Colorado Homebuyers Are Facing Many Obstacles Preventing Them From Getting Under Contract. Watch Our #ChadwicksRealTips Video To Learn Some Solutions!
My furry assistant and I have 4 important tips for you to take into consideration before making an offer on your dream home! We feel your pain!
Tip #1: Be sure to talk with your lender about using the minimum down payment.
As full disclosure, we are not a licensed mortgage broker. It is based off of our experience that in the current market, it is wise to use the minimum down payment for your loan -and free up your cash. This will ultimately depend on what your monthly payment will turn out to be. It is important that the monthly payment be comfortable and not something that will require you to drastically change your lifestyle. This is an essential conversation to have with your lender and crunch numbers. So what to do with the cash you have been saving? Read tip #2!
Tip #2: Hoard your cash!
As we have learned, it may take 10% above listing price to get under contract. You may very well be competing against 10-15 offers. If the listing price of a home is at $400,000 and you offer $440,000 (with the hope of getting under contract), you obviously run the risk of going above appraisal. You will need CASH to make up the difference at closing. Use your cash to go above listing price and protect yourself from an appraisal gap.
Tip #3: Make your offer more competitive with a top dollar offer, and ask your Realtor to include:
A) An Appraisal Gap Insurance Clause
Be sure to have your Realtor disclose all the implications of this clause. If you as a buyer put an Appraisal Gap Insurance Clause, you are committing to your offer - even if it doesn't appraise. In other words, you are giving the SELLER the INSURANCE that you will pay the difference between your offer and the appraisal. If you terminate, the seller gets to keep your earnest money. Remember Tip #2? - Yeah, better keep that extra cash on hand. ;-)
B) Accept the home in "As Is Condition"; however, buyer maintains their right to their Inspection Objection and Inspection Termination Clauses.
It used to be common to put a clause in the additional provisions section that the inspection will address only health and safety items. With more competition, buyers are compelled to put "will accept as is" to ensure the seller that they will not have to make any concessions. There is not much risk in add this clause, besides the fact that you can't use the inspection objection to negotiate items that need repaired. You "can" always still ask the seller for concessions; however, the seller will usually come back and remind you that you accepted the home in "as is condition." Depending on how good or bad the home inspection was, you can decide to either accept the home in "as is condition" OR NOT. That is why it is paramount that you make sure you and your Realtor include the inspection objection and inspection termination clauses in the contract. For example, let's say the foundation is about to crumble or you need to replace a sewer line. Never Fear! You have the right to simply "object" and "terminate" and you as the buyer will be entitled to your Earnest Money. The seller and listing agent will be required to disclose to any future buyers your inspection report. So falling out of contract, the seller has a little risk in this game as well.
Tip #4: Have a serious conversation with your lender about a closing turn around time!
Many sellers are wanting a quick close. Before committing to this in your contract, be sure to have a serious conversation with your lender about a realistic time frame to get you to the closing table. Please keep in mind that since interest rates have dropped to historical lows, your favorite lender may very well be inundated with refinances! Now comes your new home loan lands on their table. Trust me, everyone wants to please and tell you that they can close quickly - but beware - make sure that your lender truly can deliver within the time frame set by contractual dates in your offer!
Shangela and I hope these tips help you get under contract! We feel your pain and understand how hard it is right now. Remember to trust the process and follow the advice of your Realtor - they are a professional in the industry!
For further questions, please do not hesitate to reach out to Shangela and I at 720-666-9805 or email -chadwick@denverrealestatepro.com
Or for lending questions, please feel free to reach out to John "JJ" Jeffrey, Mortgage Specialist (NMLS 201863) with Westerra Credit Union at 303-618-1990 or email: jjeffrey@westerracu.com