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    Home Shopping on the Cape This Summer

    If you’re actively looking for a home on the Cape but haven’t found it yet, then you might be planning to continue shopping this Summer. Lots of new listings are coming online daily, and one of them just might be your dream house. But shopping for a home during the summer months on the Cape is different than all the other months. Be sure to read the tips below to help avoid unnecessary frustration.

    Number One – Plan Ahead. During the off-season, it’s usually possible to get into homes with very little notice. Many of our Cape homes are actually vacant during the off-season. Many of them are on lockbox. And Realtors tend to be more available in the off-season. None of these are necessarily true in the summer. Homes that were vacant are suddenly filled with vacationers. Lockboxes have been removed because the homes are now occupied. And Realtors, like all other Cape residents, have guests and plans and are not necessarily available at the drop of a hat to show properties. Contact your Realtor at LEAST a few days in advance to see if it will be possible to see the homes that interest you.

    Number Two – Shop on Saturday. If you are planning to come for a day to look at a variety of homes, the best day to do that on the Cape in the summer is Saturday. The reason for this is that many homes that are for sale are also being rented. These homes can typically be shown during a very small window on Saturdays in between rentals. We call this the “turnover time”. Plan to look at these homes between 1 and 3pm. That’s your best chance of getting in after the cleaning crew has left and the new tenants have yet to check in.

    Number Three – Open House Etiquette. It’s common for Buyers to attend an Open House unaccompanied by their Realtor. That is of course, no problem. However, you should be sure to write your Realtor’s name on the sign-in sheet and make it clear to the host of the Open House that you already have a Realtor. Else, if you decide to make an offer on that particular house, your Realtor may run into trouble trying to act as your representative. Just write your Realtor’s name on the sheet and you should be covered. And be sure to let your Realtor know if you wish to make an offer.

    Number Four – Pack Your Pre-Approval Letter. If you’re coming to the Cape on vacation and plan to seriously shop for a home while you’re here, be sure to bring your pre-approval letter. The best homes go FAST – sometimes within just days of being on the market. If you see something you love and want to make an offer, your offer will be incomplete without your pre-approval letter and the Seller will likely choose someone else’s offer that HAS a pre-approval letter. If you’re paying cash, be sure to bring “proof of funds”. A simple bank statement showing that you have the funds to buy the home will suffice. Black out your account number with a Sharpie and make a copy.

    Number Five – Prepare Your Phone! With new listings coming online daily, you don’t want to miss a great new listing that came on the market just before you left the Cape. Be sure you are receiving Daily Alerts and while you are on the Cape, be sure you are receiving new listings the MOMENT they hit the market. Your Realtor can help you get your phone set up with the best App for your needs. A smart phone comes in REALLY handy when shopping for homes while you’re vacationing on the Cape.

    Following these steps will go a long way toward helping you find the perfect Cape house while shopping this summer. Good luck and I hope to have the privilege of assisting you!

    Prepare For Your Mortgage By “Going Green”

    If you’ve been actively searching for a home on Cape Cod, you’ve most likely discovered that shopping for a home on the Cape is fun!  After all, what’s not to love? Exploring beautiful, oceanfront neighborhoods; touring the wide variety of homes for sale; checking out the closest beaches; browsing the shops in the nearby village; and simply imagining yourself living in your dream home.  It’s all good!  Until you actually FIND your dream home.  Then the fun quickly turns to stress as you transition from the shopping to purchasing phase.

    Suddenly, you find yourself staring at a fully-executed offer sheet that is riddled with deadlines: a deadline for inspections, a deadline for the signing of the Purchase and Sales Agreement (P&S), a deadline to put up more money, and most importantly, (and unless you’re paying cash), a deadline for the mortgage commitment.  The latter will require you to produce a seemingly endless trail of paperwork.  You can significantly reduce your stress during these critical few weeks by getting as much of your paperwork as possible ready in advance.  We call this paperwork your “green file”, and it should contain at least the following for each applicant whose name will be on the mortgage:

