Posted by Paul Sian on Thursday, January 12, 2023 at 7:00 AMBy Paul Sian / January 12, 20232 Comments
How Does an Appraisal Gap Clause Work in Real Estate?
When you make an offer to the seller, and they accept, you still need the home to appraise when buying the home with a mortgage. Even when buying a home with cash the buyer may want to make sure the value meets or exceeds the offer amount. When buying a home with a mortgage most of the times an appraisal will be required as part of the process. If there is a difference between the amount offered and the appraised value, the purchase could fall through. An appraisal gap clause can prevent the transaction from falling through as this article explores. (Be sure to check out the video down below for more on the appraisal gap clause.)
What are Appraisal Gaps?
When the agreed purchase price of the home is higher than the appraised value, those in the real estate industry refer to it as an appraisal gap. The appraised value is determined by a licensed appraiser hired on behalf of the lender to ensure they aren’t lending more than the home is worth. For example where a contract to purchase a home is priced at $400,000 and the home actually appraises at $350,000 the lender will not allow the mortgage to be approved unless the purchase price is lowered to $350,000 or the buyer brings additional money to the closing table.
How much additional money the buyer must bring depends on the loan to value amount the buyer is borrowing based on. At an 80% loan to value (LTV) ratio the buyer must bring 20% of the total home value as cash...
Posted by Paul Sian on Thursday, October 13, 2022 at 7:00 AMBy Paul Sian / October 13, 2022Comment
Buying Real Estate With Cash
There can be many advantages to buying real estate with cash. Whether you are buying a home to live in or buying real estate to invest in cash offers grab the seller’s attention. Buying with cash allows the buyer to save time and close quicker on the purchase if that is what they want to do. With fewer contingencies a cash offer can be more competitive than a higher priced financed offer. Learn more about how to use cash to buy investment real estate or buy a home in this article.
Where To Get The Cash
If you happen to have enough cash savings to cover your purchase, then perfect. Make an offer based on the cash in a readily accessible bank account. Sellers will want to see proof of funds which means providing a copy of a bank statement showing the required amount of cash based on the offer price. Even in brokerage accounts where the value of the stock is greater than the offer price can serve as proof of funds for making a cash offer. Most of the stocks on the NASDAQ and NYSE are readily tradeable and the owner can usually sell their shares quickly in order to raise cash.
Cash that will be coming from Home Equity Line of Credit Loans (HELOC) or some other personal lines of credit (LOC) generally can be easily accessed assuming those accounts are current. If a buyer needs to apply for the HELOC or the personal LOC then the seller may not be as convinced about the ability of the buyer to make the purchase. Buyers wanting to use cash from their equity or personal LOC should have applied...
Posted by Paul Sian on Thursday, August 11, 2022 at 7:00 AMBy Paul Sian / August 11, 2022Comment
Timing The Real Estate Market
Timing the real estate market like timing the stock market is easy to talk about but hard to do in practice. Even those “experts” in the field while offering predictions rarely will offer guarantees as to performance. For the average real estate buyer or seller, trying to time the market may cause more pain than any gain. Instead buyers and sellers of residential or investment real estate need to look at their current needs and the financials in order to determine if it is the right time to buy or sell as this article explores.
Why Trying to Time the Real Estate Market May Be a Mistake
Trying to time any market for maximum profit can be a mistake as usually it is difficult to do. It may be easier to sell during a long term down trend or long term up trend and make some money. Trying to sell at the high or low for maximum gain can be appropriate where the real estate is for investment purposes. It may be that the price has reached a point where it makes sense to sell and invest somewhere else.
The homeowner hoping to sell while prices are high and then buy when prices reduce may find themselves losing money overall due to high transaction costs and getting the timing wrong. If the homeowner has a reason to sell/buy, like downsizing, upsizing, change of job, etc. then it makes sense to sell and consider everything together. A home should be viewed as something one lives in and not as an investment meant to make money. When it comes to paying interest on a 30-year mortgage, paying for maintenance and upkeep on...
