Contingent Offers

One of the more complex parts of real estate is the contingent offer.  In this post, I will explain the details of how a contingent offer works.

The first step is defining what a contingency is, as there is a difference used when speaking of the language of contingencies in a contract and a contingent offer.  Contracts have various contingencies in them, like the inspection or the appraisal.  A contingency is something that creates a dependency, meaning that the transaction will not be completed until the item is fulfilled.  For example, once the repairs have been negotiated and agreed upon, the contingency of inspection is removed, and the process moves forward.

When we speak of a contingent offer, we are talking about the need to sell a property before another property can be purchased.  If you want to make an offer on a property but you need to sell your current property first, we write up a contingent offer.

There are two parts to the contingent offer.  The first is the Contingency of Sale and Close; the other is the Contingency of Close.  The Contingency of Sale and Close means that your current property is either not listed yet and/or not under contract yet.   It says that your property must be under contract before the Contingency of Sale can be removed.  Once your house is under contract, only the second part remains, which is the Contingency of Close.  This means that your property, that is now under contract, must close before you can purchase the next property.  One way to look at it is that once a Contingency of Sale is removed, a Contingency of Close is like the inspection contingency; it is the last dependency needed to be removed before closing.

There are some things to note from the listing side.  If an offer is accepted that has a Contingency of Sale and Close, you may still market your property as Active.  That means that you can still accept another offer.  The Contingency of Sale and Close has a provision in it that says the buyer has the first right of refusal to perform.  To perform means to either remove the Contingency of Sale or have a financial way to buy without selling their current property.  There is a time-frame that is put on the first right of refusal, which is typically 24-48 hours, depending on what was negotiated.

I imagine that some of you are wondering--how many contingent offers can be stacked on one another?  The answer is they cannot be stacked.  If you are the buyer and have a Contingency of Sale and Close on a property you are trying to purchase and someone makes a contingent offer on your current property that you need to sell, it will not remove the Contingency of Sale.  The offer can have a Contingency of Close, but it cannot have a Contingency of Sale and Close.

If you are still reading, you can tell through this post that this is a complex process.  I highly recommend calling me with questions, as each situation is different.  Just as no two properties are alike, neither are offers.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

Utilizing a Real Estate Agent's Services at Any Point

When people think of using a Realtor, they typical think of just when it is time to buy or sell a house; however, a trusted real estate professional can be utilized more often than that.

There are many areas where I can assist.  One of the primary ways is when dealing with decisions on a remodel.  I see what buyers care about.  For instance, when it is time to renovate your kitchen, I can help answer questions regarding whether or not you should  put in the more expensive appliances, countertop, etc.  Sometimes, the granite countertop will bring value for the neighborhood.  Other times, it will not.  I am happy to meet and talk through the details of how you should or should not update your property.

Also, since I am in the industry, I know who are the best contractors, plumbers, electricians, masons, etc. to work on your property.

Another way I can assist is through investment questions.  You may be thinking beyond your current residence, and I am glad to talk about options that could work best for you.

While a house is a brick and mortar, real estate is constantly changing.  Utilizing my advice and contacts along the way can help make a big difference for you.

So, contact me sooner rather than later, with all of your real estate questions and needs.  I am happy to help.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

What is the Difference Between Pre-Qualification and Pre-Approval?

When starting the house search process, one of the first steps is to figure out how much you can afford to pay for a property.  A reputable loan officer will take some of your information, like your work history, yearly earnings, savings, debts, etc.  Your credit will also be run to figure out your score.  All of this information will help the loan officer figure out what you qualify to buy.  This is the pre-qualification part of the process.  Sometimes, you will receive a pre-qualification letter, stating how much you can afford to purchase.

After you complete the qualification process, the search will become more focused.  The loan officer will provide a pre-approval letter that could include the specific property address and/or the purchase price.  The pre-approval letter is the document used when submitting an offer to purchase real estate.  It is rare for an offer to be accepted without a pre-approval letter.

Give me a call with any real estate questions or needs.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

What Is An Appraisal...And Why?

An appraisal is a way to find the value of a property.  Appraisals are required by lenders to ensure that the purchase price of a property is correct.  As an example, a lender does not want to lend $215,000 on a property that is actually valued at $200,000.  As a side note, a cash transaction allows the waiver of an appraisal.  

The typical time-frame for when an appraisal is ordered is after the inspection period.  There are various reasons for this, but one of the reasons is so that money is not spend on an appraisal by the buyer before knowing if there are issues with the property.

