Hey everyone!
Throughout my real estate career, I've heard a lot of people talk about things they have seen on HGTV. Many people tune in to watch all the shows about buying and selling homes, renovating, designing, and so on. I get it. I like to watch them too. However, all is not what it seems where most of these shows are concerned. Today, I want to focus on one of the most popular programs - House Hunters.
The concept of House Hunters is simple: someone wants to buy a house, an agent shows them three homes, and they pick one of those to purchase. If only it were that simple. In the real estate world, it's not uncommon to show at least ten houses to a buyer before they decide on one. I once showed a buyer over fifty houses. We actually wrote a contract on two and had them both inspected before writing a contract on a third home that we actually closed on. This is the reality. Therefore, it shouldn't come as a shock to learn that the buyers on House Hunters go through the exact same thing.
The truth has come to the surface by way of interviews with the folks featured on the show. In most cases, the camera crew doesn't even show up until AFTER the buyer is under contract on a home. Sometimes they don't show up until after the buyer has already closed on the home. They then go back to look at two more houses that they actually walked through while they were shopping. That means every reaction you see is faked. They fully know what to expect when they are filmed walking through these homes because they have actually already seen them.
House Hunters also leaves out the escrow period. You almost never see these buyers go through the most stressful points of the purchasing process. These include price negotiations, getting all the information for the lender, having an inspection and negotiating any possible needed repairs, etc. These things can drag out the purchase process. You may have to postpone your closing date a time or two to allot time for all this to come together. While your agent can take most of the stress off your shoulders, it's still a time-consuming process that can wear on you.
These shows typically also feature inflated prices. What you have to understand is the fact that these people are not buying homes in Everytown, USA. In the earlier seasons, most of the episodes were filmed in Canada. Those filmed in the USA are usually filmed in large metropolitan areas where the cost of living is sky-high. That 3 bedroom 2 bath rancher the House Hunters couple bought for $400,000 would only cost you around $130,000 here in Eastern Alabama. Plenty of people have been scared to buy because they assumed the prices shown on HGTV were representative of prices in their own town. On the flip side, a lot of sellers have assumed their $150,000 house is worth $425,000 just because they saw a similar house sell for that much on HGTV.
You can learn a lot from these programs - and they can definitely be entertaining. That said, you shouldn't let them influence you when it comes to buying or selling a home. Keep in mind that these programs are produced for entertainment purposes and not everything you see is factual. The reality of the reality show is there isn't a ton of reality to it at all.
Jeremy Reaves - The Realtor Guy
Questions or comments? Let me know below, or send an email to jeremyr@era-king.com!
Realtor for ERA King Real Estate
Monday, March 23, 2015
Monday, March 9, 2015
Cash Talks...or Does It?
Hi everyone!
There's a lot of confusion out there in the world regarding buying a home with cash. For a long time, there's been this myth that you can get a much better deal this way. While that's true in some aspects, it's not all-encompassing.
Generally, when you purchase a home, the seller has a set figure in mind. Most of the time, they owe a mortgage company. They usually also intend to use a profit as a down payment toward their next home. While having a nice chunk of cash to outright buy a home is impressive, it may not be impressive enough to warrant a major price discount. Basically, paying with cash affects the seller in most of the same ways as using a lender would. There are some exceptions.
Cash sales are not subject to an appraisal. The appraisal process can absolutely kill a deal. Lenders require one to be performed to ensure the home is worth the amount they're sticking their necks out for. If not, the sale will not go through unless you can come up with the difference in cash or the seller agrees to reduce the price to within the appraised value. Cash buyers can fore-go the appraisal process altogether. That said, you do still have a right to have one performed on your own to protect your investment.
