House Hunting, Now What?

You've got your pre-approval letter, chosen your desired neighborhoods,calculatede your monthly payments, and are comfortable with your offer amount; along with a trusted real estate agent, you're ready to submit offers. Here's what to expect:

Despite higher interest rates, buyer activity has remained strong, and the inventory levels remain stubbornly low. You can encounter multiple offers if you find a well-priced house in a desirable neighborhood within a good school district. Please prepare for various scenarios when you submit offers with your agent's guidance.

Offer Submission Process

When making an offer on a property, the seller's agent will respond with either an acceptance, a counteroffer, or multiple counteroffers, especially if there are competing offers or they wish to modify the terms. Being strategic when handling multiple offers or negotiating adjustments to your terms is essential. Take your time, carefully weigh your options, and make well-thought-out decisions to ensure you don't miss out on your dream home that you've fallen in love with.

When you find yourself in a multiple-offer situation, consider your level of interest in the house, the number of competing offers, and how much you are willing to go up in price. Do you have enough to cover if the appraisal comes in lower? You have a few options in such situations: revise your offer, submit your best and final offer, retrieve your offer, or use an escalation clause to outbid others.

What is an Escalation Clause?

An escalation clause operates by establishing a maximum purchase price. For instance, if there are five offers and your initial bid is $1,000,000, let's assume you set the cap at $1,050,000, meaning you are willing to go up $50,000 higher. The escalation clause reads: "Not to exceed $1,050,000, the buyer is prepared to offer $10,000 above the highest bona fide offer, but the seller must reveal the highest bid for the $10,000 bonus to be applied.

Suppose someone submits an offer of $1,040,000. You would secure the purchase if another buyer submitted a bid of $1,048,000 because your cap is $1,050,000; you could potentially lose the purchase because if your cap is set at $1,050,000, the seller may choose to accept the offer of $1,048,000 as they would not be able to receive the bonus by going above your cap.

No Round Numbers

Here's another valuable tip: Don't limit yourself to round numbers when offering. Instead of stopping at $900, push it a bit further to $903. If the offering is $950, why not go the extra mile and offer $957? This minor adjustment could put you a few thousand dollars ahead of the competition. Always remember to think outside the box and seize opportunities others might overlook.

What Does Home Sellers Look For? What Makes an Offer Stand Out in Real Estate

In multiple offers, sellers often prioritize financially stable buyers. A higher down payment indicates a solid financial position, as it demonstrates less risk despite potential obstacles like property conditions, appraisals, and loan approvals.

Consider this scenario: You plan to put down 20% as your down payment. However, the seller is concerned about the property's appraisal since the multiple offers may increase the price, and the appraiser may have differing views. In such a situation, the seller might propose waiving the appraisal contingency. If the appraisal comes in lower than expected, you'd be required to cover the difference out of your pocket since the bank only loans on the property's appraised value. This adjustment could increase your down payment, so assessing whether you have the necessary funds to bridge any potential gap is crucial. Failing to do so could put your deposit at risk, making it imperative to exercise caution. 

The standard physical contingency period in the contract is 17 days, but it can be shortened to 10 or shorter days if the seller provides all necessary disclosures promptly. Both buyers and sellers must meet their obligations under the Residential Purchase Agreement (RPA). According to RPA 3L:4-8D/14A, the buyer has a five-day review and rescission period whenever the seller provides any property-related disclosure. Understanding the contract is your strategic advantage. Comprehending and adhering to it means that all disclosures must be delivered promptly. Failure to meet this obligation can delay the removal of contingencies, extending the process to a later date since it will give you 5 more days to review the disclosures. 

If you're offering a substantial sum, consider shortening contingencies and finding ways to sweeten the deal.

No More Dear Home Seller Letter

Previously, it was common to include a personal letter to the seller introducing yourself and sharing your reasons for wanting to purchase their property. However, due to recent developments in fair housing laws, sending such letters to sellers is no longer permissible. These changes have been implemented to prevent any potential issues related to discrimination and bias in the home-buying process.

