In real estate, a contingency is a contractual condition which states that certain criteria must be met in order to proceed with the purchase/sale of a property. Others may frame a contingency as “a way out” of a contract. Real estate contracts spell out the “what ifs” pertaining to each contingency, including, but not limited to, specific timeframes, steps which must be completed and by whom, as well as who will be responsible for any payment. Alan Tonnan, author of The Complete Guide to Washington Real Estate Practices, defines a contingency as “a provision placed in a contract which requires the completion of a certain act or the happening of a particular event before a contract is binding” (p. 133).
In competitive markets, contingencies (or the lack thereof) can make a substantial difference in the eyes of the buyer/seller, sometimes making or breaking the deal. In some cases, buyers may elect to waive contingencies in order to make their offer “stronger” or more attractive to the seller. Consider this scenario:
Mrs. Seller receives two offers for her property. Both offers are identical in terms (same purchase price, same closing date, et cetera) with on exception: one offer is contingent upon a home inspection. The other offer has waived the home inspection contingency. If all other aspects and details of the contract are identical, Mrs. Seller is more likely to take the offer which has waived the home inspection. For Mrs. Seller, a contract which lacks a home inspection appears stronger at face-value. A home inspection may reveal problems that the buyer may ask Mrs. Seller to remedy — or, at the very least, an inspection could allow a buyer time to reconsider their intention of purchasing the property from Mrs. Seller and provide a legal avenue for the buyer to exit the sale’s agreement unscathed. If a buyer legally rescinds upon sale’s agreement vis-à-vis a home inspection contingency, Mrs. Seller will have lost valuable time and may have possibly lost the other buyer. This will force Mrs. Seller to start the whole process over again.
A contingency is a condition which must be met in order to proceed with the contract as it is written; it is a stipulation or requirement which must be achieved or realized. Buyers may want to insulate themselves with contingencies as they provide viable legal avenues to depart from the sale’s agreement. Sellers, on the other hand, may prefer fewer contingencies as each elected contingency has the hypothetical potential of obstructing a sale’s agreement from closing. Any buyer that waives a contingency should consult legal counsel before proceeding. Waiving a contingency inherently exposes the buyer to potential risk should something go awry (even at no fault of the buyer).
Contingencies protect all involved parties; contingencies help buyers and sellers minimize risk. Contingencies should be clearly written and unambiguous. Both the buyer and seller should clearly understand the pros and cons of electing/waiving each respective contingency. The details of the sales agreement are extremely important, and buyers/sellers should work in concert with competent real estate professionals, tax advisors, attorneys when it comes to handling the purchase/sale of real estate, especially in regard to contingencies.
REO (Real Estate Owned) properties are properties owned or managed by a lender, bank or government agency. These properties are sold as-is, where is. Cash is the preferred option for purchase. The utilities in REO properties are often disconnected. This means that any inspections that require the electric, water, sewage, etc. are at the sole cost of the prospective buyer (i.e. turn on the electric, gas, etc. in order to inspect the working function). In truth, REO properties are not for everyone but they can be the right property for you, under the right circumstances.
Before you even visit an REO property, it is imperative to have your financing in order. This means that you need to be preapproved from a bank or obtain a letter from a bank demonstrating your liquid assets (this can be several letters from several different banks; i.e. $30,000 from Bank A and $43,500 from Bank B demonstrating a combined liquidity of $73,500). In order to submit an offer, banks require a preapproval letter or proof of funds letter(s) as mentioned above. Before anything else – get your financing in order, but do not hesitate to contact a real estate broker if you need help in getting preapproved; or, even to ask questions.
A real estate broker can also provide you with useful guidance and serve as a valuable resource with respect to the REO process. Since REO transactions are a specialized form of real estate, a diligent and prudent buyer will enlist the help of a qualified real estate professional. Each situation and each property is different; as is, each client and each real estate broker. It is important to utilize a real estate broker that has experience and expertise with respect to REO properties.
Bottom-line: a qualified real estate broker can greatly assist buyers in the REO process. Find a qualified real estate broker who will help you get preapproved and understands REO real estate. This could be the start of something great!
