5 Stages of Grief After Losing a Bid on Your Dream Home (and How to Avoid Them)


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When we think of real estate, we tend to think of the positives: a place to call our own, beautiful interior design, and—if ratings are any indication—all the wildly entertaining real estate TV shows.

Whether they admit it or not, most people dream of the day when they’ll get to sign the paperwork on their dream home.

But what happens when that dream goes awry and becomes a nightmare?

Sounds scary, right?

Picture this: you’ve finally found your dream home, and it’s perfect! It has everything you’re looking for (except a light fixture that needs to be replaced, but that’s not a huge deal).

You’ve waited years for this moment. You put in a bid—a great bid—and cross your fingers and toes.

But then you get a call with the bad news…the seller went with another offer.

Devastating.

Try as you might, you’re going to go through the five stages of grief after losing a bid on your dream home. They usually look something like this:

1. Denial

“How could they have gone with another offer? Don’t they know how much we loved this house? We bid over asking! There must have been some sort of mistake. I should call and schedule the movers just in case.”

2. Anger

“Who do they think they are? Nobody rejects me, I reject them! I hope they fail the inspection. If I can’t have this house, then no one should have it.”

3. Bargaining

“Is it too late to make another offer? Just tell me how much the winning bid was and I’ll add another $5,000 on top of it. Okay, make it $10,000! How about this: what if I offer to let them come back and use the pool whenever they want…they’ll go for it, right? They like dogs, maybe they’ll take a puppy to sweeten the deal.”

4. Depression

“This is terrible. It’s the only house I’ve ever truly wanted and I’ll never find one like it again. What’s the point of working so hard if I can’t even get an offer accepted? Why do I always have to settle? I wish I’d never gone to see this house so I wouldn’t have to think about what I’ve lost.”

5. Acceptance

“You know what? Everything happens for a reason. If I was meant to buy that house, then they would have accepted the offer. Let’s keep looking. Something else will come along, and it might even be a better fit. No use crying over spilled milk.”

Avoiding The Grief (And Aggravation)…

  • Losing a bid on your dream home can be painful, but the good news is there are things you can do to maximize your chances of an accepted offer.
  • First, make sure that you’re pre-approved well in advance, so when that dream house comes on the market, you’ll be ready to go.
  • Then, when it comes on the market, don’t hesitate. Go see it ASAP and put in an offer as soon as you can, and make sure to include your pre approval.
  • When submitting your offer, make sure it’s strong. If you want the house, don’t play around and try to offer less than you’d be willing to pay. If they go with another offer, you’ll want to know that you gave it your best shot.
  • And lastly, try to be accomodating with your terms. If you want the perfect house, you need to be the perfect buyer.

Don’t feel bad if you’ve “lost” a house that you love. It happens! And, it’s natural to go through the stages of grief. Sometimes out of your control and just due to the market—supply and demand. Just do what you can to avoid it happening time and time again.



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10 First-Time Home Buyer Blunders To Avoid


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Homeownership is one of the central tenets of contemporary life. Most of us dream of a familiar, comfortable place to call our own, and buying a home is a rite of passage into adulthood, and into our own piece of the American Dream.

But until and unless you’ve been through the process at least once, there are plenty of mistakes many people make on their journey to property ownership.

If you’ve made any of these yourself, don’t feel bad—it can happen to the best of us. And if you’re an aspiring homeowner who wants to get ahead of the curve, take a look at the following things NOT to do when buying your first home…so when it’s time to pull the trigger, you’ll be ready to go!

1. Ask an agent to go see houses before getting pre-approved

It’s tempting to visit properties the minute you’ve made up your mind that you want to buy, but putting the cart before the horse can backfire spectacularly.

If you haven’t actually qualified for financing, you should hold off on going to look at houses with a real estate agent (or even going to open houses), since there’s no guarantee that a mortgage company can lend you the money. There’s no greater let down than finding a house you love, and finding out you can’t be approved for a mortgage in the price range of that house.

Besides, many sellers and their agents won’t even consider your offer if you don’t include a pre-approval letter. So, you should have it in hand in order not to lose precious time when you find “the one”.

Bottom line is…getting pre-approved is the first step in the homebuying process, so always start there.

2. Buy a home you don’t feel great about because of pressure from others

We’re all influenced by the people around us, whether it’s friends, parents, significant others, or even people on the internet. But don’t let the opinions of others guide your decision making when it comes to buying a home.

Everyone has their own taste, but at the end of the day, you’re the one that will be paying, and, more importantly, (literally) living in your decision. Make an offer because you want to, not because you think it’s what someone else wants you to do.

3. Pass on the perfect house over a trivial cosmetic feature

Real estate can be quirky, and there are plenty of aesthetic choices homeowners make that won’t work for everyone else. But if everything is great except for some cosmetic features, don’t walk away from the deal over something that can be changed later on.

Location is about the only thing you can’t change about a house, but everything else can be removed, remodeled, and replaced, so don’t pass up something that might be a great fit just because it happens to have an eyesore, or isn’t quite your taste.

