Month: September 2017

Be Prepared for Loan Application

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Hey, you! Yeah… you, scrolling through Zillow. I know that you just started thinking about buying a house, but you really should be prepared for when you find “The One!” I mentioned in this FB live video that the #1 thing that you need to do when buying a home is to get PRE-APPROVED (or at the very least pre-qualified.)

get-pre-approved

Why is it important to get pre-approved, you might ask? Considering that our current, local real estate market is a seller’s market (in most price ranges and areas), you need to be pre-approved so that the seller of the home you want to purchase will take your offer seriously. And, on the occasion that you may be up against other buyers, you will want to show the seller that you have already done your homework to ensure that you can afford the property that you are looking at. Most sellers, regardless of the market leanings, will require you to show them a pre-qualification or pre-approval letter before they consider your offer terms. So… just get this part out of the way so that you don’t miss out on a home you love!

You may be asking yourself, “What do I need when I talk to my lender?” Well, you are in luck, one of my trusted loan advisers gave me her list of “Documents You Need for Loan Application,” and I am here to share that list with you!

  1. Last 2 years of Tax Returns and W-2’s.
  2. Last FULL month of pay stubs.
  3. Last 2 months of bank statements (full copies will be needed for application, including any blank pages.)
  4. Copy of your ID.

Obviously, this list may vary depending on your personal situation. If you are self-employed, collecting social security, or have multiple streams of income, you will have different documentation requirements. If you have a property that you must sell, you will need a copy of your contract for that sale.

In summary, call your lender, get pre-approved. Then, you’ll be ready to find that perfect home!! Happy house-hunting!

What’s an ESCALATION CLAUSE?

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up-to-right

Our current local real estate market is not unlike many other markets around the US. We are seeing low inventory of homes for sale, and buyers who are clamoring for the same homes as soon as they hit the market. If you are one of those buyers, what can you do to help set your offer apart? Remove inspection contingencies. Close quickly. Offer a SOLID purchase price. Pay with cash. Remove home sale contingency. Write a letter pleading your case. Your REALTOR® will help you decide what you can do. These are all great things to consider. Your situation may not allow you to pay cash or remove certain contingencies, so what can you do in this situation? You may consider adding an “Escalation Clause” to your offer.

You are probably asking yourself, “What is an escalation clause?” Don’t worry… most people (and probably a lot of real estate agents) don’t know what it is either! An escalation clause offers you the ability to make an initial offer price on the property, and then tell the seller that you are willing to exceed any other offer price incrementally until you are the highest offer, up to a predetermined cap.

Are you scratching your head, saying… “What, the what?!” Let’s look at an example.

List price on a home is $199,000. You have been informed that there are several offers being made, and you really want the house. So, you are willing to offer the seller $205,000. In addition to this $205,000 you are pre-approved to purchase a home at $215,000 (and you are willing to go up to this amount if you need to in order to get this house.) In your escalation clause you decide that you will go above the highest offer by $1,000 until you are the highest offer. But, you will not exceed $215,000. If the highest offer comes in at $210,000 then you will pay $211,000.

Does that make sense? If not, call me. Maybe I can explain it better in person!

A note of caution. Do not use this clause with abandon. It shouldn’t be used to initially “low-ball” a seller, and if your financing requires that the property appraises for the purchase price, then you will want to consider your “top end” cap, and not go too crazy with that. In the end, listen to your REALTOR® and the advice that they give you.

Now, I want to speak to the sellers out there. When considering multiple offers and offers with escalation clauses attached to them, don’t forget the other terms of the contract as well. You may have an offer that is comparable to the one with the escalation clause in price, but it doesn’t have financing or inspection contingencies… that could be worth WAY MORE than a few hundred or thousand dollars in the long run! Lean on the experience and expertise of your REALTOR® when deciding which offer to accept.

The takeaway here is that it is important to have your REALTOR® assist you in making and negotiating the best offer possible. Good luck buying and selling!