If you think a home marked “sale pending” is off-limits, think again. Yes, this label means that the buyer and seller have negotiated an accepted purchase contract, but things happen—and sales can fall through. For that reason, there’s no harm in making a backup offer.
“If a buyer is in love with a particular home that happens to be pending, why not give it a shot?” asks John Lazenby, president of the Orlando Regional Realtor® Association.
So don’t let go of that dream house just yet. Here’s what you need to know on making a backup offer If the original deal falls through and you’re next in line—you could end up nabbing the home you were pining for all along. Sweet!
Why would a pending home sale fall through?
Even after all the work that a buyer and seller went through to create the contract, sales can still fall through.
“The contract often contains contingencies that can kill a transaction if they’re not met,” says Lazenby. Common examples are contingencies related to the following:
- Inspections: A sagging foundation, leaking roof, or other big-ticket repair items could kill the deal.
- Appraisal: If a home is appraised under the sale price, the financing can fall through if the buyer isn’t able to make up the difference.
- Buyer’s loan approval: If a potential buyer is only pre-qualified, rather than pre-approved, the financing might not materialize.
Another common reason is a bit simpler: buyer’s remorse. Maybe an expected promotion didn’t come through or the buyer decided she didn’t like the open-plan kitchen after all. Truth be told, there are a million reasons buyers get cold feet and change their minds.
Reasons to make a backup offer
Some potential buyers are in a better position than others to wait it out. If you relate to one of these conditions, making a backup offer is a good idea:
- You’re not under a time constraint—such as the desire to be settled before the start of the school year. “If a buyer is in a hurry, it might not be feasible to wait a month or longer to see if the initial contract falls through,” Lazenby points out.
- Inventory is particularly tight, and there’s nothing else in your price range that’s tempting. Sometimes it’s best to wait and see on the house you love, rather than jump on something else that isn’t quite right.
- The listing agent is able to give you some intel about the house that leads you to believe the other buyers might get cold feet or that there are contingencies.
- It’s a short-sale transaction, which Lazenby says is much more likely to collapse than a regular transaction. Often the bank, or whoever holds the mortgage, will find the price too low and will demand the seller put it back on the market to achieve a fair price.
How to make a winning backup offer
If you and your agent decide to put together a backup offer, here are a few touches that can help turn the tables in your favor:
- Money talks. Present a clean offer, complete with mortgage pre-approval and proof of funds. If you are able to, offer over asking price.
- Be flexible. Are you willing to give them extra time to enjoy the holidays in their home, or forgo minor repairs that others might insist on? Some sellers might appreciate benefits other than cold, hard cash.
- Write a letter. You never know when a personal touch might resonate with the sellers. Tell them how much you’re looking forward to raising a family in their family home or entertaining in their amazing dining room.
- Stay visible. You want the sellers’ agent to know you’re ready to move when they are. Have your agent be in frequent touch to ensure you are on their radar should anything change.
The bottom line: Never say never when a sale is pending. With a little determination and luck, that house could be yours.
When shopping for a home, it seems like there’s something to pay for at every step of the way. To get your mortgage approved—thereby allowing you to actually buy your house—you’ll have to pay mortgage fees. The most common mortgage fees also fall under the umbrella of closing costs, those expenses you pay when you close on your house that help facilitate the sale (i.e., the appraisal fee, the title search, and the processing fee).
Although it’s difficult to put an exact figure on the mortgage fees (they vary from state to state) you can expect to pay, there are some costs that almost every mortgage has in common. We spoke with Amy Bailey Oehler of PrimeLending about what they are and how much money a home buyer should plan on paying for the loan.
Mortgage fees you’re likely to pay
- Appraisal ($450 to $650): An appraisal by a licensed appraiser will almost always be required by the lender. The price varies depending on the size of the property and the type of loan you’re getting. “A lot of lenders will require payment for the appraisal upfront,” says Oehler. “The appraisal fee goes directly to the appraiser. If the loan doesn’t close, but the appraisal was completed, then the appraisal fee is nonrefundable.”
- Closing fee ($300 to $600): A representative from the title company will come to your closing to supervise the transfer of title, and you’ll have to pay for the service.
- Credit report fee ($25 to $50): This is the fee to pull your credit report.
- Inspection ($450 to $500): The inspection isn’t a requirement for the loan, but it is highly, highly recommended. This is another cost that is paid before you reach the closing table. Generally, you can negotiate either fixes, concessions, or a drop in sales price based on any problems the inspector finds.
