- The appraiser didn’t use appropriate comparable sales, and you have proof of more accurate options
- The appraiser missed features or upgrades in the subject property
- You found mistakes in the report
- The appraiser only conducted a drive-by or exterior appraisal
A bidding war is when at least two prospective buyers have made legitimate offers for a home that are similar and the Seller wants to select the best offer and terms for themselves. Bidding wars are common—in most of 2020, over half of home offers presented have faced competitive bids, according to Redfin’s study. Although historically low interest rates have sparked buying activity recently, some neighborhoods are always sought-after and attract multiple offers whenever a home comes up for sale. Exclusive Buyer Agents are experts in winning bidding wars and getting credits during the due diligence period.
Expect to be in a bidding war In a hot housing market, it’s often not enough to quickly make an offer on a house but to have the highest price and best terms.
Here are a dozen ways you can get an edge on the competition.
- Offer to Pay in Cash
If you have the ability to offer an all-cash bid, you gain a distinct advantage because you eliminate the possibility of a mortgage falling through before closing. Buying with cash will make the process go quicker because you won’t need to go through the approval process with a lender, who would also request an appraisal. If you can’t cover the entire purchase price in cash, you could agree to a larger down payment on the house, which increases your approval odds and might make your bid more attractive.
- Get Pre-Approved
Pre-approval is a step most buyers will take anyway, but it’s absolutely essential for anyone in a competitive bidding situation. Pre-qualification is not enough, as it doesn’t show that the lender conducted the same amount of due diligence—such as checking your earnings and doing a hard credit check—that a pre-approval would require.
- Know Your Financial Limits
When you’re preparing for a bidding war, think of it like an auction—you need to know how much house you can afford before you actually bid. Once you know the maximum amount you’re willing to bid, you can include an escalation clause in your purchase offer to ensure you can instantly counteract any other bid. An escalation clause lets you increase your bid to avoid being outbid by another buyer up to a specified amount.
- Provide More Earnest Money
Buyers typically provide 1% to 5% of the purchase price as earnest money—a form of a security deposit—in a purchase contract, which gives sellers the assurance that you will follow through with the purchase. If you bail out on the contract without citing a contingency, you will likely lose the earnest money. If you put down more than the typical earnest money amount, it will tell the seller that you’re determined to follow through to the closing.
- Be open to making offers sight-unseen
Speed is key in a seller’s market as competitive as this one. If you’re interested in a home but live far away or just haven’t been able to tour it, you can still throw your hat in the ring. Video tours and 3D walk-throughs have made sight-unseen offers much more feasible. Almost two-thirds (63%) of people who bought a home last year made an offer on a property that they hadn’t seen in person.
- Remove Some or All Contingencies
When you make an offer to purchase a house, you know the deal could fall through for numerous reasons, and you don’t want to lose your earnest money because of it. That’s why you include contingencies in the purchase contract; if the home inspection uncovers major problems or you can’t sell your current home in time to close on the new one, you can get out of the contract without penalty. Almost no offers contingent on the sale of a home will win a bidding war. Sell your home, rent and then start trying to get a home under contract. Simultaneous closings are so 1990’s.
If you can’t waive contingencies, sweeten them for the seller. Opt to expedite the contingency timeline.
- Be Flexible on the Move-in Date
First-time home buyers and those who have already sold their previous home might be in a position to be flexible with the sellers on their move-in date. A seller might ask for more time if they have concerns about potential delays for a new home build. In this case, they could go through the closing and then rent the home back from you for a few weeks or a month. This flexibility could be as valuable—if not more valuable—than a higher bid on the house.
- Start low, bid high
A lot of successful buyers today win by making an offer that exceeds the asking price…in fact it is expected. This also means that a lot of buyers end up exceeding their budgets. To prevent this, only search for homes that are listed 10-15% below what you can afford, so that you can make an over list price offer.
- Offer to pay some of the seller’s costs
Home buyers can make their offers more competitive by offering to pay for expenses that are typically covered at least partially by the seller.
- Write a Personal Note
Home sellers, especially ones who have lived in a home for a long period of time, can sometimes be swayed by a personal note that explains why you believe this is the home of your dreams. For example, you might know that the current owner raised a family in the home, and you can discuss how you hope to do the same. It might seem a bit over the top, but it’s certainly worth a try when not much separates your offer from others. And yes—sometimes it works. Avoid putting any personal information in the letter that may expose the Seller of real estate agents from violating Fair Housing laws.
- Prepare to lose before you win
With more than half of offers facing competition these days, it’s more likely than not that you’ll get into a bidding war if you’re in the market for a home. It’s also wise to know when to walk away. It’s OK to put your search on hold if you reach the point where you’re not comfortable making the aggressive offers that are often necessary to win in today’s market. You don’t want to end up with buyer’s remorse, after all.
- Use an experienced Exclusive Buyer Agent that has been successful with winning bidding wars and speak with their references. Be prepared to ask to be in a Back Up position if you lose the bid. The market is too competitive and offers move too fast for novices to be effective at winning bidding wars in a multiple offer situation.