4. Get hung up on properties outside your price range

The thing about dream homes is that they’re usually pretty darn expensive. And, it’s just human nature to want as much (or more) than we can afford. So, it’s pretty common for home buyers to find themselves longing for that perfect house that’s usually a few hundred thousand (or million) dollars outside their price range.

Don’t let these properties get you down. If you look hard enough, there’s going to be a great option within your price range. And who knows, maybe sometime in the future, that dream house might actually be within your budget.

5. Assume that your offer will be accepted

Making your first offer is a big deal, and you might think that since you’re putting so much money on the line that there’s no way someone could possibly turn it down. But the reality is a little more complex.

In a competitive market, sellers will often get multiple offers, or hold out for a higher price than you might be willing to go. There are a lot of moving parts, and there’s a good chance that if you saw something you liked about a house, some other buyer might have seen the same thing too. But don’t get discouraged—negotiations are common, and, if it doesn’t work out, another house will eventually come along.

6. Assume that once an offer has been accepted, the deal is done

An accepted offer is an important milestone, but it doesn’t mean the deal is done.

Between an accepted offer and closing, there are lots of moving parts and boxes that need to be checked: from financing, to inspections, to the title search, to seller’s circumstances—and unexpected things can happen throughout the process. While the overwhelming majority of accepted offers turn into closed deals, you should never assume that just because the buyer and seller have agreed, that the deal is finalized.

7. Make a big purchase or take out new debt before the closing

This has been the kiss of death for many real estate transactions. A buyer gets their offer accepted, starts the mortgage process, and then goes out and buys a car, or finances a bunch of new furniture for their new place. Then, once the mortgage company checks the credit report before closing—as they always do—the buyer no longer qualifies for the mortgage since they now have new debt that changes their debt to income ratio.

There’s a simple solution to this potential problem…don’t do it!

8. Forget to get an estimate of how much money you’ll need at closing

Many people do back-of-the-napkin calculations, or use an online calculator, to figure out how much money they’ll need to bring to closing. But it’s important to get accurate estimates from your mortgage lender, because if you don’t, you run the risk of being unpleasantly surprised, or worse, coming up short.

There are many fees associated with a real estate transaction, from closing costs, to state taxes and fees, to attorney’s fees, and you should be aware of all of them well before the closing day. You won’t be able to get an exact amount on your closing costs until you are close to your closing day, but you can and should get a good handle on how much to approximately expect.

9. Try to mislead the mortgage company

Most people wouldn’t do this, of course, but not only do you run the risk of not being approved for financing if you try to mislead your lender, you also might end up facing some legal issues down the road. There are some who—in an effort to get approved—might embellish, or flat-out lie on their mortgage application, but the only one that will ultimately be hurt by these lies is the borrower. Mortgage companies have rigorous screening and validation processes, and they usually uncover deception when it can’t be backed up with the proper documentation. So make sure you tell the truth, it’s the only way to go.

10. Work with an agent who doesn’t care

A real estate transaction is a complicated, sometimes stressful experience that requires a knowledgeable and level-headed professional to help guide you through the process. That’s why picking the wrong agent can have devastating consequences. Even worse than hiring an agent who doesn’t know the answers, is working with someone who doesn’t care. A great agent has empathy, and will make sure you feel good about things as you go through the process. So don’t be flippant about who you decide to work with, because the consequences are more impactful than you might think.

At the end of the day, buying your first home should be an exciting and rewarding experience. It’s a rite of passage, and you should be proud of yourself for getting there!



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Will Shutdowns, Lower Unemployment Benefits Hurt the Housing Market?


The U.S. housing market has defied the odds during a public health crisis, economic recession, and the highest unemployment since the Great Depression. Home prices are surging nationally as buyers duke it out over a very limited number of properties for sale. However, there are fears the already battered economy is on the verge of taking yet another hit.

COVID-19 cases are spiking in many parts of the country, which could lead to a second round of shutdowns, furloughs, and layoffs in some areas. The additional $600 that more than 17 million people are getting in weekly unemployment benefits is set to expire at the end of this month if Congress doesn’t act soon. And several large companies have announced tens of thousands of job cuts on the horizon.

Can residential real estate remain unscathed in the face of this looming financial pain?

Most experts expect the market will remain strong—at least in the short term. The blockbuster combination of record-low mortgage interest rates, which dipped below 3% for the first time ever this month, hordes of still-employed buyers descending on whatever listings they can find, and a brutal housing shortage have kept prices high.

“I don’t expect an immediate impact on the housing market,” says realtor.com® Senior Economist George Ratiu. “The housing market’s summer season will remain hot. It’s going gangbusters. In the late fall and winter, it could cool off as the market tends to be a lot slower and more small businesses close.”

Congress and the White House are attempting to bang out another coronavirus stimulus plan by the end of the month. This will likely provide another jolt to the economy. But it’s not yet decided what this stimulus would consist of, and how much of it would make its way to cash-strapped consumers.

This likely won’t be the last time the government is called on to step in. Another wave of foreclosures could deal the housing market a blow, knocking down prices and making families homeless. But that wouldn’t materialize until at least next year, after the maximum 12 months of mortgage forbearance runs out for homeowners with government-backed loans. The hope is by that time, laid-off homeowners will have returned to work and can make their payments or the federal government offers additional assistance.

