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My Offer is accepted

What Happens After Your Offer is Accepted

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You’ve found the right home at the right price. You submitted an offer, and it has been accepted. Now you are “under contract.” What happens next? Your agent that helped you win the home will manage the timeframe for performing the inspections and contingencies to help complete the purchase or advise you the cancel the purchase offer shpi;d there be any deal breakers. Here are the major items in the process from “contract to close” for a successful purchase.

1. Follow up with your lender if purchasing with a loan

Hopefully your lender already knows the offer has been accepted. However, you need to sync up with your lender and make sure the loan contingencies can be completed by the contract timeframe (typically 21 days after an accepted offer for the loan contingency in California). A conversation with your lender should get the ball rolling and make sure any documentation needed for approving your loan is being worked on. The home appraisal is one of the pieces the bank will need for the loan approval. A home appraisal helps determine how much your home is worth. The appraiser is typically chosen by your lender and scheduled by the lender.

2. Get the earnest money to the escrow company, review disclosures/reports

Your agent should be making sure the “earnest money” or deposit is given to the escrow company within 3 days in California after the offer is accepted. Your agent should also be working with the listing agent to get all the disclosures and reports available for the property. The disclosures and reports are key to helping you determine the condition of the home you are buying and useful for helping you further investigate any issues with your future home.

3. Schedule the home inspection

Inspections are highly recommended to help find any underlying issues that may affect the value of your home and how much work it needs. Even if you have a pre sales inspections including the home inspection, you should make time to review the report on the property with your agent.

4. Get Quotes and purchase home insurance

You are required by law to get home insurance when you purchase a home. Escrow will need to have proof of insurance prior to the close of escrow. Don’t let this be a last minute item, if you do it now you will be able to shop around to find the best deals.

Pro Tip: Bundling your home, auto, and other insurance can save you money.

5. Follow up/purchase a home warranty

Home warranties help protect you if large ticket items—like appliances—fail after you have bought the home. If you purchase a home warranty plan before closing, it will be included in your closing costs. Sometimes, the seller will purchase a home warranty plan for the buyer.

6. Completing the purchase

At this point, you will be roughly 14-21 days since you accepted the offer. You should have: be approved for you loan, have a home appraisal, completed any inspections, reviewed disclosures and reports, requested any repairs, and should be ready to either complete the purchase or cancel the contract. Let’s assume everything is a go and you are ready to complete the purchase. You should be working on your move to the new home. In parallel to your actual move, the real estate professionals will be working hard to get the purchase closed. You typically will see the following happening: The seller will usually ask for a release of all contingencies, and your lender will get the loan documents into escrow for signing. The seller will be signing documents to transfer the home to you. You will be signing all documents you need to transfer and purchase the home to you, bring the rest of funds and depositing into escrow that are needed to close. Once everything is done, correct and reviewed by the Escrow company for seller and buyer, the house will released for recording and transferred to you as the new owner by the escrow and title company

7. After closing

You should be transferring utilities as soon as possible into your name for the new home. Security is a big concern so you should be rekeying the home and looking ar home security and automation options as well. This is also a good time to find contractors for any work you may need or want. Hiring a maid service, pool service, and lawn service is also done after you move.

Pro Tip: Ask the Seller who they use to work on the house while they owned it. It’s often a good idea to retain the home pros that worked on the home and learn more about how and what maintenance is being done. The listing agent is often a good resource to ask if you are looking for recommendations as well.

Hot home sellers market

Selling Your Home in a Hot Market

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Right now, the real estate market in the area for sellers has never been stronger. Low inventory and super low interest rates for mortgages for buyers is driving prices higher. Sellers may think that a “hot” market means more money for their home. In many instances, a hot market does indeed mean a faster sale at or above asking price. However, there are some pitfalls that a seller in a hot market needs to be aware of before putting their home on the market.

A Clean and Well Maintain Home Sells For More

Your home if selling in a hot market will always do better when it shows well. Getting the home ready and cleaned for the market matters. If you want to attract multiple offers on your property right after listing it, prepping and a deep clean is probably the best way to make that happen. In a hot market, buyers need to move quickly and are driven by first impressions and emotions. There is no better way to make someone fall in love with your house than to make it shine.

Your home doesn’t have to be perfect in a hot market. One of the “lucky” aspects of a hot market is that outdated or quirky homes sell more quickly than they otherwise would. However, it doesn’t mean more money, it just means buyers become more willing to overlook cosmetic or dated homes and may even be more willing to accept pricey fixes such as an old roof or leaky windows. Seller’s should be aware that buyers often are pushing the limits of the budget they have for home. Pre-sale inspections can go a long way to help buyers see the quality and condition of your home as well as not get surprised after they get into contract.

