The Massachusetts South Shore Real Estate Blog: How to Approach Low Inventory to Thaw a “Frozen” Market

Anyone with familiarity with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at three strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

One Day Exclusive Listing Offers:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter, often as simple as a post card from your local office supply store, stating that they are an agent with a Buyer who is interested in homes in the area. The Agent will represent list the recipient’s home for a single day to allow for an offer from their Buyer to be submitted.  Even if the Buyer does not make an offer, very often the Seller will ask the Agent to list their house because their mindset has shifted. The Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either Sells a house or gets a listing: this is a truly a win, win, win situation.

Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should consider including a home sale contingency with their offer to mitigate the risk of not being able to sell their home. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. The spectrum of possible contingencies shifts the risk from the Buyer to the Seller. In a Seller’s market, it’s unlikely that a Seller will agree to number four. Number one generally leaves the Buyer too exposed: the Buyer’s buyer may terminate after conducting a home inspection. Generally, number two or three is a fair option that Buyers and Sellers can accept. Be aware that a Seller may send a counter offer with a “Kickout Clause.” Generally speaking, a kickout clause allows the Seller to continue listing the house for sale, during which time the Seller receives a bona fide offer that is higher than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

Negotiate a Suitable Housing Contingency:

Many Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to Sell. As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. Usually, Buyers will accept numbers two or three, as they fairly spread the risk between the Buyer and Seller. The benefit of spreading the risk is that Buyers that would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, increasing inventory generally.

Above all, Buyers and Sellers who are motivated to move need to accept some degree of risk. Thinking creatively will help to increase inventory in this period of high demand. While not a panacea, the three strategies that we’ve listed will help to thaw today’s frozen market.

 

 

 

 

TRID One Year Later – The Sky Isn’t Falling After All

It’s officially fall and kids are settled back in school. It’s about time that we called attendance for Real Estate 101. Today, October 3, 2016 is the one year anniversary implementation of TILA-RESPA Integrated Disclosures rule (more widely known as “TRID”). We have all had a year to experience the new closing process and one thing is clear: “the sky isn’t falling” as many had predicted it would. This week, we’re going to cover four of our top thoughts dealing with TRID.

  1. Borrowers Are Not Being Told (or Are Not Appreciating) How Important it is to Acknowledge the CD: real estate professionals realize that acknowledging the CD is an important milestone on the path to closing. Without this important step, a closing may not occur. Borrowers are often sent a link for acknowledgment without further instruction or any warning that missing the midnight deadline will result in delaying closing. Astute Real Estate Professionals would be well served to send a simple reminder as to the importance of this task.
  2. Credits and Commission Statements are Often Provided Too Late:
  3. Generating a New Closing Disclosure is Common, Triggering a Waiting Period is Not
  4. Back to Back Closings Remain Challenging:

Massachusetts South Shore Real Estate Blog: Back-to-Back Closings

Buying and Selling a house can be a stressful, time consuming event. Very often, a Buyer/Seller will experience both on the same day. When a person sells and buys on the same day, they are said to have closed “back-to-back.” There are many moving parts: lenders funds, buyers funds, movers, recording, final walk-throughs, and the list goes on. It is, unfortunately, often the case that the second transaction is not recorded on the closing date. This often causes tempers to flare and Buyers left scrambling. This week, we’re going to tackle a few tips that will help ease the logistic burden of closing a back-to-back transaction.

