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Serving South Florida

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For over 35 years

Homebuyer Advice

Pros and Cons of Self-Insuring For Wind Coverage

Hurricane Wind Damage
On average, the cost of homeowners insurance in Florida has gone up by 32.5% since 2016. This is more than three times higher than the average rate change than the rest of the country experienced during this time (10.9%).
More and more of my clients are analyzing the pros and cons of self-insuring instead of carrying a wind insurance policy. Self-insurance entails setting aside money for a potential loss in lieu of purchasing a third-party insurance policy. Depending on the losses your home faces, this could either save or cost more money than conventional insurance coverage.
The logic behind self-insurance is that providers calculate premiums based on forecasted risk. These figures are designed to profit the insurance company by bringing in more money than they are likely to pay out. Under this reasoning, a homeowner should theoretically be able to set aside funds in case an incident occurs, thereby protecting themselves without an insurance company taking a cut. Even with wind coverage a homeowner has a minimum deductible of 2% that they will have to pay out-of-pocket before insurance covers any damages.
All forms of insurance are essentially risk transfer strategies. When you purchase an insurance policy, you are paying a third-party to shoulder some of the risk. If you self-insure, however, you are choosing to retain the risk yourself.
Pros:
Interest: The funds you earmark for self-insurance can accumulate interest until you need them, growing substantially if you don’t have infrequent losses.
More Control: With self-insurance, you’re not bound to insurance policy fine print that contains specific exclusions and stipulations. You can spend the designated funds to cover virtually any wind incident.
Cons:
Potential for Significant Loss: Some types of claims can be extraordinarily expensive. That’s a very risky proposition for most people.
Self-insuring is normally only an option if there is no bank mortgage on your home. When you have a mortgage held by a financial institution, they want to make sure their investment is protected. The mortgage holder will insist on seeing proof of insurance coverage, so dropping your coverage is not typically an option.
How high could repair costs go?
Even for the people with no mortgage, self-insuring is a risky strategy and requires you to have liquid assets set aside for repairs.  It’s hard to plan for the financial impact of hurricane damage. In South Florida, we can go several seasons without getting a wind event; but when a major storm hits, like Andrew (1992), Wilma (2005) or Irma (2017), it’s impossible to predict in advance how much damage will be left in the storm’s wake.
You may have heard how construction costs are already sky-high due to material shortages. Just imagine how high those costs will climb if a major storm hits our area. Replacing a tile roof in South Florida is one of the most expensive repairs a homeowner can face. That cost could easily double after a storm. Without insurance, will you have enough cash or liquid resources on hand to pay for that, let alone cover months of temporary housing in this ultra-competitive rental market while you make repairs?
Other Options:
Talk to your homeowner’s insurance agent to explore other options like raising your hurricane deductible (typically 2% in Florida to 5%). Also, consider wind mitigation measures like impact glass windows and doors and installing a whole home generator, which can help protect your home and reduce premiums. If your home is located east on or near the water, hefty insurance costs may simply be a fact of life. The only way to reduce costs may be to relocate to a less hurricane-prone area ( which is not South Florida).
And one final thought – don’t forget the importance of flood insurance.  Without flood insurance, you are not protected from rising water. In past years, 25% of actual flood claims have been on properties classified as low flood risk. A small investment in insurance can protect you from major expenses.
Pocketing extra money instead of paying a premium to an insurer sounds like a great idea in theory, but it doesn’t always work out in the long run. The cost of your monthly premiums over the years could end up being less than what you’ll pay for rebuilding your home on your own.
Consulting a qualified insurance professional can help you decide whether self-insurance is a viable option in your situation.

Caveat Emptor- Buyers Beware!