    • Copy of your driver’s license.
    • Most recent 2-3 consecutive months of statements from each of your financial asset accounts, including checking/savings, investments, IRAs, 401(k)s, CDs, etc.
    • Proof of down-payment and closing costs.  Lenders will want to follow the paper trail of any and all monies you’re using at closing, including the down-payment.  It is best to have this money in a single liquid account for at least 2 months prior to your mortgage application.   If all of the money cannot be traced in the above-referenced accounts, you need to account for it.  If some of it is a gift from a relative, you need to provide proof of where it came from and also proof that it does not need to be paid back (via a Gift Letter).
    • 2 years of W2s and tax returns.
    • 2 months of most recent pay stubs.
    • Names and addresses of employers for two years.
    • If self-employed, year-to-date profit and loss statement, plus signed returns for last two years.
    • If applicable, documentation related to any of the following: pension income, Social Security and Disability payments, dividend earnings, bonuses, child support payments and alimony payments.
    • Information on debts, including car loans, student loans, credit cards, mortgages, etc.

    Having these documents ready in advance will substantially reduce your stress level and make the home buying process far more enjoyable from beginning to end.  After all, you want to spend your pre-closing time picking out paint colors, shopping for furniture and planning your move – not searching your basement for old bank statements and tax returns!

    For more specific detail about what will be required in order to approve your mortgage, consult your mortgage lender. If you don’t have one, your Cape Cod Oceanview Realtor will be happy to introduce you to several reputable lenders who can help find the best loan for your needs.

    Buy Your Cape Cod Home Today – Retire Tomorrow

    If you’re one of the many Cape Cod home buyers who are shopping for a home today but not planning on purchasing until you retire, you might want to consider the benefits of buying your Cape Cod retirement home sooner rather than later, if you are in the financial position to do so.

    First, while nobody knows for sure what home prices will be like at any particular point in time, history tells us that over time, real estate prices inevitably rise. By buying today, you are locked in at today’s prices instead of tomorrow’s.   If you are putting money away for your retirement anyway, perhaps you should discuss with your financial advisor whether or not it makes good financial sense to put some of it toward a mortgage on your retirement home, which can be paid off when you eventually sell your primary residence. If you have solid equity in your primary residence, you might even consider tapping some of that equity to use as the down-payment on the Cape house. Not only will you get into the Cape market at a likely lower price, but you will have the home to enjoy until you are ready to retire.

    If you feel your finances are just a little too stretched to support both your primary residence and your eventual retirement home on the Cape, remember that Cape Cod is a vacation destination and most homes on the Cape have rental potential. Of course the exact value of the potential depends on many factors, including how close the home is to a beach. But even homes that are inland can typically be rented in the summer if the price is right. This means you can likely use some rental income to offset the cost of your annual mortgage, and STILL have the home available for your own personal use. Many homeowners on Cape Cod only come down during the shoulder seasons and rent their home during the peak summer weeks.

    Finally, if you typically vacation on the Cape each year through a summer rental, remember that by buying your own home on the Cape, you may be saving several thousand dollars each year that you would typically be handing over to another homeowner to rent THEIR home and thus pay THEIR mortgage. That “vacation fund” savings, combined with the potential rental income, could go a long way toward paying for your own place.

    While buying a retirement home early isn’t for everyone, it may be the perfect plan for you – one that allows you to get into the market at today’s prices, enjoy the home periodically until you are ready to retire, and use potential rental income and your vacation budget to take a bite out of your mortgage payment.  It’s an idea worth discussing with your financial advisor, who can help you evaluate the pros and cons of buying your retirement home sooner rather than later. Good luck and whether renting or buying, we hope to see you on the Cape soon!

    What a Difference a Point Makes

    On the heels of the Federal Reserve’s most recent rate hike, which takes its key rate to the highest it has been since the housing crisis, it’s important to understand its likely impact on mortgage rates and on your buying power if you are in the market for a new home.