“Will there be some fallout? Of course,” says Matthew Gardner, chief economist of Windermere Real Estate. “But I don’t think it will be enough to cause [housing] prices to drop.”

Additional unemployment benefits have helped keep the economy afloat

The additional $600 a week in unemployment benefits has helped sustain unemployed workers and their families—as well as the economy itself. If it isn’t renewed or the amount is cut significantly, “it can be catastrophic,” warns Edgar Ndjatou, executive director of Workplace Fairness, a national organization that educates the public on worker rights.

Normally when people lose their job, their spending drops by about 7%, according to a recent JPMorgan Chase & Co. study. But this time, those receiving the boosted unemployment benefits increased their spending by about 10%.

“In many parts of the country, it goes a long way,” says Ndjatou.

While the fate of the unemployment benefit isn’t likely to affect the housing market directly, the impact of its disappearance could trickle down to homeowners and potential buyers—and possibly even lead to more layoffs and corporate cost cutting, according to Gregory Daco, chief economist of Oxford Economics, a global economics consulting firm.

“There are a host of industries that depend on people and businesses spending money,” says Ratiu.

More than 51 million Americans have filed for unemployment since the beginning of the crisis in March, with about 17.3 million continuing to collect unemployment as of July 11. In plain English: Nearly 1 in 5 workers received unemployment in June—five times more than the previous record, according to to JPMorgan Chase.

Buying a home is such a monumental financial commitment, of course, that those who lost their jobs or a substantial chunk of their income are much less likely to be looking to buy a home.

For some, the extra $600 a week contributes to the most money they’ve ever brought home. More than two-thirds of Americans who lost their jobs, 68%, are receiving more in unemployment than they did at their previous jobs, according to a May University of Chicago study.

“The life support the economy was on is being removed,” says Taner Osman, manager of regional economics analysis at Beacon Economics, a Los Angeles–based economics consulting firm. “You’re obviously going to have somewhat of a crash.”

More layoffs on the way

The unemployment picture may currently be looking a bit brighter as states have reopened and some workers are back at their jobs—but the layoffs are far from over.

Many economists expect the double-digit unemployment rate, which hit a high of nearly 15% in April before falling to roughly 11% in June, to continue through the year and probably into the next. New rounds of layoffs could hurt workers in higher income brackets this time around. But those job losses could be offset by folks going back to their jobs in newly reopened industries such as shipping, warehousing, or manufacturing.

“Whether things get better or worse, it’s not going to be a big movement one way or another,” says New York University economics professor Lawrence White.



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3 Things to Consider When Looking for a Vacation Home


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You work hard. You deserve a vacation. If you’d like to enjoy that blissed-out state of mind more than just two weeks a year, you may be thinking about buying a vacation home.

Owning a second property in a favorite destination may sound like a dream come true. But as with any real estate purchase, you’ll want to give this decision plenty of careful consideration.

There are many benefits that go hand-in-hand with owning a home in a coveted locale. For example, you can furnish it as you wish and leave all your vacation-related gear there year-round. So, if you’ve been lugging skiing or surfing gear back and forth, you’ll revel in the ease that comes with making the switch from renter to owner. You can also enjoy more getaways throughout the year at times that are most convenient for you as opposed to when it works best for your landlord.

At the same time, taking on a second home is a major expense. And, as you know from your primary residence, all properties demand near-constant upkeep.

If you find yourself wondering if buying a vacation home is the right move, take a look at some of the questions you should ask yourself before you put in for those days off.

1. Can you afford it?

Any time you buy property, it’s a big investment. Before you begin house-hunting and get your heart set on a place you can’t afford, take a look at your budget and determine what makes sense.

Don’t forget that in addition to your mortgage, you’ll need to pay property taxes and homeowners insurance. If you purchase a condo or townhouse, factor in homeowners association fees as well. And don’t forget there will be those ongoing expenses in the form of utilities and general maintenance.

Of course, you can choose to rent out this property and generate a little income. But before you count on this as a way to pay the mortgage, talk to local real estate agents to get a feel for what you can realistically expect in terms of annual rental revenue.

You’ll also want to speak with an accountant or real estate attorney who can provide accurate information on how this purchase may impact your tax situation.

2. How often will you use it?

Who wouldn’t love a beachfront bungalow in Maui? But if Hawaii is a long and pricey plane ride away, chances are you won’t get much use out of this vacation home. When you’re looking for a second property, consider those places that are easily accessible so you know you’ll be able to enjoy it as frequently as you wish. Most people who purchase a vacation home choose one that’s within a two-to-three hour drive.

Also, will your family’s schedule allow you to get away as often as you hope to? Will teens fight you about leaving friends behind or lobby to bring their pals along, which may mean you need additional space?

Before you buy, you may want to consider renting a home in your preferred destination for a full season to see if you will truly take advantage of the place as often as you think you will. This also gives you an opportunity to get a feel for the area as well as traffic and weather patterns to see if it’s as ideal as you imagine it to be.

