Buying a Home in Oakland County MI: Responding to A Counteroffer 

Buying a Home in Oakland County MI: Responding to A Counteroffer 

Buying a Home in Oakland County MI: Responding to A Counteroffer 

When buying a home in Oakland County MI, the stakes are high for both the person buying the home and for the seller. Hence, it may take some negotiating to reach an agreement that both the buyer and the seller are happy with. Of course, the optimum scenario would be to submit an offer on a home you love and the seller accepts it with no conditions. However, it’s more common, that the seller will respond to an offer with a counteroffer, which means they are open to starting the negotiation process.  In real estate terms, this is appropriately referred to as the seller-to-buyer counteroffer. 

How Many Counteroffers Are Typical? 

Just as a seller can submit a counteroffer to a buyer, a buyer can counter the seller’s counter, which then becomes a counter-counteroffer or Buyer Counteroffer No. 1. There’s no limit to the number of counteroffers that can go back and forth. If either party does not agree to the terms, the offer becomes void, and the buyer and seller go their separate ways with no further obligation. 

Responding to a counteroffer

A counteroffer changes one or more aspects of your original offer, and basically, you have three options for responding. You can either accept the seller’s counteroffer, reject the counteroffer or present a counteroffer of your own.

If you decide to continue negotiations, know your options such as how much you can spend, whether there are (or will be) similar properties to bid on, and what you are willing to concede – whether that’s contingencies or repairs you were previously set on.  

Also, consider how you can make the deal smoother for the seller, which may help push your offer through. For example, how quickly is the seller looking to close and can you agree on that? Have they already bought a new house? Do they want reassurance that their childhood home will be well-loved?  

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Find out what the seller’s motivations are – financial, emotional, logistical – and create a counteroffer that is in alignment with your own priorities. The seller’s motivations may become apparent with their first counteroffer and your counter may address some but not all of the seller’s concerns.

Commonly negotiated aspects of home buying 

With homebuying, everything is negotiable from repairs and closing costs to furniture and appliances. Some of the most commonly negotiated aspects of homebuying include the purchase price, closing costs, closing date, contingencies, earnest money deposit, and personal property. Offers and counteroffers can negotiate on a mix of these factors:

Purchase price 

Your pre-approval letter from your lender will tell you the maximum you can pay for a property, but you may not need to increase the price up to your limit. Your Farmington Hills MI REALTORⓇ will be able to advise you on what makes the most sense for your budget and the local market. The sale price is the most commonly changed item in the seller-to-buyer counter offer.

The seller might change this number in one of two ways. They might offer a price that is somewhere in between your offer and the original asking price or counter back with their original asking price, which means they are not willing to negotiate on price. But if they give you a counteroffer below the original list price, the negotiations are on. You can then choose to accept the seller’s proposal or make another counter offer back to them.

Closing costs 

The closing costs, which include insurance, title fees, taxes, and appraisals, are often the most negotiated line item between buyers and sellers. Closing costs can add up to as much as 5% of your total loan amount.  The seller’s counteroffer might address any contributions toward closing costs.

For example, you ask them to cover $6,000 worth of your closing costs, which is a common strategy in a buyers market. The seller might simply say no to this request. They could also agree to contribute $6,000 toward your closing costs while increasing the sale price by $6,000 – allowing you to finance your closing costs into the loan.

Closing date  

This is the date that you get the keys to the home. In a counteroffer, the seller might make changes to the closing date. Maybe they need more time to pack up and move, so they sign a counteroffer back to you proposing a 45-day escrow period. As the buyer, you can accept it or not. In most cases, the buyer will accept the seller’s proposed changes to the closing date, if it’s not a big difference

Contingencies 

If the provisions aren’t met, contingencies let you back out of a contract. A seller can reject or modify the contingencies, or conditions for the purchase, that you included in your offer. A home appraisal, obtaining financing, home inspection, and home sale are all examples of contingencies:

  • An appraisal contingency protects the buyer and is used to ensure a property is valued at a minimum, specified amount. 
  • A financing contingency gives the buyer time to obtain financing for the purchase of the property.
  • An inspection or a due diligence contingency gives the buyer the right to have the home inspected within a specified time period.
  • A home sale contingency gives the buyer a specified amount of time to sell and settle their existing home to finance the new one.

Before you consider dropping contingencies, be sure to speak with your Oakland County MI real estate agent about the possible risks. Sellers almost always accept the home-inspection contingency, as well as the financing contingency because they know that most buyers will refuse to move forward without those contingencies.

Earnest money deposit 

The earnest money deposit – also referred to as good faith money – is the sum you put down with your offer to show the seller you are a serious buyer. The earnest money deposit applies toward your down payment or closing costs. While the buyer and seller can negotiate the earnest money deposit, it often ranges between 1% and 2% of the home’s purchase price, depending on the market.

The earnest money deposit might range between 5% and 10% of a property’s sale price in a hot housing market. Some sellers prefer a fixed amount, such as $5,000 or $10,000. Of course, the higher the earnest money amount, the more serious the seller is likely to consider the buyer.

Therefore, a buyer should offer a high enough earnest deposit to be accepted, but not one so high as to put extra money at risk. Earnest money is always returned to the buyer if the seller terminates the deal.

