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So you have an accepted offer.  Either on the home you’re selling, or the home you’re buying.  You’re almost done, but don’t be surprised with a few surprises.

Although the hardest part is over, here are a few things that may come up.  It’s better to be ready for them than it is to be surprised by them:

Problems SELLER may have with BUYER:

• Loan falls through
• Changes in credit report from time of application to time of closing
• Buyer loses their job
• Gift donor for down-payment changes their mind
• Interest rates increase and buyer hasn’t locked-in yet
• Buyer switches jobs while in escrow
• Family members influence change of mind/heart of the buyer’s decision
•  Buyer spends their down-payment before closing (dumb I know, but it’s happened)

Problems BUYER may have with the SELLER:

• Sellers lose motivation to sell (no longer transferring, reconciles marriage)
• Cannot find a suitable replacement property
• Will not allow inspectors or appraisers in home (usually due to grumpy-ness)
• Removes items from the property that the buyer thought was staying
• Unable to clear liens or tax assessments on the property
• Did not complete repairs asked for during the negotiations
• Sellers home goes into foreclosure during escrow
• Final inspection on home does not meet buyer’s satisfaction
• Seller does not show up to closing

*Keep in mind that most of these will not happen to you.  Also keep in mind that they are on this list because they have happened before.

Never Fear, FHA 203K is here!

Did you find that “fixer-upper” but not really know how to “fix” things up?

Highlights of the Program:

• Get a government loan that covers the purchase price of the home as well as extra money for the hired contractors to “fix-er up”
• Can be used to purchase a new home, or refinancing and update your current one
• Rates are higher than traditional FHA loans or conventional loans (4.75% as of 1/10/11) but still historically good.  Typically, plan on .5% to .75% increase on the interest rate for this loan
• Require licensed and insured contractors, so you know the work will get done right
• Allows you to move into a nice home for a good price.  Rather than a crappy home for a good price.

For more information on this loan, go to the source directly. CLICK HERE

Minneapolis StarTribune Reports:

According to Jim Buchta of the Minneapolis Star Tribune, and licensed real estate agents across the Twin Cities, multiple offers are happening more often than you may think.

Finally!  An article in the local media that portrays a positive outlook on the residential real estate market. Yesterday, the story broke that more and more homes are going into multiple offers.  Especially in the price ranges under $300k.

I have been telling my prospective buyer clients for over a year that they need to be prepared for a situation where they might pay close to, or more than asking price for a home.  More often than not, if you like it, someone else likes it too.  This leads to a bidding war.  Seller’s dream!

Most buyers in this market think they have two things:  Time to decide, and tons of homes to pick from.  In some cases, they do.  But in my experience, there are more buyers out there and less desirable homes than you think.  One third of all homes on the market are bank-owned right now.  Although they are typically the best price, they are often times a project that not too many buyers want or have the experience to deal with.  So take one third of the market away and you have a pretty normal supply.

So what can you do to avoid this issue?

If you are at the point that you’re looking at homes with your real estate agent (why aren’t you using me?!), then you better be ready to write an offer.  The first mistake buyers make is going out “just to look.”  Well, sure enough with the deals out there, you are going to find at least one home that you “want.”  If you’re not ready, i.e. you haven’t been pre-approved, then kiss that home goodbye.  The best houses don’t last.  Or, “the good one’s sell,” you’ll hear many-a-realtor say.

Also, if you are 100% ready to make an offer when you find the right home, MAKE THE OFFER!  Just because you write an offer doesn’t mean you’re going to end up living in that house.  You still have to get through the inspection, appraisal, mortgage underwriting, and a number of other steps.  But, and it’s a BIG “but,” you can’t start the process of buying the home unless you get pen on the paper and write an offer.  There is an old saying in real estate that I have found to be true for some buyers enough times to make me cry; “While you’re sleeping on it, someone else will be sleeping in it.”  Meaning, while you’re thinking about it, someone else started thinking about it two days ago and now they beat you.

So, be prepared for multiple offers when you get into the buying-game.  It could happen to you.  Especially if you fall in love with the best house on the block.  Despite what you might think and what the media is telling you, you’re not the only buyer out there.

What is the true value of a pre-approval letter?

A lot of people make a blunder in their home search by first finding homes that they truly like, and then seeing if they can afford it.  However, the best way and most correct way to start your home buying process is to determine how much you can afford.  How do you do that? —–You have to start by selecting and meeting with a loan officer to go through the pre-approval process.

A pre-approval letter is worth its weight in gold.  When you first meet or speak with a loan officer, they will review your income and assets and weigh that against your monthly obligations, or debt.  This, along with your credit score found by using your social security number will give you great insight into what you can afford in a home.

When you start shopping for a home, understanding what you can afford sets you up for a smooth experience and a high level of success.  It helps not only you focus on what you should be looking at, but helps your real estate agent look for homes that will give you the biggest bang for your buck.

Pre-qualification vs. Pre-approval

Although they sound similar, these two terms are very different.  Although a pre-qualification letter can be important and used as leverage, it is the “light” version of the two.  A pre-qualification looks at basic information and a lender can pre-qualify you based on the fact that you are telling the truth on your mortgage application.  Basically, when you are pre-qualified, the lender is saying that in his or her best estimate, the transaction would “most likely” close with the information you provided them with.

A pre-approval goes much deeper.  It is the more solid choice for a seller to negotiate with because this states that the lender has verified debt and income rations with banks and collectors.  They also have documents that support your claim of assets and liquid money.  Think of a pre-qualification as a “best educated guess” of what you can afford and a pre-approval as you should most definitely get approved for the loan pending no mis-fortunes such as the loss of a job.

The Bottom Line

In a real estate market like the one we are currently in, sellers are weary to sign a purchase agreement with a buyer that isn’t pre-approved.  Years ago, when lending standards were much more lenient, seller’s would not be nearly as hesitant to do so.  With a pre-approval letter, a seller can have confidence that an offer you make is one they feel good about.  It’s peace of mind and it’s hard to put a price-tag on that.

*Tip from the pros: Never submit a pre-approval letter with an offer that has a dollar amount on it.  Instead, have your lender write something like “Mr. and Mrs. buyer are approved to purchase 1234 Maple St.”  This way, the seller doesn’t know how much room you have to negotiate upwards, but they do know you are pre-approved to buy their home.