbers,” Black said.
“Everything is relative—yes, affordability is low compared to where it was
following '08, but that does not mean that every home in every market is
Thanks to improving incomes, employment and the economy, housing
is actually still affordable in much of the U.S. In fact, according to the
recent Real House Price Index from First American, consumer-home buying power
is up 14.3% since 2011, and “real” home prices—which are adjusted for changes
in incomes and rates—are 32.5% lower than their housing boom peak.
If they did reach that peak, Fleming says people would still
continue buying homes.
“Even when both mortgage rates and real, consumer house-buying
power-adjusted house prices were significantly higher than they are today,
people still bought homes,” he said. “Our home purchase decisions are often
less financially motivated than personal preference driven."
Home Buying Has Other Benefits,
No matter where rates or prices go, when a fixed-rate mortgage is
involved, homeownership always offers more consistency than renting—and that’s
not going to change. Even Tourville, who’s closing on his Boston home later
this month, said that reliability was a big reason he and his wife decided to
buy in today’s hot market.
“We almost saw buying as a way to lock in our monthly housing
payment, even if it would be at a slight premium compared to our current rent,”
Michael Micheletti, director of corporate communications at Unison
Home Ownership Investors, said this consistency is one of the biggest benefits
homeownership can offer today’s consumers—especially amidst rising costs
“To me, the biggest benefit is the ability to control housing
costs—a major component in the household budget—giving you an ability to take
care of rising healthcare costs, saving for a kid's education, transportation,
food and other quality of life issues that the average American faces,”
According to Laura Conry, executive vice president of consumer
originations at FirstBank, homeownership also cuts out all the relocation costs
that renters deal with on a regular basis.
“Not only can owning be more affordable, but it allows people to
control their housing costs and ensure they are not forced to relocate as
opposed to choosing to relocate,” she said. “Rising rent costs cause tenants to
move often, which can be difficult, costly, and causes instability for
Millennials are Finally Buying in
According to experts, Millennials are behind much of today’s
price-resistant housing demand as they finally reach the point where they can
both afford a home and desire one.
“The majority of first-time buyers/Millennials have been waiting
to enter the marketplace to purchase a home,” Micheletti said. “They have saved
enough over the past few years to qualify, and when they do the math on renting
versus buying, in most cases, it makes sense for them to buy now.”
Data from the National Association of Realtors shows that
Millennials currently account for 36% of all home purchases. And though student
loans have long been holding this cohort back from buying, Brendan McKay,
owner of McKay Mortgage Company, said improving jobs and income have
helped alleviate some of the financial pressure.
“The job market has improved, “McKay said.
“There was a dearth of young people buying homes over the last five years. They
were buried in student loans, and their income allowed for little in the way of
savings. This is less the case now than it was then. Those same people are a
little older, have better jobs, and feel stable enough to take on a mortgage
payment in addition to their student loans.”
And at 27, Tourville and his wife are two of those Millennials. He says he and Chelsey budgeted, knew what they
could pay, and stuck to it. The rest is history.
“We had to be firm about what we were willing to pay, and not compromise,”
Tourville said. “In a market where bidding wars are the norm and waiving
inspection contingencies is becoming dangerously common, sticking to a number
and having an ‘If it’s meant to be, it will be’ mentality helped us not get too
high or too low when making offers on houses we liked.”
As Tourville put it, “It takes time, patience, and thick skin. But
that doesn’t mean it’s impossible.”
some potential home improvement projects in the near future? If that's the
case, it's imperative you do your homework. While some renovation ideas tend to
add value to one's home, others equate to throwing money down the drain and
getting nothing in return.
this in mind, here are four of the best and worst home renovation ideas, as
well as some resources that can help you decide what to improve and what to
leave as is:
What Offers the Biggest Bang for Your Buck
year, Remodeling magazine conducts an in-depth survey of experts to determine
which home improvement projects offer the highest and lowest return on
investment. Dubbed the Cost vs. Value Report, it compares the typical costs of
29 common renovations that were completed by professionals in 99 major cities.
Talk about an excellent primer of ideas.
another great resource for homeowners is answers to commonly asked questions
about construction, including many that relate to home renovation. By visiting
credible websites for some much-needed inspiration, homeowners can put their
focus and funds on projects that will make the biggest impact.
Kitchens and Bathrooms
to HGTV, splurging for a kitchen and/or bathroom remodel is typically a wise
investment, one that usually nets homeowners with 100 percent ROI. For
example, basic kitchen renovations typically run about $15,000. And in cities
like Miami and New Orleans, homeowners who then later put their home on the
market recouped top dollar in total resale value.
specific projects that offer the most bang for your buck, upgrading your
cabinets to solid-wood options, countertops with a new stone or quartz finish
and/or flooring with a stone mosaic are all safe options.
