5 Ways to Write a Winning Offer in Today’s Real Estate Market
Our nation is in the midst of a serious housing crunch. Last year, a lack of inventory and soaring prices left many would-be homebuyers feeling pinched. But now, with interest rates climbing, many of them are also feeling desperate to lock in a mortgage—which has only added fuel to the fire.1 Fortunately, if you’re a buyer struggling to find a home, we have some good news. While it’s true that higher mortgage rates can decrease your purchasing budget, there are additional ways to compete in a hot market. Yes, a high offer price gets attention. But most sellers consider a variety of factors when evaluating an offer. With that in mind, here are five tactics you can utilize to sweeten your proposal and outshine your competition. We can help you weigh the risks and benefits of each tactic and craft a compelling offer designed to get you your dream home—without giving away the farm. 1. Demonstrate Solid Financing The reality is, no one gets paid if a home sale falls through. That’s why sellers (and their listing agents) favor offers with a high probability of closing. Sellers particularly love all-cash offers because there’s no chance of financing issues cropping up at the last moment. But don’t despair if you can’t pay cash for your home. According to the National Association of Realtors, only about 1 in 4 home purchases are all-cash deals, which means the vast majority are financed with a mortgage.2 If sellers are assured that financing will come through, buying with a mortgage doesn’t have to be a big disadvantage. The most important step you can take as a buyer is to get preapproved before you start looking for homes. A preapproval letter shows sellers that you are serious about buying and that you will be able to make good on your offer. It’s also important to consider the reputation of your lender. While sellers may not know or care about a lender’s reputation, their agents often do. Some lenders are much easier to work with than others, especially if you are pursuing certain types of mortgages like FHA or VA loans.3 If so, you’ll want a lender who specializes in these types of mortgages. If you’re unsure who to choose, we are happy to refer you to reputable lenders known for their ease of doing business. 2. Put Down a Sizeable Deposit Buyers can show sellers that they’re serious about their offer and have “skin in the game” by putting down a large earnest money deposit. Earnest money is a deposit held in escrow by a title company or the seller’s broker or lawyer. If the purchase goes through, it is applied to the down payment and closing costs—if the sale falls through, the buyer may lose some or all of that deposit. While an earnest money deposit is typically around 1-2% of the sale price, offering a higher deposit can help demonstrate to the buyer that you are serious about the property.4 However, this strategy can also be risky. We can help you determine an appropriate deposit to offer based on your specific circumstances. 3. Ask for Few (or No) Contingencies Most real estate offers include contingencies, which are clauses that allow one or both parties to back out of the agreement if certain conditions are not met. These contingencies appear in the purchase agreement and must be accepted by both the buyer and seller to be legally binding.5 Common contingencies include: Financing: A financing contingency gives the buyer a window of time in which to secure a mortgage. If they are unable to do so, they can withdraw from the purchase and the seller can move on to other buyers. Inspection: An inspection contingency gives the buyer the opportunity to have the home professionally inspected for issues with the structure, wiring, plumbing, etc. Typically, the seller may choose whether or not to remediate those issues; if they do not, the buyer may withdraw from the contract. Appraisal: Most lenders will not offer a mortgage on a home that costs more than it's worth. An appraisal contingency gives the buyer an opportunity to get the home professionally assessed to ensure that its value is at or above the sales price. If an appraisal comes in low, the seller may be asked to renegotiate the contract. Sale of a prior home: Some buyers cannot afford to purchase a new home until they sell their previous one. If the buyer is unable to sell their current home within a specified window of time, this contingency enables them to withdraw from the contract without penalty. Since contingencies reduce the likelihood that a sale will go through, they generally make an offer less desirable to the seller. The more contingencies that are included, the weaker the offer becomes. Therefore, buyers in a competitive market often volunteer to waive certain contingencies. However, it’s very important to make this decision carefully and recognize the risks of doing so. For example, a buyer who chooses to waive a home inspection contingency may find out too late that the home requires extensive renovations, and a buyer who waives the appraisal may risk their mortgage falling through. If you back out of a home purchase without the protection of a contingency, you could lose your earnest money deposit.6 We can help you assess the risks and benefits involved. 