When it comes to buying a home, some of us don’t have a choice about how we’re going to pay for it. We will, of course, be taking out a mortgage! But many buyers, especially CAPE buyers who are often retirees or investors, DO have a choice between cash and a mortgage. So what should you do?

Well, first. You should consult your financial advisor before assuming that you know the correct answer. Even if you have the cash readily available, a mortgage might make more sense, given your specific financial goals, circumstances, and intended use of the house.

In most cases, though, paying by cash offers many advantages over taking out a mortgage, assuming you are in the position to do so. Here are just a few of the more obvious ones:



 

• Sellers LOVE cash buyers. Cash buyers tend to close more quickly because there is no mortgage contingency which can ruin a deal as much as 6 weeks after accepting the offer. That means the seller’s home has been essentially off the market for all that time, causing the seller to miss out on other buyers. Even if the buyer is financially qualified for the mortgage, the deal can potentially fall apart if the home does not appraise for at or above the selling price. Cash buyers don’t pose this risk, although a cash buyer is certainly welcome to insert their own appraisal contingency.




• Cash buyers can buy ANY property. Many of the best real estate deals are distressed properties that are in poor yet reparable condition. These properties are often difficult to finance, yet may represent a great investment opportunity. A cash buyer can do whatever he or she wants with his or her money.




• Cash buyers aren’t mandated to carry flood insurance. Many homes on the Cape are located in flood zones that require flood insurance by lenders – even if the home has never experienced a flooding event. Cash buyers can make their own decisions regarding flood insurance. There is nothing forcing them to carry it.

Many Cape buyers who DO require financing but have substantial equity in their primary home choose to refinance or take out a home equity loan on THAT property in order to buy the Cape house with cash, and thus realize all the benefits listed above. Again, how best to finance your Cape Cod home is a very personal decision that is based on your own specific needs and situation, and should be discussed with your financial advisor for proper guidance regarding your options. If you don’t have a trusted advisor, contact Sarah Robinson, Certified Financial Planner, at Robinson Financial Solutions.

Whether you will be paying by cash or with a mortgage, you want to be sure you are getting the home at a fair price. Be sure you are working with a good Buyer’s Agent who can educate you about the selling price of similar homes that have recently sold. This will help you make a decision regarding the fair market value of the property you are pursuing. Please contact me anytime for assistance. It would be my privilege to help you procure your dream house on Cape Cod.

If you’re actively looking for a home on the Cape but haven’t found it yet, then you might be planning to continue shopping this Summer. Lots of new listings are coming online daily, and one of them just might be your dream house. But shopping for a home during the summer months on the Cape is different than all the other months. Be sure to read the tips below to help avoid unnecessary frustration.

Number One – Plan Ahead. During the off-season, it’s usually possible to get into homes with very little notice. Many of our Cape homes are actually vacant during the off-season. Many of them are on lockbox. And Realtors tend to be more available in the off-season. None of these are necessarily true in the summer. Homes that were vacant are suddenly filled with vacationers. Lockboxes have been removed because the homes are now occupied. And Realtors, like all other Cape residents, have guests and plans and are not necessarily available at the drop of a hat to show properties. Contact your Realtor at LEAST a few days in advance to see if it will be possible to see the homes that interest you.

Number Two – Shop on Saturday. If you are planning to come for a day to look at a variety of homes, the best day to do that on the Cape in the summer is Saturday. The reason for this is that many homes that are for sale are also being rented. These homes can typically be shown during a very small window on Saturdays in between rentals. We call this the “turnover time”. Plan to look at these homes between 1 and 3pm. That’s your best chance of getting in after the cleaning crew has left and the new tenants have yet to check in.

Number Three – Open House Etiquette. It’s common for Buyers to attend an Open House unaccompanied by their Realtor. That is of course, no problem. However, you should be sure to write your Realtor’s name on the sign-in sheet and make it clear to the host of the Open House that you already have a Realtor. Else, if you decide to make an offer on that particular house, your Realtor may run into trouble trying to act as your representative. Just write your Realtor’s name on the sheet and you should be covered. And be sure to let your Realtor know if you wish to make an offer.

Number Four – Pack Your Pre-Approval Letter. If you’re coming to the Cape on vacation and plan to seriously shop for a home while you’re here, be sure to bring your pre-approval letter. The best homes go FAST – sometimes within just days of being on the market. If you see something you love and want to make an offer, your offer will be incomplete without your pre-approval letter and the Seller will likely choose someone else’s offer that HAS a pre-approval letter. If you’re paying cash, be sure to bring “proof of funds”. A simple bank statement showing that you have the funds to buy the home will suffice. Black out your account number with a Sharpie and make a copy.

