Heroic Team

All too often, it’s the shiny features of a home that catch our eye – the quartz countertops and stainless-steel appliances, the gleaming hardwood floors, and glass-enclosed showers…

Don’t get me wrong, those are certainly desirable features of a new home; however, there is much more to a house than meets the eye. Less exciting things like the HVAC systems, water heaters, plumbing, electrical wiring, roofs, and basements are just a few examples of features that, if damaged and not identified, could end up costing you a fortune early on in your homeownership.

When you submit a contract on a home, it then becomes your responsibility as the purchaser to perform any necessary due diligence to determine the physical condition of the property, in addition to any other potential threats that might affect the property’s value at some point in the future. This concept is known as “buyer beware” when it comes to home buying. The sales contract actually outlines this to make the buyer aware of buyer beware, and also grants the buyer the legal right to access the property with certain inspectors, contractors, appraisers, etc. to perform that critical due diligence on the property.

Some homes need more attention than others. Older homes, homes that have not been properly maintained or were “DIY” updated by the previous owner, or homes that have been rented out for a long period of time are the most likely to require more due diligence on the buyer’s end. Other homes don’t need as much attention, like newer ones, homes that have been recently updated by professional contractors, or homes that have been nicely maintained. Knowing which homes might need more diligence than others is the responsibility of your real estate professional.

At Stello Homes, our home professionals have years of experience identifying these homes. We keep our clients’ best interest in mind – every time. Give us a call if you’re interested in learning more about what we’re doing for our clients.

You cannot void a real estate contract for any reason; it must be done within a section or addendum of the sales contract that allows the buyer to do so. Any execution of a void outside of what the contract allows the buyer to do is considered default. If the buyer defaults on the contract, the seller has the legal right to do two things: 1) either take the buyer to court, force them to perform on the contract (purchase the house), and pay all fees associated, and/or 2) collect the earnest money, which is a deposit put down by the buyer upon execution of the sales contract expressing in good faith that “I will not default on the contract.” These costs are worth thousands of dollars

Most real estate contracts have a number of contingencies to get through. Contingent means dependent. The contract exists and settlement occurs only if certain conditions are met, which are defined in the sales contract and additional addendums. Here is a brief outline of the most popular contingencies:

• Home Inspection Contingency allows the buyer to have a licensed home inspector inspect the home for any existing defects. The buyer normally has a certain period of time to perform this inspection and provide the seller with the results. The buyer is then able to execute a void of contract or, depending on how it is negotiated, the seller may be held responsible for repairs. After the expiration of this contingency, the buyer loses the right to void.
• Financing Contingency provides the buyer with an opportunity to secure financing and get a mortgage for the purchase of the property. If for some reason, the buyer is rejected by a lender and cannot get a mortgage, they have the legal right to void the contract.
• Appraisal Contingency is normally included if the buyer is getting a mortgage. Say you offer $500,000 for your dream home and the seller agrees to that price in the sales contract. You are qualified for a loan of $400,000, which means you are making a 20% ($100,000) down payment and the lender is financing 80% of deal; however, the appraisal determines the market value of the home to be $490,000. The lender is only going to finance 80% of the appraised value! 80% of that $490,000 is $392,000. If the sales price remains at $500,000, and the bank is only giving you $392,000, that means you need to bring $108,000 to the table instead of the $100,000. This contingency says that if this happens, the buyer and seller can renegotiate the contract sales price and if they cannot agree, the buyer has the legal right to void the contract.
• Property Association /Condo Act Document Review allows a purchaser three days from the date and time of receipt to review the resale package of the HOA or condo association they are moving into. It is a legal requirement for all sellers to provide this documentation to buyers. If the seller fails to, or if any of the contents of the package are unsatisfactory to the buyer, they may void the contract. 

The above are the most common contingencies within a real estate sales contract. There are other special contingencies that are used from time to time depending on the specific property. They are used mainly for buyer due diligence, and a good agent will know which ones you need depending on that specific property. A contract with a lot of contingencies is more favorable to a buyer, but sometimes a buyer has to give up some leverage in order to compete for a home if other buyers want it too. That can be OK, especially if that buyer is set up with the proper protections after they purchase their home.

What happens when you walk into a restaurant and, after placing your order, you reach down and realize that you don’t have any money? You’re not going to get your food, right?

Well, the same thing is true for buying a home. Without the money to buy the home, you can’t buy it.

This is why the very first thing that you must do when entering the market to buy a home is to make sure that you have enough money to buy one. Most people don’t have enough cash to buy a home outright, so they get a mortgage loan from a lending institution (bank).

Getting pre-approved to buy a home means having a lending professional review your financial situation. You will be approved for a loan of a certain amount of money based upon your income, debts, expenses, credit score, etc. Once you have been pre-approved by the bank, you then know what your price range is so that you can begin to look for houses that you can actually afford. Online estimate tools are helpful but typically not very accurate.

Getting pre-approved is a requirement for buying a home. In fact, every real estate sales contract is contingent upon the buyer being able to get financing. The pre-approval letter is proof that the buyer will be able to get said financing, and actually perform on the contract (buy the house). If you make an offer that is not attached with a lender prepared pre-approval letter it likely will not even be considered as a legitimate offer. Not getting approved, and, therefore, not being prepared to purchase a home, can cost you a lot of time and prevent you from getting your dream home – it can even end up costing you thousands of dollars.

At Stello Homes, we have partnered with local lenders in order to make the pre-approval process as simple as possible for our clients.

Have you been pre-approved for a loan yet? If not, please let us know and we would love to get in touch with a lender for you.