The window of opportunity for purchasing a new home in the Garland, Rowlett, and Rockwall areas is prime. Interest rates are now at 19-month all-time lows. However, area listing inventory and sales trends over the last several months make it more important than ever that you have the best negotiating position with your purchase offer. So if you are considering purchasing that dream home in the Garland, Rowlett, and Rockwall areas, following are five considerations in making the right purchase offer:
1. Understand your financing options and then get your loan conditionally approved.
You must include the type of financing you are securing in your offer to the seller. If the loan to finance your purchase is a VA or FHA loan, you will need to recognize the additional financial and performance obligations this places on the seller because of “non-allowable fees.” These are typical loan fees that are charged by lenders and title companies. They are called “non-allowable” because you as the buyer are “not allowed” to pay them. The result is that the seller must pay them instead of you. Since these are fees they would not have to pay with conventional financing, the type of financing must be included in the offer.
To assist your real estate agent in presenting the best offer on your behalf, you should ask your loan officer to provide you with the amount and itemized list of the lender’s non-allowable fees so that this can be considered when making your purchase offer. If you are already working with a professional real estate agent they should also have an idea of what non-allowable fees will be charged to ensure a good offer is presented.
2. Know the difference and the value of real estate appraisals and property inspections.
FHA and VA loans require more stringent guidelines with regards to the appraisal and home inspections. In addition to determining the estimated market value of the property, the appraiser is required to perform certain minimum inspections. These are not as detailed as a professional home inspection, nor are they a substitute.
The value of working with a professional real estate agent is the knowledge that agent brings to helping you have a heads up as much as possible to probable repairs that could be required by the appraiser. A good rule of thumb that an appraiser uses to determine necessary repairs: is it safe, is it sound, and is it sanitary. If it fails that criteria, there will likely be required repairs prior to closing and funding of your mortgage loan. This means there is some artful negotiation between the agents representing both buyer and seller as well as a good idea of what possible repairs and cost could arise so that this is handled in your offer.
3. Understand what the seller can contribute to your closing costs (refer to #1).
If you are using conventional financing, the amount of your down payment will determine the amount of contributions you can have the seller contribute to your closing costs and prepaids (hazard insurance and interest for the month). This typically ranges from three (3%) percent to six (6%) percent of the sales price. Your loan officer should be able to provide this to you. If you do ask for the seller to contribute this amount, you will want to be sure you consider this in the seller’s bottom line.
4. Be aware of the proposed closing date and what it means to the seller and your bottom line.
Your real estate agent will likely have a good idea of what the seller is looking for in regards to the closing date so that this does not become an obstacle to the closing. If the seller has an FHA or VA loan they definitely will want to close and fund by the end of a month to avoid being charged a full month of interest by their current mortgage lender. This should be considered in the offer presented to the seller.
5. Help your real estate agent negotiate effectively — Remember conditional loan approval wins over pre-approved.
If two identical offers are presented to a seller and one offer shows the buyer approved and the other shows pre-approved, the approved buyer wins. It is a great advantage to provide your real estate agent with an approval letter from your lender. The approval letter should only be conditioned based on an acceptable appraisal, verification of funds to close, verification of employment, and clear and acceptable title of the property.
Your real estate agent will be able to walk you through each step of the home-buying process and discuss what choices you are comfortable making. If you are in the market to purchase a new home, today’s market environment in the Garland, Rowlett, and Rockwall areas is very promising and offers many opportunities. I would be glad to help you.