BASICS Series: What is a Good Faith Deposit?

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Welcome to HouseHunt’s BASICS Series, where we take a look at the questions of every homeowner and potential homeowner.

If you’re a first-time buyer, you can get very far into the process before you first hear the term ‘good faith deposit.’ This can be frustrating because it’s basically extra money you spend on the front-end (when you’re already tight on finances) in order to be taken seriously as a new buyer. This post will take a look at what you need to know about this often overlooked term.

good faith deposit BASICS Series: What is a Good Faith Deposit?

What is a Good Faith Deposit?

A good faith deposit is often called an earnest money deposit. This is money that is submitted at the same time as the contract with your proposal and offer. The reason for this extra cash is to show that you are serious as a buyer. It says, “I want your property, and I’m willing to prove it by putting up some cash (in good faith) before we even get around to the down payment.”

Sure, you’ve already been pre-qualified and pre-approved, but frankly that only matters to the banks and brokers. For the people actually selling their home, all they care about is green. Putting some money in view right off the bat is a customary step that will make your offer as appealing as possible.

The good faith deposit is not to be confused with a down payment. There are probably ways to sneak into the contract that your earnest money is a portion of a down payment, but that likely won’t work in your favor. Both will ultimately go towards paying off that house, but they are viewed by the seller as two separate entities.

How Much is It?

As with a down payment, there is no set amount for a good faith deposit, but there are recommended amounts to a) appeal to the seller, and b) protect yourself.  It is also important to remember that this amount varies greatly depending on if you’re operating in a buyer’s or seller’s market. If there is more inventory than there are buyers, your good faith deposit becomes a lot less significant!

1-3% of the cost is customary for an earnest money contribution, although you could technically offer as little as a dollar. Your real estate agent will know the best offer given the market conditions. Since the seller is required to handle closing costs, they are often looking for a good faith deposit that will cover that portion.

How to Go About It

The name “good faith” indicates that you are good for the money you’re offering on the home. However, it also implies you’re being vulnerable with this money. Don’t worry! That is not the case!

The earnest money does not go directly to the seller. It goes to a reliable third party, usually the escrow office. As the buyer, you are also advised to obtain a receipt for your deposit. This ensures that if, for any reason, the contract doesn’t go through, you can get your money back!

Because it tends to be a smaller amount, the good faith deposit is usually overlooked in the real estate transaction discussions. Regardless, we don’t want it to sneak up on you when you already have so much going on to try to close on a home! We hope that this brief overview of the subject empowers you to go into the process more aware. Once this is on your radar, you can let your Realtor handle the details, and you’ll be in your dream home in no time.

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How a Closing Can Go Wrong [Infographic]

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If you think everything will run smoothly once the closing date has been scheduled, then we need to talk! Anything can still happen. Let us tell you how a closing can go wrong.

Closing 2 How a Closing Can Go Wrong [Infographic]

What Could Go Wrong at a Closing?

1. Financial Problems: The buyer may not have the funds available to cover the closing costs.

Tip: Ask your lender to give you a rough estimate before closing day.

2. Your Loan: The loan can be denied due to changes in income, credit or missing documents.

Tip: Avoid big purchases and changing jobs. Also, be sure to bring all of your documents with you.

3. Title issues: The title may not be cleared because of existing liens, unpaid taxes or another claim on the property.

Tip: Do a title search and buy title insurance.

4. Closing in Escrow: There could be a hold up on the closing date if the transfers are not done immediately.

Tip: Arrange for money to be transferred to the closing agent the day before.

5. Final Walk-Through: The buyer notices recent damages or missing items.

Tip: Don’t sign any papers until you’ve checked everything.

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Permanent link to this article: http://www.househunt.com/news-realestate/closing-can-go-wrong/

Does Homeownership Really Offer Social Benefits?

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Every few years, the National Association of Realtors releases a study about the social benefits of homeownership. It is a comprehensive study that looks at homeowners versus renters in regards to their education, civic engagement, and overall well-being. The study proposes, as you see in the infographic below, courtesy of the California Association of Realtors, that owning real estate improves socioeconomic standings in almost every way.

In this article, we intend to delve into those social benefits and open discussion as to whether the relationship between homeownership and status is as dependent as the study suggests.

SocialBenefitsIG ColorPaletteC alex.edits 12 7 11 Does Homeownership Really Offer Social Benefits?

The Supposed Social Benefits

The first item the graphic looks at is the education of children in of homeowners. They have higher achievements in math and reading, fewer behavior problems, and a lower dropout rate.

In terms of civic participation, homeowners are more likely to vote, volunteer, and get to know their neighbors.

Lastly, those who own their own real estate report a higher quality of life, self-esteem, and a feeling of control over the direction of their lives.

All these things sound great, but is it possible that they’re not consequences of homeownership? Perhaps it’s even the other way around? Could homeownership be a result of civil engagement and a high quality of life?