Caveat Emptor
Caveat Emptor, “Let the buyer beware.” is a real estate principle that warns buyers to “beware” and do their due diligence. It is of paramount importance, for Florida real estate buyers, since the majority of real estate agents are transactional agents.  When a purchase contract for property says the buyer is to take the property “as is,” the seller truly means “as is.” Under the doctrine of caveat emptor, property buyers are held responsible for inspecting the quality and condition of the land or building before the final execution of the purchase contract.
If the buyer does not exercise due diligence during the Inspection Contingency Period and fails to examine the property, then the seller is shielded from liability for any defects. Additionally, the burden of proof is on the buyer to show that the seller actively concealed a material defect.
Florida courts continue to adhere to caveat emptor, which was reaffirmed in the Florida Fourth District Court of Appeals decision for Florida Holding 4800, LLC v. Lauderhill Mall Investment.There are three exceptions to the caveat emptor doctrine in Florida, including (1) where the purchaser has been prevented from making an independent inspection of the property due to a trick or artifice, (2) where the purchaser does not have an equal opportunity to become apprised of the fact, and (3) where one of the parties attempts to disclose facts and fails to reveal the whole truth. Nonetheless, these exceptions are difficult to claim in court because the buyer has the burden of proving that the seller actively hid the material fact to sidestep any “as-is” language of a contract.   Additionally, oral representations by the seller regarding the property’s condition are explicitly contradicted by any “as is” language in the written agreement. This notion rests on the buyer’s inherent ability to inspect the property and withdraw from the property agreement if the quality of the land or building does not meet their expectations.
There are two forms of representation available under a Broker license held by a real estate professional according to Florida law: the Single Agent and the Transaction Broker. These two relationships entitle the buyer or seller to different upheld duties by the real estate professional.  Full disclosure applies exclusively to single agent brokers. Limited confidentiality is a transaction broker duty.
A Single Agent is defined by Florida Statutes Chapter 475, Part I as a broker who represents either the buyer or seller of real estate, but not in the same transaction. It is the highest form, providing the most confidence to the customer that the Realtor represents only the customer’s interest. In the case of an Exclusive Buyer Agent the buyer is their CLIENT and the single agent owes the buyer a fiduciary duty.
The duties of a single agent that must be fully described and disclosed in writing to a buyer or seller in agreements for representation include the following:
  • Dealing honestly and fairly
  • Loyalty
  • Confidentiality
  • Obedience
  • Full disclosure
  • Accounting for all funds
  • Skill, care, and diligence in the transaction
  • Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing
  • Disclosing all known facts that materially affect the value of residential real property and are not readily observable
Disclosure of these duties must be made before or during entrance into a listing/representation agreement, or before the showing of property.
A transactional agent is defined as a real estate agent who provides limited representation to a buyer, a seller or both, in a real estate transaction, but does not represent either in a fiduciary capacity or as a single agent.
Section 475.278(1)(b), Florida Statutes, presumes that a licensee is operating as a transaction broker, unless the customer and broker establish a single agent or no brokerage relationship, in writing.
Most U.S. states now require a Sellers Disclosure Form, often called “disclosure notices,” “property disclosures,” or “property condition statements.” On these forms, sellers must advise the potential buyer of any material defect they’re aware of in the home — usually within a few days of finalizing the purchase agreement or sales contract. Filling out this form is NOT a legal requirement in Florida and many real estate transactional brokerages are taking the position that they are not going to provide a written disclosure from the Seller.
Before deciding to finalize a Contract for Sale the Buyer is provided with an Inspection Contingency Period. You are advised to include some of all the following in your due diligence.
·      Conducting professional inspections of the building and its systems. This could include roof inspections, electrical inspections, HVAC inspections, WDO Inspections, and more.
·      Reviewing the property’s records, including its past owners, title, deed, property survey,  and other important documents. Make sure to look for past code violations, too.
·      Having the property’s value professionally appraised. Your lender might require this anyway if you’re financing the property.
·      Reviewing the property’s compliance with local zoning and land-use regulations.
·      Having an environmental assessment conducted on the lot and the building.  Are there hazardous materials in the building, like lead-based paints? You’ll also want to know if the property is in a flood zone.
·      If you plan to renovate the property you’re buying, bringing in a contractor or consultant is also a smart move. You’ll want to assess the property’s condition as well as the potential repair costs and structural feasibility of the project.
As a home buyer in Florida, you should only seek out an Exclusive Buyer Agent. They owe you a fiduciary duty and are charged with full disclosure of all known facts regarding the property, community and hold your interest in strict confidence. They will work for you to get all the answers you need to make a valid and informed purchase decision.