Often time in real estate, I encounter property that falls outside of my area of expertise. Sure, I could probably talk my way around the problem and attempt to help someone out – but this is putting my interests above the client’s, while at the same time, dramatically increasing my liability and chances of error. This is doing the very opposite of fiduciary duty. If I encounter a property in which I lack the relevant expertise, I refer my client to another more qualified real estate professional with germane experience specific to the individual property or situation.
I am constantly trying to build relationships with other qualified real estate professionals (residential, commercial, property management, condo-specialists), and experts that often are included in the real estate process (inspectors, lenders, builders, etc.). Some agents – generally residential real estate agents – do not like building relationships with so-called ‘rival’ agents, but this is a very short-sighted approach. As a real estate professional, I want as many solid relationships with true experts and professionals within the real estate field. When I encounter a problem, I want to know who to call – and, to even take it one-step further, whose advice and counsel I should pay careful attention.
By practicing referral real estate, real estate professionals both limit their legal liability and truly function as a fiduciary. All consumers of real estate should verify that their agent is qualified to assist in the real estate process of each specific type of property. Referral real estate is an under-used option in the transaction process which should be practiced by every agent on a property-to-property basis.
When it comes to commercial real estate, it is important to understand that not every real estate broker is equally qualified — even though said brokers may have the same real estate license on paper. Commercial real estate is a different beast than residential real estate.
Credit scores fall within the following range: 200-800. Scores above 620 are considered desirable for obtaining a mortgage. It is possible to get a mortgage with a lower credit score, though generally these loans are far less favorable to the buyer. I have listed five factors which will affect your score.
- Payment history — whether you paid credit card or loan obligations on time.
- Debt. The amount of debt and the number of accounts the debt is under are key contributing factors.
- The length of your credit history. As a rule of thumb, the longer the better.
- How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly.
- The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example.
For more on evaluating and understanding your credit score, go to http://www.myfico.com .
- Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.
- Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income.
- Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.
- Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.
- Save for a downpayment. Although it’s possible to get a mortgage with only 5 percent down—or even less in some cases—you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.
- Create a house fund. Don’t just plan on saving whatever’s left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.
- Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.
- Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.
Below I have listed some ways to boost the possibility of selling your property on your own and without an agent. I truly wish you luck!
Place an ad in your local newspaper and online. Always include the area of town, the price, number of bedrooms and bathrooms; these are the most important considerations for a buyer. Also consider placing ads in other local publications: Area Shopper, Craigslist, Meadville Tribune, etc.
Know your property. This means know and understand your property taxes, zoning, lot size, square footage, and amenities.
Design a flyer or brochure for your property. A photo and description of the property is the very important. People love to have something they can look at that contains crucial details like tax amounts, bedroom sizes, school district, acreage, etc. Basically, include anything that sets your property apart from other properties.
Consider having an appraisal. This will help determine the current market value of your property. Buyers typically will offer less than you are asking because they know a savings of the commission is often built into the price. You are trying to save the commission and so are they.
Research property laws in your area. Disclosure laws, Restrictive Covenants, Eminent Domain, Zoning Restrictions, etc.
Do you have a recognizable and attractive For Sale by Owner Sign? If not, get one! You might also want to invest in directional arrows and an info box for people who are just driving buy. I have found that many people are too timid to come knock on your door or call you if they do not know details about the property.
When showing the house make sure all lights are turned on. A bright house is more attractive than a gloomy house. Open your blinds as well.
Think about what you’re asking price and final price will be. Buyers want to negotiate. Think about it: no one wants to pay full price, so do expect offers.
Request a Pre-Approval letter. No offer makes sense unless the buyer has the economic resources to purchase your house at the price you negotiated. Put extra care in financing contingencies related to the Purchase and Sales contract.
Please feel free to contact me if you have any questions about any of the aforementioned topics. I wish you the best of luck on selling your property on your own, but if you ever would like a real estate professional to help out, I hope you will remember to contact me.
Make improvements if they make sense, but don’t over improve. You know those little things you’ve been putting off? Well, it’s time to get them done. You’ve seen the statistics about how much money you’ll get back on improvements, but as often as not those numbers are a tad inflated. Remember, prospective buyers have their own tastes and may not share yours. Specifically, you want to address all the senses of the prospective buyer including touch and hearing. The only sense you probably won’t worry about is taste. No one is likely to lick your house. If doors or floor boards squeak, take care of the noise. Rule of thumb: If it doesn’t need done – don’t do it.