Personal property 

A refrigerator, washer, and dryer set, and other appliances may be included in a home sale, but if they’re not, ask for them. The same goes for furniture and other personal belongings. The structure, fixtures, outbuildings, and anything attached to the land is included in the sale and is considered the “real property.”  

Negotiate with the market in mind

How you negotiate the seller’s counteroffer will depend on the type of market you’re in. Do you know if the seller has multiple offers on the house? If they do, you need to tread carefully. In a hot seller’s market, the seller’s counter may come with an unofficial “take it or leave it” clause. 

How is a counteroffer accepted?

The buyer can simply accept the counteroffer and deliver it back signed to the seller and their agent. Time is of the essence here as all counteroffers include an expiration date. It’s also important to note that the seller can accept another offer while the buyer is deciding whether to move forward, which is another reason to act quickly when a counteroffer is on the table. 

If the seller receives a more favorable offer while the buyer is deciding, the seller will typically withdraw the counteroffer, effectively removing the first buyer from the situation.  

The bottom line

The counter-offer process in real estate is more art than science. Look at what motivates the other person, get all the information you can about your alternatives, and look for a middle ground that still meets all of your priorities. Also, don’t believe an agent who tells you the seller will always counter the offer. Even if the seller does, you can still lose the house if the home is still getting showings. 

Partner With Oakland County MI REALTOR® – Tom Gilliam

REALTOR® – Tom Gilliam is your expert to buy or sell your home in Oakland County, Michigan – the Oakland County community’s number one REALTOR®.  In Oakland County, MI, you need to find an experienced agent who knows the community.

Tom currently lives in the Oakland County area and is very familiar with the local market, neighborhoods, schools, and community issues. His office is located in the heart of Farmington Hills, with five additional offices throughout the southeast metropolitan area.

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Tom is always ready to help families find the perfect home in the Oakland County area they want to live, whether it’s Farmington Hills, Novi, Birmingham, Troy, Rochester Hills, West Bloomfield, Bloomfield Hills, Ferndale, Royal Oak, Northville, Novi, Troy, Rochester, or Rochester Hills.

Give Tom Gilliam – “Your number one Oakland County Michigan REALTOR®” – a call today!

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Homes2MoveYou.com
License #314578 

Why You Need A Top-rated RE/MAX Farmington Hills MI REALTOR®

Why You Need A Top-rated RE/MAX Farmington Hills MI REALTOR®

Why You Need A Top-rated RE/MAX Farmington Hills REALTOR®: Whether you are a first-time buyer or a seasoned veteran, buying a home in Farmington Hills MI can be one of the most exciting experiences of your life. It can also be a stressful undertaking. Fortunately, there are qualified real estate agents out there who can help you navigate the challenges of buying a home and help eliminate a lot of the stress. Overall, you’ll want to look for a REALTOR® and company you feel comfortable with and trust. Selecting the right one can make the difference between finding the right home for your lifestyle needs quickly and securing an offer or searching unsuccessfully for months.  

Tom Gilliam is a top-rated RE/MAX Farmington Hills MI REALTOR®  with over 17 years of experience. When you choose a RE/MAX professional like Tom Gilliam to help you with the home buying process, you can expect an exemplary level of service. Tom is a local market expert with access to a full complement of real estate tools and resources to ensure a successful home buying experience. With a trusted RE/MAX professional and the right support system, you’ll be able to make the most informed decisions. Tom’s comprehensive, high-quality services can save you time and money, as well as make the experience more enjoyable and less stressful.

Why Choose RE/MAX?

RE/MAX (short for Real Estate Maximums) has been in operation since 1973. The real estate company has since grown to encompass more than 100,000 sales agents working in franchise-owned and operated offices in more than 100 countries. A real estate powerhouse in its own right, and one of the industry’s most recognized brands, RE/MAX  is regarded as one of the country’s most productive real estate sales forces.  

  • When you look for the highest quality real estate service, look to a RE/MAX Associate. RE/MAX Associates are The Real Estate Leaders®. You can depend on RE/MAX Associates to make the sale or purchase of a home as effortless and seamless as possible.
  • RE/MAX agents are The Hometown Experts With a World of Experience®. They are the most knowledgeable agents, with the experience and community connections to assist you in the homebuying process. Across the globe, they are the people next door, or just down the block.
  • At RE/MAX, advanced education is a priority. RE/MAX Associates dominate the Accredited Buyer Representative (ABR), Certified Distressed Property Expert (CDPE), Certified Residential Specialist (CRS), and Seniors Real Estate Specialist (SRES) ranks.
  • Customer SatisfactionThe proof of quality service is in repeat customers and in customers who refer RE/MAX Associates to friends. RE/MAX Sales Associates typically generate a large percentage of their business from past customers and referrals.

Why You Need Top-rated REMAX Farmington Hills REALTOR® -Tom Gilliam 

For buyers interested in Farmington Hills MI homes for sale, Tom can help you every step of the way with real estate contracts, finding the best interest rate and loan programs, and even work with appraisers and home inspectors. If you are relocating to Farmington Hills from another part of the state or country, you’ll need a qualified agent to help you find the right home for your family. As a local expert, Tom can help educate you on the best neighborhoods and communities, the types of homes and features offered, schools, utilities, zoning, surrounding area amenities, commuting information, local community developments, and more.