Sell Better with Inspections and Reports for Buyers

If you as the seller appear completely prepared to sell, a buyer will feel more confident making a quick-closing offer. There is no reason not to showcase the home in the state and condition that it is. You want to assure buyers there are no surprises after they make an offer. Because properties in a hot market tend to sell quickly and have shorter contract deadlines, you need to be prepared to present all relevant documentation to potential buyers right away. Getting all the inspections done before listing your property so you can present an accurate picture to buyers from the get-go makes sense. Have your disclosure documents all prepared and ready to go before the house goes on the market. 

Be Prepared to Move Quickly

Hot markets see more buyers purchasing with cash or minimal financing than other markets. If you’re lucky, your buyer may not need to be approved for a loan, which would greatly reduce the amount of time your property is under contract. If you decide to accept an all-cash offer, you will likely close in a short amount of time.Before you list in a hot market means more often than not you need to move quickly. Be prepared for this possibility prior to placing your property on the market. You should be searching yourself for a rental or for the replacement home before you list. It may even be wise to have a rental lined up if you do not find another property to buy right away.Be Committed to Selling – It’s Not the Time to Test the Market

Work Closely With Your Agent to be Committed to Selling

Just because the market is hot does not guarantee multiple offers for over asking price. Set reasonable expectations about selling your home.

Every property for sale is different. This is where your agent can really help you understand the market. Sure, you’ve heard about the house down the street that sold in two days for $50,000 over asking. But you do not know all the circumstances surrounding that sale. Perhaps it was just a fluke with the perfect buyers coming in for that house. Perhaps there was something highly unique to that property that made it sell so fast and for so much money.

House prices can differ drastically within neighborhoods. Many criteria that aren’t readily apparent from researching the MLS or past sales might make a property sell for more: a great layout, lots of light, decorator colors, or mature fruit trees are all examples of things that might tip buyers into a frenzy that creates high prices and multiple offers.

Your home might not offer these. Take solace in the fact that you are selling in an up market and are more likely to sell for closer to your asking price than you would in a down market. And, if you happen to be one of the lucky ones who garners more from the sale than you ever imagined, feel free to pop the champagne at closing!

There is no “perfect” offer you should be hoping for to make you sell the home. Price and terms often have dependencies on them which ultimately impact the price. Make sure to have a frank discussion about your motivation and committed to sell with your agent. Buyers are often under the gun for time and that is driving the offer price. Telling the buyer, you need a 3-month rent back for free might help to NOT sell your home. Understand in a hot market time is of the essence. Be sure that you will be present or able to review all offers within a short amount of time after the property is listed.

Pro Tip: Plan on responding to the offers within 24 hours. If you plan to counteroffer, do so in a timely manner. It is not uncommon for the negotiation process to take 24 to 48 hours. I’ve seen where offers are not reviewed until a later date where the seller and agent are hoping for offers and the seller receives no offers. Buyers are well informed in today’s market, the best buyers are on the home search 24/7, if your home is priced right, it will get an offer quickly in a hot market. If you go a week without an offer and your market is hot, you’ve missed the best buyers for your home.

Hot Market Appraisal Issues 

Hot markets often arise quickly and the nature off a hot market causes issues for the appraiser. Home Appraisers may be comparing your property to properties that sold for significantly less a month ago. The appraised value of your home is supposed to be based upon a balanced market where the sale isn’t with few sellers or few buyers. Hot markets cause the value to be higher than it would be in a normal market.

What Happens If My Home Doesn’t Appraise?

If a property doesn’t appraise for the offer price and the home was to be purchased with a loan: The buyer will have a lot of difficulty getting the loan amount they needed for the current offer price. As a seller you may be forced to lower your sales price or seek out buyers who are paying cash and do not need the approval of an appraiser to complete the deal. Most of the time, if a property doesn’t appraise and the seller won’t lower the price, the deal is dead, as the buyer has no other options besides a traditional lender to cover the purchase price.

Pro-tip: Buyers in a hot market, buyers often have no extra available cash other than down payment and closing costs. It’s important that your agent qualify the buyer who makes an offer and verify if they can or have cash available should the home not appraise in a hot market. Think twice about accepting an offer where the lender pre-approval of the buyer is not higher than the purchase price. Make sure the agent calls the lender to discuss the qualifications of the buyer before accepting or countering any offer.

Final Thoughts – Don’t Second Guess Selling in a Hot Market

My advice is be committed to selling and realistic about pricing your home selling quickly, Hot markets are about commitment. Buyers are committed to buying and you should be as well. Here is a helpful checklist if you want to sell in a hot market.