  1. Be Flexible: This is quite possibly the most important tip we could give. Flexibility comes in many forms. Perhaps closing at an unusual location could result in a smoother transaction. Perhaps conducting your walk-through the night before the closing date could free up additional time. Flexibility serves two purposes: 1) it allows the process to flow more organically. Stubbornly holding onto preliminary closing times and locations can actually lessen the likelihood that the second transaction will be recorded as originally planned. 2) Being flexible helps to garner goodwill with the other parties involved in the transactions. A Buyer who agrees to meet at a time and place convenient for the Seller is often repaid with flexibility in terms of moving in early.
  2. Remember that Recording and Transferring Funds is Not Instantaneous: In order for a closing attorney to record a deed, that attorney must be “funded”; that is, the attorney must have the lender’s funds and the Buyer’s funds in their escrow account at the time of recording. In the case of a back-to-back closing, funds from the first transaction must be sent to the closing attorney for the second. There are two sources of delay: 1) recording the first deed can take time because of the need to wait for funds or for the act of recording to be completed, and 2) wire transfers through Fedwire (the Federal Reserve Bank’s funds transfer system) usually takes an hour or two to be completed. With all of these steps, recording the deed for the second transaction can often be delayed.
  3. Negotiate a Use and Occupancy Agreement at the Time of the Offer: a Use and Occupancy Agreement allows a Buyer to move in early or a Seller to stay after closing. Rather than trying to record both transactions on the same day, consider building an extra day into the schedule by either asking to stay after your sale or move in prior to your purchase.
  4. Plan to Stay at a Hotel for One Night: Moving is stressful. Nothing is worse than having the sinking feeling of having no where to go when your purchase can’t be recorded on the day of closing. Consider scheduling your purchase a day or two after your sale and booking a hotel for a night or two. Your movers will gladly hold your items for a modest fee, usually a couple of hundred dollars. With any luck, the hotel that you choose will have a spa where you can enjoy a well-deserved massage between closings.
  5. Do Not Close on Friday or the Last Day of the Month: I think this may be the most common tip that I give to Buyers and Sellers: Do not close on the last day of the month. I’m going to borrow from a former First Lady: “just say no.” For various reasons, which we’ve outlined here, Buyers see a false economy by closing on the last day of the month. The problem is that lenders are usually very busy, registries and recording ques are filled, and closing attorneys have less time to devote to your file. Even closing a few days before the end of the month or on a random Wednesday tends to result in smoother, more timely closing.

While back-to-back closings pose several challenges, they are certainly possible. Careful planning, flexibility, and a few tricks helps to reduce stress, resulting in a smoother selling and buying process.

Click here to get to know our team.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

Massachusetts South Shore Real Estate Blog: Repair Negotiations 101 for Buyers

Nothing causes more hassle in the purchasing process than negotiating repairs after a Buyer’s home inspection. The scene is recurring: Buyers see their dream home at an open house, they spend twenty minutes walking around among their fierce competition, and then make a strong offer as quickly as they can. After a few rounds, their offer is accepted; then reality sets in. Their home inspector finds a myriad of latent defects which leave the Buyers reeling. What is a Buyer to do? This week, we’re going to tackle the psychology and logistics of negotiating repairs when buying a home.

Position your Request Strategically:  Remember that this is a negotiation, not a Seller obligation. It may be the case that the Buyer “wants” certain repairs completed, but the Seller needs to understand why. First, be sure to explain that the defects were latent or not easily noticed as they were certainly factored into the Seller’s pricing strategy. The apparent defects, peeling paint, outdated kitchen, and cracked tiles should have been factored into your initial offer. It is much more compelling to explain to the Seller why you could not have seen the defect that is causing you to revise your offer. Second, as soon as possible, send a proposal that is concise, professional, and understandable. Rambling emails, with misspellings and exaggeration, do nothing but anger the Seller. Third, be realistic. Some Sellers are incapable, for physical, logistical, or financial reasons, of making repairs. There is a difference between asking for more than you expect and overreaching. Fourth, the repair items may have been disclosed and factored into the price. Avoid the impression that you’re “double dipping.” Fifth, no house is perfect. Demanding the Seller deliver a perfect house is unrealistic. Finally, negotiations will often boil down to a simple question of whether you want to fight for sport or get the deal done.

