Greater Boston Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Sept. 13, 2022

The Seller Side of the Sale in Massachusetts

 

We created this page to help clients understand how Real Estate transactions work today. There are several steps involved in the sale of a home, so we will break down each step here. Our goal in this blog is to help sellers understand the sales process before accepting an offer by explaining how these concepts work in practice. As you read this blog, it's important to keep in mind that most sales happen as described, but each sale is unique.

#1 Offer to Purchase

This is a document that outlines the key points of the purchase between the buyer and the seller. This includes the price, the transaction dates/deadlines, the amount of the deposit, etc. Upon execution by both parties, it becomes "legally binding"

 

By far the most common method of submitting an offer is for the buyer's agent to send an email directly to the listing agent. The seller has the option of accepting or rejecting the offer or making a counter-offer. A seller's offer is emailed directly from the seller's listing agent to the buyer's agent after both parties have reached an agreement on the terms. Contracts become legally binding once they are signed by both buyers and sellers. If there are contingencies such as a home inspection included in the offer, the seller is more legally obligated than the buyer is.

 

#2 Deposits

Deposits are sometimes referred to as "earnest money" and are held in escrow most commonly by the listing brokerage but could also be held by the seller's attorney. The total sum of the buyers deposit is usually divided into two parts. An offer is accompanied by one and a Purchase and Sale Agreement by the other.

In general, buyer's agents mail deposits to the listing brokerage once the Offer and the Purchase & Sale agreement has been signed. All parties must first agree and sign a mutually agreed release before funds can be returned to the buyer or given to the seller.

#3 Mortgage Pre-Approval

Pre-Approval is a conditional approval provided in advance of mortgage application. In addition to their offer, buyers who plan on getting a mortgage should provide their pre-approval documentation.

It is common for buyers to assume that once they get a pre-approval for their loan, everything will be fine, but the "pre" in the pre-approval is crucial to understand. A buyer cannot apply for full approval until they find a home. It is more likely that a buyer with a pre-approval from a reputable mortgage broker and company will be able to obtain a mortgage, provided they do not have extreme life changes, such as losing their jobs or making large purchases that affect their credit.

#4 Home Inspection Contingency

It is simply a period of time during which buyers have to inspect the home and conduct their own due diligence before they purchase the home. In the Offer to Purchase, inspection deadlines and types of inspections are outlined.

Ultimately, after their inspections of the property, buyers have the option of proceeding with the sale, renegotiating the terms of the transaction, or backing out of the sale. The buyer's deposit is refunded if both parties cannot come to an agreement. Inspection contingencies are sometimes used by buyers to renegotiate their offers terms. If this happens, we will advise you on the most appropriate course of action based on the specific situation.

#5 Purchase & Sale Agreement (P&S)

The Purchase and Sale Agreement is a comprehensive and legally binding contract between the buyer and the seller. To complete the sale, each party must perform certain tasks prior to and up until the closing. The agreement contains clauses that are designed to protect both the buyer and the seller.

 

Upon signing, you have successfully crossed one of the biggest hurdles for the sale to take place. The Purchase and Sale Agreement may be breached in certain circumstances, for example, when one or both parties fail to fulfill their obligations under the Purchase and Sale Agreement. Our team will provide you with advice according to the situation if this occurs.

#6 Appraisal

Appraisals are conducted by licensed appraisers hired by the buyer's mortgage company to determine the home's value. This is done so that the lender will be sure that the home's value is sufficient to justify a mortgage in the buyer's proposed amount.

Appraisals are not another inspection, and buyers have no control over how much the appraisal will be. In most cases, an appraisal value will reflect what a buyer is willing to pay. In some cases, appraisals come in lower than expected; such instances are more likely to occur in areas with fewer comparable sales. Depending on the circumstances, if the appraisal comes back too low, we can advise you accordingly.

 

#7 Mortage Contingency Date

The Mortgage Contingency Date date is in the offer and purchase and sale agreement. This date specifies when the buyers must receive their mortgage commitment from their lender.

When buyers notify the seller earlier than the contingency date that they may need additional time or that they will not be able to obtain a mortgage, the buyer may request an extension of the date or the sale can be terminated and the deposit returned. It is often the case, however, that the seller keeps the deposit if the buyer is denied a mortgage after this date. If this situation occurs, please note that the Escrow policy with regards to the deposit will apply.