Number Five – Prepare Your Phone! With new listings coming online daily, you don’t want to miss a great new listing that came on the market just before you left the Cape. Be sure you are receiving Daily Alerts and while you are on the Cape, be sure you are receiving new listings the MOMENT they hit the market. Your Realtor can help you get your phone set up with the best App for your needs. A smart phone comes in REALLY handy when shopping for homes while you’re vacationing on the Cape.

Following these steps will go a long way toward helping you find the perfect Cape house while shopping this summer. Good luck and I hope to have the privilege of assisting you!

If you’ve been actively searching for a home on Cape Cod, you’ve most likely discovered that shopping for a home on the Cape is fun! After all, what’s not to love? Exploring beautiful, oceanfront neighborhoods; touring the wide variety of homes for sale; checking out the closest beaches; browsing the shops in the nearby village; and simply imagining yourself living in your dream home. It’s all good! Until you actually FIND your dream home. Then the fun quickly turns to stress as you transition from the shopping to purchasing phase.

Suddenly, you find yourself staring at a fully-executed offer sheet that is riddled with deadlines: a deadline for inspections, a deadline for the signing of the Purchase and Sales Agreement (P&S), a deadline to put up more money, and most importantly, (and unless you’re paying cash), a deadline for the mortgage commitment. The latter will require you to produce a seemingly endless trail of paperwork. You can significantly reduce your stress during these critical few weeks by getting as much of your paperwork as possible ready in advance. We call this paperwork your “green file”, and it should contain at least the following for each applicant whose name will be on the mortgage:

• Copy of your driver’s license.
• Most recent 2-3 consecutive months of statements from each of your financial asset accounts, including checking/savings, investments, IRAs, 401(k)s, CDs, etc.
• Proof of down-payment and closing costs. Lenders will want to follow the paper trail of any and all monies you’re using at closing, including the down-payment. It is best to have this money in a single liquid account for at least 2 months prior to your mortgage application. If all of the money cannot be traced in the above-referenced accounts, you need to account for it. If some of it is a gift from a relative, you need to provide proof of where it came from and also proof that it does not need to be paid back (via a Gift Letter).
• 2 years of W2s and tax returns.
• 2 months of most recent pay stubs.
• Names and addresses of employers for two years.
• If self-employed, year-to-date profit and loss statement, plus signed returns for last two years.
• If applicable, documentation related to any of the following: pension income, Social Security and Disability payments, dividend earnings, bonuses, child support payments and alimony payments.
• Information on debts, including car loans, student loans, credit cards, mortgages, etc.

Having these documents ready in advance will substantially reduce your stress level and make the home buying process far more enjoyable from beginning to end. After all, you want to spend your pre-closing time picking out paint colors, shopping for furniture and planning your move – not searching your basement for old bank statements and tax returns!

For more specific detail about what will be required in order to approve your mortgage, consult your mortgage lender. If you don’t have one, your Cape Cod Oceanview Realtor will be happy to introduce you to several reputable lenders who can help find the best loan for your needs.

If you’re one of the many Cape Cod home buyers who are shopping for a home today but not planning on purchasing until you retire, you might want to consider the benefits of buying your Cape Cod retirement home sooner rather than later, if you are in the financial position to do so.

First, while nobody knows for sure what home prices will be like at any particular point in time, history tells us that over time, real estate prices inevitably rise. By buying today, you are locked in at today’s prices instead of tomorrow’s. If you are putting money away for your retirement anyway, perhaps you should discuss with your financial advisor whether or not it makes good financial sense to put some of it toward a mortgage on your retirement home, which can be paid off when you eventually sell your primary residence. If you have solid equity in your primary residence, you might even consider tapping some of that equity to use as the down-payment on the Cape house. Not only will you get into the Cape market at a likely lower price, but you will have the home to enjoy until you are ready to retire.

If you feel your finances are just a little too stretched to support both your primary residence and your eventual retirement home on the Cape, remember that Cape Cod is a vacation destination and most homes on the Cape have rental potential. Of course the exact value of the potential depends on many factors, including how close the home is to a beach. But even homes that are inland can typically be rented in the summer if the price is right. This means you can likely use some rental income to offset the cost of your annual mortgage, and STILL have the home available for your own personal use. Many homeowners on Cape Cod only come down during the shoulder seasons and rent their home during the peak summer weeks.

