Comparing sales data from September of 2006 to September of 2007 shows that the number of sales for Collin County is down by 200 (that's a lot) and the average days on market is slightly up (this may continue to increase). Both of these are indicative of our current market with higher inventory (more homes for sale) and tougher mortgage requirements (i.e. even though rates are still great, fewer people can now qualify). The good news: while much of the country is also seeing sales prices slump, Collin County remains flat at an average of $92/sq.ft.

I just got another contract on a listing of mine. It's always a good feeling when you're helping a Seller towards their goal. Now the Option Period has begun and the Buyer will most likely have the home inspected and notify us of any repairs which they feel are necessary. The seller and I will then have the opportunity to decide if we agree that these repairs are necessary (i.e. almost any Buyer would want these items repaired) or if we feel that the Buyer is being picky (they are, after all, buying a pre-owned home).

Generally, repairs can be handled in two ways (it is up to Buyer and Seller to decide which they choose/approve of): 1) The Seller can have the items repaired prior to closing (by a licensed contractor for those items that require licensing like plumbing, electrical, etc.) or 2) Cash (generally from the Seller's equity) can be applied towards the buyer's closing costs (or off of the sales price) in lieu of said repairs. Personally, I prefer option #2 as it helps insure that the Buyer gets to pick who does the work and the Seller is not blamed if the work is not satisfactory. Of course, then the debate is how much cash do you give or how much will the repairs cost? I always tell my Buyers that if you let the Sellers do the repairs themselves, they will generally hire the cheapest contractor they can find (or do the repairs themselves if a license is not required). So, if a Buyer thinks a repair will cost $500, and the Seller gets a quote for $250, you can either choose to have their contractor do the work, or take the $250 and apply it towards the contractor of your choosing. It's generally difficult to get more if the Seller has a written quote for less (i.e. why would they give you more than $250 if they have a guy who will do the work for that amount). Ultimately, many repairs are a matter of opinion. Some Sellers fell that, if they have accepted a price that is less than they wanted, few (if any) repairs should be done. Conversely, if Buyers don't feel that they are getting a "steal of a deal" (or if there are plenty of other homes to choose from) they often want every little detail fixed. The truth generally lies somewhere in the middle. I always say that major items (i.e. the roof, A/C, disposal & dishwasher) need to be in good working condition unless the property was advertised and priced for an "as-is" condition. However, every light bulb will not be new, a fan may wobble slightly, and there may be a small hole in the wall where the doorknob hit it (if you want a new home, go buy one... pre-owned homes are not perfect). Ultimately, the goal is to get major repairs addressed so that the Buyer can feel confident moving in, and the Seller can feel that they did what was necessary to sell their home.

Homeowners Insurance When Buying or Selling Real Estate

Did you know that when buying a home you should have your homeowners insurance coverage begin AT LEAST the day before closing? The last thing a Buyer wants is to be signing to buy a home without homeowners insurance coverage. What if the home burned down while you were at the title company closing? A scary thought, and rare I know, but it has happened. Did you know that when selling a home you should keep your homeowners insurance in place until AT LEAST a day after closing AND FUNDING. It sometimes takes a day (or longer) for the Buyer's loan to fund after all of the paperwork has been signed... and ownership/title does not transfer until then. The last thing a Seller wants is to be signing to sell their home without homeowners insurance coverage. What if the home you were selling was vandalized as you were leaving the title company from your closing? Even after you've signed the paperwork, you still own (and are responsible for) the home until the Buyer's loan funds (and that may be the next day, or longer). Long story short, whether buying or selling, you want an extra day or two of insurance coverage. It will only cost a few dollars but could save you hundreds of thousands. Ideally, good real estate agents would like the Buyer and Seller to have overlapping insurance coverage so that, should something happen to the home during the "grey area" of property ownership/title transfer, the two insurance companies can argue over who's going to pay for it (instead of trying to pin the costs on the Buyer or Seller).

Important note: Most insurance companies require you to notify them if your home becomes vacant (i.e. you move out to head to your new home). It's usually in your policy if you read the fine print (or ask your agent). Without notifying them that you have moved out (and obtaining what some call a "vacancy rider") you run the risk that they could deny claims on your home and leave you, in essence, without coverage.

I'm happy to help answer any general questions about closing, funding, insurance, etc. For any insurance questions specific to your policy, it's best to check with your insurance agent.

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com

As stated previously: When you buy a pre-owned home in Texas, you'll generally find yourself writing two checks along with your purchase contract: One for "Option Money" (made payable to the Seller) and one for "Earnest Money" (made payable to the closing Title Company). Today's topic is almost always the larger of the two, Earnest Money:

"Earnest Money" is exactly that: money that the Buyer of a home puts up (generally in escrow with a title company) to show the Seller that they are serious about buying the home. The amount of Earnest Money can vary widely, and is dependent on the terms of the contract (i.e. a longer time before closing may mean more Earnest Money) but it is often between .5% and 1.25% of the sales price. So, $1,500 would not be unusual as Earnest Money on the purchase of a $200,000 home. If the sale goes through, it is almost always credited towards the closing costs or down payment of the Buyer. So, think of it as a deposit to hold the house. There are generally two opportunities for a Buyer to get out of a deal (contract) and retain their Earnest Money:

1. During the "Option Period" (generally the first 7-10 days of a contract) a Buyer may terminate a contract for any reason and receive their full Earnest Money back... if they had an Option Period and their Option Fee was receipted within 2 days of contract execution (see the previous post about Option Fees).
2. During the "Third Party Finance Period" (generally the first 10-20 days of a contract) a Buyer may terminate a contract if they can prove that they cannot obtain the financing specified in the Third Party Finance Addenda of their contract.