3. Are you ready and able to handle an emergency?

Trees fall, pipes burst, a renter has an accident. All these unpleasant events can happen when you least expect them. In some cases, you may be able to send someone to handle the situation for you, but in others you may need to be there to deal with it yourself.

Especially in tropical locales where hurricanes occur, you can find yourself facing unforeseen expenses in the form of insurance deductibles or repairs as a result of Mother Nature. Are you prepared to drop everything to take care of this second home should the need arise?

It’s hard to imagine saying “no” to a vacation home if you have the means, but it’s wise to consider all aspects before you jump in. Before you make a purchase, just make sure it’s something you can comfortably afford, manage, and enjoy to the fullest!



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Is Your Future House Haunted?


Paranormal activity, suicide, murder, cult activity, famous adulteries — is that dream house a “stigmatized property”?

We’ve all heard home-buying horror stories. Sellers backing out or financing falling through can quickly kill a deal. But these snags don’t hold a candle to buying a “stigmatized” home.

A home where paranormal activity, suicide, murder, cult activity or other misfortunes and crimes took place could be categorized as a stigmatized property.

In real estate terms, a stigma refers to an intangible attribute of a property that may prompt a psychological or emotional response on the part of a potential buyer. In addition to physical defects, a house may have unusual features or a history that negatively impacts its value.

Get to know your state’s disclosure laws

Here’s a scary fact: A listing agent may not be required to disclose a stigma to buyers.

Ever heard the phrase “caveat emptor” (let the buyer beware)? In the past, sellers were not required to disclose anything about homes they were selling. Over the years, most states have made changes to this rule and now require that buyers be made aware of certain issues.

The law urges buyers, sellers and their agents to engage in fair and honest dealing with all principals in the real estate transaction. However, the laws that regulate disclosure of sketchy events vary from state to state. Some state laws explicitly relieve the salesperson or broker of the obligation to disclose certain property stigmas.

For instance, what if a house is haunted? Massachusetts is particularly lax when it comes to stigmas. In the witch city of Salem, a seller’s agent does not necessarily need to volunteer information about paranormal activity or even a felony, suicide or homicide that has occurred in a home.

But if you or your agent asks a seller’s agent directly, they must answer truthfully. This differs from California’s stringent laws, which, in addition to other disclosures, mandate that buyers be informed of any deaths that occurred at a property in the last three years.

While it’s certainly ethical for sellers to be upfront about any defects that may impact the value of a property, it may not be a legal requirement.

Research before you fall in love

Since you’re unlikely to find the descriptors “haunted” or “former crime scene” in a property listing, how should you go about digging up some dirt?

  • Check with a real estate attorney in your state to see what disclosures are required.
  • Ask the seller’s representative if criminal or paranormal activity has been reported. Again, sellers and their agents are legally obligated to reveal problems they’re aware of when asked.
  • Carefully review the seller’s disclosures, if one is included with the listing. In many states, property owners are forced to put their real estate disclosures in writing.
  • Get the inside scoop from the neighbors.
  • Always Google the address of your future home. You may uncover a headline that sways your decision.

You may learn that a former owner passed away in the house. In areas with older properties, this is likely going to be the case, though it may not be cause for concern. Someone peacefully passing away in the comfort of their home is a lot different from a situation that involved foul play.

Related:



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Say What? Home-Buying Lingo You Should Know


Need a crash course on real estate terms? This glossary will get you started.

DTI, PMI, LTV … TBH, it can be hard to keep all this stuff straight. This lexicon of real estate terms and acronyms will help you speak the language like a pro.

Appraisal management company (AMC): An institution operated independently of a lender that, once notified by a lender, orders a home appraisal.

Appraisal: An informed, impartial and well-documented opinion of the value of a home, prepared by a licensed and certified appraiser and based on data about comparable homes in the area, as well as the appraiser’s own walkthrough.

Approved for short sale: A term that indicates that a homeowner’s bank has approved a reduced listing price on a home, and the home is ready for resale.

American Society of Home Inspectors (ASHI): A not-for-profit professional association that sets and promotes standards for property inspections and provides educational opportunities to its members. (i.e., Look for this accreditation or something similar when shopping for a home inspector.)

Attorney state: A state in which a real estate attorney is responsible for closing.

Back-end ratio: One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares the borrower’s monthly debt payments (proposed housing expenses, plus student loan, car payment, credit card debt, maintenance or child support and installment loans) to gross income.

Buyers market: Market conditions that exist when homes for sale outnumber buyers. Homes sit on the market a long time, and prices drop.

Cancellation of escrow: A situation in which a buyer backs out of a home purchase.

Capacity: The amount of money a home buyer can afford to borrow.

Cash-value policy: A homeowners insurance policy that pays the replacement cost of a home, minus depreciation, should damage occur.

Closing: A one- to two-hour meeting during which ownership of a home is transferred from seller to buyer. A closing is usually attended by the buyer, the seller, both real estate agents and the lender.

Closing costs: Fees associated with the purchase of a home that are due at the end of the sales transaction. Fees may include the appraisal, the home inspection, a title search, a pest inspection and more. Buyers should budget for an amount that is 1% to 3% of the home’s purchase price.