As your RE/MAX Farmington Hills MI REALTOR®, Tom can go over different financing options and refer lenders that are best qualified to help you. He will take the time to investigate all available properties and has access to many resources to assist you in uncovering the right home for your family. Tom will arrange private showings for homes worth seeing in person based on your specific criteria and assist you in making the best purchase decision by providing objective information about each property. He can also help with negotiations and inspections and will guide you through the closing process to ensure that everything flows together smoothly.

Living in Farmington Hills, MI

 Farmington Hills is a northern suburb of Metro Detroit and the second most-populated city in Oakland County. Farmington and Farmington Hills are often thought of as the same community although the two cities have separate services and addresses. Downtown Farmington is a charming, walkable destination with over 160 businesses from banks, to photography and yoga studios to one-of-a-kind shops along with a variety of local eateries. 

Also located downtown is Riley Park and Walter E. Sundquist Pavilion, home to the popular Farmington Farmers & Artisans Market that is held every Saturday. The best-known park event is Rhythmz in Riley Park, attended by about 500 people every Friday between the months of June and August.  

Several major corporations are located in Farmington Hills including Nissan Technical Center and Nissan Trading Corp, Hitachi Automotive Services, Hino Motors Manufacturing, and branches of Panasonic, Mercedes Benz, and Greenpath. Other top Farmington Hills employers include Robert Bosch Corporation, Botsford Hospital, Quicken Loans, Cengage Learning Gale, and Chrysler Financial Services.  

Twelve Oaks Mall in Novi is located less than 6 miles from Farmington Hills. The mall is the destination of choice of metro Detroit and features nearly 200 distinctive stores and restaurants such as Apple, Coach, Michael Kors, The Cheese Cake Factory, and more.  

For parents with school-age children, most of Farmington Hills is served by the highly-acclaimed district of Farmington Public Schools, which is shared with nearby Farmington and filled with top-rated schools. School districts serving a smaller portion of the community include Clarenceville Public Schools and Walled Lake Consolidated Schools.

Private schools in Farmington Hills include The International School, Maria Montessori Center, Mercy High School, St. Fabian Elementary and Middle School, Schoolhouse Montessori Academy – Farmington Hills, and Steppingstone School. Institutions of higher learning include branches of Michigan School of Psychology, Oakland Community College mi, and Wayne State University.

Farmington Hills has several community parks and facilities, including Costick Activities Center, MI -Dog Park, Fishing Pier, Founders Sports Park, MI – Golf Club & Driving Range, Heritage Park, Ice Arena, Jon Grant Community Center, Longacre House, Nature Center, Riley Archery Range, Skate Park, Splash Pad, and Farmington Hills Community Center.

The 211-acre Heritage Park in Farmington Hills features 4.5 miles of trails for hiking and nature study which are also used for cross-country skiing during the winter months. The park features a large picnic area, splash pad, group picnic shelter, playground, in-ground grills, two sand volleyball courts, an in-line hockey rink, and six horseshoe pits. 

The Great Lakes are the dominant physical resource in the region and a number of inland lakes reinforce the popularity of water sports and water-based activities. Lake St. Clair, the Detroit River, and Lake Erie are all within an hour’s drive of Farmington Hills and attract boaters, swimmers and fishermen. The Upper Rogue River flows from Farmington Hills southward through the north and eastern portions of the City. 

For golfers, the Farmington Hills Golf Club’s pristine 175-acre course offers one of the best golfing venues in the area, with 18 challenging holes measuring 6,413 yards, manicured bent grass tees, fairways and greens, ponds, and gently rolling hills. Other golf courses in Farmington Hills include Copper Creek Golf Course (9 holes) and Glen Oaks Golf Course (9-holes).

Several major highways service the city: Grand River Avenue is a major east-west corridor through downtown Farmington. I-696 is about three miles north and I-275 about three miles west. The M-5 Freeway runs through the City and Eight Mile Road is on the southern border. Because of the excellent highway system, most sections of the metropolitan area are readily available to Farmington’s residents. Suburban Mobility Authority for Regional Transportation (SMART) operates local and regional bus services for Farmington Hills. The closest major airport is Detroit Metropolitan Wayne County Airport located about 30 miles from the center of town. 

Partner with REMAX Farmington Hills REALTOR® -Tom Gilliam 

Whether you’re interested in purchasing your first home, upsizing to a larger home with room for a growing family, looking to buy your dream home or the right investment property, why not take advantage of Tom’s 17-plus years of experience as a top-rated RE/MAX Farmington Hills MI REALTOR®? Tom will look out for your best interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure the best results possible. Get the homebuying process started today by calling Tom directly at (248) 790-5594 or you can reach him by email.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Homes2MoveYou.com
License #314578 

Farmington Hills MI 

Closing Costs To Consider When Buying A Home in Farmington Hills MI

Closing Costs To Consider When Buying A Home in Farmington Hills MI

Closing Costs To Consider When Buying A Home in Farmington Hills MI

Buying a home in Farmington Hills MI involves more money out-of-pocket than just the down payment. There are also closing costs to consider. Closing costs refer to the charges and fees that are paid when a house purchase is finalized.

Typically, the buyer’s closing costs include mortgage insurance, homeowner’s insurance, appraisal fees, property taxes, reserves to set up escrow, and various fees that lenders typically charge, among others – while the seller covers ownership transfer fees and pays a commission to their real estate agent.