Include the Repairs in the Purchase and Sale Agreement:  You may be advised to keep the repairs from the bank since “it might complicate things.” Our advice is to be fully transparent with your lender. While it may be aggravating to pay for a re-inspection by the appraiser, it is far better than allegations of mortgage fraud or violating consumer protection laws. Keep everything above board and disclosed.

Don’t Ask for Repairs:  You read that correctly. Sellers have a lot to do and most do not have the time and some do not have the money to make extensive repairs prior to closing. By getting, thorough, written, reasonable quotes from licensed service providers and proposing the Seller cover some or all of that expense by reducing the price or providing a credit, it gives the Seller the most flexibility with little effort. A credit, with the lender’s approval, is an appealing option as it will generally leave the Buyer with additional funds to complete the repair after closing or to compensate the Buyer for the effect that a repair item has on property value. One quick pointer: Sellers will often foresee your concern with a particular issue and gather quotes in anticipation of negotiation. As a Buyer, you may want to ask the service provider to state, in writing, that they will honor the quote for some period of time. It is unpleasant for Buyers when the cost of a repair balloons after a service provider refuses to honor their previous quote.

By following these tips, you maximize your chances of having the Seller agree to your proposed repairs or concession. Many deals fall apart during this stage of negotiation. By approaching with strategy, diligence, and integrity, a Buyer will be best positioned to have their proposal accepted.

Click here to get to know our team.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

Bob ThawAnyone involved with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at five strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

  1. One Day Exclusive Listing Agreements:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes, if any, to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter stating that they are an Agent of a Buyer who is interested in their home. The Agent will represent/list the recipient’s home for a single day to allow their Buyer to view and potentially submit an offer and as an additional benefit to the Agent, even if the Buyer does not make an offer, for whatever reason, the Seller will often ask the Agent to list their home for sale because now their mindset has shifted due to the excitement of moving. Result: the Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either sells a house or gets a listing: this is  truly a win, win, win situation.

2. Technology/Social Media: 

One may take the “old school” approach of actually knocking on doors and asking if the owner is interested in selling; and it may work. With social media as a platform to broadcast a desire or need, it’s easy for an Agent to post what their client is looking for, perhaps enticing an otherwise non-selling homeowner to sell their home. For example: “I have a Buyer looking for a 3 bedroom home with a yard big enough for their dog in Mytown, USA.” As an additional benefit, you are marketing and developing your brand as a Real Estate Agent. Friends who didn’t know you were an Agent will be reminded by such posts. Use technology and creativity to “manufacture” inventory and develop your brand.

3. Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should make an offer which includes a home sale contingency with their offer. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. Sellers should bear in mind that while inventory is low, there’s a good chance that the Buyer will sell their own home quickly assuming their home is properly marketed at a realistic price. The Seller’s agent may be able to evaluate the Buyer’s marketing strategy and home to get a better sense of how likely it will be to sell at the Buyer’s listing price.

Notwithstanding, Sellers may also choose to include a “Kickout Clause” in their counter offer. Generally speaking, a kickout clause allows the Seller to continue listing their house for sale, during which time if the Seller receives a bona fide offer that is stronger than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

4. Negotiate a Suitable Housing Contingency:

Many Sellers are saying that “If I found the right house, I would sell mine.” Those Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. (Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to close on their sale.) As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. The benefit of sharing the risk is that Buyers who would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, thus, increasing inventory.

5. Disclose the Seller’s Time Requirements:

Finally, a Seller may choose to disclose on the listing that they need more time than is customary between signing the Purchase and Sale Agreement and closing: sixty days or even longer is not unreasonable when properly disclosed. Many Buyers are flexible and wouldn’t mind extra time if it means buying the home of their dreams.

While the above strategies do not present a complete panacea, using one day exclusive listings and strategic contingencies can help to bring homes that would otherwise stay off the market, into the market. The common thread between these five strategies is creativity. Creative thinking can help to thaw the frozen market, benefiting Buyer, Sellers and even Agents, alike.

Click here to get to know our team.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.