There are two main types of real estate transactions; cash and financed.
Cash transactions can close much more quickly than financed, but they will not close in a matter of days from contract. The necessary steps between contract and closing for a cash transaction are: Inspection, sometimes a survey and title. The inspection period is typically between seven and 14 days. During that time the buyer will normally have a right of refusal if the inspection reveals anything unacceptable. In some cases there are negotiations to remedy issues that are revealed as well, but they don’t stop the clock unless both parties agree to an extension of the inspection period. Once the inspection/right of refusal period ends, the buyer is obligated to purchase under the terms of the contract. In our experience, the title search can be as quick as a few days or as long as 15 days. During that time the title company will make sure that the seller has a clear title to the property and that there are no outstanding liens on the property. If any title issues are found, they must be corrected before the agreed to closing date on the contract unless both parties agree to an extension of closing. Since inspections, survey and title can be done concurrently, closing can happen as quickly as seven days from the date of contract. Naturally there are exceptions, but seven top 15 days is what we consider normal for a cash transaction.
Financed transactions take longer because there are more steps. Financed transactions typically take between 30 – 45 days with some being as quick as 20 days, but those are uncommon.The steps in a financed transaction are: Pre-approval, which is normally done before the contract is accepted, Inspection/right of refusal, appraisal, providing documentation to the lender, survey, underwriting and finally, closing. In a financed transaction, the inspection/right of refusal period is typically between 10 and 14 days. As with a cash transaction, once the inspection period has passed, the buyer is obligated to purchase unless they are unable to obtain financing after diligent efforts in which case the contract can be cancelled. Likewise, lenders will not loan more than the appraised value of the property. If the appraised value is less than a predetermined percentage of the purchase price, either the buyer or seller will have to make up the difference for the transaction to move forward. Failing to appraise is usually another acceptable reason to cancel the contract. If you’re the seller, it’s important to price the property appropriately. Even if your Realtor manages to find a buyer willing to overpay, their lender will not allow them to finance above a percentage of the appraised value. If this happens, the parties will have to re-negotiate or cancel the contract.
No matter what type of transaction, what the contract says goes. The only way to change what is agreed to in the contract is by a written addendum agreed to by both parties. All of the stated deadlines, terms and conditions are serious and failure to perform may have consequences. For that reason it is vital to have a competent Realtor to help the buyer or seller make sure every detail is taken care of correctly so there are no delays in closing. The Realtor, lender and title company should all work together to make sure everything goes as planned. Not every seller is willing or able to extend a closing date.
By Chuck Vosburgh, Realtor, NextHome Gulf to Bay
Home sales are up substantially but there’s something missing – first time home buyers. Normally, first time home buyers represent about 40% of primary home purchases. This year they represent 32%, the lowest number since 1987 when first time home buyers represented 30% of the market.
Low interest rates and a healthy job market would mean more first time home buyers, but there are a number of obstacles facing today’s first time buyer. According to the Nationals Association of Realtors, 25% of would-be first time home buyers reported saving up for a down payment was the biggest obstacle. Increasing rents and debt conspire to keep many out of their first home. 58% reported that student loans are delaying their ability to save so they are waiting until their debt is at a more manageable level. With a median student debt of $25,000 combined with high consumer debt, for many it will take years.
So who’s buying?
Most buyers are people taking advantage of high values on their homes and using the equity for down payments to trade up or down. Married couple represent 67% of buyers with their higher purchasing power. Married repeat buyers have the highest income among buyers with an average of $108,600.
Home values are expected to continue to rise and interest rates are predicted to remain low keeping existing home owners in a good position to purchase their next home. For first time buyers, the best course of action is to reduce debt as quickly as possible and begin saving.
Want to know what your purchasing power is? Have questions? Just ask. It’s free and no strings attached. Call 727.743.1740 or email Chuck@VosburghandVosburgh.com