4. Offer a Flexible Closing Date and/or Leaseback Option When it comes to selling a house, money isn’t everything. People sell their homes for a wide variety of reasons, and flexible terms that work with their personal situations can sometimes make all the difference. For example, if a seller is in the process of planning a significant move, they may prefer a longer closing timeline that gives them time to find housing in their new location. Similarly, short-term leaseback options, in which the sale is completed but the seller retains the right to rent the home for a specified period of time, can be compelling.7 These arrangements enable the seller to use the money from the sale of their home to purchase their next house. A leaseback agreement also makes it possible for them to avoid moving twice when their next home is not yet ready to occupy. Flexible closing dates and leaseback options can provide a powerful advantage for first-time homebuyers. If you have a month-to-month or easily transferable lease, for example, you may be able to offer a more flexible timeline than a buyer who is simultaneously selling their existing home. Of course, the value of these terms depends on the seller’s situation. We can reach out to the listing agent to find out the seller’s preferred terms, and then collaborate with you to write a compelling offer that works for both parties. 5. Work With a Skilled Buyer’s Agent In this ultra-competitive real estate market, one of the greatest advantages you can give yourself is to work with a skilled and trustworthy real estate professional. We will make sure you fully understand the process and help you submit an appealing offer without taking on too much risk. Plus, we know how to write offers that are designed to win over both the seller and their listing agent. The truth is, listing agents play a huge role in helping sellers evaluate offers, and they want to work with skilled buyer’s agents who are professional, communicative, and courteous. Once your offer is accepted, we’ll also handle any further negotiations and coordinate all the paperwork and other details involved in your home purchase. The best part is, you’ll have a knowledgeable, licensed advocate on your side who is watching out for your best interests every step of the way. Helping You Get to the Right Offer In many cases, a competitive offer doesn’t need to be all-cash, contingency-free, or significantly above asking price. But if you’re serious about buying a home in today’s market, it’s important to consider what you can do to sweeten the deal. If you’re a buyer, we can help you compete in today’s market without getting steamrolled. And if you’re a seller, we can help you evaluate offers by taking all the relevant factors into account. Contact us today to schedule a free consultation. Sources: National Association of Realtors -https://www.nar.realtor/newsroom/pending-home-sales-dwindle-4-1-in-february National Association of Realtors -https://www.nar.realtor/newsroom/existing-home-sales-fade-7-2-in-february Forbes - https://www.forbes.com/advisor/mortgages/housing-crisis-tips/ com -https://www.realtor.com/advice/finance/earnest-money-deposit-mistakes-buyers-make/ Bankrate -https://www.bankrate.com/real-estate/contingency-clause/ Home Buying Institute - http://www.homebuyinginstitute.com/mortgage/risks-of-waiving-a-contingency/ Realtor.com -https://www.realtor.com/advice/sell/what-is-a-rent-back-agreement
Seller’s Checklist: A Timeline to Prep Your Home for Sale
We’re still in a seller’s market, but that doesn’t mean your home is guaranteed to easily sell.1 If you want to maximize your sale price, it’s still important to prepare your home before putting it on the market. Start by connecting with a real estate agent as soon as possible. Having the eyes and ears of an insightful real estate professional on your side can help you boost your home’s appeal to buyers. What’s more, beginning the preparation process early allows you to tackle repairs and upgrades that can increase your property’s value. Use the checklist below to figure out what other tasks you should complete in the months leading up to listing your home. While everyone’s situation is unique, these guidelines will help you make sure you’re ready to sell when the time is right. Of course, you can always call us if you’re not sure where to start or what to tackle first. We can help customize a plan that works for you. AS SOON AS YOU THINK OF SELLING Some home sellers want to plan their future move far in advance, while others will be required to pack up on very short notice. Whatever your circumstances, these first steps will help assure you’ll be ahead of the listing game. Contact Your Real Estate Agent We go the extra mile when it comes to servicing our clients, and that includes a series of complimentary, pre-listing consultations to help you prepare your home for the market. Some sellers make the mistake of waiting until they are ready to list their home to contact a real estate agent. But we’ve found that the earlier we’re brought into the process, the better the result. That often means a faster sale—and more money in your pocket after closing. We know what buyers want in today’s market, and we can help devise a plan to maximize your property’s appeal. We can also connect you with our trusted network of contractors, vendors, and service professionals, so you’ll be sure to get the VIP treatment. This network of support can alleviate stress and help ensure you get everything done in the weeks or months leading up to listing. Address Major Issues and Upgrades In most cases, you won’t need to make any major renovations before you list. But if you’re selling an older home, or if you have any doubt about its