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Archive for May, 2011

Clarkston MI– Are Final Water Bills Settled At Close or Possession?

The question above, or variations of it, was a search term that was used a few times to find my seller blog this week. It’s a good question. After selling real estate for a while it’s easy to forget that most sellers only go through this every few years at most and often times as long as 10, 15 or 20 years since the previous real estate transaction.

The correct technical answer is– whatever is written in the purchase agreement.

Typically any past due bill will be paid at close and if there is any possession after closing, then there is a dollar amount escrowed until the seller moves out and a final water bill issued. The bill is paid out of the escrowed money and the rest returned to the seller. If there is no possession we try to get a final water bill for the closing and it’s paid from the proceeds. If that doesn’t happen for some reason, money will be escrowed until the final reading.

Jackie Hawley
Keller Williams Realty, Clarkston
cell: (248)736-6407
email:
Jackie@JackieHawley.com

A Tale of Two Taxes- How Property Taxes Affect Your Buying Power

Highest and Best are NOT Synonyms

Is the Appraisal for Your Protection?

What Happens if the Appraisal is Low?

If You Work As My Buyer’s Agent, How Much Does That Cost Me?

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What Is A Home Warranty And Who Pays For It?

I was going over an offer to purchase with one of my sellers recently and one of the things the buyer was asking for was for the seller to supply a 1 year home warranty. The seller asked if this meant she was responsible for any repairs in the house for the next year. And her question is quite common; I’d say 7 out of 10 sellers ask that same question.

So to the first part of the question- What is a home warranty? Basically a home warranty is an insurance policy that covers the house for 1 plus year after closing. Policies vary in costs; the one our office endorses starts at $375 for a 1 year policy with a $100 deductible. They tend to cover things such as heating systems, water heater, appliances, well pump, plumbing and such. Now this doesn’t mean if the furnace breaks you get a new furnace for a hundred dollars. They may pay a large chunk of it- there are limitations, $ caps, conditions.

Basically it’s an insurance policy, and you need to read everything before you fix or call in a problem. Follow their rules to a T and everything should go smoothly. Sometimes they end up being just a waste of money. Sometimes you end up saving a lot of money. Some would say that $375 is cheap peace of mind.

Who pays? That depends on how it is written in the purchase agreement. It can be part of the negotiation process just like asking for appliances, possession, price, etc. The seller usually has a bottom line in mind and will factor the cost of the home warranty right along with seller concessions, offer price, etc.

If a buyer wants to purchase their own home warranty they don’t need to make it a part of the offer to purchase. Their agent should be able to hook them up with a good warranty company.

Jackie Hawley
ReMax Encore, Clarkston
cell: (248)736-6407
email:
Jackie@JackieHawley.com

A Tale of Two Taxes- How Property Taxes Affect Your Buying Power

Highest and Best are NOT Synonyms

Is the Appraisal for Your Protection?

What Happens if the Appraisal is Low?

If You Work As My Buyer’s Agent, How Much Does That Cost Me?

Read Full Post »

What Happens if the Appraisal is Low?

Low appraisals (appraised value coming in lower than the agreed upon sale price) are becoming more common and will probably remain a problem for quite awhile to come. There are many reasons why appraisals can come in low, and it is usually NOT because the buyer was prepared to “over pay” for the house.

I used to define the word “appraisal” as an opinion of value. Back in the day the loan officer got to choose the appraiser; an appraiser on that lender’s approved list of appraisers. Most of the time a local appraiser was used, and appraisals were usually pretty accurate. In fact- contrary to recent pundit opinion– many appraisals tended to come in lower than they should have. Most of the time, the appraiser would justify the sale price, even if the buyer was buying the house at a bargain price.

Today I define the word “appraisal” as an opinion of value derived from data that fits a particular lender’s criteria. Also, because of fairly recent legislation (over the past couple years) the choice of the appraiser is taken away from the lender, and I have been seeing a lot of out of the area appraisers on my listings and when representing the buyer. On a recent purchase my buyers ended up paying for 2 appraisals- both licensed appraisers, both appraisals were within a week of each other- one came in at $300,000 and one came in at $362,000.

Buyers and sellers both want the house to appraise. Buyers are represented now ‘days, and their agent should advise them if they are over paying. Buyers are more savvy and educated than in the past, and by the time they make an offer they know what a house is worth. But the appraisal is usually needed to obtain a mortgage.

So what happens when the appraisal comes in low?

  • The seller can come down in price to match the appraised value
  • The buyer can pony up the difference
  • The buyer and seller can settle somewhere in between
  • The buyer can back out and the house go back on the market

The above scenarios assume the purchase agreement stipulates the house must appraise for at least the sale price. The purchase agreement I use lets the appraised value become part of the negotiations. For example the buyer may offer to pay $200,000 for a house but is contingent on the appraiser coming in no lower than $190,000. This can be very useful in a multiple offer situation.

There is no law that forces a seller to come down in price, just like there’s no law that forces the buyer to go through with the purchase if the appraisal is low. Some sellers can’t come down any farther and sometimes the buyer just isn’t able to pay the difference. This can be a real problem when seller concessions are needed.

Bottom line is: appraisals come in low way too often and there is no right or wrong way to resolve the problem. BUT don’t assume the seller will automatically come down in price because a third party doesn’t agree with the buyer or seller on the value of the home.

If You Work As My Buyers Agent How Much Does That Cost Me?

How Not to Buy a House

All About Short Sales and Why a Short Sale May be Wrong for You

Search the MLS

Jackie Hawley
ReMax Encore, Clarkston MI
cell: (248)736-6407
Jackie@JackieHawley.com
www.MiRelocation.com

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