Buying a home in a Seller’s market always has its challenges. But when you’re trying to do it in a seller’s market, the difficulty can reach a new level. When the market favors the seller, time is of the essence. Multiple offers happen with more regularity in a seller’s market than a buyer’s market, because a seller’s market is defined in part by low inventory and a surplus of home buyers. A beautiful home that is priced well can attract more than one offer.
In a seller’s market, you should always assume you’re competing against several other offers. However, that doesn’t mean you can’t buy a new home in a seller’s market, when there are more buyers than homes, and sellers can afford to hold out for higher offers. You just need to make sure you do it right and arm yourself with the right information:
Here are a few things to consider as you prepare your offer when buying in a seller’s market:
Choose an Experienced REALTOR: In sports and in business, it’s important to have the best players on your team when facing fierce competition. In a seller’s market, that means choosing a real estate agent who not only has proven expertise in the neighborhoods you’re interested in but is also highly responsive and efficient. Make sure to use an Exclusive Buyer’s Agent that owes you a fiduciary and works in your best interest.
Demonstrate Credit Worthiness: You should get Pre-Approved for a home mortgage with a local lender before touring homes if you need to get financing. By obtaining a pre-approval for a mortgage before you start home shopping, you’ll know how much buying power you have. Your offer may have far more credibility than competing ones where buyers didn’t take this step.
Lower Your Expectations: When the inventory of homes is limited, you probably can’t afford to wait for the perfect house to hit the market. Prepare yourself to adjust your expectations. It makes the most sense to make exceptions to your criteria for things that can be changed. For example, you can renovate or add a bathroom someday, but you can’t change the home’s location or lot size.
Make your Best Offer first, be Ready to Bid: Make your best offer but be prepared for it not to be your final offer. High home prices can lead to home appraisals that don’t climb as fast, leaving lenders to not fund the loan. Home buyers should have money set aside the pay the difference between a contracted purchase price and the appraisal.
By Prepared to Make Concessions: Your relative lack of power in a seller’s market doesn’t just affect the question of price. It carries over to every other aspect of the deal, too. Shorten the inspection period, be flexible on closing dates; you should be prepared to accommodate the seller’s needs even if it is an inconvenience to you.
Don’t be that buyer who wants to wait until the weekend to view a home in a seller’s market. By the weekend, that home could be sold. Try to be one of the first showings. Sellers usually don’t enjoy having buyers come through their homes at all hours of the day, so most would like to see their home sold quickly. If you write a good, fast, and clean offer, your chances of acceptance are far better than those of a buyer who is unprepared or is unrealistic on price.
Finally, don’t get carried away with the pressure to buy, even in a seller’s market. Remember that a home decision has a long-term impact on your financial future. It may be better to let a house go than make a poor decision that’s expensive to change.
Rates are lower than ever; when a refinancing is done right, it can save you thousands of dollars. But not every potential refi makes the cut. Sometimes the expenses just don’t justify the potential savings.
It is time to refinance your home mortgage if the terms lower your mortgage interest rate, pay off their mortgage years earlier, or saves thousands in interest over the life of the loan. You can save serious money by refinancing your mortgage. But due to refinancing fees and expenses, not every refi makes financial sense.
COVID-19 is creating changes with lenders and how they are doing business. This is resulting in refinancing taking longer and getting stricter than it has been in the past. Although the mortgage process is considered essential as a financial transaction, depending on where you live, there may be changes related to COVID-19 involving your appraisal, rate lock and closing process.
Rates are quite low and because your home is your biggest financial investment, the equity can be very useful as a resource in times of trouble. But if you’re thinking of financing your home loan there are several steps you should take to make sure that it’s the right move for you.
How Long Do You Plan On Being In Your Home?
Being able to answer this question will help you figure out the term length you want on any refinanced mortgage; but there’s another reason asking this question …
If you plan on moving within the next 5 – 10 years, it could be worth your while to look at an adjustable rate mortgage ( ARM). You get a lower rate initially with an ARM because the rate can adjust after the teaser period. But if you move before the end of the fixed-rate time frame, you don’t have to worry about whether the rate is going up and down in the end. Additionally, your payment will tend to be lower because most adjustable rate mortgages are based on 30-year terms.
Age Of Current Loan
The age of your current loan sometimes plays a role in whether you can refinance. Even if you can refinance, it does not always make sense. When you refinance you have to pay closing costs. If you are not planning on staying in the house past the breakeven point when the savings and the additional expenses paid starts to net to overall reduced costs for home ownership, the it is not the time to refinance. You may want to accelerate buying a new home to realize the saving from lower interest rates.
Plans For Monthly Savings
If you determine that you’re going to save money by refinancing based on the rate and term you can get, make sure that you have a plan for what you’re going to do with the monthly savings in order to put yourself in a better financial position. No one knows exactly when COVID-19 is going to end and how long it will take for the economy to recover. If you can save money now, you can work on establishing the savings need should the vaccine be delayed or we continue with a longer recession
You could use your savings to build up an emergency fund. Maybe you choose to allow yourself to save money in the future by paying off high-interest debt now. You can also use this to catch up on saving for retirement if you stopped contributing temporarily while dealing with the situation caused by the virus.