#8 Closing Date

This is the date on which the deed is executed and transferred to the buyers, and buyers officially take ownership. Sellers may think they can remain in the home up to or after this date, or that the seller can easily change this date after signing a contract. Both are misconceptions. It is often stipulated in the purchase and sale that the house is to be 100% cleaned out by this date.

As stated in the Purchase and Sales Agreement, this is a firm date that cannot be changed easily in the future. There are times when a closing can be delayed because of items like mortgage or title delays.

Posted in Selling a home
March 19, 2022

Bidding wars are on, how to prepare for victory!

It is imperative that buyers make as compelling an offer as possible when an attractive house is available in this highly competitive market. A good strategy is to hire a real estate agent who is experienced in dealing with multiple offers and is also familiar with the complications that come with this. An expert will then be able to assist the buyers during the bidding war and offer some of the following tips that will enable them to set their offers apart from the rest of the competition.

 

Letter of Pre-Approval

The lender should keep your pre-approval letter current, within 20 days, and if you can, specific to the house you're bidding on. When choosing your lender, you should take into account whether they'll go the extra mile for you in case there's a bidding war. A mortgage lender should be respected in their specific area, be highly skilled in their area of expertise, and be highly regarded in their local community. When the lender is prepared to advocate on your behalf, he or she will contact the listing agent, if necessary, after business hours, informing them of your eligibility; along with your qualifications and a thorough assessment of your documents.

Prepare a customized letter

It is common for sellers to want to do business with a buyer they feel comfortable with. Most people view their homes as their most precious possessions, and they want to be sure that you will treat the home as well as they have. You can convey your appreciation of the home by writing a letter. You should make sure to address their feelings in the letter. If the family raised its children in the home, how you could imagine raising your children there. If the family home has been passed down through generations with the same care and love, describe how excited you are to be the next custodian of the home, preserving its beauty and detail for future generations.

 

Bid more than the asking price

Pricing homes aggressively often leads to bidding wars. If there are multiple offers on a house, you know before you make an offer the home will likely sell for more than its asking price. Identifying how much a home will likely sell over the asking price is the difficult part. It is best to submit a generous offer, but also one that is comfortable. Do you think you would be prepared to give up your dream home for an extra $9K? That translates to roughly $5 a day - is that really worth giving up your dream house? Say you offer 80K more than the asking price on an 800k house. You will be able to recover the cost of the offer within a few years as the property values have been increasing at an annual rate of about 10%.

Think about looking for homes that are slightly below your budget so you can put your best foot forward with the funds that you have to work with. Adding homes $50K below your ideal price to your house search may help you win a bidding war since you can offer much more than the asking price. Recent years have seen a growing number of homes sold over the asking price, which is especially common now.

Here are five recent sales that exceeded the asking price:

 

Escalation Clause

 

Escalation clauses can boost your odds of beating other offers in certain situations. This allows you to offer the seller a certain amount over their highest offer up to a fixed maximum price.

Waiving inspections may be an option

To demonstrate your seriousness about a property, you can decide to waive the home inspection. An alternative is to have an inspection performed and state that you will cover the estimated repair costs up to a certain amount. If you choose to go this route, make sure the number is high or it won't be as appealing to sellers. Typically, buyers allow for repair costs of $10,000 - $15,000. However, in a bidding war, these numbers might not be sufficient. Sellers will be confident that you do not intend to back out or renegotiate the sale as you have shown them that you are fully engaged in the purchase.

Reduce contingency timelines

You may want to shorten contingency dates on inspections, purchase and sale, and mortgage. To figure out the earliest mortgage contingency date, speak to your lender.

Make Your Down Payment Larger

Sellers may consider a buyer who makes a larger down payment, such as 10-20%, to be more qualified than one who makes a smaller down payment, such as 3.5-5%. If you can, consider putting down more money. If you can, borrowing from your investments or retirement accounts could be a useful method to bring your down payment to 20%. This option may be more sensible, rather than paying mortgage insurance that comes with an upfront fee and a monthly fee if you put less than 20% down. An additional way to strengthen your bid is to submit a larger deposit. It is common for buyers to submit a deposit of $1,000 with their offer, followed by a second deposit with the purchase and sale. Wouldn’t it make sense to put $5,000 upfront if you were going to have to at the end anyway?

Be willing to adjust on Closing Date

In some cases, sellers have rigid circumstances and must sell to a buyer who can accommodate their schedule. If you want to stand out from the crowd, be as accommodating as possible.

Lease Back

 

Consider allowing a use and occupancy agreement or also known as a “lease back.” Before moving into their new home, some sellers need to live in their current home while they wait.

A U&O agreement is a great option if a buyer is under a lease that they don't want to break or if they're selling a home and don't want to worry about packing and moving right away. In addition, by closing earlier, you are more likely to lock in an attractive interest rate. If you wait until the seller's timeline can be accommodated, you might have to pay for an extension of your rate lock.

If you are thinking of purchasing a home, you hope to find the right house at the right price and make the winning offer. Getting what you want the first time is not always simple and you may not always get what you want the first time. You will stand out to sellers and their listing agents if you have the best real estate professionals behind you. To beat out other offers and ultimately win the house you want, you need to do your due diligence, hire the best agent, and use the right lender.

Posted in Buying a home
March 17, 2022

Buying a home 101 and what you should expect

 

 

This page aims to provide buyers with more information and a better understanding of how today's real estate transactions work. Here is a breakdown of the most significant steps in a buyer transaction:

1. Letter of pre-approval from a mortgage broker/lender

When a buyer plans to obtain a mortgage to finance their purchase, they need to consult with a reputable lender before even looking at properties. To help narrow their focus and save them time in the long run, it is crucial for the buyer to know how much they can afford. A pre-approval is a letter of "preliminary approval" that a lender provides after analyzing a buyer's income and expenses and he/she submits the necessary documentation. The buyer will need an updated pre-approval at the time of offer. This pre-approval is included in the offer package as the seller will want to have the assurance the buyer is financially qualified to purchase the home. 

 

 

 

 

2. Submitting an Offer to Purchase

The buyer's agent prepares the Offer to Purchase. The offer to purchase will outline the terms the buyer is offering to the seller to purchase their home. Price, deposit amounts, performance dates, and additional provision are all included. The offer for the property is submitted electronically by the buyer's agent to the seller's agent. Upon receiving the offer, the seller has the option of accepting, rejecting, or countering. When both parties are in agreement, the offer is signed. In order for the offer to purchase to become legally binding and enforceable, the acceptance must be communicated. The deposit is then delivered.

     Multiple offers are possible

An offer situation involving multiple offers occurs when a seller receives more than one written offer at the same time. A seller's agent will typically set an "offer deadline" when multiple offers are expected- meaning all offers must be submitted by a certain date and time. The seller's agent may not disclose to other bidders the offer price and terms of the other bids without the seller's permission. Typically, once the seller has reviewed all the offers, he or she will: accept the offer with the best price and terms, choose one of the offers and negotiate to reach an agreement or ask for a “highest and best” from all the bidders to see if anyone is willing to sweeten their offer. In most cases, the seller will accept one of the offers without negotiating, so it is vital that a buyer puts forth their best offer in the time that the deadline for offers is approaching.

3. Deposit Amounts & Dates

The first deposit is due when the Offer to Purchase is made and is typically $1,000. A copy of the check is included by the buyer's agent when the offer is submitted electronically. After both parties execute the offer, the deposit will need to be delivered to the listing brokerage in the manner agreed upon. Funds are due the same day as the Purchase and Sale agreement is executed for the second deposit. The deposit may range from 3-10% of the purchase price, but sometimes it may be higher depending on the buyer. Deposits can be made by personal check, e-check, or certified check. Your agent will confirm arrangements with you. Deposits are typically held in the Listing Brokerage's escrow account, so the check should be made payable to the Listing Brokerage unless otherwise indicated. A mutually agreed-upon release must be executed by all parties before funds can be released if a buyer utilizes a contingency or defaults on an obligation outlined in the offer.

4. Acceptance of the offer to purchase

When a buyer and seller reach an agreement and both sign the offer, it is considered 'accepted'. As a result, the buyer and seller have binding legal obligations.

