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Week of June 3rd-9th
Property Tips and Tricks
Cash Rules in Home Purchases
Imagine waking up one morning and scrolling through Zillow, only to stumble upon a listing that seems too good to be true.
Could this be your dream home? Excitement builds as you rush to schedule a showing, but you soon realize that you're not the only one vying for this property – there are already numerous other buyers jockeying for position.
You manage to secure the next available time slot, rearrange your schedule, and visit the home, only to confirm your initial suspicions – it is indeed the perfect house for you. Now, the race is on to make an offer that stands out from the competition.
The All-Cash Offer Dilemma
In your eagerness to secure the property, you consider making an all-cash offer, hoping it will give you an edge over other buyers. However, you quickly realize that you haven't fully prepared for this scenario. Should you sell stocks and pay capital gains to buy in cash? Explore a line of credit? Obtain a mortgage pre-approval? The opportunity is unfolding rapidly, and you don't want to miss your chance. The question lingers: can you make an all-cash offer but still secure a loan? The answer is both yes and no, and it's crucial to understand the nuances.
The Legalities of an All-Cash Offer
If you make an all-cash offer, you should have the funds readily available and be prepared to pay for the home entirely in cash. If your offer stipulates cash but you fail to follow through, you could be in breach of contract, and the seller may decline the sale and retain your earnest money deposit.
Delayed Financing: A Potential Solution
While it's possible to obtain a loan within the specified escrow period, it's essential to keep all parties informed and obtain their agreement. The seller has the right to walk away and keep your earnest money if they don't approve of your plan to secure financing after making a cash offer. Alternatively, you can explore delayed financing, which involves closing the purchase with cash and obtaining a mortgage later. This option allows you to secure the property first and then refinance it with a mortgage.
Waiving the Mortgage Contingency
Instead of making an all-cash offer, you could consider waiving the mortgage contingency. This approach involves letting the seller know that you plan to obtain a mortgage, but if you're unable to secure financing, you'll still pay cash. Combining this strategy with a strong earnest money deposit could make your offer more attractive to the seller. This strategy requires you to proceed with caution - if you decide not to proceed with the deal due to inability to obtain a mortgage, your earnest money deposit could be at risk.
Final Thoughts
The pursuit of your dream home can be an exhilarating yet challenging journey, especially in a competitive market. While an all-cash offer may seem like a surefire way to stand out, it's crucial to understand the legal implications and potential risks involved. Exploring alternative options, such as delayed financing or waiving the mortgage contingency, could provide a more viable path to purchasing the property without compromising your financial stability. Ultimately, the key to success lies in being well-informed, prepared, and working closely with experienced real estate professionals who can guide you through the intricate process of securing your dream property.
Real Estate News
The More Things Change, The More They Stay The Same
In California, the current housing market shows homes priced at 8.2 times the median income, which is 17% above the historical average ratio of 7.04. While it's not for me to declare if this indicates an overvaluation, it's worth noting that in 1963, California constructed 331,000 homes—a time when its population was just half of today's. Fast forward to last year, and the number of homes built was only 120,000. This stark contrast highlights the basic economic principle of supply and demand shaping our market.
As we delve deeper, we observe that in May, close to 25% of national listings—and 19% in California—saw price reductions, marking a 300% increase from pandemic levels. This trend points to sellers adapting to a shifting landscape, striving to differentiate their offerings amidst a burgeoning inventory.
High interest rates continue to deter prospective buyers, as evidenced by the decline in mortgage applications—a forward-looking indicator of home sales in the coming months.
On the topic of mortgages, approximately 40% of households hold one, with 92% of these being fixed-rate mortgages. Such rates are advantageous when sufficiently low, influencing how buyers evaluate homes based on mortgage payments, property taxes, and insurance costs.
However, not all ownership costs aren't static. For instance, in Texas, homeowners face escalating foreclosures as variable expenses like property taxes and insurance have nearly doubled, leading to a significant uptick in monthly housing payments. These rising costs are a concern for many.
Despite these affordability hurdles, real estate remains the favored long-term investment among various income groups. A recent Gallup poll revealed that people are nearly twice as likely to choose real estate over stocks for long-term financial commitments.
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Jonathan Balog
DRE# 01980970
Broker
M: 831.747.0310
[email protected]
Compass is a real estate broker licensed by the State of California operating under multiple entities. License Numbers 01991628, 1527235, 1527365, 1356742, 1443761, 1997075, 1935359, 1961027, 1842987, 1869607, 1866771, 1527205, 1079009, 1272467. All material is intended for informational purposes only and is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to the accuracy of any description or measurements (including square footage). This is not intended to solicit property already listed. No financial or legal advice provided. Equal Housing Opportunity. Photos may be virtually staged or digitally enhanced and may not reflect actual property conditions.
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