Posted by Paul Sian on Thursday, June 30, 2022 at 2:00 PMBy Paul Sian / June 30, 20222 Comments
Terminating A Real Estate Contract
The real estate market is always in a state of change. Whether it is a buyer’s market or a seller’s market there are times when one party to the transaction wants to cancel it. Up until the closing paperwork has been signed there is always the ability for one party to walk away from the transaction. Whether the walking away can be legally done within the terms of the contract is another story. This article looks at how buyers and sellers can terminate a real estate contract.
Buyer Termination Within the Terms of the Real Estate Contract
The buyer in a real estate contract usually has more options that allow them to terminate than the seller does. Depending on how the contract is written the buyer can terminate during the inspection period, due to a low appraisal, inability to get insurance on the property, and the inability to get financing. Those situations do not usually result in an automatic termination though (depending on the contract language). Instead the buyer needs to take active steps to sign a release of contract and then send over to the seller for their signature. The contract release basically provides that both the buyer and the seller agree to terminate the contract and go their separate ways.
The contract release will usually contain terms...
Posted by Paul Sian on Thursday, May 19, 2022 at 7:00 AMBy Paul Sian / May 19, 20221 Comment
Mortgage Payment and Interest Rates
The amount of a monthly mortgage payment will be directly impacted by the interest rate that is charged for the mortgage. Home buyers are usually looking at the total monthly mortgage payment to determine what their budget is for buying a home. Higher interest rates on mortgages means looking for a home with a sales price that can get to the desired monthly payment a buyer needs. This article looks at how the interest rate will impact the monthly mortgage payment.
Fixed Rate Mortgage
A fixed rate mortgage means that the interest rate for the mortgage will remain unchanged for the length of the loan. So if the mortgage is a 30 year fixed mortgage with a 5% interest rate that 5% will be the same the entire 30 years the homeowner has the mortgage for. The mortgage term can be also be 15 or 10 year terms depending on what the homeowner opted for when buying or refinancing the house. With the fixed interest the principal and interest payments will remain the same for the length of the loan but the actual mortgage payment can still be subject to change if the payment includes escrowed insurance and tax payments. Insurance rates can go up with the price of inflation and taxes as well can increase or decrease based on the value of the home. In most cases the taxes increase as the home price increases. What that means is that the portion of the monthly payment that is for...
Posted by Paul Sian on Thursday, April 21, 2022 at 1:00 PMBy Paul Sian / April 21, 2022Comment
Different Statuses For Homes On The Market And What They Mean
When a home is on the Multiple Listing Service (MLS) listed for sale there are different statuses that are reported on the home. Those statuses help home buyers to know whether a home has accepted an offer, been sold, been removed from the market and even if the home has come back to the market after accepting an offer. Most MLS systems have similar statuses for real estate listed for sale in their market. This article looks at the different statuses and what each means.
Timing Of Status Changes
Generally any time the status of a home changes the change on the MLS must be made by some human input. A real estate agent who is listing the property is responsible for changing the status. Many MLS organizations require that the agents make their changes within a certain amount of time on the MLS after the status is updated in the real world. That means if an offer has been accepted by the seller the listing agent should be making that change in status sooner rather than later. By making the change sooner buyers can take that home off their list and look for other homes and save the time of buyers and sellers alike. Often, after accepting an offer home sellers want to stop the showings from happening in order to minimize the disruption it can cause.
One of the most common statuses on a home listed for sale is the active status. The active status means the home is on the market and still taking offers. As...
Posted by Paul Sian on Thursday, March 17, 2022 at 7:00 AMBy Paul Sian / March 17, 2022Comment
What Is Seller Financing?
When buying real estate the typical methods for paying are providing cash or getting a mortgage. One other method which is not very common is buying the property through seller provided financing. With seller provided financing the owner of the property is basically agreeing to sell the property to the buyer and take monthly payments in exchange. This article looks at seller provided financing to help buyers understand why it may or may not work.