Cash sales are NOT contingent on financing. There have definitely been tears shed by many a buyer who lost the opportunity to purchase a home because their financing fell through. Sometimes it's the lender's fault, sometimes it's the buyer's fault, sometimes it's unforeseeable circumstances. The lender may miss something on the credit report, the buyer may forget to mention a significant event, one of the parties could make an error or omission, or there could be a life changing event that occurs in the process. Lenders have a lot of requirements for good reasons. These don't necessarily apply to cash buyers. (I am planning another blog post to talk about lender requirements - stay tuned).
Cash sales carry a MUCH more reasonable closing cost. You can usually close a cash sale for under $1000. Financed sales typically run well into the thousands - normally three to four thousand for an average priced home. Cash buyers will not have to worry about down payments, escrow account payments, first month's mortgage payment, etc. All of these figures add up to a decent amount of money that is only required by purchasers using a lender.
Cash sales can close more quickly. The norm for most lender involved closings is 45 days. Sometimes they may come together sooner, sometimes later (we're looking at you, USDA). Barring any title issues, a cash sale can usually be closed within a few days. I recently sold a home to a cash buyer that closed less than 48 hours after the initial offer was submitted. This speaks volumes to sellers who may be in a time crunch. Should a bidding war ensue with another buyer, the seller may be more apt to accept your offer for this reason, even if it's not as high as the other(s). This is about the only time that having cash can tend to warrant a better price. As a side note: don't be offended when the seller asks you for a proof of funds letter. They aren't being nosy - they just need to be sure that you actually have the money to buy their house.
Purchasing a home with cold, hard cash does have its advantages - but that may not necessarily include a significant reduction in price. That said, you can still get an excellent deal with proper negotiations, and by avoiding fees normally associated with loans. Because it can move more quickly, there may be less stress involved as well. In the end, you get the pride of ownership and the comfort in knowing you've made a sound investment!
...and ALWAYS have a home inspection performed!!!
Jeremy Reaves - The Realtor Guy
Questions or comments? Let me know below or send an email to jeremyr@era-king.com!
There's a lot of confusion out there in the world regarding buying a home with cash. For a long time, there's been this myth that you can get a much better deal this way. While that's true in some aspects, it's not all-encompassing.
Generally, when you purchase a home, the seller has a set figure in mind. Most of the time, they owe a mortgage company. They usually also intend to use a profit as a down payment toward their next home. While having a nice chunk of cash to outright buy a home is impressive, it may not be impressive enough to warrant a major price discount. Basically, paying with cash affects the seller in most of the same ways as using a lender would. There are some exceptions.
Cash sales are not subject to an appraisal. The appraisal process can absolutely kill a deal. Lenders require one to be performed to ensure the home is worth the amount they're sticking their necks out for. If not, the sale will not go through unless you can come up with the difference in cash or the seller agrees to reduce the price to within the appraised value. Cash buyers can fore-go the appraisal process altogether. That said, you do still have a right to have one performed on your own to protect your investment.
Cash sales are NOT contingent on financing. There have definitely been tears shed by many a buyer who lost the opportunity to purchase a home because their financing fell through. Sometimes it's the lender's fault, sometimes it's the buyer's fault, sometimes it's unforeseeable circumstances. The lender may miss something on the credit report, the buyer may forget to mention a significant event, one of the parties could make an error or omission, or there could be a life changing event that occurs in the process. Lenders have a lot of requirements for good reasons. These don't necessarily apply to cash buyers. (I am planning another blog post to talk about lender requirements - stay tuned).
Cash sales carry a MUCH more reasonable closing cost. You can usually close a cash sale for under $1000. Financed sales typically run well into the thousands - normally three to four thousand for an average priced home. Cash buyers will not have to worry about down payments, escrow account payments, first month's mortgage payment, etc. All of these figures add up to a decent amount of money that is only required by purchasers using a lender.
Cash sales can close more quickly. The norm for most lender involved closings is 45 days. Sometimes they may come together sooner, sometimes later (we're looking at you, USDA). Barring any title issues, a cash sale can usually be closed within a few days. I recently sold a home to a cash buyer that closed less than 48 hours after the initial offer was submitted. This speaks volumes to sellers who may be in a time crunch. Should a bidding war ensue with another buyer, the seller may be more apt to accept your offer for this reason, even if it's not as high as the other(s). This is about the only time that having cash can tend to warrant a better price. As a side note: don't be offended when the seller asks you for a proof of funds letter. They aren't being nosy - they just need to be sure that you actually have the money to buy their house.