  • Do your research before you sell and explore homes for sale 
    • Look at the market as a buyer – tour open houses and talk to real estate agents to assess the hot market.
    • Contact a real estate agent(s) and get a real price for you home to sell in less than 30 days.
    • Make plans to rent or to buy quickly so you can sell quickly.
    • Commit to making your home ready for sale.
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  • Commit to selling
    • Enter into a listing agreement to sell your home with a price to sell quickly.
    • Get pre-sale inspections, reports, and disclosures.
    • Adjust the price based upon your homes condition to sell quickly
  • Sell the home
    • Respond to offers as they come and quickly
    • Make sure you pick the best buyer who can and will complete the purchase
How to make a winning offer to buy a home

How to Make a Winning Offer to Buy a Home

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We’ve all been there including myself. You see the right home at the right price online. You rush over to the open house, its swamped with buyers. You want the home and want to make a great winning offer. How do you win the home? If you’re buying in 2020, your offer to purchase will likely be up against offers from other just as motivated buyers. Learn ways you can make your offer stand out from and be the one that gets accepted.

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent. 

Ways to make your offer better with a loan

Submit a pre-approval not pre-qualification letter with the offer

This is basic if you are buying a home with a loan. A pre-qualification letter isn’t going to win in a multiple offer situation in fact you might not even get a response from the seller with one. In a seller’s market you need a pre-approval letter and not from an internet lender who sent an email saying you are “pre-approved.” Find a reputable bank and letter to provide you this critical item.

Shorten the time period in the purchase contract for loan and appraisal contingencies

The typical timeframe in the California Residential Purchase agreement is 21 days for this contingencies/conditions to be removed. Buyers can get more than pre-approved for a loan. If you can get fully approved subject only to the bank appraisal and clear title, consider getting a loan commitment letter.

Ask your lender to email and call the listing agent after you make an offer

This simple touch makes a difference and inspires confidence in the seller that you will perform and close the purchase since the lender is good and you as a buyer are solid.

Finance only 80% of the purchase if you can

Not only are you showing the buy you have more money to buy the home, but you can also look and see if your lender will waive the appraisal contingency for the purchase. Waiving the appraisal contingency will help show the seller you are a stronger buyer.

Review any reports, disclosures, and inspections the seller has made available

Get pre-sale inspections, reports, and disclosures if available prior to making an offer

If available these reports can help you streamline what you need to do to purchase the home. You may be able to shorten timelines, pay for items or seller costs, remove contingencies, not pay for your own inspections (accept the seller reports/inspections will save you money). Also makes you a savvy and smart buyer to the seller because you didn’t ask them for an inspection they already paid for.

Make the terms in the offer stand out

Find out when the seller’s preferred date and write it into the offer.

In a competitive situation you want to do all that you can to reasonably address the seller’s preferred terms. Giving the seller their preferred closing date is a great way to tip the scales in your favor. 

Pro Tip: Find out the seller’s preferred date and close 5-10 days early and offer the seller to remain in the home after the close and at no cost. In the end this wins more often than not. The seller isn’t moving until the home is sold, they have the money from the sale, the seller have the time to move out and at no cost.

Make a 1%+ earnest money deposit with your offer

The California residential purchase agreement allows up to 3% of the sales price for a deposit subject to liquidated damages. The typical earnest money check is about 1% of the offer price. Make your offer stand out by submitting a higher than average earnest money amount. Including a check with your offer should be sent as well.

Include proof of funds with your offer

Showing the seller, you have all the money available to purchase the home helps validate you as a strong buyer. You can do this with a letter from your lender saying that proof of funds has been provided or verified or send over a redacted (hide the account numbers) bank statements. More importantly if you are financing over 95% of the home purchase with a loan, showing the seller you have more cash available will help them not discount the seriousness of your offer because of the loan terms.

Waive the appraisal contingency if possible and you are comfortable doing so

If you have an 80% or lower loan amount to the sales price often the lenders can waive the appraisal contingency. Work closely with your lender to see if a waiver is available prior to making an offer. If you waive the appraisal contingency and the bank still requires an appraisal for the loan. If the home doesn’t appraise for the loan you may put your deposit at risk if you don’t complete the purchase.

Consider modifying the appraisal contingency for the loan

If the home doesn’t appraise that you will bring the additional funds to close. This is a risk to the earnest money deposit you made to purchase should you not perform. This strategy should be discussed with your agent.

Don’t make the buyer pay for a home warranty

If you want a home warranty purchase it, if not don’t ask for the seller to provide one anyway. You will learn about the home during your inspections and even if the expense of a warranty makes sense.

Don’t make your offer contingent on the sale of your current home

Instead, work with your lender to get pre-approved for financing which doesn’t require you to sell in order to buy.

Pay for closing costs

Closing costs and other extra fees affect the seller’s bottom line and could cause you to miss out on your dream home. Another option is to increase the offer price to pay for any closing costs. Discuss with your lender if you are buying with a loan if this is allowable.

