The Seller Accepted Your Offer: Can You Still Back Out?

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You’ve found a home that you’ve fallen in love with, submitted an offer, and it was accepted by the seller! It should be time to celebrate, but shortly after you celebrate your accepted offer, something causes you to have second thoughts. Is it too late to back out?

The answer to this question depends on whether or not the offer is still in the contingency phase (if there are any), or whether certain circumstances have arisen that may give you the liberty to back out of the deal even after the sale is firm.

You’ve likely provided a handsome earnest money deposit to show the seller that you’re serious about buying, and may be concerned that you may lose that money if you don’t follow through with the deal as promised. Without a valid reason to back out of the deal, that deposit could realistically be as good as gone. However, contingencies and legal protections may enable you to walk away from the deal.

Contingencies Can Give Buyers the Option to Break the Deal

If the offer is still in its escrow phase, that means the sale has not yet been completed. If contingencies were included in your purchase agreement, they need to either be fulfilled or waived by their respective expriry dates before the deal is sealed.

During such time, you may have the opportunity to walk away from the deal if any one of these contingencies is unsatisfactory. For instance, a home inspection might uncover issues with the home that you are either uncomfortable with or are unwilling to pay to have repaired. Or perhaps you’re having a tough time being able to secure financing to pay for the home, in which case your financing contingency cannot be fulfilled.

If the home is goverened by an HOA or condo corporation, you should make sure that your contract is contingent upon review of the complex’s Declaration of Covenants, Conditions, and Restrictions, or CC&Rs. If you are not satisfied with what such documents tell you about how the financial and legal health of the HOA, you have the right to back out of the deal.

Other contingecies can also help you break your promise to follow through with the sale, such as a home sale contingency that makes the transaction dependent upon the sale of your current home. If you are unable to find a buyer for your own property within the time frame stiuplated in the contract, the deal can be quashed.

The point is, if you are still within the contingency phase of your real estate contract, you likely have the right to withdraw from the deal without consequence. This is the best chance you have to walk away without having to pay any financial penalties. As long as you provide the seller with adequate notice during the time period of the contingency, you’re allowed to withdraw your offer and back out without having to sacrifice your deposit.

What If There Are No Contingencies to Rely On?

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Unfortunately, once you’ve waived or fulfilled the contingencies on the contract, you’ll be putting your earnest money deposit at risk. Some real estate contracts allow sellers to request liquidated damages if the buyer is in default. These are damages in the amount that has been stipulated in the contract and agreed upon by all parties, and allows the the seller to collect this money as compensation if the buyer is in breach of the contract.

If both you and the seller agreed to liquidated damages, the money that the seller receives as a result of your default of the contract could be limited to the deposit. 

If there are no liquidated damages stipulated in the contract, the seller can actually take you to court and sue you for the money they claim to have lost as a result of the quashed deal, which could be a lot more than the earnest money deposit.

That said, there may be extenuating circumstances that could be justification for backing out of a deal without being subject to ramifications, including the following:

• Seller’s failure to make agreed-upon repairs

• Seller’s failure to provide clear title

• Inaccurate boundary lines

• Undisclosed easements

• Job loss

• Military personnel being transferred

In cases such as these, you may have some protection against any legal liabilities if you decide to walk away from the deal. If the seller still chooses to come after you for damages, you may want to secure a real estate lawyer to help.

The Bottom Line

Buying a home is a big deal. Under no circumstances should you make the decision to purchase a home without having given it a lot of thought. While you may be able to back off from a deal for various reasons, you’ll just be wasting everyone’s time and effort – including yours.

Your best bet is to speak with a mortgage specialist and team up with an experienced real estate agent to make sure you’re ready – both emotionally and financially – to become a homeowner in order to avoid buyer’s remorse and any unpleasant circumstances that come with it.

How to Get Your Home Ready For the Fall Selling Season

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With the housing market being as hot as it is across the Golden State, there’s really no bad time to sell. If you think you ‘missed’ your window of opportunity to sell in the spring or summer, autumn is just a good season as any other to put your home on the market.

As with selling at any other time of the year, you want to make sure your home is prepped for the market so that it’s prime for the picking. When it comes to selling in the fall, consider some of the following ways to get your home ready to sell this season.