Helping Your Pet Cope With Fireworks

 

The 4th of July is here, and if your pet is afraid of fireworks and loud noises, you may need just a little more preparation to make sure your pet stays happy and relaxed during the celebration.

  • Set up a safe space in advance.Create a “happy place” where your pet can retreat to and feel secure. Choose a spot in your house where your pet usually likes to relax that will also buffer the sights and sounds of the fireworks, such as a walk-in closet or a room with blackout curtains. Fill it with comfortable beds and some favorite toys and make it extra awesome with playtime or treats.
  • Drown out the sound. Leave music playing in the safe space throughout the firework display to help block the booms. Closing all windows and doors in the house will help as well.
  • Provide plenty of distraction. Pull out your pet’s favorite toys or stuff toys with treats to give your pet something fun to focus on during the celebration.
  • Don’t make a fuss. When your pet is distressed, it’s hard to ignore the urge to comfort them, but excessive comforting may reward your pet’s behavior or (even worse!) validate their fears. Besides a few calm pats, carry on as if nothing special is happening.
  • Consider calming supplements or pheromones.  Starting some before the fireworks begin may help relax your pet and reduce their reactivity.

 

 

Summer Energy Saving Tips!

Summer
Summer
With higher temperatures often comes…higher energy bills, as we attempt to combat the heat outside with cool, air-conditioned interiors. To help you shave a few dollars off your energy bills all summer long, here are some tips and tricks for reducing your energy consumption and saving some money. From little fixes to some more major projects, these changes will help you stay calm, cool, and collected this summer.
Install a Smart Thermostat. Smart thermostats can automatically adjust your home’s temperature when you’re asleep or away to whatever your preferences are. While these high-tech gadgets require an initial investment, they have the potential to reduce your cooling bill by about 10 percent!
Use Your Ceiling Fan(s). Have ceiling fans in your home? Use them! Ceiling fans utilize about 10 percent of the energy that an A/C unit does. Make sure your fans are set to a counterclockwise direction to push the cooler air down.
Shade Your Windows. Sunlight entering through windows can significantly heat up your house, causing your A/C unit to work overtime. Keep your blinds shut or install heavier shutters or curtains to keep the heat out this summer!
Set the Temperature Higher — and Leave It. Set your thermostat to the highest temperature you can comfortably live in. And keep it there! The less you change the temperature, the less your unit must work to adjust. Remember that each degree you raise your thermostat equals more savings… up to 5% on your monthly cooling costs.
Add Insulation.Adding insulation to your home can reduce heating and cooling costs. Homes built prior to 1982 were not required to have insulation. If your home was constructed before 1982, you may benefit from adding the proper insulation.
Regularly Replace Your Filter. Dusty and dirty filters can block airflow and make your system work harder. Replacing your filter once a month can reduce your energy consumption by 5–15 percent!
Turn Off the A/C When You Leave. When you leave for summer vacation, make sure you turn off your A/C — or set it to 80 degrees. While you may return to a warm house, you’ll be thankful you saved all that money on your monthly bill.
Properly Maintain Your A/C System. The better you take care of your system, the better it will run — and the more money you will save. Schedule a routine maintenance checkup at the start of both the hotter and colder months to make sure everything is running smoothly!
Seal it up. Make sure your refrigerator has a tight seal. If you don’t have one all the way around the door, it’s almost the same as leaving the door open.
Get Outside and Grill: Cooking on the grill helps you save energy. It doesn’t heat up your home and make your air conditioning system work harder than necessary.
Upgrade to LED light bulbs. Lighting used to be a common source of unwanted summertime heat, but in this age of affordable LED lighting, there’s no need to sit in the dark. LED light bulbs stay cool to the touch, all while drawing a fraction of the power used by incandescent and fluorescent bulbs. Make a plan to upgrade all the bulbs in your home, even if you just buy a few bulbs per month.
Enjoy your Summer!

