Home homebuyer aug01

homebuyer aug01

August, 2001 Newsletter


+++++++++++ August 2, 2001 +++++++++++++++++++

CONTENTS:
Introduction: Home Sales Remain Brisk
Mortgage Rate Update: A Break in Rate Increases
Recent Site Updates: Timeline for Buying a Home
Quick Links
This Month’s Tip: Changing Your Mind

Introduction

Welcome to the August edition of the Home Buyer’s Information Newsletter.

Continuing to defy many forecasts, home sales (both new and resale) have remained strong through the early summer. Fortunately, though, we have seen a bit of easing in the price appreciation run ups of the last year. This stability works in the buyer’s favor in a couple of ways: First, it means that less buyers get overpriced out of the market and second, it means fewer of the crazy “bidding wars” that were common in some areas of the country. When prices get out of control due to bids that take the sales price considerably over the listing price, the “winner’ is frequently the loser.

Mortgage Rate Update: A Break in Rate Increases

Late July has seen a break in the upward mortgage rate trend seen thus far this summer. Mortgage company Freddie Mac reports that as of July 26th, 30 year fixed- rate mortgages averaged 7.03%, down from 7.11% one month earlier and down considerably from the 8.13% rate of one year ago. 15 year fixed rates averaged 6.58%, down slightly from the 6.63% rate of late June.

Many analyists are predicting that rates will stay in the same general range (low 7.00% range for 30- year fixed-rate mortgages) for at least the forseeable future, regardless of what happens with the Federal Discount Rate. Be aware, though, that if the economy begins to re-energize, rates will likely rise in step with economic conditions.

For more information on mortgages, visit the Mortgage Section at:
Mortgage Information

Recent Site Updates:

Timeline for Buying a Home
A sample guide for how much time is needed to buy a home, from the initial decision to purchase all the way through the time of closing. Home Buying Timeline

Quick Links
Quick access to many of the resources available on The Home Buyer’s Information Center Quick Links

You can always find out “Whats New” at the Home Buyer’s Information Center at the following location: Site Updates

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This Month’s Tip: Changing Your Mind

Several times a week, we get questions from visitor to the Home Buyer’s Information Center that go along the lines of “We’ve made an offer on a house and the seller has accepted it. We’ve now found a house that we like better. What are the procedures for getting out of the first deal?”

Ouch. There really aren’t many opportunities to get out of a legally binding contract (which this would likely be) and none of them involve a simple change of mind or heart.

Many of these potential buyers are convinced that there is some sort of law or regulation that will allow them to back out of the deal simply because they have changed their mind. Some will say “we have a friend who told us that we have 3 days (or 3 weeks or 3 months) to cancel a Real Estate contract if we have decided not to proceed.” Simply put, such a law does not now (and never did) exist. We’re fairly certain that this misconception comes from the 3-day Right of Recission law that only applies to contracts for purchases made in your home (this is a protection against pushy door-to-door salespeople). It has absolutely no effect on Real Estate purchase transactions.

An offer to purchase a home, then, should never be taken lightly. With the approval of a seller, the offer, in the majority of cases, becomes a binding and enforceable contract. An offer should never be made to “test the waters” unless a buyer is absolutely certain that they want to purchase the home. With the simple stroke of a pen, a seller can accept the offer and, unless there are conditions or agreements to the contrary, the buyer will be required to complete the purchase.

NOTE: This legal contractual protection applies to both sides of the agreement: A seller, likewise, cannot negate a contract due to change of mind, which is protection for the buyer.

More information on the site:
Offers
Contracts

The Potential Consequences

Due either to ignorance of contract law or bravado, some buyers will still attempt to walk away from a legal and binding contract. They may attempt to do this either without an Attorney’s advice or, sometimes against it. Although there are no absolutes (occasionally a seller will allow a buyer to back down) the potential consequences can be severe. Not only is any deposit tendered with the offer at risk, such a buyer can be subject to further legal proceedings. These can include judge ments for damages due to the fact that the seller was unable to market (and find another buyer for) the home during the time that the contract was in force.

None of the above is meant to imply that a buyer will be forced to purchase a home with defects, for example, or one for which they are not able to secure a mortgage–if such concerns are specifically addressed in the offer and the contract. Any offer should reference such items as a whole house inspection to the buyer’s approval or financial considerations such as approval of a mortgage acceptable to the buyer including a maximum interest rate and number of points. Once these contingencies or conditions are accepted as part of the contract, they become a safety valve that protects the buyer from being forced to proceed with a purchase that is clearly not in their best interests.

It is of utmost importance, then, to incorporate any such conditions into any offer, since they give the buyer some breathing room. If, for example, a qualified home inspector finds a major defect such as a cracked foundation and the seller refuses to make repairs (or to monetarily make compensation) the buyer would not be required to buy the home. Likewise, if the offer and contract had a provision for a mortgage rate under 8% with no more than 2 points, a buyer would not be forced to accept a 10% mortgage plus 3 points. Any offer should also reference mortgage approval, so that a deposit would not be lost if the buyer cannot be approved for a mortgage.

An important note: Most contracts will have wording that will limit these contingencies to prevent, for example, a buyer not securing mortgage approval simply because they never applied. Or, doing something (like not producing requested tax returns) to torpedo the application. A buyer must make every reasonable effort to live up to their end of the agreement. Intentionally sabatoging an element of the contract as an attempt to negate it can leave the buyer exposed to legal proceedings.

Summing Up

Buying a home has very little in common with most other consumer purchases, which frequently can be negated. When making a purchase offer for a home, a buyer must understand that they are making a legal–and enforceable–commitment that cannot be made to disappear simply because there was a change of heart or mind. This is why it is critically important to have all “homework” done BEFORE entering into an agreement. Also, since there are so many legal considerations involved, it is important to have professionals such as Agents and Attorneys on your team. With so many laws, regulations and disclosures involved, it can be foolhardy for a buyer to attempt the process alone.

Next months topic: Mortgage Qualifying

As always, if you have suggestions for improving the site, or topics you would like to see addressed in this newsletter (or, if you have used the Home Buyer’s Information Center to successfully purchase a home), access our feedback page at: Home Buyers Information Center Feedback

A special thanks to all those who have written to let us know that they have found the Home Buyer’s Information Center a helpful resource in their buying process.

Have a great month of August and good luck in your home buying process!

The Team at the Home Buyer’s Information Center

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