Give Your Yard a Clean Up

Improving your home’s curb appeal can’t be done without a thorough cleaning job. Get rid of any debris that may have collected, rake any dead leaves, and trim any bushes or other vegetation that may block your walkway. Cut off any overgrown branches from trees that could reduce the amount of natural light in your home, and plant some flower beds to bring a little color to your outdoor space.

Add a few pots of chrysanthemums (more commonly referred to as ‘mums’) on your front porch or along the walkway or driveway, as this is the most popular type of flower for the autumn season. Accentuate them with a few pumpkins, gourds, and other types of squash.

Polish and Decorate Your Windows

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Windows have a tendency to get dirty really quickly, and all that dirt from the summer months can wreak havoc on them. Before you schedule that first showing, give your windows a good cleaning job. You can hire a professional window cleaner to do the job for you, or you can tackle it yourself with a pressure washer or some warm soapy water.

Don’t forget to wash the screens as well, as they tend to be traps for a lot of dirt and grime. Polishing up your windows will make them sparkle and will do wonders at letting all that natural sunlight in your home.

Have Your HVAC System Checked

The beginning of each season is the perfect time to check on your HVAC system and make sure all components are in good condition. At the very least, the filter should be changed, as they can become bogged down with all the debris that becomes trapped over time. A healthy HVAC system will do a much better job at keeping the air in the home fresh and comfortable, so it’s important that it is in proper working order.

The system will be checked by the buyer’s home inspector anyway, so you would be well advised to have it inspected yourself before you even put your home on the market. This will give you the opportunity to identify if there are any issues that you can rectify beforehand.

Make Good Use of Pretty Fall Colors

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While California might not necessarily experience all the vibrant reds, oranges, and yellows that accompany the fall season in cooler parts of the country (except perhaps in certain northern areas of the state), there’s no reason why you can’t decorate with them.

Arrange some vibrantly colored flowers in vases on various surfaces in your home. Drape an autumn-hued blanket or throw pillows on your sofa and chairs, and create centerpieces for your kitchen or dining room table with some candles in red, orange or yellow surrounded by nuts and pine cones.

There are literally dozens of ways to add the colors of fall to your home’s decor through a number of different accessories that can be easily swapped out when you’re ready to decorate for the next season.

Keep the Lights On

As we approach the fall and winter months, the days become shorter, which means fewer daylight hours. With the sun setting earlier in the day and taking the light with it, you’ll want to make sure that your home is still filled with light, albeit from artificial sources.

When you’ve got a showing scheduled, be sure to keep all lights on in every room, including closet lights, appliance lights, and outdoor lights. You may even want to invest in some additional table and floor lamps to keep the space even brighter during evening showings.

The Bottom Line

Like any other season of the year, fall is a great time to sell as long as the appropriate measures are taken. In addition to pricing your home competitively and marketing it extensively, a little staging and prepping can attract even more eyes on your property.

How is a New Home in an Old Neighborhood Valued?

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When it comes to valuing homes, the key is to compare them to other properties that are very similar in a number of ways. Real estate professionals typically look at other homes that are similar in location, style, size, design, and age compared to the subject property in order to get an accurate idea of the home’s value. In addition, only homes that have been recently sold should be looked at, as market conditions can fluctuate very quickly.

Properties that are located on the same block or even in the same neighborhood are typically similar to one another, particularly when it comes to age. That makes it easier for appraisers and real estate professionals to more accurately gauge how much properties in a given community are worth.

But a growing trend in many markets across the U.S. is new home construction in older neighborhoods where original properties still exist. New construction in an old area can often be viewed as a positive thing for the community, especially if it has been considered an undesirable neighborhood. New home builds in areas like these can breathe new life into them and even help increase the overall appeal and value of the properties that exist within them.

But valuing a new home in a new subdivision is certainly different – and easier – than valuing a new home that’s been built on an old street surrounded by older homes. So, how exactly is a new home valued in an old neighborhood?