Seller Financing Terms
With seller financing pretty much everything is negotiable. The buyer can negotiate how long they want the loan to be, how much down payment they should pay, what interest rate they will be paying and more. Of course, depending whether it is a buyer’s or seller’s market the negotiating position of the buyer to get the terms that want may or may not be the greatest. The seller is also the one offering the financing so regardless of the type of market they have more ability to control what they will or will not accept.
A traditional mortgage can have minimum down payments anywhere from 0-30% and terms are typically 7 to 30 years depending on type of real estate involved (commercial vs. residential). When using seller financing it is highly recommended that the buyer work with a real estate attorney to make sure their interests are being properly protected. Buyer’s should insist that the real estate title be transferred over to their name and the seller have their financing document be registered on the property as a mortgage lien to protect both sides.
Posted by Paul Sian on Thursday, February 24, 2022 at 7:00 AMBy Paul Sian / February 24, 2022Comment
The Importance of Timelines When Buying or Selling A Home
Timelines are critical when it comes to buying any type of real estate. The timelines set when certain things must happen and if missed the buyer or the seller can lose out on some important rights that they have based on those timelines. This article looks at what timelines are common when buying or selling a home and the consequences if those timelines are missed.
Common Timelines In A Real Estate Contract
In most real estate contracts, whether for commercial or residential transactions there will be due dates for accepting the offer, inspections, responding to repair requests (including request for price reduction based on repair issues), financing (if used), depositing earnest money, and the closing date. All the dates listed out in the contract are deadlines that if missed can cause a breach of contract claim. Both the buyer and the seller each have their own due dates they need to stick to in order to have a smooth transaction.
While an appraisal will generally be required when financing is used (there are some exceptions) usually there is no timeline required for the appraisal. An appraisal is usually ordered by the buyer’s lender after the home inspection is done. Since buyers are paying for the appraisal the lender will wait until the buyer gives them the green light to order the appraisal in order to help the buyer save some money if the deal gets cancelled due inspection issues. Appraisers are an independent part of the real estate process and their part only starts when the...
Posted by Paul Sian on Thursday, September 30, 2021 at 7:00 AMBy Paul Sian / September 30, 2021Comment
Can You Buy Real Estate With Cryptocurrency?
With the increase in value that Bitcoin and many other cryptocurrencies have been seeing over the past few years the question that sometimes gets asked is can one buy a house using cryptocurrency. The answer to that is it depends. Generally, homes in the US are usually bought using US Dollars. Converting cryptocurrency to dollars does allow one to buy that home with the cryptocurrency they have but is not as direct as it would be if the buyer directly transferred the cryptocurrency to the seller and did not have to convert to dollars. This article explores the possibility of using cryptocurrency to buy real estate.
Posted by Paul Sian on Thursday, September 2, 2021 at 7:00 AMBy Paul Sian / September 2, 2021Comment
What Are Some Of The Common Causes Of A Delay In Closing On A Home?
When buying or selling a home the timelines set by the contract are an important factor. Getting inspections done in a timely manner, having appraisals done on schedule and going through the mortgage loan process means there are a lot of moving parts to the process for buying or selling real estate. This article explores some of the common delays and how they are dealt with.
Can A Home Inspection Cause A Delay?
A home inspection can cause a delay in closing for a number of reasons. If an inspection cannot be done within the time frame requested on the contract the buyer may need to ask the seller for extra time to get the inspection done. Especially in an active real estate market, home inspectors will be booked out in advance. The preferred home inspector may not be available nor might any other inspector be available. Home buyers should be taking account of this and make sure they are requesting enough time for the inspection.
Home inspections will also bring up issues that sometime need to be further explored by a licensed professional in that area. For instance, electrical, plumbing, HVAC issues are better diagnosed by someone trained and licensed to provide an opinion on the issue. Home inspectors are more generalists by nature when it comes to the overall condition of the home and usually will let a home buyer know they found something that may be of concern that should be looked into further.
All of the above can add time to the process. Buyers may be holding off on ordering an appraisal until after all inspection matters have been resolved. Since...