    But before panicking, be aware that mortgage interest rates won’t necessarily react immediately to this week’s news. The Fed controls the short-term rates which typically have a longer term impact on mortgage rates. Plus, the recent rate hike by the Feds has already been at least partially baked into today’s interest rates, which are a good point higher than they were a year and a half ago (hovering around 4.5% versus 3.5%). Still, experts believe that mortgage rates could be a good deal higher by the end of 2018, falling anywhere from 4.7 to 5.9% (source:

    If you’ve been searching for the perfect home on the Cape for more than a year, not only are you impacted by rising prices (largely due to inventory shortage), but if you are planning to take out a mortgage, your buying power may be impacted by the slow but continual rise in mortgage interest rates.

    Consider a buyer who eighteen months ago was approved for a $500,000 mortgage at 3.5%. Her monthly payment (principle and interest only) would have been $2245. Today, with interest rates hovering around 4.5, that same monthly payment will only get her a $445,000 mortgage – more than 10% less than what she could have afforded 18 months ago. This might be OK if sale prices were falling, but they are not. They are slowly rising, along with interest rates. If she doesn’t find the perfect house until the end of the year, and if rates are at 5% by then, her $2245 monthly payment will only support a $420,000 mortgage. With prices slowly rising at the same time, that buys you less house than today’s $445,000 and a LOT less than $500,000 from 18 months ago.

    This is not to suggest that you should buy the wrong house simply to buy it quickly. But when you are shopping for homes and weighing the pros and cons of each, be sure to factor in the effect of rising prices and interest rates, the longer you wait. You may pass up an ALMOST perfect home today and have to settle for even less by the end of the year. When searching for a Cape Cod home, be sure you are considering ALL your options and carefully weighing the impact of acting vs. waiting.

    For professional assistance buying your Cape Cod home, please contact me and be sure you are signed up to receive Daily Property Alerts which email all the latest listings to your mailbox each day. We can’t change today’s inventory, but we can help ensure you are not missing new listings when they hit the market. Contact me today to get started. It would be my privilege to assist you.

    Buying a Cape Cod Home in a Seller’s Market

    If you receive our monthly newsletter, you already know we’ve been in somewhat of a Seller’s market for nearly a year now. But that doesn’t mean you still can’t get the perfect Cape Cod home at a fair price! Here are some tips to help guide you.

    Know the Market

    Be sure you are staying on top of the market, so that when the right home comes along, you’ll not only be one of the first to see it, but you’ll also have a good sense of what it is worth in the current market. The best way to do this is to sign up for Daily Alerts so that you see all new listings that meet your criteria right when they hit the market. Timing is everything with new listings. Nice homes that are reasonably priced go quickly.

    Know the House

    Once you find the perfect house, be sure to learn as much as possible about it to help you formulate a winning offer. How does it compare to similar homes that have recently sold? This will give you an idea of its TRUE market value. How long has it been on the market? Depending on the house, you may not have much negotiating power with a brand new listing. The Seller is likely going to take their chances that a better offer will come along. But if it’s been on the market for a while, the Seller will likely be more motivated to negotiate and you are less likely to find yourself in a bidding war.

    Know the Cost of Upgrades

    Homes that have been recently updated typically go more quickly and for top-dollar because many buyers – especially many CAPE buyers who are frequently retirees or second homeowners – don’t want to deal with the hassle of renovations. A home that isn’t perfect but COULD be perfect with some updating and upgrades could be the right house and will likely provide more room for negotiation. Make sure you have a good sense of what the upgrades will cost and make your offer with this in mind.

    Be Realistic

    Don’t sit around waiting for the deal-of-the-century to come along. With inventory so dramatically low compared to previous years, it’s not likely to happen. In the meantime, prices are rising and so are interest rates. So your buying power could be weakening the longer you wait.

    Be Ready

    As we discussed in our January post, you want to be ready to act as soon as you find the right house. That means having your financing lined up, have all your funds in the right places, and have as few contingencies as possible. In a Seller’s market, many Sellers – especially of new listings – won’t be keen on potential show-stoppers such as a home sale contingency or a lengthy closing date. But as noted above, if the house has been on the market for a while, you may have more negotiating power.

    A good Buyer’s Agent can assist you with all of the above. Please contact us for assistance in buying your new home. It would be our privilege to assist you.

    On Your Mark, Get Set, BUY!

