Showing How Earnest You Are

The expression "putting your money where your mouth is" demonstrates a monetary sincerity to what could be empty words.  In today's competitive market where multiple offers are common, sellers want as much assurance as possible that the buyer is sincere and will close on the sale.

The seller who accepts a contract expects the buyer to follow through but, in most cases, doesn't know the buyer either personally or by reputation.  The earnest money submitted by the buyer with the contract shows their commitment to the terms of the offer.

If the amount is relatively small, the seller could be concerned that the buyer may walk away from the contract if they change their mind before closing.  The lost time could be injurious to a seller who is trying to meet a deadline.

The more earnest money a buyer deposits indicates to the seller a higher level of commitment to the contract.  Except for stated contingencies in the sales contract, if the buyer fails to close on the sale, the earnest money could be forfeited.  Significant earnest money makes the seller feel more secure that the contract will indeed close. 

There certainly are a lot of things that can dictate how much earnest money is appropriate.  Local customs, price of the home and type of mortgage can all help to determine the proper amount.  In some areas, it may be common for it to be one to five percent of the purchase price.  In other areas, it might be a specific amount like $1,000 to $10,000 depending on the sales price.  It really comes down to whatever the buyer and seller agree is the proper amount. 

Another strategy is for the buyer to put up an adequate amount initially prior to inspections or other contingencies, and then, to put up an additional amount when the contingencies have been removed. 

The earnest money demonstrates the buyers' sincerity in making the offer and proceeding according to the agreement so the seller can take their home off the market and start making plans to move and give possession of their home.  A higher-than-normal amount could also help the seller to choose yours in a multiple offer situation.  Ultimately, both parties want to close as anticipated according to the contract and the earnest money helps facilitate that. 

Your agent can explain what is customary for your area and price range.  Many times, a disinterested party, like a title company, will hold the earnest money and the sales contract will provide how to dispose of it should the contract not close.

Is Your Home Inventory Up To Date?

A current inventory of all the personal items in your home is important and even necessary, if you are faced with filing a police report or insurance claim. The homeowner is usually asked if they have a home inventory.  If not, the homeowner can reconstruct one to estimate the loss.

Imagine you are in this position; would you be able to make an accurate list of your belongings and their value?  As an exercise, pick a room of your home, and, while being in another room, list all the belongings and their value.  When you're finished with the list, go into the room, and check to see how you did.

This little project should demonstrate the difficulty of reconstructing a list and depending on whether you missed a lot of items and the importance of having an up-to-date home inventory.  Not only will this help you purchase the right amount and type of insurance, having an accurate inventory will make filing a claim easier.

An accurate accounting of your belongings can also help you and your insurance agent  to see that your belongings are properly insured.  Other reasons for a home inventory include creating a maintenance calendar and helping you declutter by getting rid of items no longer needed.  Over half of households do not have a home inventory and the majority of those who do have them, haven't updated them with new possessions purchased since it was done.

The peace of mind having one can be a strong reason for having a home inventory.  It provides confidence that this area is financially organized and prepared should you have need of proving losses.  It will help you and your family return to your normal life after an unsettling event.

Download our Home Inventory for more tips on creating one along with alternatives for documenting your belongings.  If you don't have another media, this will allow you to take pictures and list individual items along with values in a fillable PDF that can be stored safely in your online cloud.

Difficult to Buy What Is Not For Sale

Buyers are becoming discouraged there are not enough homes on the market, especially, in certain price ranges.  When they do find something they want, there may be multiple offers and they end up losing to another buyer.

Some buyers after experiencing several of these instances have decided to wait until the market changes.  It is understandable but it may be a very long wait as well as being a very costly decision.

Inflation is affecting all sectors of the economy; prices on food, cars, and electronics are going up as well as housing and mortgage rates.  Home prices rose 20.2% year over year in May 2022 over 2021, according to a recently released CoreLogic report. 

The advantage to current homeowners wanting to move up is that their home is now worth more and it takes the sting out of the price they will have to pay for a larger home.

Unfortunately, first-time buyers and those who don't currently own a home are seeing the prices continue to increase at a rate many Americans have never seen before.  Waiting is most probably going to make it less affordable.

It is true that housing inventory is at very low levels but over six million homes sold last year so there was enough inventory available for six million buyers.  For buyers, the problem was they sold fast and there was a lot of competition.  The advantage for sellers is they sold fast and there was a lot of competition that increased the price they received.