Posted by Paul Sian on Thursday, July 29, 2021 at 7:00 AMBy Paul Sian / July 29, 2021Comment
Who Should Be Notified Before You Move
What Businesses and People Should Be Told You're Moving
Are you going to be moving? Moving from home to home is a difficult and stressful time for most people. You need to do things like get boxes, pack all your stuff carefully, and rent a truck or hire professional movers.
One of the many tasks you need to complete when moving is changing your address. You need to understand who to let know you are moving to avoid problems after being in your new home. Knowing how to forward mail will be an essential part of moving you can't forget about.
Some of the companies you need to notify of the move need to be contacted as soon as you know your moving day. We give you a list of businesses and organizations that you need to update with your new address before moving.
Post Office Change of Address
One of the first places you should notify of move intentions is the post office. Their change of address service will forward your mail to your new address for a year.
Notification of moving with the post office can easily be done online through their website. Please fill out their forms at least a week before your moving day to avoid any of your mail going missing. It is always better to make the change as early as possible.
Posted by Paul Sian on Thursday, April 8, 2021 at 7:00 AMBy Paul Sian / April 8, 2021Comment
How Do Real Estate Websites Work?
As a home buyer or seller you may have come across many different real estate websites. While there are different “brands” of real estate websites they usually all share one thing in common, they show current listings of homes that are available for sale on the market. Some websites can show which homes are for sale all around the United States whereas others are limited to specific areas. This article explores how real estate websites work and which websites may be the better option to go with.
Who Owns These Real Estate Websites?
The big nationwide real estate websites like Zillow, Redfin, Trulia, Realtor.com and some others are owned by big corporations. Those websites get nationwide access to all the multiple listing services (MLS) around the US so they can provide home buyers with current homes listed for sale. Those national real estate websites and their home listings though may not always be accurate depending on how they get the information for their websites. Some of them are pulling the information directly from the MLS while others use a third party to pull that information together for them which can result in some delays of status updates on properties.
There are other national real estate websites that have listings from where ever they have a physical presence in the market. Most home buyers and sellers have heard...
Posted by Paul Sian on Thursday, March 18, 2021 at 7:00 AMBy Paul Sian / March 18, 2021Comment
8 Smart Moving Tips To Prevent Yourself From Going Crazy
While the activities of buying or selling a home are not as stressful, the time when people really can melt down is when it comes to moving. Moving literally involves a lot of moving parts. Getting the right packing materials, packing up items so as not to break or lose them, disassembling larger items in order to transport them more effectively and not getting injured in the process. Moving is not easy and moving without a plan is a recipe for disaster. This article provides eight great moving tips which can help you from having a nervous breakdown.
1. Hire Professional Movers
Professional movers are worth their weight in gold and can move their weight in gold and then some. These mover teams are moving many home buyers and sellers throughout the week so they know how to care for the things you care for. Don’t just pick any mover or the cheapest mover since the results may not impress you. Professional movers have insurance on themselves and on the items they are moving for you. So, if something does happen to break or not make it to the final destination at least you can be financially covered.
Movers can do everything for you if you want them too. Movers will pack up each and every room safely and securely and unpack them in the new house as well. All the homeowner has to do is tell the movers where to unpack things and let the movers handle the rest. Make sure to choose movers by either using multiple word of mouth recommendations or one that has stellar online reviews in order to have the best experience.
Posted by Paul Sian on Thursday, January 30, 2020 at 7:00 AMBy Paul Sian / January 30, 2020Comment
How Do Real Estate Agents Get Paid?
In many lines of work or professions employees get paid by the hour and may get some work performance incentive bonuses as well. Many sales people on the other hand may make a small hourly wage but rely more on commissions that are earned upon closing of the sale. Other sales people are strictly commission based which means they only bring in a paycheck upon the closing of the sale. A majority of real estate agents in the US are paid on a commission only basis which means until they help a client buy or sell a home they do not earn any pay. This article looks in depth at the ways how and how much real estate agents get paid when representing clients.