Farmington Hills MI Homes for Sale

The total cost can often come as a shock to first-time homebuyers who may only be looking at coming up with the amount of their down payment. Understanding what closing costs cover and budgeting for them will smooth out the final stretch of the home buying process. Lender fees can be the most significant of all closing costs.

How much can a buyer expect to pay?

Average closing costs for the buyer will typically run between 2% and 5% of the loan amount.  On a $300,000 home purchase, for example, you could expect to pay from $6,000 to $15,000 In closing costs. Much depends on the points and origination fees a lender charges to make the loan. The points, together with any origination fee will be included in the Origination Charges section of your Loan Estimate.

The government requires lenders to list closing costs and the amount of cash you’ll need to have on hand at the time of settlement on every mortgage applicant’s Loan Estimate. The lender should provide the loan estimate to potential borrowers within three days of submitting an application. The Loan Estimate details the terms of your loan, including:

  • Expenses, with clear “yes” or “no” answers to important questions, such as whether each amount can increase after closing, whether your loan includes a prepayment penalty or a balloon payment, and which expenses are included in your escrow account 
  • The projected monthly mortgage payment, including taxes, insurance, and other assessments 
  • Estimated closing costs and the amount of cash you’ll need to have on hand at the time of settlement 
  • Information on services you can, and cannot, shop for — such as pest inspections, survey fees, and the home appraisal 

The Closing Disclosure provides the same information as the Loan Estimate but in final form. This means that it contains the locked-in costs of your loan and the specific amount you’ll need to pay at closing. You’ll receive this document three days before your scheduled loan closing.

Non-recurring and recurring closing costs 

There are over 35 closing cost items that you may be required to pay, which can be separated into two categories: non-recurring and recurring:

Non-recurring closing costs are paid once at closing and never again. Non-recurring closing costs are the fees that most mortgage borrowers are familiar with and may include the following items: 

  • Title policy
  • Escrow or closing
  • Appraisal
  • Credit report
  • Notary
  • Wire fees
  • Courier and delivery
  • Attorney fees
  • Endorsements
  • Recording
  • Jurisdictional transfer taxes
  • Home protection plan
  • Natural hazard disclosure
  • Home inspection
  • Fees paid to the lender in conjunction with the loan 

Although non-recurring closing costs are set by the specific service provider, you may be able to comparison shop and negotiate some of the fees to lower your closing costs.   

Recurring closing costs are those charges that you will pay again and again. They are paid either monthly or yearly as time goes on. Recurring closing costs include items such as:  

  • Fire insurance premium
  • Flood insurance (if required in your area)
  • Property taxes
  • Mutual or private mortgage insurance premiums
  • Prepaid interest
  • HOA fees

You will be required to pay a portion of these ongoing expenses when the loan closes. Additionally, depending on the time of year your loan closes and your local property tax rate, the amount of property tax you are required to pay at closing can be significant, especially if your loan closes earlier in the year and you’re required to pay several months of property taxes in advance.

If you are required to use an impound or escrow account after your loan closes for your mortgage payment, property tax, homeowners insurance, and other expenses, you may also be required to pre-pay certain expenses. These additional recurring closing costs are due at closing.   

Seller Credit  

Buyers with limited funds can utilize a Seller Credit to help significantly reduce their out-of-pocket costs and enable them to purchase a property they would be unable to buy otherwise. A seller credit also referred to as: sales concessions, seller paid costs, or seller contributions –  is money the seller gives the buyer to pay for closing costs. Some or all of the closing costs, including your property taxes and personal hazard/fire insurance, may be paid for by the seller. 

If the seller pays all your closing costs, you will only pay your down payment. By law, the seller cannot pay for any portion of your down payment. Also, homebuyers cannot receive cash from the seller – not even one dollar.

In order to get a seller credit, you must have it included in your Purchase and Sale Agreement.  The lender doesn’t handle the negotiation of a seller credit. Ask your Farmington Hills MI REALTORⓇ to negotiate it for you (it’s part of the price negotiation of the home).  

A seller credit allows the buyer to finance his closing costs into the new loan amount. The lender must approve the credit and the home’s value must merit the increase in the sale price as determined by an appraisal. Be sure to always check with your lender before you negotiate an offer that involves a seller credit because the lender might not allow it.

Lenders limit what the buyer and a seller credit can pay for. For example, the lender might limit your credit to 3% of the purchase price if you’re financing 100% of the purchase price. Or, depending on your FICO score and the amount of your down payment, the lender might allow a seller to credit you as much as 6% of the purchase price. 

Help with closing costs 

There are also grants and loans available to help with closing costs. If you qualify, you could receive thousands of dollars to help with your mortgage costs. Oftentimes, closing cost assistance is offered by a HUD-approved local or state housing commission, or a mortgage lender. These agencies set aside a certain amount of funds for closing cost grants for low-to-moderate-income borrowers.

Check out the resources below to locate and learn about programs you may qualify for:

Requirements to qualify for closing cost assistance vary by program, and income caps and maximum loan amounts are common. You don’t always have to be a first-time homebuyer to get financial aid.

Many programs are available to repeat buyers or former homeowners who haven’t owned property in the last 3 years. 