Immediate Neighborhood

Ideally, the subject property would be compared to other homes in the immediate vicinity. In the case of a newer home, it would only make sense to compare it to another home that’s similar in age. In many up-and-coming neighborhoods where old homes are being torn down in favor of building new ones, it can be rather feasible to compare the property to these others in order to gauge its value.

However, when dealing with a new home that’s surrounded predominantly by older properties, it can be tough to assess its value based on the current homes in the area. If that’s the case, it might be helpful to look up comparable neighborhoods in the surrounding market and compare any homes that are similar in age and size as the subject property, if there are any.

Premium

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Depending on the exact area, appraisers need to assess how sought-after new home construction is in specific neighborhoods. Buyers are often willing to pay a premium for new homes, as there are obvious perks to new home construction.

For instance, nobody’s ever lived in the home, which gives new owners a clean slate. Materials and finishes are more modern, which means they typically require a lot less maintenance, at least for the first few years. As opposed to buying a new home in a new subdivision that has yet to mature, a new home in an old neighborhood gives buyers the added benefit of a neighborhood that is already well-established.

It should be noted, however, that this premium typically only lasts for a very limited amount of time. The premium that buyers may be willing to pay right after the new home construction has been completed doesn’t always last very long.

Quality

Newer homes should translate into fewer repair issues over the short term, which could translate into a higher value compared to older homes. Many times new homes are superior to the older homes in the same neighborhood, depending on the area and the condition of the other surrounding properties. However, this is not always the case. 

It’s been said that the quality of construction these days is nowhere near what it was decades earlier. The quality of many older homes is often higher than new homes. These days, many builders use cheap materials in order to keep costs down. As such, new homes are not always more valuable.

The Fit For the Neighborhood

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A new home that’s twice the size of others in the area might look grand and highly valuable, but that doesn’t necessarily mean that it could sell at a huge premium. It all depends on what the surrounding neighborhood calls for. If the new home is completely misplaced, then it probably won’t warrant nearly as high of a sale price as it probably would in a different neighborhood with similar properties. In fact, if it’s the wrong type of home for the block, buyers might probably even pay less for it.

Again, it all depends on the specific neighborhood. While new homes in some older areas won’t get the high premiums, they might sell for a lot more in other neighborhoods. If the property fits in well with the charm of the neighborhood as far as size and design are concerned, it could probably demand a higher price. On the other hand, if it stands out in a negative way, it would probably sell at a discount.

Conformity plays a key role when valuing real estate, and how well a home fits in with the surrounding area makes a big difference to its value.

The Bottom Line

Obviously, it’s a lot harder to value a new home in an older area if it’s the only newer property on the block. Many would assume that a new home would automatically be worth more, but that’s not always the case. Many factors come into play when assessing the value of a new home in an old neighborhood, and the price can go in either direction depending on the specifics of the area and the homes within it.

What’s the Difference Between a Mortgage Broker and Direct Lender?

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When it’s time for you to apply for a mortgage, where do you turn to in order to get one? Should you work with a mortgage broker, or a direct lender? Or are they even the same thing?

The terms “brokers” and “lenders” tend to be used interchangeably, but they’re actually different. Read more to distinguish one from the other so you can make a more informed decision about who to work with to get your mortgage.

Direct Lenders

Direct lenders include financial institutions that can are able to offer home loans. This can include commercial banks and other entities that are capable of directly loaning you the money needed to finance a home purchase. Direct lenders handle all aspects of home loan origination, including applications, loan terms, processing, underwriting, and closing.

If you go this route, you will need to fill out and submit a mortgage application to each direct lender individually. You will also be tasked with contacting each direct lender yourself if you choose to shop around for the best quote, which can prove to be cumbersome and time-consuming.

That said, direct lenders might be better able to handle any potential problems that could pop up during the application process. A mortgage broker might not necessarily be able to address all issues that could come up or answer all the questions that a direct lender might have in regards to your application. As such, the process can be quicker with a direct lender.

Mortgage Brokers

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Unlike direct lenders, mortgage brokers don’t actually loan out the money needed for a mortgage. Instead, they are individuals who get quotes from various lenders on behalf of their clients. Borrowers then use the quotes provided by their mortgage broker and compare them to each other before deciding on which package to take. 