Closing disclosure (CD): A five-page document sent to the buyer three days before closing. This document spells out all the terms of the loan: the amount, the interest rate, the monthly payment, mortgage insurance, the monthly escrow amount and all closing costs.

Closing escrow: The final and official transfer of property from seller to buyer and delivery of appropriate paperwork to each party. Closing of escrow is the responsibility of the escrow agent.

Comparative market analysis (CMA): An in-depth analysis, prepared by a real estate agent, that determines the estimated value of a home based on recently sold homes of similar condition, size, features and age that are located in the same area.

Compliance agreement: A document signed by the buyer at closing, in which they agree to cooperate if the lender needs to fix any mistakes in the loan documents.

Comps: Or comparable sales, are homes in a given area that have sold within the past six months that a real estate agent uses to determine a home’s value.

Condo insurance: Homeowners insurance that covers personal property and the interior of a condo unit should damage occur.

Contingencies: Conditions written into a home purchase contract that protect the buyer should issues arise with financing, the home inspection, etc.

Conventional 97: A home loan that requires a down payment equivalent to 3% of the home’s purchase price. Private mortgage insurance, which is required, can be canceled when the owner reaches 80% equity.

Conventional loan: A home loan not guaranteed by a government agency, such as the FHA or the VA.

Days on market (DOM): The number of days a property listing is considered active.

Depository institutions: Banks, savings and loans, and credit unions. These institutions underwrite as well as set home loan pricing in-house.

Down payment: A certain portion of the home’s purchase price that a buyer must pay. A minimum requirement is often dictated by the loan type.

Debt-to-income ratio (DTI): A ratio that compares a home buyer’s expenses to gross income.

Earnest money: A security deposit made by the buyer to assure the seller of his or her intent to purchase.

Equity: A percentage of the home’s value owned by the homeowner.

Escrow account: An account required by a lender and funded by a buyer’s mortgage payment to pay the buyer’s homeowners insurance and property taxes.

Escrow agent: A neutral third-party officer who holds all paperwork and funding in trust until all parties in the transaction fulfill their obligations as part of the transfer of property ownership.

Escrow state: A state in which an escrow agent is responsible for closing.

Fannie Mae: A government-sponsored enterprise chartered in 1938 to help ensure a reliable and affordable supply of mortgage funds throughout the country.

Federal Reserve: The central bank of the United States, established in 1913 to provide the nation with a safer, more flexible and more stable monetary and financial system.

Federal Housing Administration (FHA): A government agency created by the National Housing Act of 1934 that insures loans made by private lenders.

FHA 203(k): A rehabilitation loan backed by the federal government that permits home buyers to finance money into a mortgage to repair, improve or upgrade a home.

Foreclosure: A property repossessed by a bank when the owner fails to make mortgage payments.

Freddie Mac: A government agency chartered by Congress in 1970 to provide a constant source of mortgage funding for the nation’s housing markets.

Funding fee: A fee that protects the lender from loss and also funds the loan program itself. Examples include the VA funding fee and the FHA funding fee.

Gentrification: The process of rehabilitation and renewal that occurs in an urban area as the demographic changes. Rents and property values increase, culture changes and lower-income residents are often displaced.

Guaranteed replacement coverage: Homeowners insurance that covers what it would cost to replace property based on today’s prices, not original purchase price, should damage occur.

Homeowners association (HOA): The governing body of a housing development, condo or townhome complex that sets rules and regulations and charges dues and special assessments used to maintain common areas and cover unexpected expenses respectively.

Home equity line of credit (HELOC): A revolving line of credit with an adjustable interest rate. Like a credit card, this line of credit has a limit. There is a specified time during which money can be drawn. Payment in full is due at the end of the draw period.

Home equity loan: A lump-sum loan that allows the homeowner to use the equity in their home as collateral. The loan places a lien against the property and reduces home equity.

Home inspection: A nondestructive visual look at the systems in a building. Inspection occurs when the home is under contract or in escrow.

Homeowners insurance: A policy that protects the structure of the home, its contents, injury to others and living expenses should damage occur.

Housing ratio: One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares total housing cost (principal, homeowners insurance, taxes and private mortgage insurance) to gross income.

In escrow: A period of time (30 days or longer) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title searched for liens, etc.

Jumbo loan: A loan amount that exceeds the Fannie Mae/Freddie Mac limit, which is generally $425,100 in most parts of the U.S.

Listing price: The price of a home, as set by the seller.

Loan estimate: A three-page document sent to an applicant three days after they apply for a home loan. The document includes loan terms, monthly payment and closing costs.

Loan-to-value ratio (LTV): The amount of the loan divided by the price of the house. Lenders reward lower LTV ratios.

Market value coverage: Homeowners insurance that covers the amount the home would go for on the market, not the cost to repair, should damage occur.

Mechanic’s lien: A hold against a property, filed in the county recorder’s office by someone who’s done work on a home and not been paid. If the homeowner refuses to pay, the lien allows a foreclosure action.

Mortgage broker: A licensed professional who works on behalf of the buyer to secure financing through a bank or other lending institution.