 

A Shift in Perspective

It may be unnecessary that real estate professionals feel the need to sell the idea of homeownership at all. Many studies indicated that, even after the burst of the housing bubble and the subsequent recession, owning real estate is still very much the American Dream. Even with millennials – often referred to as the renter generation – 93% of people plan to own in the future, even if that’s not a feasible present reality.

So why don’t those wannabe-homeowners just go buy a home? It’s a culmination of a bunch of different factors. Many don’t have a spouse or family, so they lack the urgency to make such a hefty investment. Many haven’t settled down geographically in order to feel confident in a purchase. Or lastly, many are younger in the job market and lack the financial means to accomplish such a long-term goal.

For example, people who are constantly travelling won’t invest in real estate and also won’t engage as much in their neighborhood, since it’s only temporary.

Sure, the social benefits are perfectly legitimate. The statistics certainly aren’t fudged and the pros are obvious. It’s worth considering, however, that they are not benefits of homeownership. They are simply supplemental facets of a stage in life when homeownership is a reality.

Here at HouseHunt, we love homeownership as an goal and homeowners as people. But instead of viewing ownership as the fountain of all things good in your life, it could be healthier to view it as a result of many other wise choices and investments. If you take away all the lofty ideals of homeownership, it could be less intimidating to new buyers and give young people a sense of direction for where they should be heading in order to achieve their goals.

What do YOU think? Is this approach too cynical? Or are real estate professionals just subject to skew perspective in order to benefit the nationwide dream of homeownership?

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Permanent link to this article: http://www.househunt.com/news-realestate/homeownership-really-offer-social-benefits/

BASICS Series: What is Escrow?

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Welcome to HouseHunt’s BASICS Series, where we take a look at the questions of every homeowner and potential homeowner.

In the hit 90s sitcom Friends, there is a scene where a couple of the gang are planning to move out of the city. When assured that they won’t be moving too far, dim-witted Joey replies, “It’s not close. You said it was in escrow? I can’t even find that on a map!”

Although everyone knew to laugh at Joey’s misunderstanding, the truth is a lot of people who haven’t been through the home-buying process really don’t know how to define escrow. Truth be told, even those who have bought a home and dealt with the process may still have a lot of questions about exactly what is escrow.

what is escrow BASICS Series: What is Escrow?

The Definition

Escrow is the neutral third party where money is held while waiting for the completion of an agreement. Escrow is a good thing that protects both the buying and selling parties in a real estate transaction.

After the seller has accepted an offer, the buyer’s money is held in escrow while a whole bunch of boring real estate-y work happens behind the scenes. The escrow office looks at buyer finances, verifies all proper disclosures, ensures negotiation stipulations were met, etc.

Who exactly is this third party? There are actual escrow offices that focus specifically on this process. The process can also be conducted by a title company. Often, real estate agents have specific companies or representatives that they like to work with. Ultimately, the decision of which escrow office to go with lies with the buying party. No buyer can ever be forced to go with the company of a seller’s choosing.

For the buyer, escrow ensures that all of your terms are met before the sellers can take your money. Everything that was discussed in your contract will be combed through to make sure the seller doesn’t short change you in any aspect.

For the seller, escrow makes sure you actually get your money!

The Timeline

No matter which end of the transaction you’re on, you’re probably ready for escrow to get a move on. So how long does escrow take? Well, just getting a standard home loan takes about 11 days, so you can expect escrow to take at least that long. If it’s an all cash deal, that could very well be the end of the process. Otherwise, it could range anywhere from two weeks to a month, depending on circumstances.

The process is dependent on many different factors. The most common reasons escrow takes longer than expected is if contingencies are not met, repairs need done, title and tax statements are not signed by both parties promptly, etc.

No matter the timeline, it’s important to remember that the escrow process is there to protect you. A home is one of the biggest investments you could ever make, so escrow is your buffer to make sure there are no nasty surprises on the other side.

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Permanent link to this article: http://www.househunt.com/news-realestate/basics-series-escrow/

How to Be Safe in Your New Home [Infographic]

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When buying a new home safety is always an important factor. Here are some helpful tips on how to be safe in your new home.

Safety4 How to Be Safe in Your New Home [Infographic]

Be Safe Than Be Sorry

1. Do Your Homework- Research the crime rate in the neighborhood(s) you are considering.

2. Introduce Yourself- Get to know your neighbors and exchange phone numbers in case there’s an emergency.

3. Checkout the Landscaping- Be sure your landscaping is maintained. Overgrown bushes give burglars the best hiding spot.

4. Check All Windows- Install windows with built-in window stoppers.

5. Test Your Fire Detectors- Insert newer batteries and make sure all fire detectors are working properly.

6. Inspect All Mechanical Features- Make sure the electric system is NOT outdated to avoid fires and carbon monoxide poisoning.

7. Secure All Doors- Check the deadbolts, make sure you have heavy duty locks on your doors.

8. Consider a Security System- Have one installed before you move in.

You’ve Been Warned

34% of burglars enter from the front door.

23% of burglars enter from back door.

23% of burglars also enter from the floor window.

7% of burglars enter from the garage.

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