Clean and stage your home inside. Do what you must to clear your home of the really personal “you-ness” and set a stage for the buyer to imagine how it would be for them to live in. This may repainting with neutral colors like ivory, grey, and beige; possibly even sagey greens or caramelly browns. Try to strip each room down to its bare necessities because buyers need to experience the benefits of the space. Emphasize light, space, coziness, character, and those special features that each room has.
Assemble home documentation. Anything concerning home improvements or appliances you intend to leave should be assembled into a notebook or folder so you can answer questions quickly. It’s another great sales tool for showing that you have consistently maintained your home.
Work on curb appeal. Curb appeal is that special look that attracts the second glance and makes the buyer want to come in. The yard should be tidy with flowers deadheaded and lawns mowed. Trees should look lush and healthy and shrubs should be neatly shaped. The front entry should be welcoming and obvious. The buyer should know where to go. Window boxes and planters should be freshly planted with healthy flowers to attract the eye. Curtains or window treatments should look good from the street.
Price fairly. Because you are selling your home yourself, you can price your home at the current appraised value. To ensure a quick sale, the value needs to stand out compared with other area homes that are similar. Use grocery store marketing too. Instead of pricing your home at $100,000, list it at $98,900. Compared with other similar homes in your immediate neighborhood listing at $101,000, the buyer is going to perceive that difference as much larger than it is in reality.
Here are nine ways that many people overlook when marketing real estate. These 10 tips hold true for property types of all price-ranges. Buyers today are looking for reasons NOT to buy your property. The real estate market is fierce and competitive — so, as a seller, it is your duty to do everything in your power to help your property sell.
- Get rid of clutter. Throw out or file stacks of newspapers and magazines. Pack away most of your small decorative items. Store out-of-season clothing to make closets seem roomier. Clean out the garage
- Wash and clean. Wash your windows and screens to let more light into the interior. Keep everything extra clean. Wash fingerprints from light switch plates. Mop and wax floors. Clean the stove and refrigerator. A clean house makes a better first impression and convinces buyers that the home has been well cared for.
- Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows.
- Lighting. Put higher wattage bulbs in light sockets to make rooms seem brighter, especially basements and other dark rooms. Replace any burnt-out bulbs. Open blinds for natural light to come in. Show the house on a sunny afternoon day.
- Make minor repairs that can create a bad impression. Small problems, such as sticky doors, torn screens, cracked caulking, or a dripping faucet, may seem trivial, but they’ll give buyers the impression that the house isn’t well maintained.
- Tidy your yard. Cut the grass, rake the leaves, trim the bushes, and edge the walks. Put a pot or two of bright flowers near the entryway.
- Driveway. The first thing people see or use when entering your residence. Patch holes in your driveway and reapply sealant, if applicable.
- Clean your gutters. It is never a positive feature when growth is coming from your gutters. Make sure you have no trees or shrubs sprouting from your gutters. Also make sure the gutters are adequately connected and in good, working condition.
- Polish the finer details. Make the little things stand out. Polish your front doorknob and door numbers. Enable the small things of your property to glisten and shine.
These five tips are imperative to consider when selling property. If your property is lingering on an active market, chances are that one of the listed tips could really make a difference. In truth, all sales hinge upon the first step listed below. Accurately pricing your property is extremely important because the initial activity and interest on a property is most robust at the beginning. If a property sits on a market too long, it may become hackneyed and shelf-worn to potential buyers; they may assume something is wrong with the property. This is escpecially important in an active market, like the Tacoma-Pierce County Area.
- Price it right. Set a price at the lower end of your property’s realistic price range.
- Prep! Get your house market-ready for at least two weeks before you begin showing it.
- Be flexible about showings. It’s often disruptive to have a house ready to show on the spur of the moment, but the more often someone can see your home, the sooner you’ll find a seller.
- Be ready for the offers. Decide in advance what price and terms you’ll find acceptable.
- Don’t refuse to drop the price. If your home has been advertised for more than 30 days without an offer, be prepared to lower your asking price. If you think your price is fair, you need to get it more exposure. Remember there is a reason you have not received an offer.
Let me put it this way: if your property is priced accurately, it will sell.