How To Win A Bidding War!

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1.  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.

  1.  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.

  1. 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.

  1.  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.

  1.  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.

  1. 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.

  1.  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.

  1.  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.

2021 Hurricane Preparedness Guide

The 2021 Atlantic hurricane season is predicted to be more active than usual.
A total of 18 named storms, eight hurricanes and three major hurricanes are expected this season.This is above the 30-year average of 14 named storms, seven hurricanes and three major hurricanes.
In order to ensure you are properly prepared this hurricane season, you should consider how you are going to supply your homes given that hurricane season begins June 1st. Don’t be caught unaware, protect yourself.
Hurricane hazards come in many forms, including storm surge, high winds, tornadoes, and flooding. History teaches that a lack of hurricane awareness and preparation are common threads among all major hurricane disasters. By knowing your vulnerability and what actions you should take, you can reduce the effects of a hurricane disaster.
May 9, 2021 is the first day of National Hurricane Preparedness Week; hope you find this information informative and useful as we approach the beginning of the Hurricane Season.
2021 Hurricane Preparedness Guide
Look carefully at the safety actions associated with each type of hurricane hazard and prepare your family disaster plan accordingly. But remember this is only a guide. The first and most important thing anyone should do when facing a hurricane threat is to use common sense.
Know Hurricane Terms:
Hurricane Watch – A hurricane is possible within thirty-six hours. Stay tuned for additional information.
Hurricane Warning – A hurricane is expected within twenty-four hours. You may be advised to evacuate. If so, evacuate immediately.
Storm Surge – Storm surge is simply water that is pushed toward the shore by the force of the winds swirling around the storm. This advancing surge combines with the normal tides to create the hurricane storm tide, which can increase the mean water level 15 feet or more.
Ask your local emergency preparedness office about evacuation plans. Learn evacuation routes.
  • Plan a place to meet your family in case you are separated from one another in the hurricane.
  • Assemble a disaster supplies kit ( See information below)
  • Board up windows. Permanent storm shutters and impact glass offer the best protection. Also, you can use 5/8″ marine plywood. Tape does not prevent windows from breaking.
  • Know how to shut off utilities.
  • Make a record of your personal property (take digital photos or video tape the contents of your home and/or business and keep in a waterproof container with you along with your homeowners insurance policy or better yet, upload everything to the Cloud)
  • Be sure trees and shrubs around your home are well trimmed.
  • Clear loose and clogged rain gutters and downspouts.
  • Determine how and where to secure your boat.
  • Reduce the water level in your pool by about 1 foot. DO NOT drain your pool.
  • Charge cell phones and back up batteries
  • Get extra cash since ATMs will be inoperative if power is lost.
  • Consider flood insurance and purchase it well in advance.
Have a Place To Go:
Develop a family hurricane preparedness plan before an actual storm threatens your area. If your family hurricane preparedness plan includes evacuation to a safer location for any of the reasons specified with in this web site, then it is important to consider the following points:
If ordered to evacuate, do not wait or delay your departure.
If possible, leave before local officials issue an evacuation order for your area. Even a slight delay in starting your evacuation will result in significantly longer travel times as traffic congestion and weather deteriorates worsens.
Select an evacuation destination that is nearest to your home, preferably in the same county, or at least minimize the distance over which you must travel in order to reach your intended shelter location. In choosing your destination, keep in mind that the hotels and other sheltering options in most inland metropolitan areas are likely to be filled very quickly in a large, multi-county hurricane evacuation event.
If you decide to evacuate to another county or region, be prepared to wait in traffic.
The large number of people in this state who must evacuate during a hurricane will probably cause massive delays and major congestion along most designated evacuation routes; the larger the storm, the greater the probability of traffic jams and extended travel times.
If possible, make arrangements to stay with the friend or relative who resides closest to your home and who will not have to evacuate. Discuss with your intended host the details of your family evacuation plan well before the beginning of the hurricane season.
