Real Esatate Posts

You find the perfect house, make what you believe is a fair offer, wait on pins and needles to see if it is accepted, only to find out that someone outbid you. It begs the question: what is a strong offer on a home?

What to Do When There Are Multiple Offers on a House

When there are multiple offers on a house, buyers might have to bring more to the table, employ strategic tactics, and work with an experienced, full-time real estate agent. But one of the biggest questions buyers have isn’t just how much they’re willing to offer. They may have to decide how much they’re willing to offer over list price. And while there isn’t a perfect formula to help a buyer decide, there are several things to consider when creating a purchase offer that could help it stand a chance of winning a bidding war.

How Much to Offer on a Home

In some markets, offering a few thousand dollars over list price might be all it takes to win a bidding war. But in other markets, offering $50,000 over still won’t get the job done. Since real estate is a local endeavor, it’s critical to work with an experienced buyer’s agent that has a pulse on the current trends of your market.

When deciding on the offer price:

  • Have your buyer’s agent pull the localized data on recent home sales to determine what percentage of the list price the previous sales received.
  • Determine if the local comps support a higher purchase price than the current list price.
  • Evaluate how much liquid cash you have to pay over appraisal value if need be.
  • Before you agree to an escalation clause, make sure your agent fully explains how they work.
  • In most cases, you don’t get to know what others are bidding on the home. You are blindly bidding against someone else, so in this market, offer your best right out of the gate, keeping in mind that the highest isn’t always the best if it means you’ll wind up “house poor.”

Other Ways to Strengthen Your Offer

There’s a reason real estate contracts are several pages long, and price is only one small section in the offer. While presenting a strong purchase price is critical, there are other factors that make up a home purchase contract — which means there are other ways to strengthen an offer, even in a seller’s market.

Remove Contingencies

One of the biggest ways buyers weaken their offer is by including contingencies. The most common contingency is the home sale contingency—the purchase is contingent upon the sale of their home. While needing to sell in order to buy is common and reasonable, sellers may not want to entertain these offers if they can avoid it.

Buyers should consult their lender to see if they can safely purchase without having to sell. In addition, work with your real estate agent to determine a reasonable list price and sale price to get your home sold quickly. And while it’s not ideal, buyers should consider selling first and living in temporary or month-to-month housing while they search for a home to avoid having a contingency offer. If a home sale contingency is necessary, buyers can strengthen their offer by adding a kick-out clause.

Remove Requests

If you’re considering asking the seller to pay for your closing costs, you should rethink it depending on your local market. In a hot market, sellers may not be willing to consider requests for concessions. Before buyers begin their home search, they should educate themselves on the upfront costs of purchasing a home, and become familiar with loan programs available to buyers that assist with some of those upfront costs.

Forego Repairs or Offer a Repair Threshold

In a seller’s market, sellers are doing less and getting more. They’re not wanting to spend thousands on repairs, especially when there are plenty of buyers who would purchase their home “as is.” That said, offers that forego inspection and repairs or offer a repair threshold stand out among the crowd.

While waiving an inspection altogether can be highly risky (and is often not recommended), it does happen in some markets. But, if you still wish to have the comfort and protection of a professional home inspection without sabotaging your offer, consider an offer that specifies there will be no requests for repairs, or that you will request repairs only if they meet a certain financial threshold. This tactic gives buyers the protection of an inspection discovery while also reassuring the seller that they won’t be nickel-and-dimed on repairs.

Include an Appraisal Gap

In years past, the appraisal price was the dominant factor in the transaction and one of the biggest protections for buyers. In some markets, however, buyers may offer more than the home’s current value. By including an appraisal gap in a purchase offer, buyers can substantially strengthen their offer. An appraisal gap is when a buyer agrees to pay all or some of the shortage between the offer price and the appraisal value. It’s important to remember that banks will only lend on the appraised value, so any appraisal gap is the out-of-pocket responsibility of the buyer. We buy houses in Orland Park

What Not to Do in a Seller’s Market

The best way to get your offer accepted? Submit an excellent offer and keep it ethical. Submitting a subpar offer but including a buyer love letter is no longer the way to win a bidding war. Not only is it risky, but it can also potentially violate federal law. So forego the love letter and instead submit your strongest, cleanest offer for the best chance to stand out from the crowd. It might not be the most convenient scenario, but if you’re really wanting to buy, it could mean all the difference between getting that coveted house or staying in the search pool.

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ery homeowner who’s considering hiring a contractor to do some work in or around their house should make sure they’re familiar with their state’s mechanics lien laws before making a decision. Never heard of a mechanics lien? You’re not alone. Let’s uncover what it is and why you should protect yourself from a mechanics lien on your house.

What Is a Mechanics Lien?