Brokers don’t have a hand in all functions of the loan origination process, and typically only deal with applications and loan processing. Basically, mortgage brokers communicate between lenders and borrowers.

With this option, you only need to fill out one mortgage application which is then submitted to various lenders through your broker. This is a big advantage as you will only have to talk to one broker as opposed to several direct lenders when shopping around for a home loan.

However, the process can take longer compared to working with a direct lender because there is an extra party involved in the communication process. Working with a mortgage broker can also come with higher fees associated with processing the mortgage, which is how they are essentially paid for their services. That means that you are paying for both the broker’s fees as well as the lender’s fees, which makes this a potentially more expensive option.

The Bottom Line

There are pros and cons associated with both mortgage brokers and direct lenders. A mortgage broker can do all the legwork for you and shop around for the best quote on your behalf, but they also typically come with higher fees. At the end of the day, your end goal is to find a mortgage package that is best suited to your needs and financial situation, and both direct lenders and mortgage brokers can assist you with that.

What Buyers Should Consider When Purchasing a Home With a Shared Driveway

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When shopping for a home, there’s a possibility that you may come across a property that’s sharing a driveway with the home next door. That means that one driveway needs to be shared between the two adjoining neighbors.

If shared driveways are common in the community that you’re looking at buying in, then you shouldn’t be surprised to find out that the property you’ve got your eye on has one. That said, the purchase price should reflect that. For instance, a home with its own private driveway might possibly sell for more money than a home with a shared driveway. This will be helpful when putting in an offer on a home.

Before buying a home with a shared driveway, there are a few things you should take into consideration first.

Determine Any Existing Covenants

It’s important to identify whether or not there are any covenants that outline the rules of sharing the area.

For instance, is the driveway shared equally between both neighbors? Who is responsible for maintenance and repair of the driveway? What are the restrictions, if any, about parking vehicles? How and where is the shared driveway easement recorded? The answers to these questions are important before a decision is made on whether or not to buy a home with a shared driveway, as it can impact how you enjoy your home.

For the most part, there are written rules regarding shared driveways that are recorded on subdivision plans as easements or covenants on the deeds of the homes that are sharing the driveway. However, there may also be times when a separate deed for the shared driveway under the easement exists. If there is ever a dispute between the two property owners regarding the shared driveway, it will be important to identify how the deeds are recorded.

Get a Copy of the Survey

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If you are considering purchasing a property with a shared driveway, make sure to ask your real estate agent to obtain a survey map and the recorded information about the shared driveway first. This will help you determine the actual ownership interest and exactly where the easement boundaries are located.

It should be noted that a shared driveway doesn’t necessarily mean equal ownership with the neighbor. It’s possible that one property owner owns the whole driveway while the other owner only has certain rights to use it. The surveyor who prepares the survey will mark off the boundaries of the property so you can identify how much of the driveway you actually own.

Ask For a Copy of Any Agreements

The seller should provide you with a copy of any agreements that might exist related to the shared driveway. In many cases, there are rules already in place that stipulate how the shared driveway is to be cared for and how disputes should be handled.

Most of the time, there is little issue with sharing a driveway as long as both neighbors act in a considerate manner and practice common sense. However, there are certainly times when disagreements arise as a result of how a shared driveway is being used.

For example, one neighbor might take up too much of the space for parking, or is causing damage to the driveway. There are definitely plenty of scenarios that can play out when two neighbors are sharing the same driveway, which can be a huge disadvantage in terms of a buying a home with this type of easement.

It’s pretty common for there to be written rules included in the legal documentation for the property where the shared driveway is.

If the seller doesn’t have any or wasn’t even aware that the driveway was shared, such information should be researched during the title search of the property.

Be Very Detailed With Your Purchase Contract

If you’re concerned that a potential dispute could arise, consider writing up an offer that requires the seller to provide a written document outlining the shared driveway and how it is to be shared and used between both property owners.

The agreement should be very detailed and include stipulations regarding how maintenance and repair costs are to be allocated and completed, how much of the driveway is actually owned by one neighbor over the other, what your specific rights regarding use of the driveway will be, and so forth.

