Rick Dulai

Real Estate Broker, Investor & Entrepreneur

Phone

(586) 997-9900

What to Consider When Writing an Offer

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There is a lot that goes into writing an offer when purchasing a home. Most people are just focused on the price and getting the best deal possible, however, there are many things to consider. Some of these effect the bottom-line number and others address other terms that are just as important.

What’s Included and What’s Not

The first thing is to make sure you are clear what is and isn’t included with the purchase. Our typical purchase agreement already includes things like surface and mineral rights. The purchase also includes things like built-in appliances (dishwasher, water heater, furnace, etc), shelving, cabinets, lighting fixtures, window treatments, etc. If you are expecting the kitchen appliances to stay, then you must explicitly list those items. Although any attached items should be included, I would list out any attached speakers or home theater equipment is you want it to stay. You may also explicitly EXCLUDE items. This means you do not want it and the seller is responsible for removing it from the premises before the closing. The seller might want to exclude appliances they intend to take with them (like a washer & dryer).

Purchase Price & Financing

I’m including these together because they many sellers may take a lesser offer price if the financing is stronger. In general, a cash offer is the best financing option. Typically this means the buyer doesn’t have to jump through hoops with a lender and an appraisal is not necessary. If the buyer is getting a mortgage, then the more they are putting down, the better their offer.

Earnest Money Deposit (EMD)

This is a deposit on the offer. It will be credited towards the buyer’s purchase. The EMD is usually contingent on the home inspection and financing (specifically the appraisal in most cases). The higher the EMD, the more serious the buyer. That is because once all of the contingencies are removed, the buyer is less likely to abandon the deal knowing they will lose the EMD.

Closing Date

Believe it or not, this could be a bigger deal than people realize. On the seller’s side, they might need time to arrange their move. So a quick closing isn’t necessarily desirable for them. For the buyer, however, that closing date could be based on the end of their current lease, the sale of their own home, the start of a job or the beginning of the school year.

Possession

In some cases, after the closing date is negotiated, the seller might need to remain in the property for a week, a month or even more. Possession is when the seller (previous owner) will hand over the keys to the new owner. If this is not happening at closing, then there is a daily occupancy rate the seller must pay to the new home owner. This amount is typically based on the new home owner’s principal, interest, taxes and insurance payments. However, this is totally negotiable. The new owner might want to collect more than that or maybe will accept less just to make the deal work.

Sewage & Water

You can negotiate who pays the sewer and water bill during any potential possession period.

Home Warranty

The buyer can request the seller to provide a home warranty. Who pays for the home warranty is totally negotiable.

Offer Time Limit

In order to put some pressure on the seller to decide before entertaining other offers, the buyer can put a deadline on their offer. This works well in a buyer’s market where the seller is desperate to get offers. However, in a seller’s market, a seller could ignore any expiration date/time on the offer knowing that you might still be interested whether they respond in time or not. So don’t put too much weight on this unless you know it will have the impact you are expecting.

Inspection Contingency

The buyer can sometimes increase the “attractiveness” of their offer by waiving the home inspection. However, I always recommend getting a home inspection (even if you want to waive the contingency). How much time you have to do your due diligence is another negotiable item. A seller could favor an offer with a 3 day inspection period over one that is 10 days.

City Inspections

Some cities require an inspection or certification. Who pays of it, who pays for any required repairs, etc are all negotiable.

Seller Concessions

For buyers that might need help with closing costs, you can negotiate a credit from the seller towards the buyers’ closing costs. This is typically applied towards closing costs, pre-paid interest, tax pro-rations, etc up to an agreed amount and not as cash back to the buyer at the closing. Use it or lose it.

Final Walk-thru

Typically scheduled within 24 hours of the closing, the final walk-thru is the buyer’s chance to check the property and ensure that everything is as expected. In most cases the buyer last viewed the property at the home inspection. The final walk-thru is to make sure that the property condition has not changed. It is not to see if they change their mind or not. Any repairs or unexpected changes can be dealt with prior to closing.

Contact me directly or visit my YouTube Channel for tips and important information when comes to buying or selling your home.

Pre-Qualification vs. Pre-Approval Explained

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One of the very first steps you should take as a home buyer is to speak with a lender to determine your buying power (what you can afford). Most people actually start searching online, sometimes months before they are ready to start the process. There’s nothing wrong with that. But, when it is time to get serious you need to know the difference between a “pre-qualification” and an actual “pre-approval”.

Pre-qualification

A statement from your potential lender stating that you can afford to purchase a home up to a specific amount is called a Pre-qualification Letter. The problem with this pre-qualification letter is that it is based on very minimal information (typically just your credit score and a few questions).

A pre-qualification letter is not an official approval. It typically states the conditions that are still required in order to actually pre-approve you for the amount stated. Typically these verification of income, debts and cash on hand (in your bank account).

Pre-approval

A pre-approval letter goes the extra few steps not covered above. The loan officer has done more than just check your credit. They have reviewed w-2’s, 1099’s or other income statements (like recent paychecks). They have also verified how much cash you have available for a down payment.

Keep in mind is that when you get a pre-approval, it is in the very beginning stages of your search. We have not identified a property, a purchase price or a timeline yet. As a result, we call this a PRE-approval.