If you wind up having a beef with the contractor you employ for builds or repairs – poor workmanship, perhaps, or maybe they walked off the job before it was completed or failed to finish the work in a timely manner as promised – and you decide not to pay, that contractor can respond by attaching your house to a legal claim for unpaid work until some kind of settlement is reached.

That could turn into a waiting game if you are not considering selling your home. But, if you intend to put your home on the market in the near future, that lien could stop you in your tracks.

What Happens If My Home Has a Mechanics Lien?

Sometimes known as a materialmans lien, every state has a a mechanics lien law granting tradespeople a way to protect themselves from those who fail to pay them for services and time rendered.

Here’s how Rusty Adams, a research attorney for the Texas Real Estate Research Center at Texas A&M University, described it in a recent edition of Terra Grande, the Center’s monthly magazine:

“It is an equitable interest that gives its holder the right to have satisfaction out of the property to secure payment on a debt. It is not title to the property, and a lien holder does not have ownership rights. Rather, it is an equitable interest that gives the lien holder the right to have satisfaction out of the property to secure the payment of a debt.”

In other words, it is an encumbrance the property owner must deal with, one way or another. Otherwise, it could result in a foreclosure and forced sale of your house.

How Mechanics Liens Work

None of what follows should be considered legal advice. Rather, it is intended only as a brief, mile-high overview.

A mechanics lien can be filed by anyone with a claim against the property. This concept isn’t new; for example, Uncle Sam can place a lien if you fail to pay your taxes, as can your state. Your homeowners association can do the same if you don’t pay your dues or a special assessment.

In the case of work done to your house, the contractor can file if you fail to pay, even if you feel you’re justified in withholding. The company from which he or she gets their supplies – roof shingles, for instance – can also file against your house if the contractor doesn’t pay them. And if the contractor uses subcontractors, they, too, can go against the house if the contractor doesn’t pay them.

The “very broad” law in Maryland “covers almost everything,” attorney Harvey Jacobs says. For example, if the developer doesn’t pay the paving company hired to cover your cul-de-sac, the company can file a mechanics lien against every house that touches that street. Ditto for the outfit hired to landscape, sod, and plant shrubs.

How to Protect Against Mechanics Liens

Fortunately, lien laws afford owners some protections. In some places, the amount owed must be of at least a certain amount. They also must be filed within a certain number of days from when the work was completed, and may require the property owner to be notified within a specified time that a lien has been filed.

The rules, which also apply to subs and suppliers, can be somewhat tricky for an owner to decipher. But the absolute best way to protect yourself is to require the contractor to provide lien releases before you pay anything more than your down payment. In other words, no draws or final payment until he or she certifies that everyone in the chain has been paid.

Often, says Texas attorney Adams, a notice of intent to file or the actual filing is enough to resolve the debt attached to the property without going through the process itself.

Once payment has been received, a contractor has a duty to remove the notice or the lien itself from public records. Failure to do so allows the property owner to file a lawsuit against the contractor to compel the lien’s removal. But to avoid that, Adams suggests making sure the release has been recorded.

Lien Releases vs. Lien Waivers

A lien release is not the same as a lien waiver. Nor is it the same as a lis pendens. While a release removes an existing lien, a waiver is an agreement that prohibits a contractor or supplier from placing a lien on the property. But some states don’t permit waivers at all.

lis pendens, which is Latin for “suit pending,” is a written notice that a lawsuit has been filed in the county land records office involving either the title to the property or a claimed ownership interest in it. The notice alerts a potential purchaser or lender that the property’s title is in question, making it less attractive, if only because the buyer or lender is subject to the suit’s ultimate outcome.

Beyond this, it is crucial for a homeowner to ensure the contractor, subcontractor or supplier has followed the rules of the road.  In Texas, said Adams, the claimant must give the appropriate preliminary notices, make the proper filing and give filing notice to the property owner.

In Maryland, the unpaid amount must be at least 15% of the property’s assessed value. So if the house is assessed at $100,000, the lien must be for $15,000 or more. “Small jobs don’t count,” Jacobs said. Contractors must also file a lien within 180 days of performing the work in Maryland, but subs must file within 120 days.

In neighboring D.C., though, there is no minimum to file, and the contractor, supplier or sub has only 90 days to file.

(Note: In the case of mechanics liens, property value is an evidentiary question. Courts often use assessed value in deciding whether a lien can be brought.)

In Texas, though, contractors aren’t required to provide a preliminary notice, but they are required to present a list of all subs and suppliers before starting work. But subs and suppliers who have a contract with the original contractor must send notices to both the contractor and the homeowner by the 15th day of the second month.

As you can see, once you get into the tall grass with mechanics liens, it becomes fairly complicated. It’s at this point that it may be time to consult legal counsel.

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