Short Sale 101 for Buyers

Short Sale Homes

Whether you’re an investor or a prospective home buyer, you’ve probably heard the team “short sale” but just might not be that familiar with the process. Before you ask, no, short sale doesn’t mean the process will be faster or shorter.

To help you get your footing on the subject, let’s take a few minutes to get you up-to-speed on the term and what all the short sale process encompasses.

In a nutshell, a short sale means that a home is sold for less than the outstanding mortgage. Simply put, the seller will end up ‘short’ on paying back the lender; however, the lender has agreed to accept the lesser amount owed.

While not the norm, short sales aren’t totally uncommon or unheard of in today’s marketing. In fact, according to RealtyTrac, about 5 percent of all US single-family home and condo sales are short sales.

Typically a short sale will arise if the homeowners are experiencing financial issues that make it impossible for them to pay their mortgage. In order to avoid foreclosure, they are needing to sell their home; however, they are finding it difficult to sell their home at a price that would cover their current outstanding mortgage.

Buyer Benefits of a Short Sale Purchase

A short sale property can be a bargain for potential home buyers or investors, but it will require a bit of extra work and can take 90 to 120 days. If you’re looking at a short sale property, be prepared to jump through additional hoops. Because of the extra pressure and requirements, short sales aren’t typically recommended for first-time home buyers.

Why extra hoops and a longer timeframe? Lenders, while in agreement to the short sale process, will be covering the closing costs a home seller usually sells. As such, they will often counter with their own demands in an effort to raise their bottom line. Dealing with a lender can extend the overall process timeframe.

The Difference Between Foreclosure and Short Sale

People often confuse foreclosures with short sales, and while they share some similarities in that both typically happen to homeowners in distress, the process and consequences are very different.

One difference is that a foreclosure is typically a faster process as lenders are eager to recoup the costs they are currently incurring on the property via way of unpaid mortgage payments and house upkeep. For one, foreclosures typically happen very quickly, since lenders are eager to recoup the costs incurred by the unpaid mortgage.

Secondly, a foreclosure will negatively impact an individual’s credit score by appearing as derogatory markings on their credit report. Because of this, individuals with a foreclosure on their credit report will often find they are not likely to qualify for another mortgage for at least five years.

While selling a home as a short sale is hardly ideal, many experts argue it’s smarter than pursuing more drastic measures like foreclosing on a house.

Should I Buy a Foreclosure Home?

While foreclosures can also be bargains, buyers should know that a foreclosure also comes with a lot more risk than a short sale. One of the biggest risks is that foreclosures are often sold at auction at a courthouse, sight unseen. Buyers will inherit all liens and any issues tied to the property.

When done right, a short sale is a better option for both the buyer and the sell.

Wondering about selling your home via the short sale process or interested in touring a short sale property you’ve seen on the market? Contact me today!

What Happens When You Go Into Escrow?

When it comes to buying a home, some of the terms and steps within the process can be a little confusing. Case and point — escrow.

Let’s jump in and break down exactly what “escrow” means and how it applies to you during the home buying process.

Going Into Escrow

The definition of an escrow is that it’s a financial arrangement whereby a third party holds funds in safekeeping pending the completion of a contract or other obligation.

Typically a homebuyer will enter into escrow after agreeing with the seller on a final price for the home they are purchasing. Both the seller and homebuyer will sign an agreement that declares the agreed upon price and then, that agreement will be given to the Escrow Officer or the escrow company.

The escrow company is responsible to for keeping the earnest money, or the “good faith deposit” of the homebuyer, and the money from the lender safe throughout the process until the transaction is completed during closing. As part of the closing process, the escrow officer will handle transfer of the property and the release the funds being held to complete the process.

What’s the Point of Escrow?

The short answer for why escrow takes place as part of the home buying/selling process is that it creates a way to keep the monies involved in the real estate transaction safe. As a neutral third-party to the transaction, the money will remain safe and secure until it is needed.

With the exception of the earnest money, the buyer won’t put down any additional money at the start of escrow. The money received is typically deposited by the escrow company into a trust until it is needed.

During escrow, things can pop up that might impact the transaction such as the buyer’s loan financing might fall through or the two parties might not be able to resolve a disagreement during the home inspection process.