Financing Approval

An actual approval comes once you have written an offer on a specific property with a target closing date. At that point, the loan underwriters will really dig into your debt and income. As a result, they’ll be able to determine if they will lend you the money for this purchase.

An approval is given after the property has appraised at value. This simply means that the appraisal came in at the purchase price or higher. There are other items like debt-to-income ratios. If everything checks out, the lender will approve your request for financing the loan.

My purchase agreement has a finance contingency in it. This allows you to cancel the purchase without penalty if the lender disapproves the financing request.

Sellers like to see offers accompanied with a pre-approval vs a pre-qualification. This is because they know a buyer that is pre-approved is more likely to get an actual approval once they go under contract. You want to set yourself apart from the crowd by making sure your offer comes with a pre-approval letter.

For more information and tips about purchasing your next home, please contact me directly or visit my YouTube Channel.

Home Selling Process Timeline Explained

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A lot of the anxiety and stress in the home selling process can come from not knowing what to expect next. In this article, I will break down the timelines and explain the most significant takeaways for each item.

Home Selling Process Timeline Breakdown:

  1. List the Property for Sale: Listing the property for sale includes much more than just meeting with your agent and filling out paperwork. There is a lot of prep work that goes into putting your house on the market. Cleaning, repairs & maintenance, photography, yard sign installation, lockbox access, etc are all parts of this first step in the process. You can read more about that here.
  2. Order Pre-title: I always like to order what we call “Pre-title” when the property is first listed. Basically, what that means is that I am asking the title company to do a preliminary title search on your property. This means that they will do a quick check to see who has claim to the title of your house besides you. Also, this gives them a chance to start your file. Now, when a buyer comes along, we already have a jump on things.
  3. Showing the Property to Buyers: Often the most showings (and best offers) come right at the beginning. As a property sits on the market it can lose its luster. However, it all depends on the market. DOM stands for “Days on the Market.” The average DOM for Oakland County is 36 days. To learn more about what to expect when showing your home, click here.
  4. Review Offers: If your agent has prepared you well, you should already have a good idea of what you will net at various price points. Most offers come with an expiration date/time. In a hot buyer’s market, that might be a matter of hours. In a hot seller’s market, it could be a day or two (or even more). So by this point, you might be 4-5 weeks into the whole process. To learn more about what to look for when negotiating offers, click here.
  5. Home Inspection: A typical home inspection period is 5-10 days from acceptance of an offer. Always pay attention to the wording of the purchase agreement regarding the timelines. Some purchase agreements just give a definitive amount of time to do the inspection and notify the seller whether the buyer is satisfied with the results or not. Other purchase agreements are worded such that the buyer has XX number of days to report their satisfaction. This gives the home inspector time to produce the report and the buyer time to review before notifying the seller. So keep this in mind. If you are keeping track, we would be about 6 weeks into the whole process at this point. To learn more about what to expect during a home inspection, click here.
  6. Appraisal: The lender will order an appraisal, once the buyer is satisfied with the home inspection and decides to continue with their purchase. The appraiser will schedule to view the home just like a showing. It usually takes about 3-4 days to get results back to the lender. To learn more about what to expect during an appraisal, click here.
  7. Lender Clear-to-Close: After the appraisal is in, the lender’s underwriter (the person that qualifies all the details from employment, income, debt, etc to approve the loan) will finish reviewing all of the borrower’s (the buyer’s) credentials and issue a “clear-to-close”. What that means is that all of the closing costs, interest rates, payments of principal and interest, etc have all been set and they have what is referred to as a “CD” or “Closing Disclosure”. This means the buyer side is ready to close and the file is passed on to the title company. This is typically 2-4 weeks after the appraisal is received.
  8. Title Company Clear-to-Close: Remember earlier in step 2 above I mentioned pre-title? Well, once an accepted offer was in place the title company goes to work researching the chain of title. This is to make sure they can provide the appropriate title insurance for the transaction. The title company in Michigan becomes the central hub for the closing. Essentially the buyer, seller, listing broker (seller’s broker), selling broker (buyer’ broker) and the lender all coordinate with the title company. If the title company has completed its research and is ready to issue a policy and the lender has already sent their clear-to-close, then the title company will let everyone know that they are also clear-to-close. The title company only needs about a week or so after the lender is clear.
  9. Schedule Closing: The title company then coordinates the closing with the listing and selling brokers/agents. The agents will coordinate with their respective clients. Typically the closing takes place at the listing agent’s office or at the title company. The title company will send out closing packages for the sellers and the buyers. The numbers are based on the actual closing date for accurate pay-offs, interest payments and other pro-rations.
  10. Attend Closing: Most closings take place 4-6 weeks out from an accepted offer. At this point, we are at about 8-9 weeks into the process (based on the average DOM). A typical closing will have the title company rep, the sellers, the listing agent, the buyers, the buyer’s agent and sometimes the loan officer. So it can be a roomful! A typical closing can take anywhere from 45 minutes to 2 hours. Timing al depending on the amount of paperwork and how much time everyone needs to review all of the documents. I would say the average closing is just about an hour.

I hope this helps you understand the timeline to sell your house a little better than before. Don’t forget to visit my YouTube Channel for more tips and information.