Partner with Highly-rated Farmington Hills MI REALTOR -Tom Gilliam

With over 20 years of real estate experience, Tom Gilliam is proud to be a trusted Farmington Hills MI REALTORⓇ – offering his guidance and expertise to area home buyers and sellers. Tom understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust.

Farmington Hills MI Homes for Sale

You can be assured that Tom will protect your best interests, advocate for you, negotiate on your behalf, and guide you towards the best results possible. Get the process started today by contacting Tom directly at (248) 790-5594 or you can get in touch with him by email.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

Farmington Hills MI

 

Article sources:

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Buying Mistakes to Avoid When Buying A Home in Farmington Hills MIAre you currently in the market to buy a home in Farmington Hills, MI? If this is your first rodeo as a homebuyer, or if it’s been several years since you last bought a home, knowledge is power. Buying a home comes with many big decisions, and it doesn’t hurt to be mindful of possible pitfalls so you can avoid as many mishaps as possible. Some are minor, some are costly and some even involve buyers purchasing homes that are completely wrong for them.

Here are 10 common home buying mistakes to avoid and and some expert advice to help you on your journey to homeownership:  

1).  House hunting before getting pre-approved  

House shopping can be exhilarating and it can also be taxing, so it’s no surprise that many people want to get going on it right away. However, shopping for a home before getting pre-approved for a mortgage is not a good idea.

Getting pre-approved ensures that you have the financial ability to purchase a home, helps you understand how much home you can afford, and shows sellers that you are serious when making a purchase offer. There’s no need to tour any Farmington Hills MI homes for sale if you don’t know which properties are within your budget.

Sellers are also more likely to consider your purchase offer if they know they are dealing with someone who already has a mortgage pre-approval.

2).  Obtaining a rate quote from only one lender

No two lenders are the same and each one may offer different interest rates, closing costs or other fixed fees. If you don’t shop around, you could miss out on a better deal. By getting quotes from a number of lenders, you’ll be able to choose the one that will save you the most money at the closing table or over the life of the loan.

Pick at least three to five lenders and request quotes on the same day to help you compare apples to apples. According to Freddie Mac, getting a quote from just one additional lender could save you an average of $1,500 over the life of a loan.

Get a quote from 5 different lenders and the average savings doubles. Visit lender websites to learn more about the products they offer and read customer reviews to make sure you’ll be in good hands once the loan closes. Find a lender who is a good fit in costs and in service.  

3). Not checking credit reports and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.

You can request a free credit report each year from each of the three main credit bureaus. Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay.

Federal law gives you free access to your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. Using the government-mandated AnnualCreditReport.com site is the quickest way, but you can also request them by phone or mail. Disputing any credit report errors and getting those negative items removed can be a quick route to a better score.

4).  Buying more home than you can afford

Don’t buy more house than you can reasonably afford. The maximum loan amount on your pre-approval letter doesn’t mean you should look at homes that are priced to match it. The lender may know your income and even your debt-to-income ratio, but that’s all they look at when it comes to monthly expenses.

The lender doesn’t know how much you pay for groceries, gas and insurance, healthcare, school tuition or loans, utilities, and other expenses you might have.  If maxing out the loan amount you qualify for means that you are stretching your monthly budget to the limit, you probably need to find a more affordable home.

Even if you can make your mortgage payments with all of your other monthly expenses, a higher monthly payment can affect other areas of your life. The more money you borrow, the less you’ll be able to put towards important savings such as your 401(k) or emergency fund.

5).  Depleting your savings

One of the biggest mistakes many first-time homebuyers make is spending all or most of their savings on the down payment and closing costs. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance.

This may translate to substantial savings on the monthly mortgage payment, but it’s not worth the risk of living on the edge. Instead, aim to have three to six months of living expenses in an emergency fund, even after you close. Depleting your emergency or retirement savings to make a large down payment is a risk best avoided.

6).  Being Unaware of the hidden costs of owning a home

Many first-time home buyers are unaware of the hidden costs of homeownership because they’ve never owned one. When moving from an apartment to a home, there can be some additional costs that you may not have experience paying as a renter.

These hidden costs include higher utility bills, new utilities like trash removal and recycling, property taxes, homeowners insurance, outdoor maintenance and equipment, maintenance and repair, tools for home improvement and maintenance, furniture to fill more space, etc.

Figure out how much each expense will be, add that amount to your savings goal, and have it saved up before you move in.

7).  Believing that you must have a 20% down payment

There’s still a long-standing myth that you need a 20% downpayment in order to buy a home, but that isn’t actually correct. When you make a bigger down payment on your home purchase, you’ll likely get a better mortgage rate and a lower monthly payment, since you’re not borrowing as much. But that doesn’t mean you should hold off purchasing your first home, or upgrading to a new one, until you have a 20% down payment.

You can get a conventional loan with as little as 3% down or a loan backed by the Federal Housing Administration (FHA) with just 3.5% down. There are also 0% down payment programs available if you’re in the military, or you’re a low- to moderate-income borrower buying a home in a rural community.

Plus, some first-time buyers may qualify for a down payment assistance program through their state or local housing agency.