Mortgage companies: Lenders who underwrite loans in-house and fund loans from a line of credit before selling them off to a loan buyer.

Mortgage interest deduction: Mortgage interest paid in a year subtracted from annual gross salary.

Mortgage interest rate: The price of borrowing money. The base rate is set by the Federal Reserve and then customized per borrower, based on credit score, down payment, property type and points the buyer pays to lower the rate.

Multiple listing service (MLS): A database where real estate agents list properties for sale.

Origination fee: A fee, charged by a broker or lender, to initiate and complete the home loan application process.

Piggyback loan: A combination of loans bundled to avoid private mortgage Insurance. One loan covers 80% of the home’s value, another loan covers 10% to 15% of the home’s value, and the buyer contributes the remainder.

Principal, interest, property taxes and homeowners insurance (PITI): The components of a monthly mortgage payment.

Private mortgage insurance (PMI): A fee charged to borrowers who make a down payment that is less than 20% of the home’s value. The fee, 0.3% to 1.5% of the yearly loan amount, can be canceled in certain circumstances when the borrower reaches 20% equity.

Points: Prepaid interest owed at closing, with one point representing 1% of the loan. Paying points, which are tax deductible, will lower the monthly mortgage payment.

Pre-approval: A thorough assessment of a borrower’s income, assets and other data to determine a loan amount they would qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home.

Pre-qualification: A basic assessment of income, assets and credit score to determine what, if any, loan programs a borrower might qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home.

Property tax exemption: A reduction in taxes based on specific criteria, such as installation of a renewable energy system or rehabilitation of a historic home.

Round table closing: All parties (the buyer, the seller, the real estate agents and maybe the lender) meet at a specified time to sign paperwork, pay fees and finalize the transfer of homeownership.

Sellers market: Market conditions that exist when buyers outnumber homes for sale. Bidding wars are common.

Short sale: The sale of a home by an owner who owes more on the home than it’s worth (i.e., “underwater” or “upside down”). The owner’s bank must approve a lower listing price before the home can be sold.

Special assessment: A fee charged by a condo complex HOA when cash on reserve is not enough to cover unexpected expenses.

Tax lien: The government’s legal claim against property when the homeowner neglects or fails to pay a tax debt.

Third-party review required: Verbiage included in a home listing to indicate that the lender has not yet approved the home for short sale. The seller must submit the buyer’s offer to the lender for approval.

Title insurance: Insurance that protects the buyer and lender should an individual or entity step forward with a claim that was attached to the property before the seller transferred legal ownership of the property or “title” to the buyer.

Transfer stamps: The form in which transfer taxes are paid by the home buyer. Stamps can also serve as proof of transfer tax payment.

Transfer taxes: Fees imposed by the state, county or municipality on transfer of title.

Under contract: A period of time (30 days or longer) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title is searched for liens, etc.

Underwater or upside down: A situation in which a homeowner owes more for a property than it’s worth.

Underwriting: A process a lender follows to assess a home loan applicant’s income, assets and credit, and the risk involved in offering the applicant a mortgage.

VA home loan: A home loan partially guaranteed by the United States Department of Veteran Affairs and offered by private lenders, such as banks and mortgage companies.

VantageScore: A credit scoring model lenders use to make lending decisions. A borrower’s score is based on bill-paying habits, debt balances, age, variety of credit accounts and number of inquiries on credit reports.

Walkthrough: A buyer’s final inspection of a home before closing.

Water certificate: A document that certifies that a water account has been paid in full. The seller must produce this certificate at closing.

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Don’t Believe These 5 Myths About Real Estate Agents


Do you need one? Do they pocket the whole commission? Let’s set the facts straight.

Buyers and sellers often enter the market with misconceptions about real estate agents — how they work, how the process works and what the agency relationship is all about.

It’s helpful to point out, without getting too far into the weeds, that in any one real estate transaction, there are most likely two agents: one for the buyer and one for the seller.

Here are five myths (and five truths) about working with both buyer’s and seller’s agents.

1. Agents get a 6% commission, no matter what

Most people assume that their agent is pocketing the entire commission. That would be nice, but it’s just not accurate.

Truth

First, it’s helpful to know that the seller pays the commission, and they split it four ways: between the two brokerages and the two agents.

Finally, the brokerage commission isn’t fixed or set in stone, and sellers can sometimes negotiate it.

2. Once you start with an agent, you’re stuck with them

If you’re a seller, you sign a contract with the real estate agent and their brokerage. That contract includes a term — typically six months to a year. Once you sign the agreement, you could, in fact, be stuck with their agent through the term. But that’s not always the case.

Truth

If things aren’t working out, it’s possible to ask the agent or the brokerage manager to release you from the agreement early.

Buyers are rarely under a contract. In fact, buyer’s agents work for free until their clients find a home. It can be as quick as a month, or it can take up to a year or more. And sometimes a buyer never purchases a house, and the agent doesn’t get paid.

Before jumping into an agent’s car and asking them to play tour guide, consider a sit-down consultation or a call, and read their online reviews to see if they’re the right fit.

