A Broker who decides to make investments with earnest money deposits that become profitable
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ON THIS PAGE Jump to Open page navigation Before you start the hunt for your dream home, there are a few things to do to prepare. Learning how to buy a house and how much house you can afford will put you in a better position to quickly make a stand-out offer once you find “the one.” What to do before making an offer on a house
Submitting an offer on a houseOnce you’ve decided to buy a home and found one that you love, it’s time to get down to business. Writing an offer that gets a seller’s attention is about standing out from other buyers. Here are the steps you’ll need to take to prepare and submit your offer. Step 1: Review comparable listings with a real estate agentWork with your real estate agent to evaluate comparable local listings, aka comps, to determine the right amount to offer. A good rule of thumb is that the more competitive the market, the closer to the asking price you should bid. Step 2: Know how to time your offerThe housing market is extremely competitive in most areas right now, so for many buyers, getting an offer accepted and into contract quickly is key. If a listing has been on the market for a while and isn’t moving, however, you might have a little more leeway to drive a hard bargain. Step 3: If you can, offer cashOffer cash if you can. Not having a mortgage will make the sale much more efficient for you and the seller. Oftentimes, sellers will accept a lower all-cash offer than a higher financed one because they figure it’ll streamline the transaction, and make it more of a sure thing. Putting an offer on a house: What’s included?A formal, written offer includes more than just the price you’re willing to pay for the property you’re hoping to buy. Here are some of the other items a home offer should include, or at least allude to (some will be spelled out in detail in the contract):
What happens after you submit an offer?This is probably the most tense part of the process. Be patient while the seller reviews your offerWait for a response from the seller. It’s the worst, but obviously necessary. Don’t let yourself get too anxious during the waiting game. If declined or countered, consider a counter-offerIf the seller declines or issues a counter-offer and you still want to buy the home, come up with a more attractive offer and resubmit. It’s important to make sure you can still comfortably afford your counteroffer. If the seller wants more than you can reasonably pay, you need to be ready to continue your home search. The same advice applies if you find yourself in a bidding war. In this competitive market, it’s normal for multiple buyers to compete over the same house. It can be intense, but be sure to keep your cool and not blow your budget. If it’s your dream home, avoid the deal-breakersEven if the seller accepts your offer, it ain’t over until it’s in writing — specifically, in a purchase and sales agreement, a contract that makes the deal legally binding. To ensure you get to this step, avoid the big deal-breakers. Common ones can include asking for too many contingencies, asking the sale to include personal property items, demanding a really fast closing date, and other potential turn-offs to sellers. Work with your real estate agent to craft a contract that shows you’re willing to compromise. If accepted, begin the homebuying processIf the offer is accepted, and the purchase and sale agreement is signed by all parties, you’re ready to move on to the other steps in the homebuying process (finalizing financing and getting a home inspection, for example). How to back out of an offerIf you start having second thoughts or regrets about your home purchase — aka buyer’s remorse — and want to back out of the deal, what to do? If the offer’s just been verbally accepted by the seller, it’s not that big a deal to rescind it. But if it’s been formalized in a signed purchase and sales agreement, things can get complicated. “Most real estate offers are binding once the seller accepts, signs and the contract is fully executed,” Hertzberg says. “We draft offers with inspection periods which allow for due diligence and the buyer may have options to potentially cancel the contract depending on the terms.” A buyer should speak to a lawyer for situation-specific clarity on contract questions. Generally, once earnest money has been exchanged, you risk losing that deposit if you back out. “There are a few opportunities during the buying process when a contract can terminate and the buyer is not penalized,” Moynihan says, such as “if you have an inspection contingency and something comes up in the inspection that can’t be resolved between buyers and sellers; if you have an appraisal contingency and the appraisal comes back short on the home’s value; or if you have a financing contingency and the bank can’t get your loan approved.” Making the best possible offer to get your dream homeIf you’ve found your dream home, you should do everything you can to make your offer stand out, like making your highest offer first, putting as much down as possible, and forsaking any contingencies or conditions you feel comfortable leaving out. Offering over the asking price may be necessary, but this is where working with an experienced real estate agent pays off. They will know the current heat of your local market and have expert insight on what it takes to submit a winning offer. Should you ever make an offer under the asking price?In a highly competitive local housing market, offering under the asking price can mean a quick loss of the property. Sellers are often receiving many offers, including bids over their asking price. Still, don’t go against the grain. “I advise my clients to make an offer they feel good about, and that can sometimes mean offering under asking prices,” says Casey Moynihan, a Realtor and broker based in Nashville, Tennessee. “In situations when my buyer is questioning the value, we look at a few things, including days on the market, if the house is currently occupied, neighborhood comps and if there are multiple offers on the property.” Work with your real estate agent to assess the market at the time you’re making an offer. If you’re willing to take a chance, offering under the asking price can be a good way to save money and stick to your budget. Next steps in making offers on a houseOnce your offer is accepted, and the contract signed, it’s time to get ready for the closing. It usually takes one to two months between your offer being accepted and actually finalizing the transaction and completed purchase agreement. At the closing, you’ll sign a mountain of paperwork and write a bunch of checks to your mortgage lender (if you have one), lawyers, municipalities, appraisers, title insurers; for a complete rundown, read Bankrate’s guide to closing. And, last but not least: a check to the seller. They’ll respond not in kind, but with keys. And you will take possession of your new home. Who pays earnest money?Typically, you pay earnest money to an escrow account or trust under a third-party like a legal firm, real estate broker or title company.
Who keeps earnest money deposit?Earnest money protects the seller if the buyer backs out. It's typically around 1 – 3% of the sale price and is held in an escrow account until the deal is complete. The exact amount depends on what's customary in your market.
When must a broker deposit earnest money?Q: When does an EMD have to be deposited? Within five days — the deposit must occur within five business banking days following ratification unless otherwise agreed to in writing by the parties.
Who delivers earnest money?The option money is delivered to the seller or their broker, and they're both assumed to be available seven days a week. The earnest money is delivered to the escrow agent, and most title companies aren't open on weekends or legal holidays.
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