Finally, if you typically vacation on the Cape each year through a summer rental, remember that by buying your own home on the Cape, you may be saving several thousand dollars each year that you would typically be handing over to another homeowner to rent THEIR home and thus pay THEIR mortgage. That “vacation fund” savings, combined with the potential rental income, could go a long way toward paying for your own place.

While buying a retirement home early isn’t for everyone, it may be the perfect plan for you – one that allows you to get into the market at today’s prices, enjoy the home periodically until you are ready to retire, and use potential rental income and your vacation budget to take a bite out of your mortgage payment. It’s an idea worth discussing with your financial advisor, who can help you evaluate the pros and cons of buying your retirement home sooner rather than later. Good luck and whether renting or buying, we hope to see you on the Cape soon!

On the heels of the Federal Reserve’s most recent rate hike, which takes its key rate to the highest it has been since the housing crisis, it’s important to understand its likely impact on mortgage rates and on your buying power if you are in the market for a new home.

But before panicking, be aware that mortgage interest rates won’t necessarily react immediately to this week’s news. The Fed controls the short-term rates which typically have a longer term impact on mortgage rates. Plus, the recent rate hike by the Feds has already been at least partially baked into today’s interest rates, which are a good point higher than they were a year and a half ago (hovering around 4.5% versus 3.5%). Still, experts believe that mortgage rates could be a good deal higher by the end of 2018, falling anywhere from 4.7 to 5.9% (source: Realtor.com).

If you’ve been searching for the perfect home on the Cape for more than a year, not only are you impacted by rising prices (largely due to inventory shortage), but if you are planning to take out a mortgage, your buying power may be impacted by the slow but continual rise in mortgage interest rates.

Consider a buyer who eighteen months ago was approved for a $500,000 mortgage at 3.5%. Her monthly payment (principle and interest only) would have been $2245. Today, with interest rates hovering around 4.5, that same monthly payment will only get her a $445,000 mortgage – more than 10% less than what she could have afforded 18 months ago. This might be OK if sale prices were falling, but they are not. They are slowly rising, along with interest rates. If she doesn’t find the perfect house until the end of the year, and if rates are at 5% by then, her $2245 monthly payment will only support a $420,000 mortgage. With prices slowly rising at the same time, that buys you less house than today’s $445,000 and a LOT less than $500,000 from 18 months ago.

This is not to suggest that you should buy the wrong house simply to buy it quickly. But when you are shopping for homes and weighing the pros and cons of each, be sure to factor in the effect of rising prices and interest rates, the longer you wait. You may pass up an ALMOST perfect home today and have to settle for even less by the end of the year. When searching for a Cape Cod home, be sure you are considering ALL your options and carefully weighing the impact of acting vs. waiting.

For professional assistance buying your Cape Cod home, please contact me and be sure you are signed up to receive Daily Property Alerts which email all the latest listings to your mailbox each day. We can’t change today’s inventory, but we can help ensure you are not missing new listings when they hit the market. Contact me today to get started. It would be my privilege to assist you.

If you receive our monthly newsletter, you already know we’ve been in somewhat of a Seller’s market for nearly a year now. But that doesn’t mean you still can’t get the perfect Cape Cod home at a fair price! Here are some tips to help guide you.

Know the Market

Be sure you are staying on top of the market, so that when the right home comes along, you’ll not only be one of the first to see it, but you’ll also have a good sense of what it is worth in the current market. The best way to do this is to sign up for Daily Alerts so that you see all new listings that meet your criteria right when they hit the market. Timing is everything with new listings. Nice homes that are reasonably priced go quickly.

Know the House

Once you find the perfect house, be sure to learn as much as possible about it to help you formulate a winning offer. How does it compare to similar homes that have recently sold? This will give you an idea of its TRUE market value. How long has it been on the market? Depending on the house, you may not have much negotiating power with a brand new listing. The Seller is likely going to take their chances that a better offer will come along. But if it’s been on the market for a while, the Seller will likely be more motivated to negotiate and you are less likely to find yourself in a bidding war.