Purchasing a home with cold, hard cash does have its advantages - but that may not necessarily include a significant reduction in price. That said, you can still get an excellent deal with proper negotiations, and by avoiding fees normally associated with loans. Because it can move more quickly, there may be less stress involved as well. In the end, you get the pride of ownership and the comfort in knowing you've made a sound investment!
...and ALWAYS have a home inspection performed!!!
Jeremy Reaves - The Realtor Guy
Questions or comments? Let me know below or send an email to jeremyr@era-king.com!
Friday, March 6, 2015
Foreclosures - A Good Deal, At A Cost
Hi all!
I wanted to take a few moments to talk about foreclosures. It's true you can get an awesome deal by purchasing a foreclosed home, but there may be some associated expenses that you need to prepare for.
After the market crashed, the real estate industry was suddenly flooded with foreclosures. This is not the case anymore, thankfully. Those that do pop up now and again can go through a multitude of avenues in order to get sold. Some these include auction sites such as hudhomestore.com and hubzu.com. They will be accompanied with a traditional MLS listing, but will contain directives to submit offers through an online bid site. There are a few things you should take into consideration before proceeding in purchasing a home listed this way.
Upfront Costs
More often than not, these homes will require a higher than normal earnest payment along with an additional fee. This fee can be labeled as web technology fee, buyers premium fee, or just about anything else the listing company comes up with. The earnest amount can be a set amount, normally $1000, or a percentage of the total sales price. One I recently sold carried a 3.5% earnest requirement. That means if you offer on a $150,000 home and your bid is accepted, you will be required to present $5250 in certified funds within 48 hours of the close of auction. You will also be required to submit your loan approval letter (or proof of funds, if you are paying with cash) at that time. In most cases, the earnest money and any fee is NON-REFUNDABLE. That means you should be ABSOLUTELY SURE that you intend to follow through with the purchase.
Home Inspection
One of the questions I hear most in regards to foreclosures is whether or not the buyer can still obtain a home inspection. The answer is not only yes, but it's highly encouraged. In a lot of cases, foreclosed homes have deferred maintenance stemming from the previous owner's financial hardship leading up to the foreclosure. It's absolutely VITAL that you have a home inspection performed to fully know what you're dealing with. That said, it's important to note that most foreclosures have all the utilities turned off and plumbing systems winterized. As the buyer, you may be financially responsible for having the utilities turned on prior to your inspection. In some cases, the listing company may be able to help - but be prepared for this to be an upfront out of pocket expense. As always, the home inspection is also an upfront cost.
Repairs
Most of the time, the institution that holds title to or is overseeing the sale of a foreclosed home will not be willing to make ANY repairs. Some lenders and lending programs may require certain repairs to be made before they will fund the loan and allow you to close. If that's the case, the expense for those repairs will be another upfront cost for you as the buyer. These repairs could be something as simple as having a handrail installed by a staircase to something as major as having a faulty foundation repaired or a roof replaced.
Closing Costs
In some markets, it's common for a buyer to ask the seller to pay all or part of the closing costs. This is certainly the case in Alabama. The institution overseeing the sale of the foreclosure may not be willing to provide any funds toward your closing costs. These funds must be paid at closing, normally with a certified check. They will vary tremendously based on your loan, closing attorney, property taxes, insurance, and any number of other fees. The dollar amount can range into the five-digit area, depending on the price of the home and the down payment your loan may require. You can always have a preliminary talk with your lending professional regarding closing costs. They can provide you with a pretty accurate estimate of your expected closing costs to better prepare you for what lies ahead.
