What is a Short Sale?  A Short Sale occurs when a home seller is allowed by their lender to sell the home for less than what’s owed on the mortgage.

If you are a home seller you may be thinking – I like that idea – not having to payback as much as I owe – well of course it’s not that simple.  Typically several things need to occur before your mortgage holder will consider a short sale:

1)  You are delinquent on your house payments

2)  You have no other assets or ability to cover what you owe

3) Short Sale is the only option to avoid Foreclosure

4) Lender considers short sale necessary and possible

Why would a lender accept less than what you owe? Foreclosures are expensive for the lender – as much as $50,000 or more when all is said and done.  If foreclosure is eminent then accepting a short sale loss may be less of a loss than foreclosure.

Lender’s are not required to allow a short sale – they are 100% in control – and if you have a 2nd loan, like a home equity loan – then both lenders have to approve the short sale.

Impact of a Short Sale to a Home Seller:

1)  Can not receive any money from the sale of the home at closing.

2) Credit will be damaged (typically less than a foreclosure)

3) Lender may file a deficiency judgment against seller for balance of their loss (difference between what they received at closing versus what the seller actually owed)

4) Short Sale may have IRS implications where forgiven debt is considered income – currently there is a moratorium against this – it’s called the Debt Forgiveness Act.

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Impact of Short Sale to a Home Buyer:

1) Offer to Purchase agreement is between buyer and seller, with a contingency that lender must approve

2) Purchase price will probably be less than market value

3) Can take weeks or even months for lender to approve

Bottom Line – Short Sales are anything but ‘Short’- They are complex real estate transactions - if you have any questions about short sales let me know!

Thanks for Reading our Cary Real Estate Blog. Post Authored By: David Williams

David’s a Licensed North Carolina Realtor & The Voice of CaryRealEstate.com

Most buyers really don’t know what to expect during the home inspection. Should they attend?  How long will it take?  Here’s a few tips to help you be prepared and know what to expect.

Should you attend the home inspection?     Yes.

If at all possible plan on attending the home inspection.  While it is not required for the buyer to be present during the inspection I’ve found that it helps.  You get to see the inspector working and can learn great tips about preventative maintenance items. How long will the inspection last?  Typically in the 2 to 3.5 hour range.

When do I pay? How much will it cost?  Be prepared to write the inspector a check at the time of the inspection.  The cost varies between inspectors and the size of the home – a good estimate is $350 – $500

Expect to sign a home inspection agreement with the inspector.  The agreement spells out the inspectors responsibilities etc.

The Home Inspector will be visually inspecting many components of the home, you will see them run the dishwasher, test doors, windows, electrical outlets etc.  They will move through the home systematically, making notes of their findings along the way.  The inspector will wait to go under the home last (if it’s a crawl space) – having already ran water in the sinks, flushed toilets etc it will be easier to notice a leak.

Remember the home inspector is working directly for you and is not tied to the sales contract in any way.  Here’s why that’s important, you may hear the inspector say something like, “The sellers will have to fix that”, not necessarily – while it may very well be a legitimate item that needs repairing, the seller is not obligated to make the repair – how you handle the findings from the home inspection report will depend significantly on terms in the offer to purchase.  The best way to handle this is to wait for the written home inspection report and then determine which items are of concern and how to address them with the seller.

Here’s a great way to mentally categorize things the home inspector finds or points out.  This is not an official method,  if you say to the inspector “Is that a category II finding?” it’s not going to mean anything, it’s simply intended to be a help as you process things the inspector finds.

Category I items:  think of these as recommendations – things the home inspector may point out that could be done to improve or extend the life of an item.  This is not really something you would typically ask the seller for, just good info to have.

Category II items:  minor items, again good to know but not really a substantial reason to be alarmed.  For example, a closet door latch needs to be adjusted.

Category III items:  in my opinion this is really why you are having the inspection,  items you want to be aware of before you decide to close on a home, for example, plumbing leaks,  broken heating or air conditioning system, foundation problems etc

With any home (even new ones) the  inspector will likely find a number of items to report.   It’s important to wait until the end of the inspection and look at the complete findings.

After the inspector is finished they will go over their findings with you verbally, followed by a written report, typically the next day.  The written report will show their exact findings along with photos.

Once you have received the written report you can evaluate and determine which items to request the seller to repair.  Please remember, usually there will be a date within the offer to purchase contract by which any repair request must be submitted to the seller.