It may not be as easy as if there were four to six month's supply of homes for sale but when you purchase a home, these same dynamics will be working in your favor to build your equity with appreciation.

Successful buyers are positioning themselves to act decisively when the new listings hit the market. 

1. Working with a trusted real estate professional
2. Pre-approved by a local lender
3. Developed a plan to write a competitive offer
4. Determined their limits financially and emotionally.

Six million people bought homes last year and you can be among the fortunate ones who buy one this year.  Be committed to what it takes in a highly competitive market.  Surround yourself with a competent and confident team that will produce the results you want.

For more information, download the Buyers Guide and schedule an appointment with us to get the facts about the best plan to get you into a home this year.

Questions to Ask a Mover

"I'd wish I'd known that before I picked a mover."  Having a checklist of questions might have prevented this issue.  This list of questions will provide you with things to discuss when interviewing a moving company.

Fees

• What is the charge for packing?
• Does it include boxes?  If not, what do they cost and will you deliver them?
• Is there an additional charge to deliver some items to a storage unit?

Insurance

• How is a damage claim handled?
• What insurance do you provide and is there a cost?
• Does the insurance cover items packed by the owner?
• Can additional insurance be purchased?
• If items are covered by my Homeowner's insurance, whose insurance pays first?

Unusual Items

• Can you ship my car(s)?  Will they be in the moving van or towed?
• What are the charges for shipping cars, lawn tractors, etc?
• What items cannot be shipped?
• If a shuttle truck is needed because of the location of my house or size of the drive way, is there an additional charge?
• If packing and loading are on different days, can you leave the beds and other basics out for us to use?

Dates

• What dates are available for our move?
• What date will you pack and how long will this take?
• What date will you load the van?
• What date will the van arrive at my new location?
• If my new home is not ready for delivery, how many days can it be delayed before there is a charge? 
• What is the charge for additional days or weeks?

Terms

• Are there any additional fees that I'm responsible for that have not been discussed?
• What are the terms of payment? 
• Is a down payment required? 
• When will the balance be due and who is authorized to accept it?

Download a Moving Guide with more suggestions and a link to change your address online with the United States Postal Service.

Buy Before You Sell

A common concern for homeowners is that if they sell their home first, they may not be able to find another home to buy.  It is understandable with the low inventories currently available in most markets, but a strong argument can be made to buy your replacement home first.

In fact, there are some advisors that would tell you not to sell at all.  Instead, keep the home for a rental investment and refinance it to pull out some cash for the down payment and closing costs for the new one.

Many homeowners recognize that their home has been an excellent investment for them.  Their home may have outperformed their retirement and other investments.  In all likelihood, homeowners understand the management and benefits of a single-family home far better than they understand stocks, mutual funds, annuities, or ETFs.

Just as there are low inventories of homes for sales, there are shortages of available single-family homes for rent, as is evidenced by rent continuing to rise.  Rising prices and rents contribute to the rates of return that rental properties enjoy.

A homeowner, assuming they have good credit, can borrow the difference in their unpaid balance and 80% of the fair market value of their home.  The proceeds are most likely not a taxable event and can be used to purchase the replacement home.

It is likely that the rent could cover the total payment on the refinanced former home.  The seller, then, benefits from income, depreciation, equity build-up, appreciation, and leverage.

There is even a window of opportunity possible for the homeowner to rent it for a while, which covers his payment, allows the home to continue to appreciate, and then, sell and close it within two years and still be eligible for the section 121 exclusion of gain in a principal residence.

The homeowner may find that the investment is providing a better return than alternative investments and keep the rental beyond the two years.  At some later date, if the homeowner wanted to dispose of the property and buy another more expensive rental, a section 1031 exchange may be available to avoid capital gains for a while longer.

Many economists feel that the low inventory situation in most of America is going to be a long-term event due to over a decade of underbuilding and maturity of the millennial generation.  This will continue to propel both home values and rents; both of which are good for investors.

Buy before you sell but they don't have to be at the same time; they can be years apart.  Do a cash-out refinance on your current home for the proceeds to buy another home that meets your needs now.  Then, convert your current home to a rental investment.  Don't wait because rising interest rates will increase your payments on not only the new home but the refinanced home also.

Talk to your real estate professional about what the fair market value of your current home is now, what you can expect to pull out of it and what it would rent for.  Download our Rental Income Properties guide for more information.