You don't have to be afraid - just be prepared. It IS possible to get an excellent deal on a home by purchasing a foreclosure, but it may require a decent amount of upfront cash to get to the closing table. As long as you plan ahead and condition yourself to expect expenses, you can put yourself in a better mindset to see the transaction through. Your real estate professional, closing attorney, and lender can help you prepare for these costs so there are no surprises. All you have to do is ask!
Jeremy Reaves - The Realtor Guy!
Questions or Comments? Let me know below, or email me at jeremyr@era-king.com!
I wanted to take a few moments to talk about foreclosures. It's true you can get an awesome deal by purchasing a foreclosed home, but there may be some associated expenses that you need to prepare for.
After the market crashed, the real estate industry was suddenly flooded with foreclosures. This is not the case anymore, thankfully. Those that do pop up now and again can go through a multitude of avenues in order to get sold. Some these include auction sites such as hudhomestore.com and hubzu.com. They will be accompanied with a traditional MLS listing, but will contain directives to submit offers through an online bid site. There are a few things you should take into consideration before proceeding in purchasing a home listed this way.
Upfront Costs
More often than not, these homes will require a higher than normal earnest payment along with an additional fee. This fee can be labeled as web technology fee, buyers premium fee, or just about anything else the listing company comes up with. The earnest amount can be a set amount, normally $1000, or a percentage of the total sales price. One I recently sold carried a 3.5% earnest requirement. That means if you offer on a $150,000 home and your bid is accepted, you will be required to present $5250 in certified funds within 48 hours of the close of auction. You will also be required to submit your loan approval letter (or proof of funds, if you are paying with cash) at that time. In most cases, the earnest money and any fee is NON-REFUNDABLE. That means you should be ABSOLUTELY SURE that you intend to follow through with the purchase.
Home Inspection
One of the questions I hear most in regards to foreclosures is whether or not the buyer can still obtain a home inspection. The answer is not only yes, but it's highly encouraged. In a lot of cases, foreclosed homes have deferred maintenance stemming from the previous owner's financial hardship leading up to the foreclosure. It's absolutely VITAL that you have a home inspection performed to fully know what you're dealing with. That said, it's important to note that most foreclosures have all the utilities turned off and plumbing systems winterized. As the buyer, you may be financially responsible for having the utilities turned on prior to your inspection. In some cases, the listing company may be able to help - but be prepared for this to be an upfront out of pocket expense. As always, the home inspection is also an upfront cost.
Repairs
Most of the time, the institution that holds title to or is overseeing the sale of a foreclosed home will not be willing to make ANY repairs. Some lenders and lending programs may require certain repairs to be made before they will fund the loan and allow you to close. If that's the case, the expense for those repairs will be another upfront cost for you as the buyer. These repairs could be something as simple as having a handrail installed by a staircase to something as major as having a faulty foundation repaired or a roof replaced.
Closing Costs
In some markets, it's common for a buyer to ask the seller to pay all or part of the closing costs. This is certainly the case in Alabama. The institution overseeing the sale of the foreclosure may not be willing to provide any funds toward your closing costs. These funds must be paid at closing, normally with a certified check. They will vary tremendously based on your loan, closing attorney, property taxes, insurance, and any number of other fees. The dollar amount can range into the five-digit area, depending on the price of the home and the down payment your loan may require. You can always have a preliminary talk with your lending professional regarding closing costs. They can provide you with a pretty accurate estimate of your expected closing costs to better prepare you for what lies ahead.
You don't have to be afraid - just be prepared. It IS possible to get an excellent deal on a home by purchasing a foreclosure, but it may require a decent amount of upfront cash to get to the closing table. As long as you plan ahead and condition yourself to expect expenses, you can put yourself in a better mindset to see the transaction through. Your real estate professional, closing attorney, and lender can help you prepare for these costs so there are no surprises. All you have to do is ask!
Jeremy Reaves - The Realtor Guy!
Questions or Comments? Let me know below, or email me at jeremyr@era-king.com!
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