8).  Not planning for closing costs

Your down payment isn’t the only upfront cost you’ll have as a homebuyer. With such a big emphasis on the purchase price and the down payment, many people fail to plan for closing costs, which can range from around 3% to 6% of your loan amount. To prepare for closing costs, it helps to know what’s included in this major expense.

Although some of these may not be included in your closing costs, common fees include the appraisal, home inspection, property taxes, title and attorney fees, lender fees, application fee, prepaid interest, loan origination fee, discount points, title search fee, mortgage insurance application fee, upfront mortgage insurance, and lender and owner title insurance.

Other costs and specific mortgage fees will depend on where the home you are buying is located and the type of loan you get.

9).  Changing jobs or having income gaps

In order to qualify for a mortgage, you need to show stable job history and consistent income. Your lender will scrutinize your income and employment history over the last two years to determine whether you have that stability.

If you’ve been in between jobs in the past two years, be prepared to explain why.  If you’re looking to take a new job before closing on your mortgage, be strategic because it may delay your loan approval. Communicate potential job changes to your lender and be prepared tp supply any additional documentation they may request.  

10).  Applying for credit or charging up credit before closing

One important home buying mistake you want to avoid is taking on more debt in the middle of the mortgage lending process. This misstep can quickly derail your loan approval. It’s recommended that borrowers not take on any new debt or apply for a credit card until after closing on their new home. The loan underwriting department at the bank may be checking your credit after you’re approved and before the bank funds your loan.

If you max out your credit card or take out an auto loan before your closing, that debt is factored into your mortgage application. More debt pushes up your debt-to-income (DTI) ratio, or the percentage of your gross monthly income used to repay debt. If your DTI ratio exceeds the maximum ratio for your loan program, your loan may not be approved.

Partner with Award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years – offering his guidance and expertise to buyers and sellers. Tom is able to provide his clients with the kind of knowledge, skills, commitment, and expertise they need and deserve. He also understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust. Tom will protect your interests, advocate for you, negotiate on your behalf, and go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling Farmington Hills MI real estate, feel free to reach out to Tom Gilliam directly at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Home Appraisal Tips For Farmington Hills MI Homebuyers

Home Appraisal Tips For Farmington Hills MI Homebuyers

Home Appraisal Tips For Farmington Hills MI Homebuyers

You’ve been shopping for a home in Farmington Hills MI for weeks and you finally uncover the ideal home for your family in a great neighborhood. You put in a good offer and it gets accepted. If you are planning on taking out a mortgage, it now has to undergo a comprehensive appraisal of its worth. 

Although this may sound harsh, your dream-home-to-be isn’t a “home” to your lender. It’s a house and collateral, and if for some reason you are unable to make your mortgage payments, your lender can foreclose on your home and sell it to recoup all or some of its costs. 

Your mortgage lender will have to know the value of your home before handing over that large chunk of change. After you sign a home purchase agreement (the contract between you and the seller about the terms of the pending sale), and before your lender approves your loan, the home you are planning to buy must pass an appraisal by an unbiased third party – the appraiser.  

The home appraiser’s job 

An appraiser is a state-licensed or certified professional. Their job is to assess an opinion of value or how much a house is worth. The appraiser is a neutral party who doesn’t represent the buyer or the seller, a contractor chosen by your lender through an appraisal management company (AMC).

They work for lenders and help them decide if the home is a sound investment and worthy of the loan you’re asking for. Unlike a home inspector, who looks for defects that could cost the buyer money down the road, an appraiser looks at home components that contribute to the home’s value.

The appraiser will survey the house in person using specific criteria such as location, age, condition, square footage, additions/renovations, and recent sales of comparable homes. Home appraisals aren’t public records, but appraisers use public property records and other public documents to support their appraisals.

Some sellers have their Farmington Hills MI homes appraised before listing them on the market to help arrive at a fair asking price.

Who pays for the home appraisal?

Generally, it’s the buyer’s responsibility to pay for the home appraisal, a fee that’s typically included in your closing costs. While the cost of a home appraisal varies by the size and location of the home (among other factors), you can expect to pay around $300 to $400, according to recent estimates. Appraisers protect the bank and buyers from a potentially bad deal, so they’re worth every penny. 

The appraisal report

Once the appraisal is finished, the appraiser issues a written report with their opinion of the value of the home, and both the buyer and the lender will receive a copy of the report. If the home’s appraised value ends up higher than what you’re paying, generally the deal will move forward. 

However, if the appraisal is lower than your offer on the Farmington Hills MI home, your lender won’t give you a loan for more than the appraised value. If you and the seller agreed on $300,000, for example, but the appraisal value comes in at $290,000, there is a $10,000 shortfall. 

Options if faced with a low appraisal

If you are faced with a low appraisal, all is not lost. Negotiations aside, if the appraisal price seems much lower than the contract price, your agent can ask the appraiser to reevaluate their report. Appraisers can sometimes make mistakes in the basic data.

For instance, the number of bedrooms or baths. Or maybe, they need context for the comps, such as if a recent sale for a lower-than-typical price was between family members — or if a more-recent sale is available that changes the perspective.

If your offer included an appraisal contingency, you can renegotiate the price with the seller by persuading them to lower the sales price or split the difference between the home’s appraised value and the offer. If the seller is unwilling to negotiate, you can choose to walk away from the deal and keep your deposit.

Or you could decide to pay the additional $10,000 out of pocket so your home loan goes through. In either case, you have options. 