Some Of The Not So Common Ways Real Estate Agents Get Paid
There are some companies who pay their real estate agents on an hourly basis. Companies that primarily deal with leasing of property have more incentive to pay their real estate agent employees on an hourly basis since more of that job entails showing vacant rental units to prospective tenants and screening them for suitability. These agents usually work directly for a company whose primary business is the managing of rental units.
There are other real estate companies who pay agents on an hourly basis to handle things like showings and listing appointments. While not very common these types of real estate companies are exploring different business models of serving their clients. Whether these business models survive the long term is a topic for another discussion but one possible result of hourly real estate agents is they don’t have as great of an incentive to learn the full depths of different real estate...
Posted by Paul Sian on Friday, January 3, 2020 at 7:00 AMBy Paul Sian / January 3, 2020Comment
What Does a Title Company Do?
For this podcast I sat down with Chris Finney owner of Finney Law Firm and Ivy Pointe Title. During our conversation we discussed what does a title company do, title work, covenants, title insurance, the real estate closing process and more. This podcast is helpful for those about to purchase or sell real estate by showing you what to expect during closing, and how the title company helps you get your your home bought or sold! I hope you enjoy the podcast and find it informative. Please also consider sharing with those who may find it useful.
Watch (listen) on YouTube
Feel free to ask any questions via the comments section below or to email either Chris or myself. Also if you have any ideas for future podcast topics you would like to see let me know!
Posted by Paul Sian on Thursday, April 11, 2019 at 7:00 AMBy Paul Sian / April 11, 2019Comment
Should I Sue?
When something goes wrong during a real estate transaction the question comes up of should I sue? While it is easy to talk about filing a lawsuit and expecting an open and shut case the reality is quite different. This article looks at all the potential parties that could be sued, the reason they may sue and the possible outcomes to help determine whether it makes sense to sue someone when it comes to a real estate transaction. As with anything legal related it is highly recommended to speak with a local attorney who is an expert in the matter as laws vary state to state and even city to city and this article only covers the topics of lawsuits in a general manner and does not cover specifics as to each and every situation.
Should I Sue My Real Estate Agent?
When buying or selling a home a real estate agent is one of the more often seen person helping either the buyer or seller out and therefore more likely to be considered the target for a lawsuit. Those who are thinking of suing their real estate agent or the agent for the other side first need to look at if the agent actually did anything wrong. Real estate agents are bound by a code of ethics that they are required to operate by when dealing with clients and customers. There is a difference too in the duties an agent owes to their client versus the duties they own to a customer or to the other party in a transaction. For instance an agent who represents a buyer should not be sharing with the seller personal financial information that could indicate how much home they could afford. If an agent who represents the buyer...
Posted by Paul Sian on Thursday, February 7, 2019 at 7:00 AMBy Paul Sian / February 7, 2019Comment
What To Know About The Home Appraisal Process
Whether you are selling your home to someone buying with a mortgage it or working on refinancing your existing mortgage you will have to get an appraisal on your home. An appraisal is prepared by a licensed Appraiser who looks at the condition and features of your home and compares them to other similar homes in order to come up with an opinion of value. As long as your appraisal meets at least the sales price during a sale or meets the value the mortgage loan refinance is being based on you should be fine. If your home ends up getting appraised for less than the agreed to sales price or less than the value of the refinance is based upon the purchase contract or refinance could fall through. This article looks at how best a homeowner can prepare for an appraisal so they put their best foot forward to ensure the best chances of success.
When Does An Appraisal Happen?
Once an offer on a home has been made and accepted, and usually after a home inspection has been done (the buyers are comfortable with the home inspection results), the buyer’s lender will put in a request for an appraisal. Generally the homebuyer is required to pay for the appraisal and may be asked to pay for it at the time it is scheduled or they may pay for it at closing depending on lender requirements. Once requested it may take up to seven to ten days for the appraiser to actually come out to the home depending on how busy the home selling season is. After the appraiser has visited a home the actual appraisal report should be issued within a few days. When a lender is involved the appraisal report will be given directly to the lender from the...