If a hotel or motel is your final intended destination during an evacuation, make reservations before you leave. Most hotel and motels will fill quickly once evacuations begin. The longer you wait to make reservations, even if an official evacuation order has not been issued for your area or county, the less likely you are to find hotel/motel room vacancies, especially along interstate highways and in major metropolitan areas.
If you are unable to stay with friends or family and no hotels/motels rooms are available, then as a last resort go to a shelter. Remember, shelters are not designed for comfort and do not usually accept pets. Bring your disaster supply kit with you to the shelter. Find Pet-Friendly hotels and motels.
Make sure that you fill up your car with gas, before you leave.
Preparing Your Pets for Emergencies Makes Sense.
Get Ready Now.
If you are like millions of animal owners nationwide, your pet is an important member of your household. The likelihood that you and your animals will survive an emergency such as a fire or flood, tornado or hurricane depends largely on emergency planning done today. Some of the things you can do to prepare for the unexpected, such as assembling an animal emergency supply kit and developing a pet care buddy system, are the same for any emergency. Whether you decide to stay put in an emergency or evacuate to a safer location, you will need to make plans in advance for your pets. Keep in mind that what’s best for you is typically what’s best for your animals.
If you must evacuate, take your pets with you if possible. However, if you are going to a public shelter, it is important to understand that animals may not be allowed inside. Plan in advance for shelter alternatives that will work for both you and your pets.
Make a back-up emergency plan in case you can’t care for your animals yourself. Develop a buddy system with neighbors, friends and relatives to make sure that someone is available to care for or evacuate your pets if you are unable to do so. Be prepared to improvise and use what you have on hand to make it on your own for at least three days, maybe longer.
Disaster Supply Kit
I personally prepare a hurricane closet in May with all the needed supplies and materials so that there is never a last minute rush to the store when the shelves have been cleaned out.
Water :
  • Plan on one gallon of water per person per day for at least 3 days, for drinking, washing, cooking, and sanitation. Extra water for pets
  • Store as much as possible in plastic containers such as soft drink bottles.
  • Avoid using breakable containers, such as glass bottles or mason jars.
  • Fill bathtubs with water for bathing and washing dishes
Food :
  • Store at least a three day supply of non perishable food.
  • Choose foods that do not require refrigeration or cooking.
  • Choose foods that are healthy and high nutrition type.  (Canned meats, fruits and vegetables, protein or fruit bars, dry cereal or granola, peanut butter, dried fruit, nuts, crackers, canned juices, non-perishable pasteurized milk, high enery foods, vitamins, food for infants and pets, comfort/stress foods)
Supplies and Equipment:
  • A battery operated radio with extra batteries
  • NOAA Weather Radio with tone alert and extra batteries
  • A flashlight with extra batteries
  • Blankets or sleeping bags ( store in trash bags to keep dry)
  • Paper plates and utensils, including a non electric can opener
  • Candles and matches in a waterproof container
  • Plastic sheeting and duct tape to shelter-in-place
  • Toothbrushes, toothpaste, soap, moist towelettes, and other personal grooming items
  • Paper towels and toilet paper
  • First aid kit and medicines ( ask your pharmacist or drug supply company for a one month hurricane supply and store in water proof container)
  • Fire extinguisher
  • Wrench or pliers to turn off utilities
  • Cell phone and plug in battery operated charger
  • Infant formula and diapers
  • Books, games and toys to keep kids occupied ( remember those batteries)
  • Important family documents such as copies of insurance policies, identification and bank account records, COVID Vaccine Passport, in a waterproof, portable container
  • Complete change of clothing including long sleeved shirt, long pants and sturdy shoes
  • Insect repellent and sun-screen
  • Paper and pencil
  • Local Maps
  • Make sure to keep all of your medications filled.
Business Preparedness
* Have an emergency communication plan in place before the storm hits. How will co-workers stay in contact if the physical location of a business is damaged?
* Turn off all non-critical work devices before the storm hits.
* Alert a third party about business evacuation plans in case a storm makes it impossible to get to your place of business.
* Protect important business documents that you may need quickly, such as property insurance policies.
* Have cash on hand to pay employees or contractors after the storm.
* Know which employees are certified in CPR, EMT, etc.
* If possible, disconnect a building’s main electrical feeds.
* Have a plan to notify all employees, post-storm, about damage and how you’ll move forward.
* Review contracts that are date sensitive and have a backup plan in place to handle potential problems.
* Assess all functions that could be impacted by a lapse in business – cash flow, bills, budgets and any upcoming events.