Securing Full Loan Approval: The Underwriting Advantage

Engage in a conversation with your lender regarding the possibility of obtaining full approval for your loan. Not all loans may qualify, but if your loan can secure full approval, it's as strong as a cash offer. This can lead to a quicker closing on the property and significantly bolster the attractiveness of your offer.

Presentation Matters

Craft a comprehensive and well-presented offer; the clarity and completeness of your proposal can make it stand out.

Understanding the Seller's Psyche

Understanding the seller's unique requirements is critical when securing your dream property. Please dive deep into the seller's needs, uncover their desires, and shape your offer to accommodate their wants. For instance, they may wish to remain in the house post-closing or leave some old furniture behind. Your flexibility and attention to their preferences can be the winning touch that seals the deal. And if you're eager to make the house yours, please don't hesitate to ask about covering the seller's moving fees. It's a gesture that can sweeten the deal and make your offer even more solid.

Innovative Strategies for Selling Your Home in a High-interest Rate Market

Today's 30-year loan rate is 7.63%, causing builders and home sellers challenges. Here's help to navigate these times for home sellers and home buyers.

Home buyers want to reduce their monthly mortgage payments. One way to do this is with a trick called a temporary buydown, which is coming back from the late '70s and '80s when interest rates were crazy high.

Here's how it goes: Instead of paying the full monthly mortgage bill from the start, the home buyer pays less for the first year or two or three.

For example, if you're getting a $1 million mortgage, a buydown at 6% interest means you pay about $5,998.03 a month for the first year, while without a buydown at 7% interest, you'd pay about $6,653.04 monthly. But remember, in the buy-down plan, your payments go up after the first year. It's a way to help buyers or sellers close the deal when rates are high. As a buyer, you may request that the seller help you buy down points.

Temporary buydowns

Typically, home builders and sellers have covered the cost of temporary buydowns as part of the closing costs, equivalent to the amount the buyer saves on interest. 

Buyers: to save money on your mortgage, looking at different lenders and asking them the right questions is essential. Some lenders now offer special deals, like temporary buydowns, to attract customers, especially when fewer people are applying for mortgages.

Negotiating effectively is essential when you're interested in purchasing a home that has been on the market for a long time, whether a brand-new construction or an older, neglected house. By negotiating to lower your interest rates, you can save money, and knowing what to ask for and how to negotiate can make a big difference in your savings and the success of your offer.

Buydowns can provide extended savings beyond just one year:

In a 2-1 buydown, the interest rate decreases by two percentage points in the first year, followed by a one percentage point reduction in the second year, before returning to the regular rate.

Meanwhile, a 3-2-1 buydown spans three years, lowering the interest rate by three percentage points in the initial year, two percentage points in the second year, and one percentage point in the third year.

Lastly, a 1-1-1 buydown offers a one percentage point reduction in the interest rate for three consecutive years.

Instead of lowering the price, a seller might offer a buydown option. This allows the seller to achieve their desired price while saving the buyer money. it's a good practice for buyers to inquire if the seller is willing to cover the buydown option, which can be mutually beneficial.

Who You Work With Matters

Choosing the right realtor is crucial and will determine whether you successfully secure your dream home. It can ensure a smooth buying process or turn it into a potential nightmare. The choice is yours.

Why should you hire me as your buyers' agent? Because I bring innovative solutions to any market challenges. I am passionate about asking the right questions to pinpoint tailored solutions for your needs. I understand what sellers and buyers require and can effectively adapt to meet those needs.

We're here to help you if you're looking for your dream home in Santa Monica, Beverly Hills, Pacific Palisades, Malibu, Brentwood, Venice, Los Angeles, or the surrounding areas. Please feel free to reach out to us for a complimentary consultation. With a wealth of experience, we're well-equipped to guide you through the entire process and help you secure the home of your dreams.