condition, it’s best to get us involved as soon as possible so we can help you assess any necessary repairs. In some instances, we may recommend a pre-listing inspection. Although it's less common in a seller's market, a pre-listing inspection can help you avoid potential surprises down the road. We can discuss the pros and cons during our initial meeting. This is the time to address major structural, systems, or cosmetic issues that could hurt the sale of your home down the line. For example, problems with the frame, foundation, or roof are likely to be flagged on an inspection report. Issues with the HVAC system, electrical wiring, or plumbing may cause the home to be unsafe. And sometimes outdated or unpopular design features can limit a home’s sales potential. Remember, when you’re dealing with major repairs or renovations, it’s best to give yourself as much time as possible. Given rampant labor and material shortages, starting right away can help you avoid costly delays.2 Contact us so we can guide you on the updates that are worth your time and investment. 1 MONTH (OR MORE) BEFORE YOU LIST Once any large-scale renovations have been addressed, you can turn your attention to the more minor updates that still play a major role in how buyers perceive your home. Make Minor Repairs Look for any unaddressed maintenance or repair issues, such as water spots, pest activity, and rotten siding. This is the time to take care of those small annoyances like squeaky hinges, sticking doors, and leaky faucets, too. Many of these issues can be handled by going the DIY route and using a few simple tools. Tackle the ones you can and be sure to call a professional for the ones you’re not comfortable doing yourself. We can refer you to local service providers who can help. Remember that it’s easy to overlook these small issues because you live with them. When you work with us, you get a fresh set of eyes on your home—so you don’t miss any important repairs that could make a big difference to buyers. Refresh Your Design This is a great time to think about some simple design updates that can make a significant impression on buyers. For example, a fresh coat of paint is an easy and affordable way to spruce up your home. One survey found that interior paint offered a 107% return on investment.3 For broad appeal, opt for warm, neutral colors. And never underestimate the importance of good curb appeal. Homes with good curb appeal sell for 7% more, on average, than similar homes with an “uninviting exterior.”4 If weather permits, lay fresh sod where needed, plant colorful flowers, and add some new mulch to your beds. Even just repositioning your furniture can make a huge difference to buyers. A survey by the Real Estate Staging Association found that staged homes sold faster, and 73% sold over list price.5 We can refer you to a local stager or offer our insights and suggestions if you prefer the DIY route. Declutter and Depersonalize Doing a little bit of decluttering every day is a lot easier than trying to take care of it all at once right before your home hits the market. A simple strategy is to do this one room at a time, working your way through each space whenever you have a bit of free time. Start by donating or discarding items that you no longer want or need. Then pack up any seasonal items, family photos, and personal collections you can live without for the next few weeks. Bonus: This will give you a head start on packing for your move! 1 WEEK BEFORE YOU GO TO MARKET With just one week before your home is available for sale, all major items should be crossed off your to-do list. Now it’s time to focus on the small details that will really make your home shine. Here are a few key areas to focus on during this last week. Check-In With Your Agent We’ll connect again to make sure we’re aligned on the listing price, marketing plan, and any remaining prep. We will be there every step of the way, ensuring you’re fully prepared to maximize the sale of your home. Tidy Your Exterior You’ve already done the major landscaping—now it’s time to tackle the last few details. Make sure your lawn is freshly mowed, hedges are trimmed, and flower beds are weeded. In addition, now is the time to clean your home’s exterior if you haven’t already. Power wash your siding, empty the gutters, and wash all your windows and screens. Deep Clean Your Interior Your house should be deep cleaned before listing, including a thorough deodorizing of the home’s interior and steam cleaning for all carpets. Consider hiring a professional cleaning company to ensure the space smells and looks as fresh as possible. In addition to cleaning, take some time to tidy up. Buyers will look inside your closets, pantries, and cabinets, so make sure they are neat and organized. Small appliances and toiletries should be cleared off the countertops. DAY OF SHOWING Now you’re all set to go and there are just a few small things you need to handle on the day of showings or open houses. Do a final walk-through and take care of these finishing touches to give potential buyers the best possible impression. Pre-Showing Prep Happy and comfortable buyers are more likely to submit offers! Make them feel at home by adjusting the thermostat to a comfortable temperature. Open any blinds and curtains throughout the house, and turn on all lights so buyers can see all the potential in your home. Then tidy up by vacuuming and sweeping floors, emptying (or hiding) trash cans, and wiping down countertops. In the