Otherwise, start slow, and if you don’t feel comfortable, let them know early on — it’s more difficult to break up with your agent if too much time passes.

3. It’s OK for buyers to use the home’s selling agent

Today’s buyers get most things on demand, from food to a ride to the airport. When it comes to real estate, buyers now assume they need only their smartphone to purchase a home, since most property listings live online.

Truth

First-time buyers or buyers new to an area don’t know what they don’t know, and they need an advocate.

The listing agent represents the seller’s interests and has a fiduciary responsibility to negotiate the best price and terms for the seller. So working directly with the selling agent presents a conflict of interest in favor of the seller.

An excellent buyer’s agent lives and breathes their local market. They’ve likely been inside and know the history of dozens of homes nearby. They’re connected to the community, and they know the best inspectors, lenders, architects and attorneys.

They’ve facilitated many transactions, which means they know all the red flags and can tell you when to run away from (or toward) a home.

4. One agent is just as good as the next

Many people think that all agents are created equal.

Truth

A great local agent can make an incredible difference, so never settle. The right agent can save you time and money, keep you out of trouble and protect you.

Consider an agent who has lived and worked in the same town for around ten years. They know the streets like the back of their hand. They have deep relationships with the other local agents. They have the inside track on upcoming deals and past transactions that can’t be explained by looking at data online.

Compare that agent to one who’s visiting an area for the first time. Some agents aren’t forthright and might be more interested in making a sale. Many others care more about building a long-term relationship with you, because their business is based off referrals.

5. You can’t buy a for sale by owner (FSBO) home if you have an agent

In a previous generation, sellers who wouldn’t deal with any agents tried to sell their home directly to a buyer to save the commission.

Truth

Smart sellers understand that real estate is complicated and that most buyers have separate representation. And many FSBO sellers will offer payment to a buyer’s agent as an incentive to bring their buyer clients to the home.

If you see a FSBO home on the market, don’t be afraid to ask your agent to step in. Most of the time the seller will compensate them, and you can benefit from their knowledge and experience.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published June 2018.



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5 Reasons to Buy a Home This Fall


The days may be getting shorter, but the list of home-shopping benefits is getting longer.

Real estate markets ebb and flow, just like the seasons. The spring market blooms right along with the flowers, but the fall market often dwindles with the leaves — and this slower pace could be good for buyers.

If you’re in the market for a home, here are five reasons why fall can be a great time to buy.

1. Old inventory may mean deals

Sellers tend to put their homes on the market in the spring, often listing their homes too high right out of the gate. This could result in price reductions throughout the spring and summer months.

These sellers have fewer chances to capture buyers after Labor Day. By October, you are likely to find desperate sellers and prices below a home’s market value.

2. Fewer buyers are competing

Families who want to be in a new home by the beginning of the school season are no longer shopping at this point. That translates into less competition and more opportunities for buyers.

You’ll likely notice fewer buyers at open houses, which could signal a great opportunity to make an offer.

3. Sellers want to close by the end of the year

While a home is where an owner lives and makes memories, it is also an investment — one with tax consequences.

A home seller may want to take advantage of a gain or loss during this tax year, so you might find homeowners looking to make deals so they can close before December 31.

Ask why the seller is selling, and look for listings that offer incentives to close before the end of the year.

4. The holidays motivate sellers

As the holidays approach, sellers are eager to close so they can move on to planning their parties and events.

If a home has not sold by November, the seller is likely motivated to be done with the disruptions caused by listing a home for sale.

5. Harsher weather shows more flaws

The dreary fall and winter months tend to reveal flaws, making them a great time to see a home’s true colors.

It’s better to see the home’s flaws before making the offer, instead of being surprised months after you close. In fact, the best time to do a property inspection is in the rain and snow, because any major issues are more likely to be exposed.

Top photo from Shutterstock.

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Originally published October 2015.



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Buying a Home? Plan for These Hidden Costs


Get those rainy day funds in order — you’re going to need them.

You’re excited because you just found the perfect home. The neighborhood is great, the house is charming and the price is right.

But the asking price is just the beginning. Be prepared for additional — and often unexpected — home-buying costs that can catch buyers unaware and quickly leave you underwater on your new home.

Expect the unexpected

For almost every person who buys a home, the spending doesn’t stop with the down payment. Homeowners insurance and closing costs, like appraisal and lender fees, are typically easy to plan for because they’re lumped into the home-buying process, but most costs beyond those vary.

The previous owners of your home are the biggest factor affecting your move-in costs. If they take the refrigerator when they move out, you’ll have to buy one to replace it. The same goes for any large appliance.

And while these may seem like a small purchase compared to buying a home, appliances quickly add up — especially if you just spent most of your cash on a down payment.

You’ll also be on the hook for any immediate improvements the home needs, unless you negotiate them as part of your home purchase agreement.

Unfortunately, these costs are the least hidden of those you may encounter.

When purchasing a home, definitely hire a home inspector (this costs money too!) to ensure the home isn’t going to collapse the next time it rains. Inspectors look for bad electrical wiring, weak foundations, wood rot and other hidden problems you may not find on your own.

