Contract Chatter: Protect Yourself with Due Diligence

 Contract Chatter: Protect Yourself with a Due Diligence Period (Home Inspection)

We see all kinds of contracts come through - some are written perfectly, some are kind of sloppy, and some are just plain rediculous. Just because an agent successfully obtained their real estate license through the state of Georgia, doesn't always mean that they know the best ways to protect their clients. In fact, you don't really learn that through your licensing classes, it comes from experience. Here's one great tip to help protect you when purchasing a home- There is a section of the contract titled "Property Sold Subject to Due Diligence or 'As-Is'" (see above) on page 3 of the Georgia Contract, paragraph 11. This is one of the most important aspects of the contract. There are two options to this section: 1) Property Sold Subject to Due Diligence or 2) Sold As-Is. Be sure that you have a due diligence (inspection) period - Check that box! (yelling "check - that -box" kind of like they yell "move-that-bus!" on Extreme Home Makeover) There are many miconceptions about bank owned properties being sold as-is and so therefore, agents check the "as-is box" which is a huge mistake. Yes, it's true - many of them will make no repairs (but a great agent knows that sometimes they will - even if they say they won't. Be sure to have a good, aggressive agent working for you!). Even if a property is being sold as-is and without repairs, a buyer still has the right to have an inspection and terminate the contract with no penalties or risks should they uncover something they're not satisfied with. The due diligence period actually offers even more than the right to have an inspection. It offers the right to terminate the contract for any reason so long as you do so during the negotiated time frame, normally 7-10 days. By checking that awesome little box, you're creating an option contract until the due diligence period expires. After the expiration of the due diligence period, you risk losing your earnest money if you terminate and because the contract is a legally binding document, the seller could kindly request to see you in court for breech of contract.

We never recommend that our buyers pass up the due diligence period. We see a ton of offers/contracts come through with the as-is box checked and it always makes me wonder - why would you do that to your buyer? Although a buyer can still have an inspection when the "as-is" box is checked, they will lose their earnest money if the inspector found some major issues. Not fair, huh? Be sure to have an experienced agent representing you so that you're fully protected! A great agent will also be very detailed in helping you manage all of the important deadlines associated with contracts (due diligence period, financing contingency period, appraisal contingency period, etc).

Now on the flip side, understand the seller's perspective - it's not appealing to the seller to enter into a contract in which the buyer request a lengthy due diligence period. The purpose of this time frame is to give you enough time to inspect the house and feel comfortable with the condition - not for you to have a permanent out all the way up to the closing date. Asking for 25 days of due diligence will definitely put a bad taste in the seller's mouth and lead them to believe that you're not serious. A quick note to sellers -- denying a due diligence is a sure fire way to scare the buyer off. They'll be gone quicker than you can say "no due diligence." If you deny the right to an inspection it will seem as if you're hiding something. It's perfectly normal and acceptable to allow at least 5-10 days for due diligence.

If you have questions about the due diligence period or any other contract questions, give us a call or email us. Although we're not attorneys and can't offer legal advice, we can still help you understand the documents that we deal with on a daily basis!

 

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Best Time to Buy AND Sell?



If you know a great real estate professional (AHEM.......Us), you might be questioning them right now. They may tell a friend of yours in the afternoon that this is a great time to buy a home and in the evening tell another friend that they have to lower their price in order to sell their home. Wait a minute. How can it be a great time to buy if prices are falling? Is the real estate agent just saying this to make a sale? Actually, the agent is 100% correct. Perhaps for the first time in American real estate history, you must buy now and you must sell now. How can this be? Because what is important to the buyer is different than what is important to the seller. Let us explain.

The most important thing to the seller: PRICE

Every seller is most concerned with trying to get the best price possible for their home. In order to do that, they must sell now. Banks repossessed the highest number of foreclosed homes in history last month. These houses will come to market at dramatically discounted prices. This is the main reason analysts are calling for another dip in prices over the next eighteen months. The best advice a seller can receive is to sell their home now before these foreclosures come to market.

The most important thing to the buyer: COST

Price plays a part in the buyer’s decision. However, the most important thing to most buyers is the cost – the mortgage payment they must pay every month. That payment is determined by the price of the home AND THE INTEREST RATE ON THE MORTGAGE. Rates are artificially low because of government intervention. That will not last forever.

The National Association of Realtors (NAR) has projected that rates will rise over the next seven quarters. What will that do to the cost? Here are NAR’s projections and what impact it will have on a $100,000 mortgage:

As we can see, the interest rate has a major impact on the COST of the home. Even if prices continue to fall, the cost may not go down if interest rates increase.


Bottom Line
Your real estate agent is trying to give the best advice they can to every family they work with – even if that advice seems to be counter intuitive.