Talk with your Farmington Hills MI REALTOR® about their experience with the appraisal process, how they would recommend handling any shortfall — and how willing you should be to walk away from a deal that’s not right for you.

Partner with Top-rated Farmington Hills MI REALTOR® – Tom Gilliam

Whether you are interested in buying a home in Farmington Hills, MI, or it’s time to list your current property, experience matters most in a changing market. Top-rated Farmington Hills REALTOR® – Tom Gilliam offers over 20 years of local experience, in-depth market knowledge, and access to the most up-to-date listings for Farmington Hill MI homes for sale.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right neighborhood or community.

2020 Best of Farmington Hills REALTOR - Tom GilliamIf you are ready to sell your home, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, etc.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. 

Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.

Search Farmington Hill MI Homes for Sale

Tom works very hard for his clients and will be there to protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure the best possible results. If you or someone you know is interested in buying or selling Farmington Hills MI real estate, please give top-rated Farmington Hills MI REALTOR® – Tom Gilliam a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Tips for Winning a Farmington Hills MI Real Estate Bidding War

Tips for Winning a Farmington Hills MI Real Estate Bidding War

Tips for Winning a Farmington Hills MI Real Estate Bidding War

After weeks, maybe even months, searching for a home in a low-inventory competitive market, you finally uncover the perfect home for your family. It’s in the right neighborhood, near top-rated schools, has the right number of bedrooms, and provides convenient access to everyday amenities. The house has everything you have been dreaming so you decide to make an offer. But, because of the current housing market, your Farmington Hills MI REALTOR® comes back with the news that several other buyers have also submitted offers on the home. Suddenly you find yourself in a situation with multiple buyers vying for the same property, otherwise known as a bidding war. 

With so few houses for sale today and historically low mortgage rates driving buyer activity, bidding wars are becoming the new norm. In a bidding war, each buyer will make a more attractive offer, often driving up the price beyond what it was listed for, in hopes of winning the home. Although bidding wars are more likely to occur during hot seller’s markets when there is less inventory for buyers to choose from, the quality of the property, the desirability of its location, and the strength of its school district can also increase the chances of a bidding war. If you do find yourself in a bidding war, there are some things you can do to make your offer more appealing to the seller than the other offers. 

Here are some things you can do to up your chances of winning in a multiple-offer situation:

Hire an experienced Farmington Hills MI real estate agent

If you are serious about winning a bidding war, it would be wise to enlist the services of a reputable, seasoned real estate agent. A qualified REALTOR® will have the experience and skills necessary to help you win in a multiple bid situation. They will also have extensive market knowledge, which is crucial in determining the fair market value of the home you’re interested in.

By enlisting the services of a Farmington Hills MI real estate agent, you can feel confident that you won’t offer more than the house is worth or more than you can realistically afford to pay for it. Your agent will give you much-needed advice and also ensure that all decisions made are in your best interest. Bidding wars can be challenging to navigate, especially if you’re a first-time homebuyer. It’s vital to do your research so you have a clear understanding of the process, the market, and the home you are interested in purchasing.

Waiving contingencies 

In a competitive market, buyers will often waive certain contingencies to make their offers more attractive to sellers. Contingencies in home buying contracts allow a way out for the buyer should there be unexpected issues with financing or defects with the property. By waiving certain contingencies—for example, your financial contingency (an agreement that the buyer will only buy the property if they get a large enough loan from the bank) or your inspection contingency (an agreement that the buyer will only buy the property if there aren’t any deal-breaker issues found during the home inspection) – you show just how serious you are about moving forward with the deal. 

Waiving contingencies can make an offer more appealing to the seller, but it can also be a risk for the buyer. If for example, you waive your inspection contingency and then find out during the inspection that the home has serious plumbing issues, you may have to sacrifice your earnest money to back out of the deal or pay for repairs once the title has been transferred. Although waiving one or more contingencies in a multiple offer situation could be the extra push needed to get the house you want, it ultimately comes down to how much risk you feel comfortable with.

There a number of different contingencies, but the three most common include the financing contingency, inspection contingency, and appraisal contingency: 

1). Financial contingency

One common strategy used to make an offer stand out from the competition is to waive your financing contingency. In a home sale and purchase agreement, financing contingency refers to a clause that states the offer is contingent upon the buyer securing financing for the property – a standard feature in most Offers and Purchase and Sales Agreements. If your mortgage is not approved for the amount of financing you need, the seller agrees to refund your deposit in full.  During a bidding war, waiving your financing contingency sends the message that you are confident you will get the loan no matter what.

With a clear picture of your finances and enough money in reserve, you can safely waive the financial contingency with minimal risk on your end. Of course, if you are paying for the home in cash, then financing is not an issue and you can exclude the financing contingency in your offer. Not only are you eliminating the need for a third party to get involved in the deal, but you’re also showing the seller that you mean business. There is a risk any time a lender has to get involved, so when you eliminate their presence, you eliminate the risk. 

2). Inspection contingency

In a standard real estate agreement, the buyer retains the right to back out of the contract if they find unacceptable issues with the property. This contingency allows the buyer to hire a home inspector to survey the home for damages before the deal closes. If major issues are discovered during the inspection, the buyer has the right to negotiate with the seller for repairs or back out of the deal. One safe way to waive your inspection contingency is to have a pre-inspection done on the property before ever making an offer.