Posted by Paul Sian on Thursday, May 3, 2018 at 7:00 AMBy Paul Sian / May 3, 20182 Comments
Smart Tips For Your Next Move
After the purchase or sale of a home comes the challenge of moving from or to a new home. There are a number of different approaches to take with the move but the initial prep work prior to the move can make the difference between having a move that is easy versus a move that could be very stressful. This article looks at the different options for moving, offers tips on preparing for a move and provides some advice on how to avoid some common moving scams.
The Move Yourself Option
Depending on how much stuff you have to move this can always be a cost effective option. If you plan on buying new furniture and belongings at your new home then you can sell, donate or throw out stuff you no longer want so as to reduce the amount you yourself have to personally carry. If you are just moving clothing, kitchen ware and little less else then one person could handle the entire move on their own. On the other hand if furniture is involved you will need help to move the larger pieces of furniture safely. Enlist the help of your friends and make sure you plan the move ahead of time. Inventory all your heavy items and keep an inventory list of everything boxed up and tag the boxes accordingly so you don’t have to tear open every box just to find your coffee maker after you move in.
Sometimes it is easier to move the heavier items at the start of the process since that is when you will have the most energy to do so. Moving a very large dresser after you have moved 20 heavy boxes puts you at greater risk for dropping the dresser due to fatigue thus possibly causing damage to the dresser or worse injury to you or those helping...
Posted by Paul Sian on Thursday, April 26, 2018 at 7:00 AMBy Paul Sian / April 26, 2018Comment
What Are Agency Relationships In Real Estate
Due to the complexity of real estate transactions many states have adopted laws regarding the agency relationship between a real estate agent and the client. All too often lines can get blurred as to who an agent is representing when there are multiple parties involved in a real estate transaction. Generally in most states a real estate agent works for a broker who is the one setting the terms of the relationships with clients. The real estate broker can impose on their agents the rules with which how agents can represent real estate buyers and sellers provided for under the state laws they are bound by. The agency relationship between a client and their agent governs how the agent is to treat their client and this article will explore agency relationships further.
Agency Disclosure And State Laws
Often states have agency disclosure rules that require home sellers or buyers to sign a document that explains how an agent will be representing them during the real estate transaction. The document to be signed by the buyer or the seller basically describes real estate agency relationships in detail. While the document is full of legal language and may look like some sort of contract, the document is not a contract and the signature is only indicated receipt. The buyer or seller client in most cases do not have to sign it they choose not to, and in many states the real estate agent only need make a note that the form was presented but client refused to sign which will be kept in their brokerage records. Signing merely acknowledges the client was informed about real estate agency relationships and the...
Posted by Paul Sian on Thursday, October 26, 2017 at 7:00 AMBy Paul Sian / October 26, 2017Comment
When It Makes Sense To Not Use A Real Estate Agent
While most real estate agents are licensed under their state laws many agents jump into the business in hopes of easy money and little work since the barrier to entry can be quite low. In fact the opposite is true. Many agents who jump in thinking there is a lot of money to be made in real estate quickly realize that just like any other job they only get out what they put into it. As a result homebuyers and sellers will find many agents who are lacking and not willing to do all it takes to make sure their client’s needs are put first. Whether it be the agents who don’t return calls, don’t respond to emails or live in the stone age and still rely on fax machines and want ink signatures on paper forms they have to hand carry everywhere, it is not benefit to someone wanting to buy or sell real estate to have to deal with that. Real estate transactions can be done in pretty much most states without the use of a real estate agent and this article explores where doing things on one’s own can be an option.
Renting A Home
One of the most common times where a real estate agent may not be needed is when a homeowner is wanting to rent their home out. There are many national and local websites that allow owners to post their vacancies for rent without the need for a real estate agent. Some of these sites may even provide generic lease documents for property owners to use, though it should be cautioned that local laws often control specifically the way residential leases can be written so it is best to consult with a local real estate attorney to make sure the lease used meets local requirements. If you...