As unfortunate as it can be when homeowners fall behind on mortgage payments and must face the possibility of losing their homes, short sales and foreclosures provide them options for moving on financially. The terms are often used interchangeably, but they’re actually quite different, with varying timelines and financial impact on the homeowner. Here’s a brief overview.
A short sale comes into play when a homeowner needs to sell their home but the home is worth less than the remaining balance that they owe. The lender can allow the homeowner to sell the home for less than the amount owed, freeing the homeowner from the financial predicament.
On the buyer side, short sales typically take three to four months to complete and many of the closing and repair costs are shifted from the seller to the lender.
On the other hand, a foreclosure occurs when a homeowner can no longer make payments on their home so the bank begins the process of repossessing it. A foreclosure usually moves much faster than a short sale and is more financially damaging to the homeowner.
After foreclosure the bank can sell the home in a foreclosure auction. For buyers, foreclosures are riskier than short sales, because homes are often bought sight unseen, with no inspection or warranty.
A client from SoCal texted me on Thursday night after seeing a home online and wanted to see it as soon as possible. Trouble is, he was 2,000 miles away.
It made sense for why he wanted more info on it: Waterfront property, fully updated, 3 decks, and an HOA that pays for the island’s private ferry. And only $359,000! Kicker? I wasn’t sure, but I was more than happy to go check it out for him. Facetime is a wonderful tool for Sight-On-Scene purchases.
So check out the journey that my Managing Broker and I took and tell me if you think it’s too good to be true. (Hint: Rumor has it, there were at least 3 offers on it in the first weekend).
You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.
But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.
The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.
The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.
THE HAPPY MEDIUM
Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.
We are here to help you navigate these decisions. When you are ready, reach out to us and we will take care of you!
The South Sound always impresses with unparalleled views of both the water and the mountains, but why is this January different? The HGTV Dream Home featured in 2018 is now back on the market, right here in Gig Harbor:
For $1.9M, you get breathtaking views of Henderson Bay and the Olympic Mountains while you head down to your private beach to go digging for treasure. Get lost in the South Sound as you go beach camping at many of the nearby waterfront State Parks.
But if you’re itching for something a little more eclectic (and way cheaper), check out the newest listing in downtown Tacoma… A renovated, historical Engine House Condo!
For $320K, this condo is located in the heart of North Tacoma. It includes a bunch of renovations and the rare exposed brick. Great location if you’re looking for something a bit closer to amenities and for an incredible price.
Call 206-930-1597 if you are ready to make a move!
Whether you are a first-time homebuyer or a seasoned veteran, the negotiation part of the transaction can be a little daunting and stressful. However, it is necessary to ensure you are getting the best possible deal for your money. So, other than price, what should you negotiate when buying a home?
- Closing costs. Your closing costs are determined by a variety of factors, but you can expect it to be between 2% to 5% of the purchase price. Ask the seller to cover some or all of the closing costs upfront or request a closing credit that can be used to make specific updates and fixes to the home. We often see sellers agree to pay closing costs in addition to accepting a discounted price.
- Furnishings. Love how the seller has furnished and decorated the home? Buyers often negotiate keeping couches, fixtures, landscaping items, patio furniture, appliances, and more. And many sellers agree, wanting to make the home more appealing.
- Inspection and closing timing. Buyer offers that include a quick inspection and close timeline are often more attractive to sellers who have been going through the process for far too long. Just ensure you allow yourself ample time to get your financing in place and complete proper, thorough inspections.
- Home warranty. Sellers will often agree to pay the premium on the home warranty at closing and then hand it off to the new homeowner, who is responsible for the deductible on any future claims.
- Repairs. Your inspection uncovers small or large repairs needed to bring the home up to standard. You can negotiate to have these items fixed before closing or ask for a price reduction to cover the costs.
At Bennett Homes Northwest, we will help you navigate and negotiate. It’s our goal to help you feel confident with your purchase. Contact me anytime at 206-930-1597 email@example.com. Spring is coming, so let’s get ready now!