The home inspector is reporting if a particular item or system is working or not – they will typically not get into what would be required to repair the item or the cost to do so.

Remember no home inspector is perfect and they don’t have x-ray vision.  A clean inspection is not the same as a guarantee.  Something can be working today yet break tomorrow.  Depending on the age/condition of the home you may want to consider a home warranty.

What is Earnest Money?

Who Holds the Earnest Money?

How Much Does the Earnest Money Deposit Need to be?

What happens to the Earnest Money if I Don’t Close on the Home?

These are all great questions that home buyers ask  before purchasing a home in North Carolina.  Here’s a typical scenario for a buyer purchasing a resale home in the Cary-Wake County-North Carolina area  You’ve found a home you’re interested in and ready to make an offer.  That first offer needs to be in writing – for a re-sale home here in the Cary area we’ll use the standard NC Offer to Purchase Contract.  Along with the written offer, you will write an earnest money check.

What is Earnest Money?

Think of earnest money as a deposit on the home, a show of good faith.  If/when your offer becomes a contract your money will be held in trust and subject to NC Trust account regulations.   At the time of closing the earnest money deposit will be credited towards your purchase of the home.

Who is the Earnest Money  Check Made Payable to?

Typically the Listing Company.  Most listing firms in the Cary area maintain a trust account for purpose of holding earnest money deposits, however some small firms choose not to maintain a trust account, in this case we can use the CaryRealEstate.com trust account or use the trust account of a local real estate attorney.

How much should the Earnest Money Deposit be?

Technical Answer, the amount of earnest money is negotiable between buyer and seller.  Real life answer, usually around 1% of the offer amount.  Think of your offer as a gift to the seller – the terms and condition of your offer are like the wrapping paper and bow.  The larger the earnest money amount the ‘prettier’ the bow.

What Happens to the Earnest Money if I Don’t Close on the Home?

Notice I saved this one for last?  The best answer here is, IT DEPENDS!  You, the buyer, may or may not be entitled to a refund of your earnest money – depending on why the closing did not occur – the offer to purchase is the guideline.  Here’s the catch – even though it may appear obvious that you are entitled to a refund, both parties (buyer & seller) must sign off on how the earnest money is  disbursed before the firm holding the earnest money can release the money.  If the parties can not agree then it can become a legal matter.

Could I write more about the intricacies & nuances of earnest money?  Absolutely.  Would you still be reading, probably not!  Please let me know if you have any specific earnest money questions that I did not address.

Please Note:  The North Carolina Real Estate Commission has a Question and Answer Brochure available here.

Looking at homes can be a challenging task with many factors to consider.    Here’s a very practical way of analyzing items/features about a home that you do not like.

I call it my ‘Flow Chart of  Elimination“  Catchy title right . . I know you’re excited.

So you’re out looking at a home and you see something that you do not like.

Question #1 Is it the house or the current owners decorating style/furniture?

Sounds silly but it happens all the time – a buyer will walk into a home and comment “I don’t like this at all, only to find out it’s actually the sellers taste in decorating!

Okay so you made it past number 1 – it really is something to do with the house/lot – lets proceed . . .

Question #2 Can it be changed?

This is a simple yes or no – for example a carpeted floor CAN be changed over to hardwoods BUT if the home backs to a busy highway that’s NOT going to change.

If the answer is a “No”, it can’t be changed then ask yourself   “Is this something I’m willing to accept / compromise on – if so keep looking at the property – it you are not willing to compromise or accept the item and it can’t be changed then move on to the next property!

If the answer is “Yes” – the item can be changed you have a new set of questions -

Are you Willing to Change the item and are you Able to change the item.

Willing:   If its changing the carpet over to hardwood then you are ok with spending the time finding a hardwood flooring contractor, meeting with the contractor, picking out your stain color,  dealing with the process etc

Able:  You have the financial resources to have the work done – remember most likely this will not be included in the purchase price/mortgage for the home.

If the answer to willing and able is yes then keep looking at the home.  If you’re a no on either willing or able then its  back to considering if you are willing to compromise on this feature.

This may sound like a formal and dry process but once you commit the concept to memory it’s very fast to process.  I hope this helps you in your home search.  If you’re looking for a home in Cary, North Carolina please let me know – I have more tips!

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This Blog Post Provided by David Williams, Broker/Owner of CaryRealEstate.com

David is a Cary Native and A Trusted Advisor / Friendly Authority on Cary Real Estate

Licensed NC Broker & Realtor

919-386-9101

David@CaryRealEstate.com

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