KCM Crew, October 26, 2010

5 Reasons You Should Sell Your Home Now!

Selling your house in today's market can be extremely difficult. It is for that reason that every seller should take advantage of each and every opportunity that appears. Each fall, such an opportunity presents itself. This fall, that opportunity may be just too good to pass up.

Below are five reasons you should consider pricing your house to sell in the next 90 days. Meet with your real estate agent and mortgage professional today and see whether it is the right move for you and your family.

1. Entering this time of year, the buyers are more serious.

We all realize that buyers are not quick to pull the trigger on the purchase of a home today. There is no sense of urgency with the supply of eligible properties at all time highs. However, at this time of year, the 'lookers' are at the stores doing their holiday shopping. The home buyers left in the market are serious and are more apt to make a purchasing decision. Less showings – but to more motivated purchasers.

2. If you are moving up, you can save thousands.

The Chicago Tribune stated in an article last week that sellers who want to 'trade up' should act now:

It could be a bigger house, different neighborhood or a better school district, but it comes with a higher price tag. Do the math; this might be the right time.

A home that was once worth $300,000 may now be worth $240,000 in a market where prices have fallen 20 percent. Wow, you think, the seller is taking a bath. But that seller may also be a prospective buyer who wants a house that once was valued at $400,000. With an equivalent market drop and a realistic listing price, that house may now sell for $320,000. So, in effect, the person is losing $60,000 on the sale of one home but coming out ahead $20,000 on the purchase of another.

Keep in mind the spread may be even greater. There’s a smaller pool of potential buyers for more expensive homes, so sellers may be more willing to cut their price to get a deal done.

3. Interest rates just fell again – to 4.19%.

Professor Karl E. Case, the founder of the Case Shiller Pricing Index in an article in the New York Times last month actually did the math for us:

Four years ago, the monthly payment on a $300,000 house with 20 percent down and a mortgage rate of about 6.6 percent was $1,533. Today that $300,000 house would sell for $213,000 and a 30-year fixed-rate mortgage with 20 percent down would carry a rate of about 4.2 percent and a monthly payment of $833 ... housing has perhaps never been a better bargain.

4. You beat the rush of inventory that is coming next year.

Every year there is an increase of inventory which comes to market from January through April as homeowners put their houses up for sale in preparation for the spring market. As an example, here is the number of listings available for sale in each of those months in 2010.

January – 3,277,000

February – 3,531,000

March – 3,626,000

April – 4,029,000

You won't have to worry about this increasing competition if you sell now.

5. You have less 'discounted' inventory with which to compete.

This year, sellers of non-distressed properties have been given an early holiday present. With banks declaring a suspension on the sale of many distressed properties (foreclosures), there has been a large supply of discounted properties removed from competition. No one knows how long this self imposed moratorium will last. However, while it does, every homeowner has a better chance of selling their property.

Bottom Line

If you are looking to sell in the near future, there may not be a more opportune time than this fall. Serious buyers, great move-up deals and less competition from foreclosures creates the perfect selling situation. Don't miss it!










Courtesy of KCM Blog

 If HE Says It Is Time To Buy a Home, BUY A HOME!

"If you don't own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one."

– John Paulson 9/27/2010

WOW! That's a powerful statement.
There is no question that John Paulson is a bull when it comes to residential real estate right now. Should we care what Mr. Paulson thinks? Should we listen to him? The answer to both questions is a resounding 'YES'. Here are several reasons why.

Who is John Paulson?
Paulson is the person who made a fortune betting that the subprime mortgage mess would cause the the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes John Paulson is:
"a multibillionaire hedge fund operator and the investment genius who made a killing going short subprime mortgages a few years ago."

According to the Wall Street Journal Paulson is:
"a hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were."

What did other financial players think of his statement?
The Wall Street Journal agrees with Paulson:

"Ignore the critics. The odds have to be on his side...It isn’t just that home prices have fallen a long way. It’s also that, if you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now you can borrow for 30 years at around 4.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 3%. That’s going to prove an awesome deal if we see inflation again."

And Forbes said:
"As this is the best time in 50 years to buy homes, Paulson advised his listeners to take 30 year mortgages to buy a home as "your debt and interest payments get locked in at record lows, while the price of your home will rise."

Are others also saying now is the time to buy?
Just last week, we posted that there is a growing number of people saying that NOW is the time to buy, including:

The Wall Street Journal

Professor Karl Case, founder of the Case Shiller House Pricing Index

The wealthiest families in the country and

70% of everyone else in America

Bottom Line
Thinking of buying a home? Are you taking advice from a friend or family member telling you that now is not the time? It may be time to listen to people who better understand the opportunities that exist in real estate today.