Essentially, escrow let’s both the seller and the buyer know, without worry, that the money to complete the transaction is available and will be ready once the process is completed or the transaction is terminated (due to issues that cannot be resolved). It protects both parties while giving them both peace of mind.

Steps of Escrow Process

You should check with your realtor to be sure as the actual steps can vary by state, but the escrow process generally follows the steps below:

  1. Mutual Acceptance – the buyer and seller agree on the price and sign the initial contract
  2. Contracts Sent– both the buyer and seller send copies of the signed contracts over to the escrow officer who will compare them and ensure they match
  3. Escrow Opened – during this phase there are three things that will occur:
    • the escrow and title are opened
    • the escrow officer will request the seller’s mortgage payoff information and verify that there are no outstanding HOA dues
    • the escrow officer will reach out to the buyer’s lender and loop them into the process
  4. Identity Verification – the escrow officer will request affidavits to confirm the identities of the buyers and sellers
  5. 30-Day Wait – during this phase, the escrow company waits while the house goes through the inspection and appraisal process and the lender works through the underwriting process
  6. Closing Preparation – the escrow company will prepare the necessary closing documents and schedule the appointments for closing
  7. Closing – both the buyers and sellers will sign the required paperwork to make the deal official and then the escrow company will send the documents to be recorded with the county

Hidden Cost Surprises for First-time Homebuyers

first time homebuyerYou’ve found the perfect home in a great neighborhood that fits your budget!  Congratulations…you’re on your way towards becoming a first-time homebuyer!

Many first-time homebuyers are surprised to find out about the additional, and often unexpected costs, that go with purchasing a home.

But don’t despair or panic just yet because this is where your DeSoto County Realtor comes in!  Together we will discuss the entire process and create a plan so you will be ready and won’t be caught off guard.

First-time Homebuyer Costs

When it comes to purchasing a home, most first-time homebuyers are prepared for the down payment, home owner’s insurance, and various closing costs (like the appraisal and lender fees).  However, there are a handful of other costs they aren’t prepared for.

While it will be hard to prepare for every possibility, you can for most.  So, as you’re putting your home purchase budget together, allocate funds for these potential unexpected costs:

  • Appliances – The current homeowners may take some or all of the appliances with them or the appliances might be on their last leg and will need to be replaced immediately.  Make sure you allow wiggle room in your budget for appliance replacement —- specifically we’re talking about the refrigerator, dishwasher, oven, and washer and dryer.
  • Inspector Finds – You’ll have an inspector tour your potential home well before you sign the papers, so pay close attention to what he finds and the suggestions he makes.  If he finds larger issues, like bad electrical wiring or a weak foundation, think hard about how you will handle these issues down the road if you purchase the house in its current condition.  And double check with your Realtor and Insurance Agent to understand what items are and aren’t covered by the homeowner’s insurance you are purchasing.
  • Remodeling – Kitchen or bath remodeling might be something you have planned for your new home.  If so, create a strategy for how and when you’ll be able to knock out this task.  Include all construction costs/estimates along with a cushion to cover the inevitable surprise costs that come with all remodeling project.
  • Home Improvements – While bigger items, like carpets and blinds, are often covered in the purchase agreement, there are other home improvement items you’ll want to keep in mind as you’ll be handling them yourself.  Even the ‘perfect’ home will need a bit of touching up once you move in, if for no other reason than to truly make it your own.  Allocate money for repairs, painting, and landscaping.
  • Nesting and Lifestyle – Along with paint and a bit of landscaping, there are other costs first-time homeowners often fail to prepare for when creating their budget.  Not only does your budget need to include your mortgage, but it also needs to cover expenses such as cable, electric, water and sewage, and home owner’s association dues (if you’ll have any).  You might also discover that you’ll want a larger bedroom suit because of space or that you’ll need yard equipment now.  Make sure you allot money in your budget for these type of lifestyle and nesting expenses.

It’s true that you can’t be prepared for absolutely every possibility because in life, sometimes things just come up.  However, with the proper planning, you and your realtor will be able to identify most of the potentially hidden costs associated with your new home purchase, giving you the opportunity to plan for how you’ll handle any surprises with out breaking a sweat!