Pros and Cons of Escalation Clauses

An escalation clause is language inserted into a purchase offer for a home that’s intended to make sure a buyer is the highest bidder. It’s typically used when a buyer and their real estate agent strongly believe a house will receive multiple offers.

An escalation clause states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn’t agree to pay more money than they can afford.

An escalation clause can be a powerful technique when used correctly, but unfortunately it is seldom used as effectively as it could be. Such a clause increases, or escalates, a contract above its originally offered Sales or Contract Price when the Home Seller has received another Contract.  The intent of the Clause is to crush competing contracts by automatically and incrementally increasing the buyer’s offer price by a pre-determined amount above other offer(s).

Typically, there are three distinct parts to any escalation clause that’s included in a real estate contract.

Proof of a bona fide offer: You can rest easy knowing that sellers can’t just use an escalation clause as an excuse to make you pay a higher sale price. When the contract asks for “proof of a bona fide offer,” it means that the listing agent must be able to prove that another offer came in with a purchase price higher than your original suggestion. Typically, the listing agent will send over a copy of the page from the other buyer’s purchase agreement that shows the higher price. However, any identifying information for the other buyer will be redacted.

An escalation amount: The escalation clause should also include an amount by which you’d like to outbid any higher offers.

A price cap: The price cap represents the maximum amount you’re willing to pay for the property, or how high you’re willing to allow your offer to go. If an offer is submitted that is higher than this amount, be aware that your offer may be taken out of the running.

Pros of Using an Escalation Clause

  • Including an escalation clause in your offer indicates to the sellers that you’re truly invested in buying the property. It shows that you’re willing to go above and beyond what’s required in order to become the home’s new owner.
  • Some buyers love the idea of negotiating; others don’t. If you fall into the latter group, including an escalation clause in your offer might be a smart idea. Since it gives the seller a solid idea of your positioning upfront, it cuts down on the back-and-forth that needs to happen between you and the sellers.
  • If the market conditions are highly competitive — a “Seller’s Market” — or the particular property is head and shouldersabove the rest, or both, you as a Home Buyer are likely going to find yourself competing for the home against other would-be homeowners.
  • Using an escalation clause will continually bump up the price you pay, but only if there are other offers that trigger it.

Cons of Using an Escalation Clause

  • If a buyer includes a maximum price in an escalation clause, the seller will immediately know the buyer’s top price thereby compromising the buyer’s bargaining position. By providing a price cap for your escalation clause, you’re essentially telling the sellers how much you are willing to pay for the home, and there’s nothing to stop them from simply presenting you with a counteroffer at that price.
  • An offer containing an escalation clause may not become enforceable until a specific price is entered into the contract and the buyer sees the price the seller has specified.
  • The seller may fabricate a fictitious offer in order to drive up the sales price for a buyer who uses an escalation clause.
  • Real estate brokers are prohibited from drafting escalation clauses, because doing so would constitute the unauthorized practice of law. Hiring an attorney is recommended but will increase the buyer’s costs.
  • If multiple buyers were to include escalation clauses in their offers, a bidding war may follow. If no buyer is willing to commit to a specific price, then no contract is ever formed and no property is sold.
  • Since the use of an escalation clause implies that a prospective buyer is willing to pay more than other buyers, it may motivate sellers to seek higher prices, a disadvantage to the buyer using the escalation clause.
  • While the use of escalation clauses may lead to higher sales prices, a benefit to the sellers, they could also discourage buyers who do not want to use escalation clauses.
  • A broker who discloses the price/terms of an offer without the buyer’s consent or otherwise gives one party an unfair advantage over another risks disciplinary action by the Commission. A seller’s best response in a multiple offer situation where one or more of the buyers is using an escalation clause will likely be to invite all buyers to make their highest and best offers.  That way, each buyer is given an opportunity to buy the property at the price and terms he or she is willing to pay and the seller will receive the best offer from each buyer rather than an incremental offer from a buyer who wants to offer slightly more than a competing buyer.