Worse still, these problems are rarely covered by home insurance. If an inspector discovers a serious problem, you’ll then have to decide if you still want to purchase the home. Either way, you’ll be out the cost of hiring the inspector.

Consider the creature comforts

Another cost is your own comfort. There are a number of smaller considerations you may not think about until after you move in.

Are you used to having cable? If so, is your new home wired for cable? It’s much harder to watch a technician crawling around punching holes in your walls when you own those walls.

And if you’re moving from the world of renting to the world of homeownership, you’ll probably be faced with much higher utility bills. Further, you could find yourself paying for utilities once covered by a landlord, like water and garbage pickup.

Plan ahead

The best way to prepare for the unknown and unexpected is through research and planning. This starts with budgeting before house hunting and throughout your search.

Look at homes in your budget that need improvements, and then research how much those improvements could cost. Nothing is worse than buying a home thinking you can fix the yard for a few hundred dollars and then realizing it will cost thousands.

There’s really no limit to how prepared you can be. Say you find a nice home that’s priced lower than others in the area because of its age. You may save money on the list price, but with an older house, you could be slapped with a much higher home insurance payment, making the house more expensive in the long run.

This is where preparation comes in. Research home insurance and property prices in the areas you’re considering to make more educated decisions before you ever make that first offer.

Clearly define how much you intend to put toward your down payment, and then look at how much cash that leaves for improvements and minor costs, like changing the locks. That way, when you find a house at the high end of your range, you’ll know to walk away if it requires a new washer and dryer or HVAC system upgrade.

Establish a rough estimate for as many costs as you can think of, and be extremely critical of homes at the top of your budget — otherwise, you could easily end up being house-poor.

Know your budget and plan ahead. Buying a home is a lot less scary when you know what you’re getting into.

Top featured photo from Offset.

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Originally published August 2016.



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How to Actually Afford to Buy A Home in America


Home buying hurdles exist — but research, creativity and flexibility will help you clear them.

Home buyers today face tough challenges — housing prices have soared, a dollar doesn’t go as far as it once did and rent is more expensive than the past.

How are people today making such a large purchase despite these hurdles? With more flexibility and a bit of financing creativity, today’s buyers are finding ways to achieve homeownership.

Know your options (and credit score)

The first step to knowing if you can afford a home is figuring out what financing options are available to you, including what mortgages you’re eligible for and how much you need (and can afford) to put down upfront.

Learning the minimum FICO score required by lenders and understanding your own credit score are important starting points.

Many home shoppers aren’t sure how much they have to put down on a home, what the lender-required minimum down payment will be (it’s not always 20%), or what programs are available to help with down payments, like FHA loans.

Before buyers even start thinking about saving for a home, they should know what their financial resources are and if they’re eligible to buy.

Make enough money to save

With fewer resources to pull from than their older, wealthier counterparts, renters wanting to buy face tough financial headwinds.

According to the Zillow Group Consumer Housing Trends Report 2019, renter households typically earn a median income of $37,500 annually, which is nearly $40,000 less than the median household income netted by households who recently bought a home (of whom the median household income is $75,000 annually).

While there are ways to enter into homeownership without making $75,000 in household income, it’s hard to afford to buy if you make significantly less. “If you’re making $37,500 per year, it’s probably not feasible for you to buy in almost any market,” says Zillow Chief Economist Dr. Svenja Gudell.

While households purchasing homes are more likely to have two incomes than renter households (and thus a higher median household income combined), even two-income households struggle to afford to buy in competitive markets.

Save enough cash (but not as much as you think)

One of the most daunting parts of home buying? The down payment. In fact, two-thirds of renters cite saving for a down payment as the biggest hurdle to buying a home, according to the Zillow Housing Aspirations Report.

For people buying the national median home valued at $229,000, with the traditional 20% down payment, that’s $45,800 upfront — just to move in.

“The down payment remains a hurdle for a lot of people,” says Gudell. “But they should know they don’t have to put 20% down.”

Although putting down less than 20% means additional considerations, such as the cost for private mortgage insurance (PMI), some find it worth the hassle. In fact, according to the Zillow Group Consumer Housing Trends Report 2019, only one-fifth of recent buyers (20%) put 20% down, and just over half of buyers (56%) put less than the traditional 20% down.

Buyers are also getting creative about piecing together a down payment from multiple sources. According to the report findings, 34% of buyers who get a mortgage also get help in the form of gifts or loans from friends and family to come up with a down payment. 

Know your deal breakers, but be flexible

To get into a home — even if it’s not the home of their dreams — some of today’s buyers are considering homes and locations outside of their initial wish list and getting increasingly flexible when it comes to neighborhood, house condition and even home type.

“I do think people get discouraged when they look in their target neighborhood and they see homes around $170,000 when they’re looking for a $110,000 home,” Gudell says.

Affordably priced homes do, in fact, exist. But in popular areas, where people most often want to live, it’s going to be harder to find that cheaper home, Gudell says.

“If you’re willing to take a longer commute and make a couple trade-offs, you might be able to find a home that is farther out that might be cheaper,” Gudell explains. “You have to leave the paved path before you can find cheaper choices.”

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