bathrooms, close toilet lids and hang clean hand towels. Don’t forget to secure firearms, jewelry, sensitive documents, prescription medications, and any other items of value in a safe or store them off-site. Finally, it’s best to have pets out of the house during showings. If possible, you should also remove evidence of pets (litter box, dog beds, etc.), which can be a turn-off for some buyers. DON’T WAIT TO PREP YOUR HOME FOR SELLING If you want to get top dollar for your home, don’t put it on the market before it’s ready. The right preparation can make all the difference when it comes to maximizing the offers you get. The upgrades and changes you need to make will depend upon your home’s condition, so don’t wait to speak with an agent. Call our team if you’re thinking about selling your home, even if you’re not sure when. It’s never too early to seek the guidance of your real estate agent and start preparing your home to sell. Sources: Fortune -https://fortune.com/2022/02/08/should-i-buy-house-sellers-market-housing-real-estate-fannie-mae/ Forbes -https://www.forbes.com/advisor/home-improvement/labor-materials-shortage-impacts-renovations/ PR Web -https://www.prweb.com/releases/2012-homegain/home-improvement-survey/prweb9433460.htm Realtor Magazine -https://magazine.realtor/daily-news/2020/01/27/how-much-does-curb-appeal-affect-home-value Real Estate Staging Association -https://www.realestatestagingassociation.com/content.aspx?page_id=22&club_id=304550&module_id=164548
Hedge Against Inflation With These 3 Real Estate Investment Types
The annual inflation rate in the United States is currently around 7.5%—the highest it has been since 1982.1 It doesn’t matter if you’re a cashier, lawyer, plumber, or retiree; if you spend U.S. dollars, inflation impacts you. Economists expect the effects of inflation, like a higher cost of goods, to continue.2 Luckily, an investment in real estate can ease some of the financial strain. Here’s what you need to know about inflation, how it impacts you, and how an investment in real estate can help. WHAT IS INFLATION AND HOW DOES IT IMPACT ME? Inflation is a decline in the value of money. When the rate of inflation rises, prices for goods and services go up. Therefore, a dollar buys you a little bit less with every passing day. The consumer price index, or CPI, is a standard measure of inflation. Based on the latest CPI data, prices increased 7.5% from January 2021 to January 2022.1 A little bit of inflation is considered healthy for the economy, but 7.5% in a single year is high. How does inflation affect your life? Here are a few of the negative impacts: Decreased Purchasing Power We touched on this already, but as prices rise, your dollar won’t stretch as far as it used to. That means you’ll be able to purchase fewer goods and services with a limited budget. Increased Borrowing Costs In an effort to curb inflation, the Federal Reserve is expected to raise the federal funds rate. Therefore, consumers are likely to pay a higher interest rate on new mortgages, car loans, and variable-rate credit cards.3 Lower Standard of Living Wage growth tends to lag behind price increases. According to Moody Analytics, when adjusted for inflation, average weekly earnings in January were down 3.1% from a year earlier.4 As such, life is becoming less affordable for everyone. Inflation can force those on a fixed income, like retirees, to make lifestyle changes and prioritize essentials. Eroded Savings If you store all your savings in a bank account, inflation is even more damaging. As of February 2022, the national average interest rate for a savings account is 0.06%, not nearly enough to keep up with inflation. And economists don’t expect that rate to go much higher.3 One of the best ways to mitigate these effects is to find a place to invest your money other than the bank. Even though interest rates are expected to rise, they’re unlikely to get high enough to beat inflation. If you hoard cash, the value of your money will decrease every year and more rapidly in years with elevated inflation. REAL ESTATE: A PROVEN HEDGE AGAINST INFLATION So where is a good place to invest your money to protect (hedge) against the impacts of inflation? There are several investment vehicles that financial advisors traditionally recommend, including: Stocks Some people invest in stocks as their primary inflation hedge. However, the stock market can become volatile during inflationary times, as we’ve seen in recent months.5 Commodities Commodities are tangible assets, like oil, livestock, and minerals. The theory is that the price of commodities should climb alongside inflation. But the classic choice–gold–hasn’t risen consistently during periods of inflation since the 1970s, according to data from Morningstar Direct.6 Inflation-Indexed Bonds Treasury inflation-protected securities, or TIPS, are U.S. government-issued bonds that are indexed to the inflation rate. Bonds are considered low risk, but the returns they offer are generally low, as well.7 Real EstateReal estate prices across the board tend to rise along with inflation and often rise faster than inflation.8 That’s one of the reasons demand for real estate is soaring right now.9 We believe real estate is the best hedge against inflation. Owning real estate does more than protect your wealth—it can actually make you money. For example, home prices rose nearly 17% from 2020 to 2021, 10% ahead of the 7% inflation that occurred in the same timeframe.10 Plus, certain types