Don’t make the mistake of thinking the Highest Contract Price will always win; other TERMS of a contract can often prove more valuable to the Sellers.

Having a knowledgeable Exclusive Buyers Agent is invaluable for situations like this and for understanding the risks and possible benefits of opening negotiations in this manner. The seller has the right not to respond to any offer, whether or not it contains an escalation clause.

Tips for Buying a Home in a Seller’s Market

Seller's market
Seller's market

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.

Housing and Interior Design Trends for 2021

Accessory dwelling Unit

Accessory dwelling Unit

Design trends for 2021 include multi-zone kitchens, upgraded lighting, and oversized rectangle tiles according to home design website Houzz. The online resource recently released the following trends it expects to get hotter in 2021 as well as other home design sources.

Sconce lighting. Interest is growing in swing-arm and other sconce fixtures. Besides adding to decor, sconces have the benefit of adding task lighting around a sink or range

The multi-zone kitchen. Kitchens traditionally use a three-zone “work triangle” setup with a connection between the fridge, sink, and range, Houzz notes. More homeowners are adding touch points and creating additional work zones. Houzz refers to the trend as a “work trapezoid,” which might include dedicated areas for baking, prepping and chopping, or separate stations for snacks, drinks, and homework.

Rejuvenating bathroom design. Bathrooms are being designed to help reduce stress. Forty-one percent of homeowners who have undergone a bathroom renovation say they wanted their new space to evoke more of a relaxing vibe and adding steam showers, aromatherapy shower heads, and bathtub fillers that can hold a cup of tea or glass of wine.

Oversized rectangle tile. Large rectangular tiles can help visually expand a small space, and fewer grout lines means less cleaning. Houzz says the larger tiles are being used in several classic patterns, such as herringbone, stacked, and brick. Houzz designers recommend using a matte finish on bathroom floor tiles to reduce slipperiness.

Browns and beiges return. “Warm taupes, beiges, sands—basically any earth tone is surging in popularity,” Houzz notes. “Some designers say the trend is an evolution from popular whites and grays of recent years and that brown as an accent color works well to bring warmth to a palette heavy with those colors.”

Home offices and nooks. Homeowners are creating efficient spaces for offices, work nooks, and even backyard cottages as remote work grows and likely remains elevated in 2021.

Video conference-worthy backgrounds. Homeowners are feeling the need to have an aesthetically pleasing background for their video meetings and are even converting living rooms into video conferencing rooms with large screens and improved lighting and audio equipment.

Open floor plan scrutiny. “Perhaps no other design element was put under the microscope this year more than the open plan,” Houzz reports. “Anyone who had multiple family members attempting concurring video meetings in an open layout quickly saw the disadvantages to a lack of walls.” While this trendy floor plan isn’t likely to go away, many homeowners are considering sliding doors or partitions that can close off rooms for privacy.

Pergolas. To extend usable living space, homeowners are turning their attention to the outdoors.  These structures can add shade for dining, lounging, and other outdoor activities.

Backyard cottages and ADUs. For more privacy, some homeowners are adding a dedicated area to their backyard that’s separate from their main home. Accessory Dwelling Units ( ADU) are standalone structures are used as home offices, gyms, meditation areas, or extended living spaces to house relatives or kids who had to stay home from college due to the pandemic. No need for an architect, there are numerous sources that offer pre-fabircated sheds for multiple purposes from gardening to “sanity sheds”.