    After months or maybe even YEARS of looking, there’s nothing more frustrating than missing out on the Cape Cod home of your dreams because you couldn’t act fast enough when the perfect home hit the market. Being ready means having all your ducks in a row so that you can make a solid offer immediately that stands a good chance of being accepted by the Seller. Here are some tips for making sure you are THAT kind of ready.

    Get Pre-Approved.

    If you plan to take out a mortgage to buy your home, you will need a pre-approval letter from a lending institution and it must be CURRENT. If the one you have is more than 60 days old, you should have your Lender issue you an updated letter immediately. An offer that has a mortgage contingency yet no pre-approval letter will not be considered complete by most Sellers. You do not want to lose a house to another buyer, just because you couldn’t get your pre-approval letter in time. It generally only takes minutes on the phone with your Lender, so don’t put it off until you find your home.

    Plan for Downpayment Liquidity.

    Ideally, whatever money you plan to use for your downpayment should already be in an easy-to-access account that is in YOUR name. If you will be receiving gift money to buy the house, be sure you tell your Lender that when you are getting pre-approved.

    Know the Market.

    You may have found the ideal house, but do you know what it is worth? No matter how much you love it, you don’t want to overpay. While you are waiting for the perfect home to come along, be sure to keep in touch with the market, which means knowing how much similar homes in similar neighborhoods are fetching. This will help you act quickly and put together a solid, realistic offer when the right home comes along.

    Have a Good Buyer’s Agent.

    Most buyers benefit from working with a conscientious, trusted, local real estate professional who is acting as their Buyer’s Agent. Your Buyer’s Agent will not only help you search for the ideal home, but can also help you with all the issues addressed above.

    Get Your Home on the Market.

    If you need to sell a home before buying one, you should get your home on the market to hopefully avoid the need for a Home Sale Contingency in your offer. Most Sellers do not like home sale contingencies and some will not even consider an offer that has one. If you are worried that your existing home will sell before you find a new home, you could make your acceptance of the Buyer’s offer contingent upon you finding a new home. Depending upon your financial circumstances, you might also consider a bridge loan to finance the new home. But be wary of over-extending yourself. Your home may not sell quickly (if at all) and it may not sell for as much as you had hoped. Consult your Lender and/or your Financial Advisor for guidance.

    Most importantly, be sure the perfect home doesn’t escape you because you weren’t actively looking for it! Be sure your Buyer’s Agent has you registered for Daily Alerts so that you receive daily emails with all the new and updated listings. Happy House-Hunting!

    Thinking of Selling? Be Prepared!

    If you’re planning to sell your Cape Cod home in 2018, the time to start planning is NOW.  2017 was marked by historically low inventory in the Cape Cod real estate market. Many buyers never found the home of their dreams, meaning there is pent up demand going into 2018. Sellers will likely benefit from this in the form of higher sale prices and fewer days on market. In 2017 (through November), median sale prices of single family homes rose 6.1% to $398,000 and average days on market dropped by almost 20% to 111.

    So if you’re thinking of selling, here are some general tips to help you get ready.

    Understand Pricing

    The right list price is the most important factor in selling your home for the highest possible price in the shortest amount of time and without leaving money on the table. But it’s a difficult parameter to nail because in the end, the sale price is dictated by the buyers (or “the market”), not by the seller and not by the listing agent. What you paid for the home, how much you owe on it, and how much you have invested in it are largely irrelevant facts. The listing agent makes a pricing recommendation based on the recent sale prices of all similar, nearby properties, nicknamed “the comps”. The more recent, the more similar, the more nearby, and the more shear number of comps, the more credible the recommended price is likely to be. But in the end, the home will sell for whatever the highest bidder is willing to pay, assuming the seller agrees to the price.

    Unless the seller is desperate to sell their home quickly, most sellers opt to list their homes a little higher than the price they expect to receive. This leaves some wiggle room for negotiation and also addresses the reality that most buyers expect to pay a little below asking price for the home. It also leaves open the possibility that the perfect buyer will surface who really loves the house and appreciates its full value. But it’s important not to list TOO high or you will likely miss the market and find yourself reducing the price repeatedly. In 2017, homes on the Cape sold on average for 96% of their list price and 94% of their ORIGINAL list price

    In short, pricing is not an exact science. Your listing agent makes a pricing recommendation based on intelligence they gathered regarding the market. The market can change quickly for many reasons. The old adage “Don’t count your chickens before they’re hatched” applies to selling your home. Nobody can know for sure what the sale price of your home will be until it is sold. Sellers are wise to consult with 3 different reputable listing agents and to question them about how they arrived at their pricing recommendation.