The Bottom Line

Put in an offer only after you’ve identified how much – if any – ownership you would have of a shared driveway and what the current rules are governing how it is to be maintained. You want to be certain that you can comfortably live with the current arrangement before you decide to buy a home with a shared driveway. Luckily, your real estate agent will be able to help you gather the appropriate documentation regarding the rules and use of the shared driveway so you can make an informed decision.

Rights of California Tenants When the Landlord Decides to Sell

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Many real estate investors rent out their properties in order to reap the benefits of passive monthly income while increasing their equity and building wealth over time. Not only are they benefiting themselves financially, but they’re also serving a need for those who may not be financially or emotionally ready to buy a home.

But while renters are promised quiet enjoyment of their property, there may come a time when they may be asked to vacate the premises if the landlord chooses to sell the property to a willing buyer. As a renter, it can be disheartening to be asked to leave in order to make room for new buyers, especially if you are given very little warning.

Fortunately, California is a tenant-friendly state, and landlords must follow a certain procedure in order to lawfully sell their rental property before they can legally evict you. There are still some rights that you have as a renter that protect you in the event that your landlord chooses to sell.

Landlords Must Honor the Lease

Before the landlord makes a move, it’s essential that the terms of the lease are followed. Usually, if your landlord sells the property that you occupy, your lease won’t necessarily be terminated. Instead, the buyer of the property now becomes the new landlord and is obligated to comply with the terms of your existing lease until it expires.

That means if there are still three months left on the lease, your landlord cannot kick you out until the lease expires. Until then, the buyer will ordinarily have to assume the role of landlord until the lease term ends, after which they may or may not choose to renew your lease or keep you on as a month-to-month tenant. If not, they may ask you to vacate (with adequate notice) in order to live in the unit themselves or use the property as they see fit.

In addition, the sale of the property doesn’t have any effect on your right to get a refund on your security deposit.

Landlords Must Provide Ample Notice of the Sale

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As a renter, you are entitled to a reasonable amount of notice about the sale of your unit before a real estate agent brings a buyer for a showing. In the state of California, 24 hours is considered to be “reasonable notice” before a showing occurs on the property.

That means your landlord must inform you at least 24 hours before a scheduled showing that a buyer will be visiting the property. Written notice is not necessary as long as your landlord informed you that they plan to sell the property within the last four months.

In addition, landlords can’t just show the property at all hours of the day. Instead, they must be scheduled during reasonable times. For instance, 6am or 11pm would not be considered reasonable times to show the property. It’s best that you and the landlord come up with some type of agreement about an acceptable window of times for showings to occur.

If your unit has been shown to a buyer while you were not home, you have the right to be informed in writing that a showing took place.

Renter Relocation Allowance May Be an Option

If you’re currently renting a house that your landlord wants you to vacate early, perhaps an arrangement can be made between you and your landlord. With a “tenant relocation allowance” provision, your landlord would pay for the costs associated with house hunting, moving expenses, and other related costs.

Month-to-Month Tenants Have Fewer Rights

If you’re currently locked into a long-term lease, you have more rights compared to a month-to-month tenancy. In the case of the latter, your lease can be terminated with as little as 30 days notice. This will leave you with a limited amount of time to find a new unit and secure a lease. That said, your landlord can’t force you out by changing the locks or shutting off your water or electricity.

Voluntary Vacancy By the Tenant

While you have a right as a renter to stay put until your lease is up, you can voluntarily choose to waive your rights and leave early. Having your unit constantly visited by prospective buyers can be a nuisance, even though your landlord has a right to show the place according to the terms of the lease. It can also be a pain to keep your home in pristine showing condition at all times until a sale is made.

In this case, you and your landlord may be able to come up with an agreement whereby you vacate early, ideally with some form of compensation from your landlord.

The Bottom Line

Being told that the property you’re renting is being sold can be discouraging, but it’s helpful to know that you do have rights under California law. If your lease has not yet expired, your landlord does not ordinarily have the right to boot you out.

In the meantime, it would be wise to take the time you have left on your lease to start looking around for a new place and start making arrangements for an impending move. Your best bet is to get in touch with a real estate agent who can help get the ball rolling for you so you’re adequately prepared.