It’s a very volatile market right now, so we advise all of our clients to rely on the advice of their Home Loan Expert and Financial Advisors at all times.
The Mortgage Refi Process
Approving a mortgage is a complicated process, one that requires a lender to validate a borrower’s income, check the value of the home being used as collateral and scrutinize the title history of the property.
Just as refinancing applications picked up, the coronavirus pandemic dramatically changed the way everyone in the mortgage industry works. Loan officers no longer go to the office. Appraisers stopped walking through houses. And no one gathers around the title company’s closing table. The process is a little slower because everybody’s working from home right now. Things that would take an hour to do are taking a day sometimes.
It is more difficult to verify a borrower’s employment. A task once dispatched with a quick call to the borrower’s human resources department now means leaving a voicemail and waiting a day or two for a response.
Meanwhile, homeowners looking to refinance may have to get in line behind buyers who need a mortgage so they can close on a house which are a priority with lenders.
The mortgage industry already had been digitizing, and lenders quickly adapted to many changes. One stumbling block, though, is that most lenders still require some documents to be signed in the presence of a legal witness and notarized. Florida allows for mobile notaries and they are busier than ever.
Sometimes, documents are being signed remotely and online and mobile notaries are not allowed yet. You need to allow time for in person notarization and overnight mailing of documents. Digital closings may be the way of the future, but we are not there yet.
What You Can Do to Secure a Smooth Refinance
Here are a few ways you can make the refi process as smooth as possible:
— Get your paperwork in order. Don’t let something simple like a missing document delay your refinance. Collect PDFs of financial documents, including pay stubs, bank statements, tax returns and retirement accounts.
— Make sure the lender will honor your rate lock. In normal times, lenders extend rate locks for 30 to 60 days, meaning you won’t have to pay more if rates go up before your loan closes. These aren’t normal times, though, and many refinances aren’t closing within 30 to 60 days, so make sure your lender is willing to extend your rate lock if your deal is delayed.
— Keep your credit score tight. Now isn’t the time to miss a payment, take on new debt or otherwise do anything to lower your credit score. Lenders are being especially strict about borrowers’ credit histories.
- Floridians pay an average $5,679 per person in state and local taxes
- Residents pay an average $2,584 in state taxes – one of the least amounts nationwide. Only the residents of one other state pay less.
- However, local tax burdens are higher. “Per Capita Local Tax Collections” ranked No. 27 nationally.
- In the balance between state and local taxes, Florida relies more heavily on local revenue than almost all other states and is No. 2 nationwide. Local taxes account for 53.3 percent of the total.
- With property taxes, Florida ranks a solid “average” score – No. 25. The state’s per capita property tax ranking is right at the median – 25th.
- Florida also classifies 38.7 percent of its state and local revenue as non-tax revenue (such as “fees”) – the 7th largest percentage in the nation.
- Florida relies more heavily on transaction taxes, such as general and sales taxes. They make up, 81.5 percent of all state tax collections compared to the national average of 47.2 percent.
- Florida has the highest state and local selective sales (excise) taxes on utilities in the nation. The tax on motor fuels is No. 15; the tax on alcoholic beverages is No. 19.
- Florida’s housing sector produces significant revenue, and the state’s documentary stamp taxes are rising rapidly post-recession. It collected an average of $276 per capita in 2006, $72 in 2009, and $130 per capita in 2016 – the nation’s second-largest doc-tax burden.
- Florida is one of seven states without a personal income tax. The average state relies on personal income taxes for 37.0 percent of its tax revenue.
- Businesses pay 51.7 percent of all Florida state and local taxes – the 12th highest percentage in the nation.
World events are conspiring to make it more expensive for you to borrow money to buy a house.
Mortgage rates have increased for six consecutive weeks, according to Bankrate data, bringing interest on a 30-year fixed rate loan to 4.44 percent—the highest level in 11 months—while home prices continue to rise due to a lack of available homes.
After years of tepid economic growth, inflation and wage growth recently found a groove, while the Federal Reserve’s plan to raise short-term interest rates multiple times for a consecutive year has reduced the value of government debt.
Homebuyers Should Get off the Fence
Mortgage rates are moved by the yield on 10-year Treasuries, rather than short-term rate hikes by the Fed. That’s why mortgage rates fell throughout 2017, for instance, even as the central bank raised the federal funds rate three times. Rates remain cheap, however, compared to historical prices. A 30-year fixed-rate mortgage came with an interest rate above 6 percent just before the Great Recession in 2007. Potential homeowners should get off the fence and make a bid, assuming you have an affordable home target and adequate savings, because rates are likely only heading north.
Mortgage rates are expected to climb in 2018, so it might be worth shopping for a mortgage before this long period of low rates takes a turn.
Here are several predictions from the largest housing and mortgage groups for the 30-year fixed-rate mortgage: