Our Real Estate Blog

Oct. 4, 2019

Top Four Benefits of a Sellers Home Inspection

Although a home inspection is more common on the side of the buyers, it is also something that sellers can do. Here are some of the reasons why a home inspection can give you an advantage in a very competitive market:

1. Increase the confidence of prospective buyers.

Touring your home can never be enough for prospective buyers. Since they are looking for a place for where they can settle, they worry about a lot of things that a simple inspection or tour can’t reveal. Are there termites? Are there problems with the plumbing or wiring? Many such questions are on the mind of the potential buyers. With an inspection report on hand, you can increase the buyers’ confidence that they will not have to face any major surprises. They still have the option to conduct their own inspection but at least, they will be confident enough to place a bid on your home.

2. Save your precious time and hard-earned money.

A home inspector’s job is to find flaws and major concerns with a home. This means that they will usually find one or two issues within a property, may it be new or just renovated. If you conduct an inspection before listing the home, you have all the time to make the necessary repairs or make adjustments when it comes to the price of your home. On the other hand, if the inspection is done by the buyer, you will be rushed into making some decisions because you are concerned with sealing the deal with the potential buyer. When this happens, you won’t have enough time to consider all your options. As a result, you will not be able to find solutions for your problems at a reasonable price. All these can be avoided when the inspection is done way before you negotiate with any potential buyer.

3. Learn about the real issues at your home.

Although you have been in your home for so long and you feel like you know everything about it – including the major issues, it is still possible for you to misidentify some problems. With home inspection, you will be truly aware of the big issues that need to be attended to at your home. This will help you save money and time for unnecessary or repeat repairs.

4. Set an appropriate asking price.

The final selling price of your home may change depending upon any big issues that may surface when a buyer conducts an inspection of your home. This means that you’ll have to reduce your asking price when a buyer discovers that there is a serious flaw on your home. On the other hand, if you conduct your own inspection before listing our house, you’ll have more control over the situation.


Posted in Selling Your Home
Sept. 26, 2019

Should You Get Solar Panels?

1. Trees reduce output, savings

Solar panels need direct sunlight, so homes heavily shaded by trees are not good candidates.

Although some homeowners opt to cut down trees to accommodate solar panels, homeowners should consider whether the cooling shade the trees provide outweighs the benefits of solar panels. In some cases in which a home is only partially shaded, the panels can be installed to avoid the shadows, or a few extra panels can be added to make up for the lost production.

2. Is the home efficient?

It makes little sense to add solar panels to a home that has leaky air ducts, poor insulation, 70-year-old windows or other inefficient features. Often those repairs and upgrades are less expensive and more cost-effective than adding solar. Also, a home that is energy-efficient will require fewer solar panels to offset a significant portion of its energy needs.


3. What is the condition of the roof?

If the roof is near the end of its useful life, new shingles should be placed before or during the installation of solar panels. If the roof will need to be replaced in a few years, it can cost $2,000 or more to remove the solar panels to make way for that work. So, waiting to install the panels, or proceeding with the new shingles, is prudent. Installation companies consulted for this story said there is no problem installing solar on homes that have recently re-shingled, as the companies can place the equipment without causing problems on a good roof.

4. Get multiple estimates

This is solid advice whether buying new countertops, solar, or any other home improvement.

Hearing how different companies would install the equipment, what they estimate in utility-cost savings, and what they offer in their warranties, can save homeowners thousands of dollars.

Estimates from installation companies also will let consumers see whether the companies understand the homeowners' needs. Installation companies should base the size of a rooftop system on how much electricity a particular family uses, not simply install the most solar panels as can fit on a roof.

5. To lease or purchase?

Leases with little or no money down have become popular options for homeowners who want to generate their own electricity but don't want to pay a lot up front. Leases come with the benefit that another company owns and maintains the panels, but the drawback that customers will save less money over time making monthly lease payments.

Also, homeowners should carefully consider leases that escalate over time. Companies that sell rather than lease can often offer loans with little or no money down that mimic the lease products. Comparing multiple offers can help homeowners find the best deal.

6. Will the home be sold soon?

Calculating the value that solar adds to a home has generated controversy. Leased panels don’t add value to a home resale, because they are not part of the home. Anyone buying that home will have to qualify to take over the lease, or the family selling the home could have to pay a penalty to end the lease prematurely.

Panels that are owned add some value to the resale. But It’s not a straight calculation. If a homeowner paid $18,000 for solar, those panels don't necessarily add $18,000 to the resale. The panels add value in proportion to the amount of money they are expected to save on utilities through the remainder of their warranty. For example, if there are 15 years left on the warranty and the panels save $80 a month in electricity, the system could add $14,000 to a home appraisal.


7. Understand the rate plans

Some solar companies might advertise energy independence as a reason to install solar panels, but the vast majority of people who install solar are still connected to the utility grid. That means they still rely on a traditional electric company to provide power at night and when their panels aren't making enough electricity to serve all the home's appliances.

How an electric company charges customers makes a huge difference in how much they can save with solar. Companies installing solar on homes should understand utility rate plans and help homeowners choose the appropriate plan from their utility based on how much power the solar panels will generate and how much electricity homeowners use. Also understand that rates can change.

8. Federal tax credits still available

Finally, consumers should understand the federal investment tax credit for solar. Homeowners can apply the federal tax credit to their personal income taxes, reducing their taxes. The credit today is 30 percent of the cost of the solar equipment. It is scheduled to decline over time. After 2019, the investment tax credit steps down to 26 percent for projects that begin construction in 2020, and 22 percent for projects that begin in 2021, the Solar Energy Industries Association reports. After 2021, the residential credit will drop to zero.

Sept. 20, 2019

What to Know About Buying a Home with a Septic Tank

About 20% of homes use septic tanks to dispose of and treat waste, most often in less populated areas not served by municipal waste systems. Septic tanks can be an effective way of treating wastewater and carry advantages to the environment, public health, and your wallet when properly installed and maintained. But they leave many people turning their heads wondering what living with a septic tank actually involves. Read on to learn everything you need to know about buying a home with a septic tank.

How does a septic tank actually work?

In homes with a septic tank, waste is transferred out of the home through a pipe and deposited into an underground septic tank. Once waste reaches the tank, floatable materials like oil and grease stay on top, solids settle on the bottom, and a middle layer of wastewater (commonly known as effluent) exits the septic tank and travels into a drain field in the yard where it’s slowly released into the soil.

Do septic tanks impact water quality?

When designed, installed, and managed properly, septic tanks successfully treat wastewater without contaminating water and the local environment. However, when not installed and managed properly, they can contribute to problems like ground and surface water contamination, phosphorus pollution, excessive discharge of nitrogen into coastal waters, and contamination of water used for swimming.

Does a septic tank need to be serviced frequently?

Septic tanks need to be serviced somewhat regularly to maintain optimal performance. The US Environmental Protection Agency (EPA) recommends a septic tank inspection every three to five years. During inspection, a professional will usually look at the top and bottom layers of the tank, which can indicate if the tank needs to be pumped, and inspect for leaks.

The tank will also need to be pumped with a similar frequency (about every 2 years), though the amount of time you go between pumping the tank will depend on tank size and the amount of wastewater your household generates. It’s a good idea to keep notes after your tank has been inspected to have an idea of when the tank should be pumped.

Aside from your regular maintenance, you’ll also want to seek professional help if you notice any of the following signs, which indicate a potential septic tank problem:

  • A strong, sewage-like odor around your property

  • Wastewater backup in your home’s drains

  • Water accumulation around your septic system or in the basement

  • Muddy soil surrounding the area where your septic system is held Greener grass above the septic tank, which may indicate that water is collecting below

When buying a home with a septic tank

Don’t immediately be scared off from purchasing a good home because it has a septic tank. In addition to your own research on how to care for a septic tank and to make sure it’s something you can handle, it’s a good idea to ask the current owners about maintenance of their system. And if you’re considering buying the home, it’s crucial to get the septic tank inspected and make sure it’s in good condition and capable of handling the amount of wastewater you or your family is likely to generate.

Living with a septic tank

Living with a septic tank isn’t that different from living in a home served by a municipal waste system, but you’ll need to keep a few things in mind.

  • Be mindful of your water use, as all water use in the home will contribute to how quickly your septic tank fills up.

  • Be careful of what you flush, as it will eventually end up in the septic tank. Stick to human waste and toilet paper, and avoid flushing things like medication, dental floss, and flushable wipes.

  • Avoid pouring cooking oil and grease down the kitchen sink drain.

  • Limit the use of your garbage disposal, as this waste may eventually clog your septic system’s drainfield.

  • Make sure to stay on top of your septic tank maintenance.

  • Don’t park above your drain field or plant anything too close that it’s roots may extend into the septic system.

Posted in buying
Sept. 11, 2019

The #2 Leading Cause of Cancer Could Be In Your Home.

The U.S. Environmental Protection Agency (US EPA) and the Surgeon General’s Office have estimated that as many as 20,000 lung cancer deaths are caused each year by radon. Radon is the second leading cause of lung cancer. Radon-induced lung cancer costs the United States over $2 billion dollars per year in both direct and indirect health care costs. (Based on National Cancer Institute statistics of 14,400 annual radon lung cancer deaths – Oster, Colditz & Kelley, 1984)

According to the US EPA, nearly 1 in 3 homes checked in seven states and on three Indian lands had screening levels over 4 pCi/L, the EPA’s recommended action level for radon exposure.

The alpha radiation emitted by radon is the same alpha radiation emitted by other alpha generating radiation sources such as plutonium.

A family whose home has radon levels of 4 pCi/L is exposed to approximately 35 times as much radiation as the Nuclear Regulatory Commission would allow if that family was standing next to the fence of a radioactive waste site. (25 mrem limit, 800 mrem exposure)

An elementary school student that spends 8 hours per day and 180 days per year in a classroom with 4 pCi/L of radon will receive nearly 10 times as much radiation as the Nuclear Regulatory Commission allows at the edge of a nuclear power plant. (25 mrem limit, 200 mrem exposure)

Most U.S. EPA lifetime safety standards for carcinogens are established based on a 1 in 100,000 risk of death. Most scientists agree that the risk of death for radon at 4 pCi/L is approximately 1 in 100. At the 4 pCi/L EPA action guideline level, radon carries approximately 1000 times the risk of death as any other EPA carcinogen. It is important to note that the action level is not a safe level, as there are no “safe” levels of radon gas.

What is radon?

A layman’s description

Radon is a cancer-causing radioactive gas. You cannot see, smell or taste radon, but it may be a problem in your home. The Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. If you smoke and your home has high radon levels, you’re at high risk for developing lung cancer. Some scientific studies of radon exposure indicate that children may be more sensitive to radon. This may be due to their higher respiration rate and their rapidly dividing cells, which may be more vulnerable to radiation damage.

A scientific description

PROPERTIES: Radon is a gaseous highly radioactive element discovered by English physicist Ernest Rutherford in 1899. The discovery is also credited to German physicist Friedrich Ernst Dorn in 1900. More specifically, Rutherford discovered radon’s alpha radiation and Dorn discovered that radium was releasing a gas.

Radon is a colorless chemically-unreactive inert gas. The atomic radius is 1.34 angstroms and it is the heaviest known gas–radon is nine times denser than air. Because it is a single atom gas (unlike oxygen, O2, which is comprised of two atoms) it easily penetrates many common materials like paper, leather, low-density plastic (like plastic bags, etc.) most paints, and building materials like gypsum board (sheetrock), concrete block, mortar, sheathing paper (tar paper), wood paneling, and most insulations.

Radon is also fairly soluble in water and organic solvents. Although reaction with other compounds is comparatively rare, it is not completely inert and forms stable molecules with highly electronegative materials. Radon is considered a noble gas that occurs in several isotopic forms. Only two are found in significant concentrations in the human environment: radon-222, and radon-220. Radon-222 is a member of the radioactive decay chain of uranium-238. Radon-220 is formed in the decay chain of thorium-232. Radon-222 decays in a sequence of radionuclides called radon decay products, radon daughters, or radon progeny. It is radon-222 that most readily occurs in the environment. Atmospheric releases of radon-222 results in the formation of decay products that are radioisotopes of heavy metals (polonium, lead, bismuth) and rapidly attach to other airborne materials such as dust and other materials facilitating inhalation.

USE: Radon has been used in some spas for presumed medical effects. In addition, radon is used to initiate and influence chemical reactions and as a surface label in the study of surface reactions. It has been obtained by pumping the gasses off of a solution of a radium salt, sparking the gas mixture to combine the hydrogen and oxygen, removing the water and carbon dioxide by adsorption, and freezing out the radon.

PRODUCTION: Radon is not produced as a commercial product. Radon is a naturally occurring radioactive gas and comes from the natural breakdown (radioactive decay) of uranium. It is usually found in igneous rock and soil, but in some cases, well water may also be a source of radon.

EXPOSURE: The primary routes of potential human exposure to radon are inhalation and ingestion. Radon in the ground, groundwater, or building materials enters working and living spaces and disintegrates into its decay products. Although high concentrations of radon in groundwater may contribute to radon exposure through ingestion, the inhalation of radon released from water is usually more important.

RADON IN THE WORKPLACE: In comparison with levels in outdoor air, humans in confined air spaces, particularly in underground work areas such as mines and buildings, are exposed to elevated concentrations of radon and its decay products. Exhalation of radon from ordinary rock and soils and from radon-rich water can cause significant radon concentrations in tunnels, power stations, caves, public baths, and spas. The average radon concentrations in houses are generally much lower than the average radon concentrations in underground ore mines.

Workers are exposed to radon in several occupations. In countries for which data were available, concentrations of radon decay products in underground mines are now typically less than 1000 Bq/m3 EEC Rn (approx. 28 pCi/L). Underground uranium miners are exposed to the highest levels of radon and its decay products. Other underground workers and certain mineral processing workers may also be exposed to significant levels.

Should you test for radon?

Testing is the only way to know your home’s radon levels. There are no immediate symptoms that will alert you to the presence of radon. It typically takes years of exposure before any problems surface. The US EPA, Surgeon General, American Lung Association, American Medical Association, and National Safety Council recommend testing your home for radon because testing is the only way to know your home’s radon levels.

Radon is a national environmental health problem. Elevated radon levels have been discovered in every state. The US EPA estimates that as many as 8 million homes throughout the country have elevated levels of radon. Current state surveys show that 1 home in 5 has elevated radon levels.

Can you fix the problem?

If your home has high concentrations of radon there are ways to reduce it to acceptable levels. Most radon problems can be fixed with a mitigation system. If you want or require the assistance of a professional you may wish to look at the list of certified radon mitigators for your state.


Sept. 6, 2019

How to Sell Your House Faster by Improving Its Curb Appeal

A large percentage of home buyers decide whether to look inside a house or pass based on curb appeal—the way the house looks on the outside from the street. You can ensure they want to come inside your house by spending some time working on its exterior appearance.

Owners and buyers don't look at a house the same way; owners often can't see their house's faults. Decide to stop thinking of the property as a home. It's a house—a commodity you want to sell for the highest dollar possible.

Curb Appeal Exercise

The next time you drive up to your house, make a note of the following:

  1. Your first impression of the house and yard

  2. The best exterior features of the house or lot

  3. The worst exterior features of the house or lot

Park where a potential buyer would and walk toward the house, looking around you as if it were your first visit. Is the approach clean and tidy? What could you do to make it more attractive?

Take photos of the house's exterior. View the color versions first, then remove the color and look at the photos in black and white. It's easier to see problems when color isn't around to affect our senses.

Clean and Repair

Make a list of the problem areas you discovered. Tackle cleanup and repair chores first, then put some time into projects that make the grounds more attractive.

  • Kill mold and mildew on the house, sidewalks, roof, or driveway.

  • Stow away unnecessary garden implements and tools.

  • Clean windows and gutters.

  • Pressure wash dirty siding and dingy decks.

  • Edge sidewalks and remove vegetation growing between concrete or bricks.

  • Mow the lawn and get rid of weeds.

  • Rake and dispose of leaves, even if your lot is wooded.

  • Trim tree limbs near or touching the home's roof.

Don't Forget the Rear View

Buyers doing a drive-by will try to see your backyard. If this area is visible from another street or someone's driveway, include it in your curb appeal efforts.

Evening Curb Appeal

Do your curb appeal exercise again at dusk, because some potential buyers drive by houses in the evening.

One quick way to improve evening curb appeal is with lighting:

  • String low-voltage lighting along your driveway and sidewalks and near important landscaping elements.

  • Add a decorative street lamp or an attractive light fixture to a front porch.

  • Ensure that lights visible through front doors and windows enhance the home's appearance.

Landscaping Decisions

There are times that adding elements to your landscaping can improve curb appeal, but there are other times when removing something is even more effective. If a tree has overgrown the house or is blocking an attractive element, you might consider taking it out.

Make the First Look

Count Many buyers can't visualize changes and often won't take a second look at a house if the first look doesn't appeal to them. Homebuyers who can visualize changes—and are prepared to make them—will expect you to reduce the price of the house to compensate for the work they plan to do. Thinking like a buyer before potential buyers start showing up at your curb can entice more people to look at your home and can help you sell the house faster and for the price you want.


There are simple changes to can make that will give you a lot of bang for your buck:

  • A fresh paint job does wonders for a dingy house. Choose eye-catching color schemes.

  • Install a more attractive front door.

  • If you can't justify the cost of a new door, consider replacing plain doorknob hardware with something more attractive.

  • If new hardware is beyond your budget, repaint or re-stain the door and polish the hardware.

-The Balance
Posted in Selling Your Home
Aug. 27, 2019

Low Appraisal

A low appraisal may seem like a major misfortune when you’re selling your house — both for you and for your buyer. But low real estate appraisals are more common than you think. According to the Housing Trends Report 2018, among sellers who sold in the past 12 months and had a deal fall through, 10 percent said it happened because the appraisal was lower than the purchase price.

A low appraisal doesn’t always mean a canceled deal. It sometimes means you have to pivot and renegotiate. Read on for our tips on how to handle a low appraisal.

What can sellers do after a low appraisal?

  • Request a copy of the appraisal.

  • Ask the buyer to challenge the appraisal.

  • Renegotiate the sale price with the buyer.

  • Offer seller financing.

  • Cancel and re-list.

  • Consider an alternative all-cash offer.

What is an appraisal on a home?

An appraisal is a professional report that helps gauge a home’s value. Any homeowner can get a home appraisal at any time.

For example, if a homeowner is refinancing their mortgage, an appraisal is usually required. But the most common time an appraisal is performed is when you’re selling. If the person buying your home is financing the purchase, their lender orders an appraisal to ensure that the house is worth the amount the bank is agreeing to finance. It’s one of the final steps in the home-buying process, and it’s an important factor to the sale going through.

How much is a home appraisal?

Home appraisals typically cost between $300 and $600, and they’re ordered by the lender and paid for by the buyer.

What is a home appraisal contingency during a home purchase?

Appraisals are a standard part of the home-buying process, and they protect the buyer’s lender from offering too much money for a home that isn’t worth the cost. While this may seem like a formality, in hot real estate markets, bidding wars can drive home sale prices well above the true value, which is a red flag for lenders. A home appraisal contingency is an addendum to the offer contract a buyer submits. It states that if the appraisal comes back low, the buyer has the option to back out of the deal and get their earnest money back. What the lender is looking for is a healthy loan-to-value ratio, often abbreviated as LTV. It’s a risk assessment calculation of the amount of money they’ll be financing in the mortgage (not the sale price), divided by the appraised value. Generally speaking, here’s what your appraisal outcome means:

Appraisal is greater than offer:

If the home appraises for more than the agreed-upon sale price, you’re in the clear.

Appraisal is lower than the offer:

If the home appraises for less than the agreed-upon sale price, the lender won’t approve the loan. In this situation, buyers and sellers need to come to a mutually beneficial solution that will hold the deal together — more on that later.

Do buyers ever waive the appraisal contingency?

Some all-cash buyers who are home shopping in a competitive sellers market (where there are many buyers vying for relatively few homes) will waive the appraisal contingency to make their offer more attractive for the seller. Cash buyers may decide to skip an appraisal altogether, they might have an appraisal done just for their own knowledge (without a contingency), or they may still submit an appraisal contingency, just as a non-cash buyer would do. It’s up to the individual cash buyer.

How is a house appraised?

In a home purchase, appraisals are completed by a third-party licensed appraiser who is hired by the lender. The appraiser is typically chosen at random and can’t be connected to the transaction in any way or have any relationship with the buyer or seller. The appraisal happens sometime between the time the home goes under contract and the projected close date.

During the appraisal, the appraiser walks the property — both the interior and exterior — taking photos and notes. After the on-site evaluation, the appraiser writes a report, combining their notes on the home’s condition with local valuation information. The result is a final document that identifies the appraised value of the home.

Conventional loan appraisals are usually around 10 pages long and take about a week to complete.

FHA loan appraisals often take a bit longer, because they’re government-backed and require more documentation. For example, FHA appraisals must include documentation that the home meets minimum property guidelines for health and safety.

VA loan appraisals, like FHA loan appraisals, may take a bit longer, as they also have minimum property requirements for things like adequate living space, safe mechanicals, adequate heat and water availability.

It’s important to note that since the lender orders the appraisal and the buyer pays for it, neither party is obligated to share the actual report with the seller.

What is a drive-by appraisal?

Also called a summary appraisal, a drive-by appraisal is an exterior inspection only, combined with local valuation info. They usually cost less than a full appraisal but may not be accepted by a lender. Most lenders require a full interior and exterior appraisal.

What do home appraisers look for?

Remember that an appraisal is not the same as a home inspection. While an appraiser and a home inspector may look at the same features of your home, an appraiser won’t necessarily test the functionality of all your home’s systems, nor will they flag specific items of concern. What the appraiser is concerned with is determining the condition of the home and, therefore, its value.

While they’re not looking for things to fix, here’s what appraisers are looking at:

  • Age or condition of the home: Newer homes are typically worth more, because the major systems are in better working order.

  • Size and square footage: An appraiser will determine a price per square foot of usable or livable space.

  • Completed upgrades or improvements: A value will be attached to the enhancements you’ve done on the home, calculating a return on investment (ROI).

  • Needed repairs that impact value: If your home needs major repairs — damaged roof or basement water damage, for example — those will be taken into consideration.

  • Amenities or special features: They’ll pay attention to valuable features, like a pool, home theater or mother-in-law suite. Construction details: The appraiser will see if the home has modern materials, up-to-date insulation or energy-efficient windows that will impact the home’s value.

  • Lot size or zoning: Lot size can affect the value of the home, as can zoning restrictions or opportunities.

  • Comparables: The appraiser will run comps just like a real estate agent would when doing a comparative market analysis on your home. They’ll look at recent sales of homes that are similar to the one you’re looking for to help determine value.

  • Location: They’ll look for school district ratings, nearby amenities, and proximity to major metro areas and public transportation.

  • Local housing market: An appraiser will take the state of your local real estate market into consideration. Are home values rising or declining? Is it a sellers or a buyers market? How long are homes taking to sell?

Common reasons for a low appraisal

There are quite a few reasons your home’s appraisal might come in lower than you expect. Here are some of the common culprits.

Rising market or sellers market

In a sellers market, bidding wars often drive home sale prices higher than appraisals can support.

Slowing or buyers market

In a buyers market (and especially a market that has recently shifted), sellers may mistakenly overprice their home because they’re not aware of how much their value has decreased. A glut of foreclosures and distressed homes in your area can also affect your home’s value.

Inexperienced appraiser

A poorly trained appraiser or someone who’s unfamiliar with the intricacies of your local market can produce a low appraisal.

Poor evaluation of the property

An appraiser fails to take upgrades, popular features or upscale amenities into account.

Inaccurate comps

An appraiser is using comparables that aren’t a great match with the home being appraised. Comps should be both recent and similar. They should also only be using sold homes, not homes that are currently on the market.

Closing cost credits

If you’ve already negotiated a closing cost credit and the purchase price is higher to reflect the cash back the buyer will receive at closing, it can mean your appraisal has to come in higher than it would have otherwise.

What happens after an appraisal comes in low?

 If the house appraisal comes back lower than the purchase price, the buyer has a few options to keep the deal alive.

Make up the difference in cash

The buyer can increase their down payment to make up the difference. For example, if the buyer needed the appraisal to come in at $300,000 but it comes in at $290,000, the buyer can pay the $10,000 difference in cash. What the lender is concerned about is the ratio of the loan to the appraised value of the home, not necessarily the purchase price.

Shift some down payment to make up the difference Let’s say the buyer was planning on putting $60,000 down on a $300,000 home (a 20 percent down payment). If the appraisal comes in $10,000 low, the buyer could shift $10,000 of the money they’ve set aside for their down payment to make up the difference.

The downside is that they’ll be putting less than 20 percent down and will have to pay private mortgage insurance (PMI) every month until their equity in the home’s loan-to-value ratio is 20 percent. Of course, this arrangement is subject to the buyer’s lender approving the smaller down payment and greater loan amount.

Appeal the appraisal

As the person who paid for the appraisal, the buyer can ask their lender to challenge the appraisal if they believe the appraiser used incorrect information or bad comps, or if they weren’t familiar enough with the area.

Cancel the contract

Not an ideal situation for you or the buyer, but if the buyer signed an appraisal contingency, they can cancel the contract and walk away from the deal.

How can sellers prevent a low appraisal?

We’ve talked about the options a buyer has to tackle a low appraisal, but what can you, as the seller, do to help encourage the deal to move forward? There are a few actions you can take, all before the appraisal. Remember, appraisals are subjective, so it’s important to prepare for a low appraisal, just in case.

If you luck out and accept an offer from an all-cash buyer, you can avoid the appraisal contingency completely — or at least lessen the potential of a low appraisal harming your deal.

Show your comps

If you hired a real estate agent, they should have given you a comparative market analysis (CMA) when you were first deciding on a listing price, along with comps to prove your home’s value. Keep copies of the comps and give them to the appraiser when they arrive at the home.

Bring receipts

If you’ve had your land surveyed, done any major improvements or renovated, have receipts handy for the appraiser so they can calculate the added value.

Clean up

One of the most important things that an appraiser assesses is the condition of your home, so make sure it looks clean, tidy and well-maintained. Clean the gutters, touch up paint, clean thoroughly and make sure major systems are operational. You’ll also want to make sure your smoke and carbon monoxide detectors are functioning. It’s likely you already took some of these steps when you got your house ready to list, but if your home has been on the market for a while, it’s worth doing another deep clean.

How can sellers overcome a low appraisal?

If you’ve followed the pre-appraisal tips above and your appraisal still comes in low, here are some actions you can take to course correct.

Request a copy of the appraisal

Ask the buyer or their agent for the appraisal report if you believe there is misinformation in it. If they’re willing to share a copy of it with you, go through and make sure that factual items are correct. Ultimately, it’s up to the buyer and their agent to report misinformation if it’s found, but the more you can work together, the more likely the deal is to move forward.

Ask the buyer to challenge the appraisal

If the buyer is willing to challenge the appraisal, provide any documentation that could help them make your case, including comps, receipts, information on market conditions, or proof that the appraiser was unfamiliar with your area. You’ll also want to point out exactly which parts of the appraisal are being disputed. Typically, it will be the buyer’s real estate agent who brings up the dispute with the lender. If the lender agrees that the first appraisal is inaccurate, they may order a second appraisal. Again, the buyer would be responsible for paying, but you can always offer to split the cost with the buyer as a good faith effort to keep the deal together.

Be open to negotiations

Unless your buyer was looking for a reason to walk away, they likely want the deal to stay together as much as you do. So that’s when a second round of negotiations can begin. The ball’s in the seller’s court here — it’s up to you to decide if you’re willing to renegotiate the sale price so that it aligns with the appraisal outcome. Your decision depends on your financial situation and the state of your local real estate market (if you’re selling in a buyers market, you may be better off renegotiating than starting over and trying to find a new buyer).

Keep an open mind when it comes to meeting in the middle. For example, you may not have to cover the entire difference between the sale price and the appraisal. If you’ve agreed to sell the house for $250,000 and it appraises at $230,000, you and the buyer could meet in the middle. You could lower the sale price to $240,000, and they could come up with an additional $10,000 out of pocket to satisfy the lender.

Offer seller financing

If the buyer can’t come up with the difference but you know your home is worth more than what it appraised at, you can offer them seller financing for the difference — assuming you have enough cash. You’d essentially loan them the money, taking payments either in regular installments or in a lump sum down the road. If you’re interested in pursuing this option, make sure to involve a lawyer.

Cancel and re-list in a sellers market

If you’re positive the appraisal came in lower than it should have but your buyer isn’t willing to challenge it (or if the challenge fails), you may have to let the deal go. If you aren’t in a rush to sell, you might consider waiting to find a new buyer once market conditions improve — consider selling in the spring, when the market tends to move faster. If you have no choice but to relist in short order and you received multiple offers the first time around, you may be able to retain your existing sale price and find a new buyer who is willing to pay the difference — or perhaps your appraisal will come in higher next time! Or, if you’re in a hurry to sell, you may consider relisting with a lower starting sale price next time around.

Posted in Selling Your Home
Aug. 23, 2019



There is a lot of advice out there concerning selling your home – and a lot of that advice you would do best to ignore. You want to sell your home for the best possible price, in a reasonable amount of time. To accomplish your goals you need to do what works, and avoid doing the things that will make selling your home harder. Below you will find some of the biggest myths about selling real estate. These are myths that somehow some homeowners have come to believe are true. When you follow the worst home selling advice, you often end up with worst possible results. A home that didn’t sell and caused you a lot of stress in the process!


1. Selling for sale by owner is easy and will save you money.

On the surface for sale by owner appears to be a cheaper alternative to using a real estate agent. You avoid paying the agent’s commission, so why wouldn’t you get more money from your sale? In reality, the final price paid for a home can vary considerably based on numerous factors. A good real estate agent will be doing everything possible to boost the price of the home, but on your own, you may not be able to achieve the same goal. Practice makes perfect, and a great agent typically has a lot of experience. It is unlikely that you can hit all the right notes. And even if you can market to the right buyers, determine what improvements give the most bang for the buck and negotiate effectively to drive the price higher, doing so will be much, much more work for you than it will be for a practiced agent.

2. Zillow Zestimates are a good way to price your home.

Price estimates from sites like Zillow are great for a general overview of what your home might be worth, but they are inadequate to price a home for sale. Part of what makes an experienced agent so desirable is his or her ability to compare one home to numerous other homes, based on years of experience, and use both data and instinct to price a home for sale. Price too high, the home won’t sell and may wind up selling for less than it could have, months later. Price too low and you lose money. There is too much at stake to trust a free calculator on a website. Zillow is a valuable site for looking at and researching homes. Far too many believe, however, that the Zillow Zestimates are accurate. Using this as a means to price your home can cause your asking price to be way off the mark. Never rely on an online valuation tool to give you an accurate estimate of your home’s value. Instead, seek out a top local real estate agent or an appraiser. You will dramatically increase your odds of pricing your home correctly. Keep in mind that the wrong asking price is the number one cause of home sale failure!

3. Only sell your home in the spring.

Selling in spring is the most popular choice, but the other seasons offer opportunities as well. Different types of buyers come out in different seasons, buyers that may be primed for buying and willing to pay what you are asking. There is no need to wait for the perfect season if you are ready to sell. There are also some types of properties that might do better in one season or another. Selling a waterfront home in the summer would be a prime example. If you live on a lake or ocean, this season offers one of the best times to showcase what makes your property special!

4. Don’t make improvements to your home.

The buyers can do what they like after they buy it. By avoiding any improvements to your home before you put it on the market, you may be missing out on easy money. You don’t want just to start renovating randomly, though. Certain improvements are ideal for getting more money back or improving the odds of making a sale. The best way to determine what will help your specific sale is to talk to a local real estate agent who knows your area and is experienced in selling your type of home. Some sellers are in the position to make changes financially but don’t for various reasons. Often this can cause the seller to lose thousand of dollars they could have put in their pocket by just making a few sensible changes.

5. The agent you pick isn’t that important – they all do the same things to sell a home.

All real estate agents are not equal. Sure, they may all be happy to try and sell your home. They may all put your property on the MLS and be glad to collect a commission if somebody buys it. But if you want to get the best possible price for your property, it’s going to take a lot more than creating a listing and collecting a check. Knowing how to pick a real estate agent is vital to your success. A good agent will have an extensive plan primed for marketing your home. You need to attract the right buyer, and you need to convince that buyer that your home is worth what you are asking. Doing so requires experience, marketing savvy, negotiating skills, extensive market knowledge, the ability to price the home right the first time, and much, much more. When selling a home one of the most important aspects, any homeowner should look for it accurate pricing. Who wants to list their home for sale only to find out what they were expecting to sell it for was totally unrealistic? When there is a price reduction it says one thing – the home was not priced correctly! Not pricing your home accurately coming out of the gate is a sure fire way to sell it less than if it was priced appropriately. Don’t make the mistake of choosing a real estate agent based on an unrealistic sales price. Folks this happens all the time!

6. The listing agent needs to accompany all of the showings.

Unfortunately, some sellers have the mistaken belief that having the listing agent in attendance somehow increases the odds of success. Sorry, that is not the case! In fact, accompanied showings can hinder a home sale! It is not necessary for your agent to be at the showing. Real Estate agents do not talk people into buying a home. Buying a home is an emotional decision. Usually, within five minutes of walking through the door, a person can tell if they are interested in buying or not. Many owners are under the false assumption that if the real estate agent is there pointing out some feature like a security system, central vacuum, or something else, it will make a difference. Fat chance! Many buyers and their agents detest the listing being around for a showing. For one they can’t speak freely with the listing agent hanging over them. Have you ever walked into a store only to be attacked by a salesman asking if you need any help? Was it a turn-off? Of course, it was! The only time an accompanied showing should be necessary is when you are selling a luxury home and have a significant amount of valuables that can’t be put away. Part of why it is so important to take your time in choosing an agent is because you need someone representing you that you can trust. If you have made a decision you are happy with; then you can feel confident that your agent has your best interests in mind. Instead of coming to every showing, he or she may be better utilized in other ways. If all real estate showings were accompanied, the productivity of every real estate agent would suffer. This is why we use lock boxes. Think about this – How would the agent be working on selling your home if he or she was accompanying the showings of every other property they were marketing? They wouldn’t be!

Aug. 16, 2019

Closing Costs

What are closing costs?

Closing costs include the myriad fees for the services and expenses required to finalize a mortgage. You’ll have to pay closing costs whether you buy a home or refinance. Most of the closing costs fall on the buyer, but the seller typically has to pay a few, too, such as the real estate agent’s commission.

How much are closing costs?

Average closing costs for the buyer run between about 2% and 5% of the loan amount. That means, on a $300,000 home purchase, you would pay from $6,000 to $15,000 in closing costs. The most cost-effective way to cover your closing costs is to pay them out-of-pocket as a one-time expense. You may be able to finance them by folding them into the loan, if the lender allows, but then you’ll pay interest on those costs through the life of the mortgage. When buying a home, you can comparison shop and negotiate some of the fees to lower your closing costs. And some states, counties and cities offer low-interest loan programs or grants to help first-time home buyers with closing costs. Check with your local government to see what’s available. Your lender is required to outline your closing costs in the Loan Estimate you receive when you first apply for the loan and in the Closing Disclosure document you receive in the days before the settlement. Review them closely and ask questions about anything you don’t understand.

Here are the fees that the buyer’s closing costs can include:

Property-related fees

Appraisal fee: It’s important to a lender to know if the property is worth as much as the amount you want to borrow. This is for two reasons: The lender needs to verify the amount you need for a loan is justified and make sure it can recoup the value of the home if you default on your loan. The average cost of a home appraisal by a certified professional appraiser ranges between $300 and $400.

Home inspection: Most lenders require a home inspection, especially if you’re getting a government-backed mortgage, such as an FHA loan insured by the Federal Housing Administration. Before lending you hundreds of thousands of dollars, a bank needs to make sure the home is structurally sound and in good enough shape to live in. If the inspection turns up troubling results, you may be able to negotiate a lower sale price. But depending on how severe the problems are, you have the option to back out of your contract if you and the seller can’t come to an agreement on how to fix the issues. Home inspection fees, on average, range from $300 to $500.

Loan-related fees

Application fee: This covers the cost of processing your request for a new loan and includes costs such as credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application.

Assumption fee: If the seller has an assumable mortgage and you take over the remaining balance of the loan, you may be charged a variable fee based on the balance.

Attorney’s fees: Some states require an attorney to be present at the closing of a real estate purchase. The fee will vary depending on the number of hours the attorney works for you.

Prepaid interest: Most lenders require buyers to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment due date, so be prepared to pay that amount at closing; it will depend on your loan size.

Loan origination fee: This is a big one. It’s also known as an underwriting fee, administrative fee or processing fee. The loan origination fee is a charge by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees and the lender’s attorney fees. Expect to pay about 0.5% of the amount you’re borrowing. A $300,000 loan, for example, would result in a loan origination fee of $1,500.

Discount points: By paying discount points, you reduce the interest rate you pay over the life of your loan, which results in more competitive mortgage rates. The cost of one point equals 1% of the loan amount. So if the loan were $250,000, a 1-point payment would be $2,500. Generally, paying points is worthwhile only if you plan to stay in the home for a long time. Otherwise, the upfront cost isn’t worth it.

Mortgage broker fee: If you work with a mortgage broker to find a loan, the broker will usually charge a commission as a percentage of the loan amount. The commission averages from 0.5% to 2.75% of the home’s purchase price.

Mortgage insurance fees

Mortgage insurance application fee: If you make a down payment of less than 20%, you may have to get private mortgage insurance. (PMI insures the lender in case you default; it doesn’t insure the home.) The application fee varies by lender.

Upfront mortgage insurance: Some lenders require borrowers to pay the first year’s mortgage insurance premium upfront, while others ask for a lump-sum payment that covers the life of the loan. Expect to pay from 0.55% to 2.25% of the purchase price for mortgage insurance, according to Genworth, Ginnie Mae and the Urban Institute. FHA, VA and USDA fees: If your loan is insured by the Federal Housing Administration, you’ll have to pay FHA mortgage insurance premiums; if it’s guaranteed by the Department of Veterans Affairs or the U.S. Department of Agriculture, you’ll pay guarantee fees. In addition to monthly premiums, the FHA requires an upfront premium payment of 1.75% of the loan amount. The USDA loan upfront guarantee fee is 1%. VA loan guarantee fees range from 1.25% to 3.3% of the loan amount, depending on the size of your down payment. Property taxes, annual fees and insurance.

Property taxes: Buyers typically pay two months’ worth of city and county property taxes at closing.

Annual assessments: If your condo or homeowners association requires an annual fee, you might have to pay it upfront in one lump sum.

Homeowners insurance premium: Usually, your lender requires that you purchase homeowner’s insurance before settlement, which covers the property in case of vandalism, damage and so on. Some condo associations include insurance in the monthly condo fee. The amount varies depending on where you live and your home’s value.

Title fees

Title search fee: A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property. This can be fairly labor-intensive, especially if the real estate records aren’t computerized. Title search fees are about $200, but can vary among title companies by region. The search fee may be included in the cost of title insurance.

Lender’s title insurance: Most lenders require what’s called a loan policy; it protects them in case there’s an error in the title search and someone makes a claim of ownership on the property after it’s sold. Coverage lasts until the loan is paid off.

Owner’s title insurance: You should also consider purchasing title insurance to protect yourself in case title problems or claims are made on your home after closing. The owner’s coverage lasts as long as you or your heirs own the property. The cost of the owner’s policy is about 0.5% to 1% of the purchase price, according to the American Land Title Association. Whether the buyer or seller pays for title insurance varies by region. A discount is sometimes offered when both the lender’s and owner’s policies are purchased at the same time.

Mortgage closing documents

With so many closing costs to consider, it’s obvious you’ll face a lot of paperwork just prior to and during the loan signing. Two of the most important closing documents are the Loan Estimate and the Closing Disclosure. You’ll receive the Loan Estimate three days after applying with a lender. It will officially detail all fees, the interest rate and the other costs to close your loan. It’s legally binding, so you’ll want to read it carefully. Then, three days from loan settlement and prior to making the big commitment, you’ll receive the Closing Disclosure from your lender. It confirms — or makes minor adjustments to — what you saw on the Loan Estimate. Again, it’s worth a big cup of coffee and a thorough review.



Posted in Buying a Home
Aug. 8, 2019

What is an Escrow Account?

Homebuyers, especially first-time homebuyers, may not fully understand the issue of escrow and how it relates directly to a home purchase. 


But understand it they should, as escrow plays a vital - and protective - role in the home-buying process and thus needs to be thoroughly understood by homebuyer and seller alike. 


What Is Escrow? 


Escrow is defined as an impartial third party in a major financial transaction between two parties that holds a valuable asset (usually cash) until the transaction is complete. When something is referred to as being "in escrow," they mean the asset is currently being held by that third party. While escrow is typically linked to real estate, it can extend to other major financial transactions. 


Escrow is often used so that a neutral party can be involved in a transaction, giving the buyer more comfort in the deal (and the seller as well) knowing an independent mediator can mitigate the possibility of anyone trying to rip off the other party. An escrow service can also be the unbiased mediator that can help resolve the complications that inevitably arise in a large-scale transaction. 


Mainly, there are three things that the term escrow may be referring to - real estate escrow, online escrow and escrow accounts: 


Real estate escrow 


Mortgage lenders typically insist on a real estate escrow account for the buyer prior to the purchase, before any home inspection or disclosures on the home's condition are completed. Often, escrow is required for any home purchase to occur. With real estate, both property and money will be considered "in escrow" before the deal goes through. 


Once the buyer and the lender knows the property is in satisfactory condition, the money from the escrow account is released on the home purchase closing date. 


Escrow account 


Both in real estate and other areas, escrow accounts are what is used prior to a sale officially going through. Once the buyer has put their funds into an account, it is then incumbent on the seller to hold up their end of the bargain. Once the transaction has occurred, the money owed to the seller is released from the escrow account. Specific to real estate, the funds would not be the entirety of the cost of the home, but those funds still go to the seller upon completion of the purchase. 


An escrow account can also be used after the buyer moves into the home, as the mortgage lender pays money owed on property taxes and homeowners insurance out of the escrow account, funded by the buyer. Minimum balances are often required in an escrow account. For mortgage lenders and homeowners alike, an escrow account can work as a safety measure to help ensure payments get made on time with money saved away for these payments. 


Online escrow 


Consumers doing business online use online escrow to provide a measure of protection on a digital purchase of a product or service. No matter how much the internet grows and develops, online sales continue to be an incredibly risky endeavor for many. Not every online transaction is as big as that of a home purchase, but you still want a safeguard to get your money back if something goes awry with an attempted purchase. 


The escrow model works the same way, as the money is kept in an escrow account by a trusted third party, until the conditions of the purchase agreement are satisfied by both the buyer and seller, and the escrow money is released. 


Real Estate Escrow Process 


During the home sales process, the buyer puts up a predetermined amount of cash in an escrow account after an offer is accepted by the homeowner, and is held by a bank or other financial institution in an escrow account until the sale is finalized. This is what real estate and mortgage professionals refer to as "being in escrow." 


Expect the home sale escrow process to last about 30 days - or the time it takes to fully sign off on the home sale between both parties and the mortgage lender. The homeowner doesn't get access to the money during escrow and the amount of cash put into escrow by the homebuyer is applied to the overall home sales price once the deal is finalized. 


Escrow After Home Purchase 


After the home is purchased, the buyer also uses an escrow account to pay property taxes and home insurance charges incurred as a homeowner. The mortgage loan servicer makes these payments for you, and has direct access to the escrow account. Mortgage lenders prefer escrow accounts especially for property tax payments, as they don't want the property, backed by their mortgage loan, to fall behind in taxes and risk a tax lien on the property. The same thinking applies to homeowner's insurance, where the lender can't afford the homeowner to miss payments, and thus risk losing insurance coverage on the property. 


For homeowners dealing with an escrow account, a good rule of thumb is to expect to pay two months' worth of expenses on an escrow account at the home sale closing. Typically, once per year your mortgage lender will review your escrow account to make sure you have sufficient funds in your escrow account to cover property tax and home insurance payments. 


How to Get an Escrow Account 


While home sale escrow accounts aren't all that complicated, it's advisable for both parties to agree to a professional title agent, real estate lawyer or a mortgage loan servicer to handle the escrow process. Your real estate agent can direct you to a qualified escrow professional. In a home sale, generally the realtor will handle the creation of the escrow account to keep everything running smoothly. 


In the event that you are handling the transaction yourself, you'll have to do some digging. You can search online for an escrow agent or service, or it may be easier to contact your local bank and ask for information on whether you're allowed to create an escrow account with them. 


Is There Interest Paid on an Escrow Account? 


There's no federal law guaranteeing financial institutions to pay interest on the money held in an escrow account. However, a growing number of states - including Alaska, California, Connecticut, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont and Wisconsin - do require banks and financial institutions holding escrow payments to pay interest to account holders. 


Is it Okay to Not Use an Escrow Account? 


You can avoid an escrow account after a home sale (having an escrow account active while the home sale is completed is mandatory, however), but only under certain conditions. For example, if you put 20% cash down on your home, the mortgage lender may waive an escrow account, but could charge a significant fee for doing so. In general, mortgage lenders want to be sure those property tax payments and homeowner's insurance payments are on hand, in good order, and readily accessible for payments. Lenders can make it difficult to avoid an escrow account after a home purchase. 


Are Escrow Account Totals Fixed? 


Escrow accounts aren't fixed. The amount of money held in an escrow account may vary, most notably due to fluctuations in local property tax assessments, which can and do move up and down during the time the homeowner is repaying his or her home mortgage loan. Additionally, if you pay off your homeowner's insurance early or if your home declines in value, your escrow payments can decline, as well. 


Escrow Account Fees 


There are fees linked to escrow accounts. Typically, an escrow agent will charge a fee of about 1% of the home sales price for handling the escrow account, paid at the home sale closing. The homebuyer and seller can negotiate who winds up paying the fee, or whether the buyer and seller will wind up splitting the fee. 


After a home sale, it's up to the new homeowner to make sure his or her escrow account has enough cash to cover property tax and homeowner's insurance payments. The homeowner should expect the mortgage lender to be directly involved to make sure escrow payments are being made - and on time. 


                                                                                                                                           - The Street        


July 30, 2019

What is an escalation clause?

When you're deciding on what price to offer on a home, the situation may call for a single price or, in some cases, an escalation clause. An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say "I will pay x price for this home, but if the seller receives another offer that's higher than mine, I'm willing to increase my offer to y price." In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved.

How does an escalation clause work?

While escalation clauses vary significantly, the general escalation addendum has a few basic components: What is the original offer of purchase price? How much will that price be escalated above any other competitive bid? What is the maximum amount that the purchase price can reach in case of multiple offers?

For example, buyer Adam offers $100,000 for a home. His Realtor adds an escalation clause that, in the case of a higher competing offer, will increase Adam's offer in increments of $2,000 above the competing offer. His escalation clause goes up to a maximum of $110,000. If no other offers are submitted, Adam's offer remains at $100,000. If buyer Green offers the seller $103,000, then Adam's offer would automatically escalate to $2,000 above that, bringing Adam's offer to $105,000. If buyer Orange offers $111,000 for the home, then Adam's maximum of $110,000 will be eclipsed, and Orange will have the top offer.

Will the seller accept an escalation clause?

Some home sellers simply state that they will not accept an offer with an escalation clause. They would prefer that every buyer submits exactly what they're willing to pay. Sellers sometimes prefer this method because it motivates buyers to outbid one another on the first try. It also streamlines the paperwork and the decision-making process.

Will there definitely be multiple offers?

Escalation clauses should only be used when the buyer is fairly confident that there will be multiple offers, or when the buyer expects to pay an escalated price. If a buyer submits an offer with an escalation clause, they're laying all their cards on the table: The seller knows immediately how far the buyer will go to secure the home. If that offer ends up being the only offer submitted, it technically remains at its original price. A Realtor representing the seller will know, however, to counteroffer to the buyer at a higher, escalated price, since the buyer is clearly willing to pay more. While there's no guarantee that the buyer will agree to the higher price, it is likely that they will. A buyer gives up a lot of negotiating power and potentially leaves money on the table when using an escalation clause that goes unmet by a competitor.

Has the seller's agent clearly stated a one-day review or multiple rounds of offers?

In hot markets, there's a wide variety of offer-review processes. Some state that the property is going on the market on Friday, and all offers will be reviewed the following Thursday. The seller and their Realtor will make a final decision that day. This situation can be ideal for the escalation clause, when a buyer knows it's an all-or-nothing offer. Other sellers take a back-and-forth approach. They may collect offers from buyers for one week, and then respond to a handful of the best offers by saying "Send us your highest and best offer." This technique is particularly disliked by many consumers and professionals for its lack of clarity, but it's important to know that it exists. Before writing an offer, a buyer's Realtor can inquire to feel out the details and make sure the buyer is prepared for the situation. Writing an escalation clause on the initial offer in a multistage situation could put the buyer in a weak position during the second round. It's perfectly legal for a seller's Realtor, with the seller's permission, to reveal to all potential buyers what the top initial offer is and to ask everyone to beat it. In this case, the escalation clause would flesh out that buyer's maximum, and they would lose a competitive edge.

Bid with careful confidence and know that each situation is unique.

If you're considering an escalation clause, your Realtor is probably knee-deep in researching the circumstances around the seller's process of reviewing offers. The Realtor's knowledge of normal practices and probable outcomes in your market will make your offer much more likely to succeed. Escalation clauses can cause a lot of stress for home buyers, but when they're boiled down to the basics, they're fairly straightforward. Remember to be realistic, to be comfortable with how much you're willing to offer, and to confidently go after a home at that price. Buyers shouldn't be tempted to escalate their purchase price above what they are comfortable paying. At the same time, they should realize that inventory and interest rates are low, and aggressively pursuing a good home at a good price is necessary to winning in a competitive market. Potential buyers who are only looking to get a steal often end up not being buyers at all.

Posted in buying