5. Schedule Your Home Inspection(s)

The deadline for inspection(s) and type(s) of inspection(s) is/are outlined in the Offer to Purchase. Inspection(s) are typically completed between 7-10 days following offer acceptance. The inspection(s) should be scheduled immediately to allow for enough time to conduct and review the inspection(s).

6. Consult with and hire a REAL ESTATE attorney

It is critical for the buyer to hire a real estate attorney when purchasing real estate. They specialize in real estate conveyance and will represent the buyer's interests at every step. A real estate attorney prepares all legal documents, ensures there are no liens, easements or covenants on the property, and ensures that it has a clear title. These attorneys are also proficient in current real estate contract language as well as the guidelines of TRID (TILA-RESPA Integrated Disclosure).

7. Perform the home inspection(s)

During the home inspection, if any unidentified or undisclosed material defects are discovered, the buyer may renegotiate their offer terms or back out of the deal as a result. If the parties cannot come to an agreement, the buyers are entitled to get their deposit back as long as they notify the seller before their contingency date and both parties sign a release.

8. Review and sign the purchase and sale agreement

A P&S is a legally binding contract between a buyer and seller drafted by a real estate attorney. Unless otherwise agreed upon, the terms outlined in the P&S are the same as those in the original offer. As part of this agreement, each party defines what needs to be done prior to and during the closing. The P&S contains clauses to safeguard both the buyer and seller. The buyer should work with an experienced real estate lawyer to protect their interests. The P&S execution date is not flexible without an agreed upon extension, so the buyer should aim to sign prior to the due date. On the P&S date, the second deposit funds are due and they must be available for delivery.

9. Continue with the mortgage application process

The mortgage application process begins when the buyer applies for pre-approval and the lender performs an initial evaluation of the borrower's purchasing power. As mentioned, it is based on the borrower's income, assets, and creditworthiness. As part of the process, a lender will outline all the items the buyer needs to provide. The buyer's best interests are served by providing the lender with accurate and timely information.

10. The lender orders an appraisal

Appraisals are conducted by licensed appraisers hired by mortgage companies to determine the value of a home. An appraisal is done by a third party who is unbiased. The purpose of the appraisal is to allow the lender to determine whether the home's value is sufficient to qualify the buyer for a mortgage in the amount sought. The amount of the appraisal outcome cannot be controlled by buyers, sellers, agents, or lenders. In order to determine an appraised value, the appraiser must adhere to specific guidelines. If the appraisal comes in low, the buyer's agent will explain the options based on the circumstances.

11. Staying on top of Mortgage Commitment Dates

It's crucial to keep track of the mortgage commitment date during the transaction, since that's the date by which the lender must commit to providing financing to the buyer. Keeping track of this deadline is essential, and it must never be passed without commitment, extension, or termination. Should buyers need additional time to obtain a mortgage, they may request an extension from the seller prior to the mortgage contingency date. If they are unable to get a mortgage, they must let the seller know before the commitment date to receive their deposit back. If after this date the buyers cannot get a mortgage, the seller has the right to keep the deposit. You should keep in mind that the deposit release guidelines agreed upon by both parties would apply in these circumstances.

12. Schedule and conduct the final walk-through of the property

A final walk-through at the property needs to be conducted by the buyer before closing. This ensures that the property's condition hasn't changed since the buyer's last visit, that any agreed upon repairs have been made, and that the buyer has met the contract's terms. Ideally, the walk-through should take place the morning before the scheduled closing date.

13. Closing Time

The closing date is when the deed is executed and transferred to the buyers, and the buyers officially take ownership. A specific closing time is usually arranged between the buyer's attorney and the buyer. This date is usually a firm date that won't be easily changed. A delayed closing may be caused by mortgage delays from the buyer or title delays from the seller. If a delay occurs, an extension may be granted and a new date must be agreed upon by both parties. Official transfer of ownership occurs once the funds are dispersed and the property is formally recorded at the Registry of Deeds.

 

 

Please note that this document is for informational/educational purposes only. It is not a predictor or guarantee of any kind. 
Posted in Buying a home
July 31, 2017

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Posted in Market Updates