    Consider Your Presentation

    How your home shows itself, both in pictures and “in person”, is critical to attracting the maximum number of prospective buyers, which is the key to obtaining the highest possible price. The first and most important step to effective presentation is to de-clutter the house. Even if you do NOTHING else to prepare your home for sale, you should get rid of as much clutter as possible on both the inside and outside of the home. Put away extraneous items on your kitchen counters, bath vanities, bedroom bureaus, etc. Invest in some inexpensive plastic storage containers at Home Depot and “hide” as many personal items as possible. Keep a few empties on hand for quickly tidying up for a last-minute showing. Nobody will know that the neatly stacked storage containers in the closet are actually filled with today’s pile of laundry, a mountain of paperwork that was on the dining room table, and all the dog toys in the family room. But your home will show better as a result.

    Cleaning is equally important – especially in the kitchen and bathrooms. Even if these are old, they can sparkle. Most buyers can see themselves doing updates, but they will be inclined to leave a dirty, cluttered home quickly and not want to return for a second look.

    Your listing agent may recommend some furniture staging if the home is empty or if the existing furniture should be rearranged to promote better flow and/or make the rooms appear larger.

    As for repairs or renovations, you should carefully consider whether or not you will recoup your investment at the time of sale. Addressing critical home repairs such as a broken front step or extensive exterior rot might be worthwhile to make your home show better and eliminate items that will inevitably show up on the buyer’s home inspection report. Fresh, neutral-colored paint can also be a cost-effective “win” when selling, especially if you save money by doing it yourself (assuming you can do it well). Updating a kitchen will undoubtedly make the home show better and will also fetch you a higher price. But how much higher? Will it be enough to recoup your investment, not to mention the time and inconvenience of it all? These are important issues to consider and discuss in advance with your listing agent.

    Know Thy Title

    As the seller, it is your responsibility to deliver to the buyer a clean and marketable title at closing. If there are title issues with your property, it would behoove you to know about these sooner rather than later. Involving a real estate attorney BEFORE you have a signed offer is recommended so that he or she can uncover any title issues in advance.

    Other Recommendations

    • Assuming you have a septic system, have it tested immediately so that you know whether or not it passes Massachusetts Title V inspection. If it doesn’t, you may need to repair it or even install a new one prior to sale. This is information you’d be better off having BEFORE you price and list the house.  Your listing agent can recommend an appropriate septic inspector.
    • Read the Massachusetts Smoke Detector Law and know whether or not your smoke and CO2 detectors are in compliance. The laws differ depending on the year your house was built.  A passing smoke certificate will be required from your town prior to sale and the onus is on the seller to obtain this.  Your listing agent should be able to assist you with this.
    • Some sellers bring in their own real estate appraiser and/or home inspector before they list so that they will have an idea of how the home might be appraised by a buyer’s bank. The home inspection can reveal a number of issues that the seller could easily and more cost-effectively address themselves, rather than have the buyer try to renegotiate the price after their home inspection.  Your listing agent can give you names of appraisers and inspectors.
    • Be prepared for your home to be shown at any time. Sometimes showing requests are last-minute and while this can be annoying, you should try to accommodate them. The more your home is shown, the more likely you are to find the best buyer and realize the highest possible price.
    • Most importantly, be prepared to be patient and practical. Unlike some other real estate markets such as the current Boston area market, most homes on the Cape do not sell the first weekend. Nobody knows for sure when your home will sell. If you really need to sell quickly, be sure it is priced realistically, not optimistically.

    If you are thinking of selling a home on Cape Cod, I would be happy to provide you with a free, comprehensive, comparative market analysis (CMA) of what your home is worth. Please contact me for immediate service.