New multifamily amenities. With gyms, pools, and communal kitchens in multifamily buildings now periodically closing to keep residents safe, new spaces—indoors and outdoors—are emerging that are designed for fewer occupants such as

  • Quarantine stations. These designed rooms permit people who test positive for COVID-19 (but don’t need a hospital) to recuperate and avoid infecting family or neighbors.
  • Recording studios. There’s rising demand for studios that supports residents’ musical pursuits, podcasts, and videoconferencing.
  • Bicyclists’ havens. Whether it’s bike lockers or a bike-share program, multifamily experts expect this trend to accelerate due to the pandemic and communities reducing on-site parking.

Resilient landscapes.  Due to greater weather volatility, landscaping needs to better handle heavy rains and flooding, snowstorms, and drought. Multifamily waterfront communities are being designed or retrofitted with strategic landscaping and elevated public use area to address shifting shorelines and storm surges.

Health-minded building certifications.  The latest generation of certifications, rating systems, and design standards is based on scientific and medical research that affects human and occupant health such as programs like the WELL Building Standard, from the International WELL Building Institute, and Fitwel, according to the BuildingGreen site. Both suggest ways to gain a variety of benefits, from extensive natural daylight to good indoor air quality, filtration, and low energy use. Unlike LEED, these programs consider emotional wellness, too, which translates into greenery, gardens, and other biophilic design elements.

There are plenty of reasons to look forward to 2021, especially when it comes to the home design. After a year that guided many of us to spend more time at home,  the new year is an opportunity to bring comfort and creativity to our living spaces.

Stocking the Freezer During to Prepare for a Lock Down

Stock Freezer

 

Stock Freezer

As the coronavirus spreads, people across the world are preparing for the possibility of forced quarantines, and shutdowns of businesses and services. Keeping fruits, vegies and meats stocked in your refrigerator is not a practical idea if you are going to be in a mandatory lockdown or just want to limit your trips to the store for your own personal safety.

Freezing can extend the shelf-life of a huge variety of foods. You can stock up on frozen items right from the store, but if supplies are running low, it’s just as good to pop your own perishables in the freezer.

Berries, mango, peaches, cherries freeze well, as do bananas. They can all make for a convenient smoothie or, slightly thawed, a sweet treat. For veggies: corn, peas, and green beans, spinach, peppers, and onions are all good options. Avocados can also be frozen in chunks when they’re ready to eat. The key is to freeze things before they start to get overly ripe.

A lot of prepared foods are perfect for freezing, such as sliced bread, soups, lasagna, grilled chicken breast, sandwich meat and cooked rice — so consider cooking big dishes that can be portioned into single servings to freeze, then eat on the go. Not just cooked meat, but any raw meat, including chicken pieces, ground beef, steak, bacon and pork can all be thrown into the freezer and thawed to cook at a later date. Many people don’t think to freeze items like milk, cream, or yogurt, because the consistency of these items can change dramatically when frozen. However, they’ll keep longer, and can be used in sauces, soups and other recipes where the texture won’t matter.

Avoid freezer burn

Always freeze food once it has cooled down, not while it’s still hot. Make sure you get as much air out of your storage container as possible and seal tightly to prevent air from getting in and causing freezer burn.

If you are freezing leftovers, wrap them in foil first for extra protection before putting them into a zip-top plastic bag. A vacuum sealer to suck all the air out helps food last just a little bit longer.

Organize your freezer space

You should have a variety of foods in your freezer.  Label foods and date them so that you can use the first in, first out system of consumption.

Freeze in appropriate portions. Consider what one serving would be like and freeze in portions that make sense for your use. If you are cooking for a family or a friend’s family, adjust sizes accordingly.

Make an extra batch of whatever you cook for a freezer meal. If you are making meatballs or lasagna, it’s much easier to double the recipe than to have to make it again just to freeze. Eat one now and freeze one for later.

Soups and chilis freeze very well and heat up quickly. Freeze a portion or two each time you make soup and you’ll have a great variety later on.

Don’t discount breakfast. Muffins, breakfast burritos, even banana bread (just slice before freezing) make great additions to the freezer.

A little treat. Cookie dough can often be frozen, and you’ll be able to throw a fresh batch of cookies into the oven quickly.