 

Moving Tips for Homebuyers

You bought a new house — congratulations!  Now the hard work begins as your prepare to move into your new home.  Here are a few moving  tips to help make your move less stressful and go as smoothly as possible:

  1. moving tipsResearch your options for movers and don’t just settle for the first company that appears in the search results.  Ask around and check references.  You want to work with a company that you know will get your items from your old house to your new houses safely and at a reasonable price.
  2. Speaking of price, when you get estimates, be honest and tell them about everything you’re going to want them to move.  Sandbagging items can slow down your move and potentially cost you more.
  3. Book your move early so you can secure the best date and time for your schedule.  If you wait until the last minute to book your movers, odds are you’ll be forced into their schedule and timeframe.
  4. If you’re having your home packed by professionals, be there while they pack.  Being able to oversee their progress will give you peace of mind and the advantage of knowing what’s going in each box.  You can also label and tag the boxes (color-coded stickers for each room) yourself and put your last name on the box along with a description of what’s going inside.
  5. If you’re coming from an apartment, block off parking if possible.  Having parking that is closer to your front door will give the movers an advantage, making it easier for them, and help to move the process along at a quicker pace.
  6. Take inventory of what you have once the packing is complete and before the movers arrive.  This way you’ll know that you have everything and nothing is missing or was left behind.
  7. Have bottled water and a few easy to handle snacks available to offer your movers.  A simple gesture of appreciation will go a long way with their morale — and potentially the pace at which they move your belongs.
  8. As your movers are unloading, move larger items, like furniture and rugs, into position.  This will make it easier for you to unpack once you start the process.
  9. Once the move is complete, take time to inventory everything and make sure nothing was damaged during the move before you sign the statement of delivery from the movers.  And it’s not a bad idea to take a moment to review the fine print, as some companies may not accept reports of broken items after you sign-off.
  10. Pack a suitcase with everything you’ll need for the first 2 to 3 days, including toiletries, towels, medication, and clothes.  This way you’ll be able to unpack at a leisurely pace instead of finding yourself frantically looking for the box containing your toothbrush and PJs.

How to Search for a Home

When house-hunting fever strikes, it’s easy to let it take over and just download the latest real estate app and immediately hit the streets to tour homes on your own.  If you want to be successful though, there are a few tips and questions you should prepare for first.

To help you find the best possible home for you and your family, here are my best tips on how to search for a new home the right way.

Do Your Research First

Yes, your real estate agent is the expert, but as with anything in life, you want to come to the table prepared.  Do your homework and be proactive!

Check out the neighborhoods you like online and drive around the area on the weekends and in the evenings, so you can get a feel for your potential neighbors, the activity and vibe of the area, the schools, and the overall community.

Understand the Terminology and Process

Purchasing a home is unlike any other purchase you’ll ever make.  It’s both exciting and overwhelming, so you want to be as prepared as possible before you begin the process.

If this is your first home purchase, take time to understand the real estate process and basic terminology.

Home Search Tips

  • Avoid searching for homes that are over your budget.  Establish your parameters before you start your home search, stay within your budget, and allow some wiggle room for negotiating.
  • Always take your realtor with you when you tour a home.  Their extra set of expert eyes will spot things you might otherwise overlook.  Also, if they let you, snap a few photos and takes notes so you can remember the details about the house later.
  • Before you make an offer, walk through the home twice.  You might be surprised by what you notice the second time through.
  • Speaking of touring a home, open all doors, windows, and cabinets.  You want to know as much as you can about the house before you consider making an offer.
  • If it’s your second walkthrough, bring your tape measure and make sure the house will fit your furniture.  Also, take a moment to just sit quietly in the living and the master bedroom to find out how much outside noise you can hear.  If possible, tour the home first on a weekday and the second time on a weekend so you’ll get a full idea of what the neighborhood is like.

Work with a Realtor

In today’s digital age, with so much information available at your fingertips, many people wonder if they really need to work with a realtor or if they can buy and/or sell a home on their own.

While there are some people who are able to do this successfully, trying to buy or sell a home on your own is risky business and not something most of us should attempt.  The experience and expertise a realtor brings to the table can save you time and money.

A realtor will also make the overall search process easier by doing the legwork for you — they will pull together a list of houses that meet your wants and needs and call to schedule the showings on your behalf.

Ready to get started? Contact me now!