    The Anatomy of an Offer – Part 3

    Part I of this 3-part series on Offers discussed the offer price, while part 2 discussed the numerous dates associated with the offer. This final piece discusses the various contingencies, if any, that are associated with your offer.

    So what is a contingency? Simply put, it’s a condition that must be met in order for you to agree to proceed with the purchase of the property. There are some standard contingencies that are frequently included in offers, depending upon the Buyer’s circumstances and wishes. These include:

    • Inspection Contingency – The majority of Buyers opt to have the home inspected by a licensed home inspection professional before proceeding with the sale as originally written. If you are unhappy with the results of the home inspection, this contingency allows you to get your deposit money back and terminate the deal, or to attempt to renegotiate the offer based on new information that you had no way of knowing prior to the inspection.
    • Mortgage Contingency – If your purchase of the property requires you to take out a mortgage, the mortgage contingency protects your deposit money in the event you are turned down for the mortgage by the bank. You will not lose your deposit if your mortgage application is denied, as long as you have fulfilled the obligations in the Offer and/or Purchase & Sale Agreement.
    • Home Sale Contingency – While not as common as the inspection and mortgage contingency, a Buyer may have to include a home sale contingency if they are unable to purchase the property without first selling a home they already own. Sellers sometimes refuse offers with home sale contingencies because they don’t want to miss out on another “ready, willing and able” Buyer who could close more quickly. But there are ways of reducing the risk to the Seller, such as the incorporation of a “48-hour kickout clause”. The bottom line is that if you can’t afford the new home without first selling the old one, then you really have no choice but to include a home sale contingency. Thus, it is not a contingency of choice, but rather one of necessity.
    • Condo Docs Contingency – If you are buying a condominium, it is common to include a contingency that provides you with a specified timeframe to review the condo docs to be sure you are comfortable with the condominium association, its financial stability, rules & regulations, etc.

    The above are all common contingency clauses that are frequently included in offers. But you could place any contingency that you want on your offer. You could state that your offer is contingent upon not closing for 6 months. You could say it is contingent upon the dead tree in the front yard being removed prior to closing. You could stipulate that it’s contingent upon your mother approving of the house when she arrives from Italy in 3 weeks. The Seller, of course, does not have to agree to any of the conditions. The more “unusual” and uncertain, the less likely it is that the Seller will agree. Uncommon contingencies should be used sparingly if you want the Seller to accept your offer.

    Before closing, it’s important to highlight the most important quality of an offer, and that is its owner. This is YOUR offer, it is not your Realtor’s. YOU are the one buying the house. And while your Realtor may advise you on all aspects of the offer, it needs to reflect YOUR terms and YOUR wishes. So before you sign your name to the bottom and hand over a deposit check, be sure you’ve read everything carefully and that you understand and agree with everything stated therein. Good luck!

    Anatomy of an Offer – Part 2

    In Part 1 of this 3-part series, we discussed the most obviously important aspect of your offer – the PRICE! This month we’ll cover a less obvious but equally important topic – the DATES.

    Offer Dates

    When making an offer on your Cape Cod home, there are numerous dates that must be identified and all are important. Here’s a quick description of each.

    Expiration – This is the date and time at which the offer expires. The Seller must reply to you by this date and time, or technically, your offer is off the table.

    Inspections – This is the date by which you will complete your inspections of the property. A period of 2 weeks after the acceptance of the offer is usually allocated for any and all inspections.

    Inspections Response – This is the date by which you must respond to the Seller about the inspection if you wish to back out of the deal or request any concessions from the Seller.  If this date comes and goes and you do not say anything to the Seller, it is assumed that you are proceeding with the sale, and failure to do so could result in the forfeiture of your initial deposit. We will discuss this further next month.

    Purchase & Sale – This is the date by which you will sign a more elaborate and detailed contract with the Seller known as the Purchase & Sale Agreement (or P&S for short). This is typically done within 3 weeks of the initial offer being accepted and AFTER you have had your home inspection. But there are no firm rules and there are always exceptions. Your attorney is heavily involved with the preparation and review of the P&S on your behalf.