Someone may wonder why a computer cannot figure out the value through an algorithm.  While there has been much discussion around this possibility, it comes up empty.  The reason for this is that there are too many factors to consider.  Each property is unique.  Even if we had two houses of the same square footage and features, the lot is not going to be identical.  Square footage of a property, listed features, lot size, and even pictures are not enough to determine the value.  In addition, the market is constantly changing.  Human intervention and investigation are required to decide the current worth of the property.  

If you have any real estate questions or needs, please give me a call.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

What Goes Into Closing Costs?

Prior to the closing date, you (as either a buyer or a seller) will receive a closing statement that will lay out the line item details of the real estate transaction.  The items are set up as debits and credits, with the seller's on one side and the buyer's on the other.  The totals, showing what a buyer or seller needs to either bring or receive from closing, are listed at the very bottom of the last page.

Some of the detailed line items include (but not limited to) the sale price of the property, any credits (e.g. if a seller is paying toward closing costs), taxes, loan and processing fees, interest, the appraisal, certifications, homeowner's insurance, title fees, commissions, recording fees, loan payoffs, and home warranty (if applicable).

There can be variations in the line items.  For example, tax amounts can vary in different counties, there can be additional taxes for a particular city/neighborhood, commission is affected by the sales price, and the loan amount can affect the pro-rated daily interest rate that is paid.

There are attorney's fees for both the buyer and the seller.  The buyer has more closing costs with a loan; however, it is important to note that the seller has to pay a closing fee and a fee for deed preparation work.  This is for the attorney's work to essentially get the title transferred.  So, it is important to keep in mind, as a seller, that, even if you are paying toward the buyer's closing costs, you will still have title fees to pay at closing.

Give me a call with any real estate questions or needs.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

How Accurate Are Trulia, Realtor.com, and Zillow?

There are many great real estate search tools available on the Internet now.  A question of their accuracy comes into play when buyers are looking for properties.

There are two primary parts to the question I'm asking in how accurate are the on-line search tools.  One is how accurate is the data about the listings (status, price, etc.).  The second part is how much trust can be put into the estimated value of a property that some sites try to predict.

In regard to the first part, the websites are pulling data from another primary source, like the Multiple Listing Service (MLS) that Realtors use to list property.  The MLS has a local governing body to monitor accuracy, as well as self-policing from other licensed agents.  Sometimes, when data is pulled from the MLS to another site, issues occur (I've seen examples like contact information or the last sold date being inaccurate).  That doesn't mean that the sites are bad, it is just a forewarning to proceed with caution.    

In regard to the second part, there have been efforts in the past to automate what appraisers do in valuing property, but it has never come to fruition.  The simplest reason is because no two properties are ever the same (even new construction of the same style can be on a different size/type of lot).  It takes human intervention to try to assess market value of a property.

The sites have their merit and place.  However, one of the biggest reasons I tell buyers to use the MLS as the primary search tool over the other sites is timing.  I can set up a search that will notify buyers immediately when a new listing comes onto the market.  I have never seen the other sites get the information into the hands of the buyers so quickly.

If you have any real estate questions or needs, please give me a call.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com

Home Safety Items

It isn't something that we like to think much about, but it is important to be prepared in case of an emergency or natural disaster.
Home safety can go into a lot more detail, but here are some suggestions for safety items around the house:

• First Aid Kit--these kits can be picked up at any major retail store.  It is also a good idea to keep one in each vehicle you own.
• Flashlights (with extra batteries)--while always helpful in finding missing Hot Wheels under the couch, they are also important to have around for the obvious in a disaster.  
• 72 Hours Worth of Water--because we all need water to live.
• Emergency Phone Numbers Posted in the House--911 is the obvious, but poison control and animal control are two good ones to keep handy as well.  Oh, and the pizza delivery number.
• Fire Extinguisher--make sure that you know how to use it.
• Smoke Detectors--that work.  If you live in Jefferson County, there is a smoke detector ordinance that states you must have either hard-wired or 10-year lithium-ion smoke detectors present in your home when you sell it.  
• Carbon Monoxide Detector
• Weather Radio (with hand crank)--there are many weather radio products available that also have a regular radio and even cell phone charging ports on them.  The hand crank is so that it is its own power source.  Well, your arm becomes the power source.  
• Fireproof Safe--for important documentation like wills, life insurance information, copies of marriage certificates, etc.
• Plan of Action--in case a disaster occurs where there is no contact available (e.g. cell phone coverage is down), it is good to have a place to meet communicated ahead of time.

For any real estate questions or needs, give me a call.

Matt Gatewood

Realtor®

Keller Williams Louisville East

502-594-6582

www.gatewoodproperties.com