of real estate investments can help you generate a stream of passive income. In the past year, property owners didn’t just avoid the erosion of purchasing power caused by inflation; they got ahead. TYPES OF REAL ESTATE INVESTMENTS Though there are myriad ways to invest in real estate, there are three basic investment types that we recommend for beginner and intermediate investors. Remember that we can help you determine which options are best for your financial goals and budget. Primary Residence If you own your home, you’re already ahead. The advantages of homeownership become even more apparent in inflationary times. As inflation raises prices throughout the economy, the value of your home is likely to go up concurrently. At the same time, you’ve locked in a set mortgage payment for the next 30 years, so you’ll be immune to rising rental costs. If you don’t already own your primary residence, homeownership is a worthwhile goal to pursue. Though the task of saving enough for a down payment may seem daunting, there are several strategies that can make homeownership easier to achieve. If you’re not sure how to get started with the home buying process, contact us. Our team can help you find the strategy and property that fits your needs and budget. Whether you already own a primary residence or are still renting, now is a good time to also start thinking about an investment property. The types of investment properties you’ll buy as a solo investor generally fall into two categories: long-term rentals and short-term rentals. Long-Term (Traditional) Rentals A long-term or traditional rental is a dwelling that’s leased out for an extended period. An example of this is a single-family home where a tenant signs a one-year lease and brings all their own furniture. Long-term rentals are a form of housing. For most tenants, the rental serves as their primary residence, which means it’s a necessary expense. This unique quality of long-term rentals can help to provide stable returns in uncertain times, especially when we have high inflation. To invest in a long-term rental, you’ll need to budget for maintenance, repairs, property taxes, and insurance. You’ll also need to have a plan for managing the property. But a well-chosen investment property should pay for itself through rental income, and you’ll benefit from appreciation as the property rises in value. We can help you find an ideal long-term rental property to suit your budget and investment goals. Reach out to talk about your needs and our local market opportunities. Short-Term (Vacation) Rentals Short-term or vacation rentals function more like hotels in that they offer temporary accommodations. A short-term rental is defined as a residential dwelling that is rented for 30 days or less. The furniture and other amenities are provided by the property owner, and today many short-term rentals are listed on websites like Airbnb and Vrbo. A short-term rental can potentially earn you a higher return than a long-term rental, but this comes at the cost of daily, hands-on management. With a short-term rental, you’re not just entering the real estate business; you’re entering the hospitality business, too. Done right, short-term rentals can be both a hedge against inflation and a profitable source of income. As a bonus, when the home isn’t being rented you have an affordable vacation spot for yourself and your family! Contact us today if you’re interested in exploring options in either the long-term or short-term rental market. Mortgage rates are expected to rise, so you’ll want to act fast to maximize your investment return. WE’RE INVESTED IN HELPING YOU Inflation is a fact of life in the U.S. economy. Luckily, you can prepare for inflation with a carefully managed investment portfolio that includes real estate. Owning a primary residence or investing in a short-term or long-term rental will help you both mitigate the effects of inflation and grow your net worth, which makes it a strategic move in our current financial environment. If you’re ready to invest in real estate to build wealth and protect yourself from rising inflation, contact us. Our team can help you find a primary residence or investment property that meets your financial goals. The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs. Sources: Bloomberg -https://www.bloomberg.com/news/articles/2022-02-10/u-s-inflation-charges-higher-with-larger-than-forecast-gain CNN -https://www.cnn.com/2022/01/01/economy/inflation-prices-2022-preview/index.html CNBC -https://www.cnbc.com/2022/01/26/the-fed-sets-the-stage-for-a-rate-hike-heres-what-that-means-for-you.html Reuters -https://www.reuters.com/business/us-consumer-prices-rise-strongly-january-weekly-jobless-claims-fall-2022-02-10/ NBC News -https://www.nbcnews.com/business/markets/market-slide-dow-falls-700-points-sp-enters-correction-territory-rcna13304 CNBC -https://www.cnbc.com/2021/12/20/gold-is-losing-its-status-as-an-inflation-hedge-two-traders-warn.html Morningstar -https://www.morningstar.com/articles/1079158/why-are-inflation-protected-bond-funds-losing-money The Washington Post -https://www.washingtonpost.com/business/2022/01/04/heres-how-inflation-could-affect-your-next-real-estate-move/ Bloomberg - https://www.bloomberg.com/news/articles/2022-01-24/is-real-estate-a-good-investment-hedge-against-inflation-what-the-experts-say CNN -https://www.cnn.com/2022/01/20/homes/us-nar-home-sales-december-and-2021/index.html
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