If the report doesn’t reveal any serious issues, you can confidently waive the contingency with minimal risk. When a seller accepts an offer, their home is off the market. In a competitive market, the last thing the seller wants is to be waiting for an extended period of time for the inspection to happen. Make the contingency period no more than a week. If the home looks well maintained visually, it may be worth the risk to waive the inspection if you are confident you want the house no matter what. To minimize risk, the decision to waive inspection contingency should be made carefully and with the guidance of your real estate agent. 

3). Appraisal contingency

When an offer is accepted on a home, the lender will come out and appraise the property to determine its value. Mortgage lenders use appraisals to calculate the loan amount they will give buyers. If the appraisal falls short, the appraisal contingency lets the buyer cancel the contract rather than make up the difference in cost themselves.  If you waive this contingency, you are still responsible for purchasing the home if the loan does not work out – or you may be able to back out of the contract but lose your deposit. It is also possible the seller will decide to sue you if you break the contract.

That being said, more buyers these days are willing to waive appraisal contingencies to enhance their offer in a bidding war. Compared to a fully mortgage-contingent buyer, waiving the appraisal contingency is more attractive from the seller’s point of view because they have more certainty the deal is going to get done no matter where it appraises at. 

Waiving contingencies risk: Yes, there can be risk associated with waiving contingencies, but depending on the circumstances, a buyer might be in a position to do so.  When considering whether to waive contingencies, speak with your estate agent. They will be able to help you decide what’s best for you and help you determine if you are in a position to take on that risk. Your Farmington Hills MI REALTOR’s knowledge of normal practices and probable outcomes in the local market will make your offer more likely to succeed.

Up your offer

If you are set on winning a bidding war on a Farmington Hills MI property, your best bet is offering more money than the other buyers. Upping your offer doesn’t have to mean paying another ten thousand dollars or more. Sometimes, going up just a few thousand dollars can make all the difference between winning the bid on a property or losing out on it. One important thing to keep in mind when upping your offer is that just because you are ready to pay more for a house doesn’t mean the bank is. When it comes to your mortgage, you are still only going to be able to get a loan for up to what the house appraises for. So, if your higher offer gets accepted, that extra money might be coming out of your own pocket.

Pay in cash

This obviously isn’t going to apply to everyone, but if you have the cash to cover the purchase price, offer to pay it all upfront instead of getting financing. Not only are you eliminating the need for a third party to get involved in the deal, but you are also showing the seller that you mean business. Sellers typically prefer dealing with a buyer who can pay cash because they don’t have to worry about a potential buyer actually receiving the financing they need. There’s a risk any time a lender has to get involved and when you eliminate their presence, you eliminate the risk. According to a Redfin analysis of home sales over the past two years, buying a home without financing boosted a buyer’s chance of winning a bidding war by 97%.

Include an escalation clause

An escalation clause can be an excellent asset when trying to win a bidding war. An escalation clause is an addendum to your offer that states you’re willing to go up by X amount if another buyer matches your offer. More specifically, it dictates that you will raise your offer by a specific increment whenever another bid is made, with a cap. if winning a bidding war on a home is the end result you are looking for, there’s nothing wrong with putting it all on the table and letting a seller know how serious you are. Work with your agent to come up with an escalation clause that fits with both your strategy and your finances.

Be flexibility

The date of possession is often an important part of the offer in a multiple bid situation. Typically, the closing period lasts 30, 45, 60, or 90 days. Customizing the length of the closing to suit the needs of the seller can often help clench the deal over a higher offer. Sellers almost always want fast closings, usually 30 days. If the seller needs to coordinate selling with buying another home, or moving in a short amount of time, giving them the close date they want can often be the difference in getting the house or not.

If the seller needs a rent-back, you can offer to allow them to stay in the property after the close of escrow. Depending on the circumstances, you might charge them what your PITI (principal, interest, taxes, and, insurance) payment is or the local market rent rate. You can even consider giving it to them to enhance the terms of your offer, depending on the situation.

The takeaway

Bidding wars can be challenging to navigate, especially if you’re a first-time homebuyer. It’s vital to do your research so you have a clear understanding of the process, the market, and the home you are interested in purchasing. Finding experienced representation is the best way to ensure a smooth and successful transaction in a multiple offer situation.  If you are a first-time buyer or even a seasoned buyer, you should seriously consider working with a qualified Farmington Hills MI real estate agent you can trust, and carefully listen to their advice.

 

Partner with Top-rated Farmington Hills MI REALTOR® – Tom Gilliam

Whether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market. Top-rated Farmington Hills REALTOR® – Tom Gilliam offers over 20 years of local experience, in-depth market knowledge, and access to the most up-to-date listings for Farmington Hill MI homes for sale. Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right neighborhood or community.

2020 Best of Farmington Hills REALTOR - Tom Gilliam

If you are ready to sell your home, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, etc.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.

Search Farmington Hill MI Homes for Sale

Tom works very hard for his clients. He will be there to protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure a smooth and successful transaction. If you or someone you know is interested in buying or selling Farmington Hills MI real estate, please give top-rated Farmington Hills MI REALTOR® – Tom Gilliam a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

 

 

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