A Second Bathroom
homes with only one bathroom, the thought of adding a second one (even a half
bathroom) makes good financial sense, especially if you plan to one day sell
it. And while you may very well appreciate having an extra lavatory on hand for
your family, be advised that you may not necessarily recoup
the full renovation cost when putting your home up for sale.
put, adding a new bathroom is an expensive proposition, one that can run you a
hefty $25,000. However, in most cases, homeowners can expect to receive an
estimated 60 percent ROI. Bottom line: If you have no intention of moving — and
have the necessary funds available — adding on a second bathroom could very
well be a worthwhile endeavor.
course, if you're weighing your home's resale value, there are certainly better
ways to spend your hard-earned money.
can invest thousands of dollars to upgrade their kitchen and ensuite bathroom,
but if your front lawn and trees look shabby, potential buyers will drive on
by. As Improvenet.com notes, you can easily make a number of budget-friendly
and relatively minor exterior improvements that will increase your curb appeal
for less than $100, you can rent a power washer to clean off the driveway,
sidewalk and porch, and then spend some time cleaning up the yard and putting
or throwing away old lawn furniture. Add a fresh coat of paint on the front
door and spring for new, stylish house numbers and voilà — you just breathed
some serious new life into your home.
Anything Over the Top
springing for that enormous and expensive commercial grade gas stove and pricey
custom marble shower, research the local listings to see what features similar
homes offer. Instead of making any number of over-the-top renovations, you
should err on the side of caution and choose more modestly priced and classic upgrades.
doesn’t mean you have to select low-quality or unattractive finishes, as you
can certainly still replace any old or cracked floor tiles with an attractive
and durable tile that looks like wood. And heavens knows how much you'll save
by choosing to not import stone flooring from Italy.
Line: Choose Renovations Wisely
comes to your home's resale value and recouping any renovation costs, know that
not all projects are created equal. By acquainting yourself with reliable
online resources that provide worthwhile insights and primers, as well as
making good financial decisions, you can enjoy all the perks of your beautiful,
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all is said and done, buying a home is exciting—and a milestone to be
celebrated. But if you expect each step of the process to be a thrill ride,
we're here to tell you you're sorely mistaken. In fact, between the rush of the
hunt for the perfect place and the extreme satisfaction of crossing your
threshold as a new homeowner, the rest of the home-buying process can be a bit
of a slog.
many unglamorous parts of buying a home—some of which many consider downright
boring. Do the words "financial due diligence" make your eyelids feel
heavy? Yeah, ours too.
But when you
know what to expect and why, it’s a whole lot easier to deal. So pay
attention to these three very mundane—but very important—parts of the
home-buying process. We've outlined why they matter and how to get through them
without losing your sanity.
buyers know that a good credit score will
allow them to lock in a good interest rate. But what if your credit score
is in the gutter? Raising it can take some time—a year, if not more—but there
are some strategies you can take to get it where it needs to be.
One of the
easiest and most effective ways to bump up that credit score
(besides paying all your bills on time, which you already do anyway, right?) is
to avoid applying for any new credit—including personal loans, car loans or
leases, and credit cards—for about one year before starting the home-buying
process, says Shayan Jalali, an
agent with Berkshire Hathaway HomeServices, in Boston.
credit gets pulled each time you apply for a loan of any type, which negatively
impacts your credit score,” he says. And that can translate to a less favorable
rate when it comes time to get a mortgage.
satisfied with your credit, it’s time to shop for a mortgage lender who will
ultimately help you buy a home. We won't lie: Shopping for a mortgage lender is
not fun. It requires a number of steps and a lot of paperwork.
going to want to inquire with different lenders to
learn about their rates, programs, fees, and specials. You’ll also want to
consider if you want to work with a mortgage broker, who will
essentially shop home loans for you.
important to take the time to discuss the ins and outs of the loan programs
that are available, from conventional 30-year loans to adjustable-rate mortgages,
to FHA loans.
settled on where you want your loan to come from, it’s time to get that
which is a commitment from your lender to provide you with a home loan up to a
certain amount. That will set your home-buying budget, and also show sellers
that you are serious about buying when it comes time to put an offer in.
pre-approval process takes patience.
require a host of documents to get you fully pre-approved, and often it comes
down to minutiae such as explanations of small transactions in or out of your
account,” says Luke Loiselle, a
real estate agent at Keller Williams, in Portland, OR. The plus side is that
once you have your pre-approval, you can largely check tedious mortgage tasks
off the list.
alert: You are going to be bombarded with financial, legal, and technical
documents during the home-buying process—and unfortunately, it’s your job to
read through all of it. Even if that sounds about as exciting as trudging
through "War and Peace," don't skimp on the time it takes to
understand the contracts you're signing.