After these two "outs" a Buyer cannot generally get out of a contract without being considered in default of contract. If a Buyer defaults (i.e. doesn't close) on a contract to purchase a home in Texas, the contract gives the Seller three remedies:

1. Specific Performance (i.e. the Seller may sue to make the Buyer buy the home)
2. Damages (i.e. the Seller may sue the Buyer for any/all damages that Seller suffered due to the default. This can get VERY expensive for a Buyer as it may involve moving costs, a second mortgage and more).
3. Accept the Buyer's Earnest Money as liquidated damages (i.e. in lieu of a lawsuit).

So, while many Buyers don't want to put up a lot of Earnest Money, it is actually in a Buyer's best interest to write a decent sized check when it comes to Earnest Money. Not only does this show the Seller that the Buyer is sincere and plans to go forward with the purchase, but they will be credited with the money at closing anyway... and should they Buyer not close on the home, they will either get the money back, or if in default, most Buyers would much prefer that the Seller feel comfortable with the amount of Earnest Money that they could keep than decide to sue (i.e. if the amount of Earnest money is too small to satisfy them).

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com

When you buy a pre-owned home in Texas, you'll generally find yourself writing two checks along with your purchase contract: One for "Option Money" (made payable to the Seller) and one for "Earnest Money" (made payable to the closing Title Company). Let's talk about the first of those here:

"Option Money" (or the "Option Fee") is what you, as a buyer, pay the Seller for the unrestricted right to terminate your contract for a set period of time (sometimes know as the "Option Period"). The Option Fee can range widely depending on the price of the home and terms of the contract, but generally $75-$100 for every $100,000 worth of home will buy you a normal Option Period. Generally, these last the first 7-10 days of a contract from the day it was executed, or agreed upon, by all parties. During this time, property inspections are usually performed and quotes are sometimes gathered by Buyers and/or Sellers for any repairs that the Buyer deems necessary. Generally speaking, the Buyer is paying the Seller to take the property off the market while they check it out more thoroughly and negotiate any repairs of previously unknown problems. Real Estate Agents may still show the home, and even write a back-up contract(s) with another Buyer, but the Seller cannot usually back out of the primary contract for sale; only a buyer, who paid his Option Fee, can do this. Reasons for a Buyer terminating a contract during the Option Period may range from a property needing too many repairs (or a Seller not agreeing to repair enough to satisfy the Buyer) to the Buyers finding a better deal or just changing his mind. I could write a whole page (in fact I probably will) on negotiating repairs. Just know that once both parties have agreed on any/all repairs, you can move on out of the Option Period and one step closer to the sale of the home. The Option Period can also be extended, with both Buyer and Seller consent, by paying an additional "Option Fee". Sometimes a few more days may be needed (especially if major repairs are found to be needed) for both parties to get quotes. The Option Fee belongs to the Seller once a contract is executed and will generally be credited back to the Buyer at closing (if all parties have agreed to this in the contract). So, in summary, most Buyers are not to upset if they have to lose their Option Fee. In these cases, the home generally had more problems than they expected, or the Seller was not willing to fix enough to please them. Option Money also allows sellers to rest assured that they are not wasting their time. Once they have a contract, the Buyer is on the hook for the Option Fee plus any Buyer inspection costs.

*Important note: The Option Fee must be receipted (by the Seller or their Agent) within two days of the contract being executed (agreed upon by all parties & dated) or the Buyer may waive his/her right to their Option Period. This means that as a Buyer, your Agent better really stay on top of things or it could adversely affect you/your contract.

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com

There are lots of questions recently surrounding real estate and mortgage markets. So, I thought I would post a recent article I read that addresses some of them. Keep in mind that these are just one person's opinions, based on observations of the markets, but I tend to agree with most all of what is said below.

~The "Caveman"

Clients need the hard facts about the mortgage market

The current upheaval in the market has given rise to significant opportunities to help your clients make informed decisions. Tom Sherman, President of Mortgage Services Unlimited in Dallas, emphasizes the importance of educating clients.

For your sellers, the following points are key:

• Home values will stay stagnant or potentially decrease.
• Qualified borrowers are looking for deals.
• Fewer borrowers are qualifying for home loans.
• Rising foreclosures tend to negatively affect home values.
• Increased "days on the market" (DOMs) increases the likelihood that buyers will aggressively negotiate prices down.
• Continued stress in the financial markets will affect consumer confidence.
• Loans may take longer to close.
• Appraisals are becoming more difficult to obtain.
• Properties should be funded before contract contingencies are removed.

It's critical to encourage sellers to price homes to sell -- and sell quickly -- decreasing the need for price reductions.

Sherman notes that buyers also need to be armed with specific tips on how to navigate most effectively in the current market:

• Make decisions to buy sooner than later - loan guidelines are changing so quickly that an approval today may not be an approval in the future.
• Diligently protect your credit.
• Make sure that lenders are placing loans with financial institutions that can close on them.
• If someone is saying that something that is too good to be true, it probably is!
• A down payment on a property not only strengthens the case - it may be a necessity in the very near future.
• Fly-by-night lenders will say anything to get the deal. Verify anything being offered through a reputable lender.
• Rate locks and product locks can be subject to change when a market is shifting.
• Loans take much longer to close in the current market.
• Pre-approval is critical.

This uncertain market provides a huge and unique opportunity for skilled agents to educate clients, gain their confidence and loyalty and build lasting relationships.