    Mortgage – When a purchase involves a mortgage, the offer will specify a date by which you must have a mortgage commitment from your Lender. This is typically 3-4 weeks after the signing of the P&S, depending on how easy your loan is likely to be. A mortgage commitment is FAR different than a pre-approval. It is given to you by the Lender after they have completed a forensic review of your financial profile and background. Once you have a clean mortgage commitment from the Lender, you will soon be ready to close on the house. Another date specified in this section is the date by which you must have submitted at least one mortgage application. This date frequently coincides with the P&S signing date, since most lenders don’t start working on the application until they have a signed P&S.

    Closing – This is the date that you plan to close on your mortgage (if there is one) and take possession of the home.

    If your offer is accepted by the Seller, you should of course do your best to meet all the deadlines laid out in the offer. However, it is not always possible, and in those cases, the Buyer can request an extension to one or more dates. For example, after your standard home inspection, you may wish to order a pest inspection based on termite damage uncovered during the home inspection. This may require an extension to the inspection deadline. Or your mortgage lender may require a little more time before granting you a firm commitment, in which case you would need to request an extension to the mortgage commitment deadline. These are common occurrences, but keep in mind that the Seller doesn’t HAVE to agree to any extensions. So be sure you are always operating with the phrase “Time is of the essence” in mind.

    Stay tuned for the final part of this series which will further explore the various Contingencies associated with your offer.

    Anatomy of an Offer – Part 1

    You’ve been looking for months. You’re already pre-approved for a mortgage. You FINALLY found the right home. Now what? Well it’s time to put your money where your pen is and write up an offer!

    The offer tells the Seller the terms under which you would like to purchase his home. The key elements to an offer are price, dates, and contingencies. We’ll take a look at each separately in this 3-part blog series!

    The Offer Price

    The offer price tells the Seller how much you are willing to pay for his house. Unless you are deeply confident in your own knowledge and instincts, your Realtor should help you understand the market value of the home by providing you with sale prices of similar, nearby homes for comparative purposes. For example, let’s say the home is priced at $549K. Your Realtor may tell you that similar homes in the neighborhood have sold in the past six months within the range of $475K to $525K. Armed with this knowledge and an understanding of how your target home compares to the others, you may decide that this particular house seems to be worth around $515K. A Buyer typically makes an initial offer that is lower than what she is willing to pay, but there are times when that is not advisable, such as during a strong seller’s market (when inventory is low and buyer activity is high), or when the home appears to be priced right from the start.

    After confirming the offer price, you will fill in amounts for the first and second deposits. The first deposit, frequently called the “good faith” deposit, is a small deposit used to “bind” the offer and tells the Seller that you are serious. This check is generally a personal check, frequently for $1000, and is not deposited until your offer is actually accepted. If that never happens, the check is returned to you.

    The second deposit will be paid when you sign the Purchase and Sale Agreement, which is typically after you have had a professional home inspection and confirmed that you definitely want this house. The second deposit can be any amount you want, but is typically between 5 and 10% of the offer price. The Seller will take note of your second deposit amount when considering your overall offer. A strong second deposit tells the Seller you are very serious about this home, since you are willing to tie up a fair amount of cash while waiting for it. The Seller may consider this when evaluating multiple offers. The second deposit can also be a personal check, although many Seller’s Agents will insist that it is in the form of a cashier’s check – particularly if there is very little time between the second deposit and the closing.

    The final amount is the balance, and that is the offer price less the deposits. It is what you will owe to the Seller at the closing in order to complete the purchase of the house. Some or all of the balance may actually be covered by the mortgage – depending on how much you are financing and how much you are paying out of your own pocket.

    In the event that you back out of the deal after the home inspection, your first deposit will be returned to you, provided you comply with the inspection response date specified in the offer. If you move forward with the deal after the inspection and proceed to signing a P&S and paying a second deposit, the P&S will specify under what conditions you can still legally terminate the deal and receive all of your deposits back. The most common one is the mortgage contingency, which you would invoke if your lender turned you down for a mortgage.

    You need to keep a very sharp eye on all the dates and contingencies laid out in your offer so that you don’t put your deposit monies at risk in the event you are unable or unwilling to complete the transaction. These will be discussed in subsequent blog posts.