Add an “escalation clause” or “writing first and countering last” to the offer

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 with this clause. Again, you should really discuss this strategy with your agent

Shorten contingencies if possible

As much as possible, shorten each contingency deadline (financing, inspection, etc.) to the fewest number of days possible. Talk to your buyer agent about an appropriate number of days for each contingency. The type of property you are buying also should be taken into consideration. For ex, a property on acreage with easements, a private road may not be in your best interests to shorten your investigations.

Purchase the home and property “as-is” subject to inspections

If the property doesn’t have any inspection reports or disclosures available before you make an offer this is a risk. However, a diligent effort on your part can establish the condition and quality of the home and if there is deferred maintenance you need to repair. Showing the seller, you will take the home “as-is” and not request repairs with a financial contribution from the seller make you a stronger buyer. Again, this should be discussed with your agent and you should be comfortable making an offer with this condition.

Write a letter to the seller

Sellers want to like the future owner

Create a connection with your sellers by writing a thoughtful letter. For example, if the sellers raised their family in their home, write a letter which explains why their house is perfect for you and your family. Have everyone in your family sign the letter (the kids with crayons), and include a family photo. Most buyers choose not to write a letter, but very often it’s the personal letter that’s the deciding factor in a multiple offer situation. 

Make the first offer

First offers win more often than not

The first offer has the biggest impact to the seller. In general, there is psychology at play here. The seller is always unsure if the house will sell quickly and for full price. Although there may be competing offers the first offer will be the most impactful. It shows commitment since usually the buyer knows the market, see the home as soon as they can, and quickly submits an offer. These are all signs that the Buyer is very committed to completing the purchase and buying the home

Why Your First Offer is Always Your Best Offer

Final Thoughts

Very often it’s not just the price that determines the best offer. Usually it’s about the offer as a whole, the overall tone of the negotiation, and who the seller trusts are the best fit for their home. That’s why it’s so important to work with an experience local buyer’s agent who sets a positive tone during the negotiation while working with you to assemble a great fair offer.  

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent. 

Learn more about the home appraisal

Learn More About the Home Appraisal

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Here is a quick overview of the home appraisal process. Home appraisals are used by banks and buyers to get a real time value of the home and property based upon the recent sales in the area. I’m going to use a question and answer approach for helping you to learn more about this critical part of the home buying and selling process.

Whether you’re buying, selling or refinancing, getting your home appraised is a critical step in the process

How Much Time Will It Take?

An appraisal is performed by an independent third party licensed company. Its is usually ordered by the lender. However, it is not unusual that a cash buyer may want the property appraised to validate the price being paid for the home. The actual time an appraiser spends at the property may be as short as 30 minutes or several hours depending on the home’s size and complexity.

Why Do I Need It?

It assures your lender or the buyer that the money they will loan you is supported by the researched, observable facts about your home.

So it’s like an Home Inspection?

Unlike home inspectors, appraisers don’t check the operation and performance of the major systems of the home. An appraiser will be only looking to verify that the major systems like heating or air conditioning are in the house and seem to be working.

Who does the Appraisal?

Appraisers in California are licensed or certified who must complete a minimum of 200 hours of state regulated classroom education. In addition most have a Bachelor’s degree from an accredited college or university. A California Certified Residential (AR) with have 2,500 hours over 30 months of acceptable appraisal experience. There are 9,987 licensed appraisers in California as of November, 2019

What does the Appraiser look at?

These are the major components of the appraisal.

  • Recent sales of comparable homes
  • Condition of your homes physical features such as age, square footage, lot size, location, and views
  • Observable, exterior condition including cracks, damages, leaks, code violations
  • The observable; interior condition of walls, floors. windows and doors, plumbing and light fixtures.
  • Condition of the lot; landscaping, water features or pool, fencing or gates, driveways, and walkways.

What Can I Do to Boost the Homes Appraisal Value?

  • Make the home show ready. Tidy up inside and out (the appraiser will be taking pictures of the inside and outside of your property. If you have time; patch cracks, paint walls, and mow the lawn.
  • Provide a list of upgrades/improvements you made to the property. Keep the date and costs for any major improvements and upgrades. Receipts help
  • Make the appraiser comfortable: Keep any pets out of the way, make sure the temperature of the home is adjusted, and limit chit chat.
  • If you are selling and the buyer needs an appraisal for their home loan, I recommend have your listing agent attend the appraisal. Have your listing agent bring their home comps and explain to the appraiser the home’s market pricing, mention activity and offers on the home, or answer any questions the appraiser has for the home.

What Can I Do If I’m Not Happy With the Appraisal?

Most lenders review appraisals through a strict system of checks and balances that compares the appraisal report to other appraisals on all known sales in your neighborhood. This internal review system can catch discrepancies that should be investigated, but any information you can provide to your lender will help. More often than not the appraisal for the bank is the final say on the value of the home. The homeowner or buyer more often than not will have to use a different bank to obtain the loan or refinancing they need if the appraisal is enough for the loan they applied for.