The best way
to get through all the painful paperwork is to know what to expect. Here are
the three most important documents that are going to come your way:
found the home you've been searching for and now it's time to make your home
purchase offer. What's your next step and who's going to guide you through the
ready to make an offer, your real estate agent will take center stage, walking
you though the following steps and communicating closely with the seller's
agent and you. Here's how the offer process works:
Step 1: Determining Your Price
estate agent will help you determine a price that's fair, based on their
experience and important considerations, including:
Recent sales prices of similar homes in the neighborhood
The condition of the home
What you can comfortably afford
Step 2: Submitting an Offer
determined your price, your agent will draw up an offer, or purchase agreement,
to submit to the seller's real estate agent. This offer will include your
agreed upon purchase price and terms and conditions of the purchase, including:
Your target closing date
Provisions for certain fees
A deadline for the seller to accept or counter your offer,
typically one to two days
your offer, it's highly recommended that you make the home purchase contingent
on the home inspection and appraisal.
Step 3: Negotiating the Offer
the seller will counter your offer, typically asking for a higher purchase
price or to move the closing date. In these cases, the seller's agent will
submit a counteroffer to your agent, detailing their desired changes. At this
time, you can either accept the offer or decide if you want to counter.
changes are made through a counter offer, you or the seller have the option to
accept, reject or counter it again.
Step 4: Finalizing the Offer
is considered final when both parties agree to all terms and sign the written
next? You'll need to provide your lender with a copy of the signed
purchase agreement to finalize the loan application process. As always,
lean on your team for any questions or concerns
along the way – it's their job and they're there to help.
series to learn more about how things work in the mortgage industry,
from the secondary mortgage market to closing on your loan.
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A shortage of
homes for sale in the U.S. gives sellers the advantage in most housing markets.
But many sellers don’t realize that getting rid of their house likely will cost
them thousands of dollars.
commissions and other fees can eat up about 10 percent of the sale price of the
home. Some expenses are negotiable and fluctuate with the real estate market.
But sellers should expect to pay part of the costs in the transaction and avoid
sticker shock at closing time.
Here are the
major costs of selling a house.
estate commission is usually the biggest fee a seller pays — 5 percent to
6 percent of the sale price. So, if you sell your house for $250,000, you could
end up paying $15,000 in commissions. The commission is split between the
seller’s real estate agent and the buyer’s agent.
homeowners try to avoid these high fees by offering their home as for-sale-by-owner (FSBO). If you do that,
be prepared to assume the duties of a real estate agent, including showing the
place to prospective buyers, negotiating, hiring a lawyer to draw up the
contract, and taking care of the transfer of title.
thinking about selling your home, it’s likely there are a few things you could
do to enhance the appeal of your place and maybe raise its value. If you’ve
been putting off sprucing up the exterior of your property, painting the
inside, repairing a staircase or a leaky faucet, now’s the time to make those
Also, if the
buyer’s home inspector finds problems, such as a leaky roof or bad plumbing,
you might have to pay to fix those, as well.
can set you back financially, so be prepared for them before you decide to
sell, especially if you expect a problem with your home passing inspection.
to have a clear picture of what the house could look like after they move in.
Hiring a professional to stage your home might pay off. Stagers do what’s
necessary to enhance a home’s best features, downplay its worst features and
help prospective buyers imagine themselves living there. They rearrange
furniture and accessories, declutter and depersonalize the home. They may even
repurpose a room in a way you never would have imagined.
The cost of a
professional stager varies according to the size of the home, the extent of the
work, the length of time the house is on the market and other factors. Expect
to spend several hundred dollars, at minimum, and possibly thousands if you
need a professional stager.
the water and AC on
If you plan
to move out before you sell your home, you’ll want to continue to pay for water
and electricity. A home without air conditioning/heat and lighting can be very
difficult to show to buyers.
bills will give you an idea how much it will cost each month to leave on the
utilities until a new buyer takes over.
of your home sale will be used to pay off your mortgage, but it’s likely that
the payoff amount on your mortgage statement is a little less than what you
have to add prorated interest you’ve accrued to the total balance. Additionally,
your lender may penalize you if you have a prepayment penalty associated with
house and buying another? Use our calculator to determine how much
house you can afford.
costs and additional fees
While the closing costs to sell a house are
typically the responsibility of the buyer, don’t be surprised if you are asked
to foot the bill, especially if you are trying to sell your home in a buyer’s
market (one which has a lot of homes for sale).
Some of these
costs may include homeowners association fees, property taxes, attorney fees,
transfer taxes and title insurance. You also may be asked to pay an escrow fee,
a brokerage fee and a courier fee. Altogether, closing costs can range from 2
to 4 percent of the selling price.
Many of these
fees are negotiable, and it’s unlikely that a seller will be responsible for
all of these. Still, it helps to be prepared.
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