Know the Cost of Upgrades

Homes that have been recently updated typically go more quickly and for top-dollar because many buyers – especially many CAPE buyers who are frequently retirees or second homeowners – don’t want to deal with the hassle of renovations. A home that isn’t perfect but COULD be perfect with some updating and upgrades could be the right house and will likely provide more room for negotiation. Make sure you have a good sense of what the upgrades will cost and make your offer with this in mind.

Be Realistic

Don’t sit around waiting for the deal-of-the-century to come along. With inventory so dramatically low compared to previous years, it’s not likely to happen. In the meantime, prices are rising and so are interest rates. So your buying power could be weakening the longer you wait.

Be Ready

As we discussed in our January post, you want to be ready to act as soon as you find the right house. That means having your financing lined up, have all your funds in the right places, and have as few contingencies as possible. In a Seller’s market, many Sellers – especially of new listings – won’t be keen on potential show-stoppers such as a home sale contingency or a lengthy closing date. But as noted above, if the house has been on the market for a while, you may have more negotiating power.

A good Buyer’s Agent can assist you with all of the above. Please contact us for assistance in buying your new home. It would be our privilege to assist you.

After months or maybe even YEARS of looking, there’s nothing more frustrating than missing out on the Cape Cod home of your dreams because you couldn’t act fast enough when the perfect home hit the market. Being ready means having all your ducks in a row so that you can make a solid offer immediately that stands a good chance of being accepted by the Seller. Here are some tips for making sure you are THAT kind of ready.

Get Pre-Approved.

If you plan to take out a mortgage to buy your home, you will need a pre-approval letter from a lending institution and it must be CURRENT. If the one you have is more than 60 days old, you should have your Lender issue you an updated letter immediately. An offer that has a mortgage contingency yet no pre-approval letter will not be considered complete by most Sellers. You do not want to lose a house to another buyer, just because you couldn’t get your pre-approval letter in time. It generally only takes minutes on the phone with your Lender, so don’t put it off until you find your home.

Plan for Downpayment Liquidity.

Ideally, whatever money you plan to use for your downpayment should already be in an easy-to-access account that is in YOUR name. If you will be receiving gift money to buy the house, be sure you tell your Lender that when you are getting pre-approved.

Know the Market.

You may have found the ideal house, but do you know what it is worth? No matter how much you love it, you don’t want to overpay. While you are waiting for the perfect home to come along, be sure to keep in touch with the market, which means knowing how much similar homes in similar neighborhoods are fetching. This will help you act quickly and put together a solid, realistic offer when the right home comes along.

Have a Good Buyer’s Agent.

Most buyers benefit from working with a conscientious, trusted, local real estate professional who is acting as their Buyer’s Agent. Your Buyer’s Agent will not only help you search for the ideal home, but can also help you with all the issues addressed above.

Get Your Home on the Market.

If you need to sell a home before buying one, you should get your home on the market to hopefully avoid the need for a Home Sale Contingency in your offer. Most Sellers do not like home sale contingencies and some will not even consider an offer that has one. If you are worried that your existing home will sell before you find a new home, you could make your acceptance of the Buyer’s offer contingent upon you finding a new home. Depending upon your financial circumstances, you might also consider a bridge loan to finance the new home. But be wary of over-extending yourself. Your home may not sell quickly (if at all) and it may not sell for as much as you had hoped. Consult your Lender and/or your Financial Advisor for guidance.

Most importantly, be sure the perfect home doesn’t escape you because you weren’t actively looking for it! Be sure your Buyer’s Agent has you registered for Daily Alerts so that you receive daily emails with all the new and updated listings. Happy House-Hunting!

Part I of this 3-part series on Offers discussed the offer price, while part 2 discussed the numerous dates associated with the offer. This final piece discusses the various contingencies, if any, that are associated with your offer.

So what is a contingency? Simply put, it’s a condition that must be met in order for you to agree to proceed with the purchase of the property. There are some standard contingencies that are frequently included in offers, depending upon the Buyer’s circumstances and wishes. These include:

• Inspection Contingency – The majority of Buyers opt to have the home inspected by a licensed home inspection professional before proceeding with the sale as originally written. If you are unhappy with the results of the home inspection, this contingency allows you to get your deposit money back and terminate the deal, or to attempt to renegotiate the offer based on new information that you had no way of knowing prior to the inspection.
• Mortgage Contingency – If your purchase of the property requires you to take out a mortgage, the mortgage contingency protects your deposit money in the event you are turned down for the mortgage by the bank. You will not lose your deposit if your mortgage application is denied, as long as you have fulfilled the obligations in the Offer and/or Purchase & Sale Agreement.
• Home Sale Contingency – While not as common as the inspection and mortgage contingency, a Buyer may have to include a home sale contingency if they are unable to purchase the property without first selling a home they already own. Sellers sometimes refuse offers with home sale contingencies because they don’t want to miss out on another “ready, willing and able” Buyer who could close more quickly. But there are ways of reducing the risk to the Seller, such as the incorporation of a “48-hour kickout clause”. The bottom line is that if you can’t afford the new home without first selling the old one, then you really have no choice but to include a home sale contingency. Thus, it is not a contingency of choice, but rather one of necessity.
• Condo Docs Contingency – If you are buying a condominium, it is common to include a contingency that provides you with a specified timeframe to review the condo docs to be sure you are comfortable with the condominium association, its financial stability, rules & regulations, etc.

The above are all common contingency clauses that are frequently included in offers. But you could place any contingency that you want on your offer. You could state that your offer is contingent upon not closing for 6 months. You could say it is contingent upon the dead tree in the front yard being removed prior to closing. You could stipulate that it’s contingent upon your mother approving of the house when she arrives from Italy in 3 weeks. The Seller, of course, does not have to agree to any of the conditions. The more “unusual” and uncertain, the less likely it is that the Seller will agree. Uncommon contingencies should be used sparingly if you want the Seller to accept your offer.

Before closing, it’s important to highlight the most important quality of an offer, and that is its owner. This is YOUR offer, it is not your Realtor’s. YOU are the one buying the house. And while your Realtor may advise you on all aspects of the offer, it needs to reflect YOUR terms and YOUR wishes. So before you sign your name to the bottom and hand over a deposit check, be sure you’ve read everything carefully and that you understand and agree with everything stated therein. Good luck!

In Part 1 of this 3-part series, we discussed the most obviously important aspect of your offer – the PRICE! This month we’ll cover a less obvious but equally important topic – the DATES.

Offer Dates

When making an offer on your Cape Cod home, there are numerous dates that must be identified and all are important. Here’s a quick description of each.

Expiration – This is the date and time at which the offer expires. The Seller must reply to you by this date and time, or technically, your offer is off the table.

Inspections – This is the date by which you will complete your inspections of the property. A period of 2 weeks after the acceptance of the offer is usually allocated for any and all inspections.

Inspections Response – This is the date by which you must respond to the Seller about the inspection if you wish to back out of the deal or request any concessions from the Seller. If this date comes and goes and you do not say anything to the Seller, it is assumed that you are proceeding with the sale, and failure to do so could result in the forfeiture of your initial deposit. We will discuss this further next month.

Purchase & Sale – This is the date by which you will sign a more elaborate and detailed contract with the Seller known as the Purchase & Sale Agreement (or P&S for short). This is typically done within 3 weeks of the initial offer being accepted and AFTER you have had your home inspection. But there are no firm rules and there are always exceptions. Your attorney is heavily involved with the preparation and review of the P&S on your behalf.

Mortgage – When a purchase involves a mortgage, the offer will specify a date by which you must have a mortgage commitment from your Lender. This is typically 3-4 weeks after the signing of the P&S, depending on how easy your loan is likely to be. A mortgage commitment is FAR different than a pre-approval. It is given to you by the Lender after they have completed a forensic review of your financial profile and background. Once you have a clean mortgage commitment from the Lender, you will soon be ready to close on the house. Another date specified in this section is the date by which you must have submitted at least one mortgage application. This date frequently coincides with the P&S signing date, since most lenders don’t start working on the application until they have a signed P&S.

Closing – This is the date that you plan to close on your mortgage (if there is one) and take possession of the home.

If your offer is accepted by the Seller, you should of course do your best to meet all the deadlines laid out in the offer. However, it is not always possible, and in those cases, the Buyer can request an extension to one or more dates. For example, after your standard home inspection, you may wish to order a pest inspection based on termite damage uncovered during the home inspection. This may require an extension to the inspection deadline. Or your mortgage lender may require a little more time before granting you a firm commitment, in which case you would need to request an extension to the mortgage commitment deadline. These are common occurrences, but keep in mind that the Seller doesn’t HAVE to agree to any extensions. So be sure you are always operating with the phrase “Time is of the essence” in mind.

Stay tuned for the final part of this series which will further explore the various Contingencies associated with your offer.