- Lender’s title insurance (usually 0.5% of the purchase price): This protects your lender if something was missed in the title search. The cost depends on the size of the policy and is set by the state.
- Survey ($350 to $500): Most states require a survey of your property before you can get a loan. If a survey doesn’t already exist that can be used, you’ll have to pay someone to do it.
- Title search ($300 to $600): Your lender will do a search to ensure there are no liens on the property or anything that could prevent you from purchasing it. Sometimes this will be bundled with other title fees in your closing document.
Mortgage fees you might have to pay
- Application fee ($100): Some lenders charge a small fee when you submit your application. This is also sometimes bundled with the origination costs.
- Attorney fee ($150 to $500): In some states, you bring your own attorney to the closing table; in other states, you don’t. If not, the lender might need to consult an attorney to look at closing documents or contracts.
- Flood certification ($5 to $10): This tells the lender if the home is in a flood zone.
- Homeowner’s title insurance ($1,000 on average): You aren’t required to take out a title insurance policy for yourself, but it’s highly recommended. If any liens were missed during the title search, you will be on the hook for any costs to clear them unless you have this insurance.
- Origination or processing fee ($300 to $1,500): This fee covers the cost to prepare your mortgage. Sometimes you won’t be charged this fee at all. Make sure to read your Loan Estimate and Final Closing Disclosure carefully to see if/where you are being charged.
- Points (1% of your total mortgage): Points are lender fees paid to reduce your interest rate. These are different from “origination points,” which are just another way of presenting mortgage origination fees.
- Underwriting fee ($400 to $600): This fee is paid to your lender to cover the cost of researching whether or not to approve you for the loan. Some lenders bundle together the underwriting with origination fees or processing fees.
- Wire or courier fees ($30 to $100): If documents need to be sent overnight or money needs to be wired, you’ll pay these fees at closing.
How to reduce mortgage fees
As with any deal, the best way to cut mortgage costs is to shop around for the best deal. Some lenders charge more for their services, and if the overall rate isn’t any better, look for someone with lower fees.
Also, make sure you understand every fee you’re being charged. There might be some optional fees you can choose to waive—just don’t be penny-wise and pound-foolish. Saving $500 on an inspection could cost you big in repairs later. If you have an FHA loan, you can sometimes use your loan to pay for closing costs, but be aware that it could increase your interest rate.
Another potential way to save is through bank loyalty programs. Sometimes if you get a loan from the bank you have other accounts with you can reduce your origination costs.
If you are a veteran, you can qualify for a Veterans Affairs loan, which requires no down payment and has lower closing costs overall.
To save cash, you can always try to negotiate with the seller to pay some of your closing costs. Depending on how motivated the sellers are to close on their property, they might be willing to pay title fees, points, and even transfer taxes.
No matter how great a home looks at first glance, a host of problems could be hiding right under that fresh coat of paint—which is why buyers will want to scrutinize certain paperwork they’ll receive called property disclosure statements.
Property disclosure statements essentially outline any flaws that the home sellers (and their real estate agents) are aware of that could negatively affect the home’s value. These statements are required by law in most areas of the country so buyers can know a property’s good and bad points before they close the deal. Here’s what all buyers need to know about real estate disclosures.
When do buyers receive property disclosure statements?
While it varies by area, most buyers will receive property disclosure statements after their offer has been accepted, says Atlanta Realtor® Bill Golden. That way, buyers can review this paperwork at about the same time that they typically hire a home inspector to check the property for any defects. In fact, disclosure statements can help point your inspector toward areas of a home you’d like to home in on, so try to read your disclosure statements before scheduling the inspection.
In certain areas, sellers might even hand buyers disclosure statements before an offer is made. But no matter what, it should be early enough to give buyers time to do their due diligence and spot problems that could make them reconsider whether this home is right for them.
What types of flaws must be disclosed?
Sellers are required to complete a variety of disclosure documents, which are often in the form of a government-issued checklist where they mark whether their home has (or once had) a variety of problems such as the following:
- Windows that don’t close or doors that stick
- Faulty foundation or leaky roof
- Problems with appliances or home systems like the HVAC
- Repairs made on any of the above as well as insurance claims
- Renovations completed without a permit
- Pest or mold infestations
- Environmental hazards in the area (e.g., floods and wildfires)
The federal government requires certain disclosures anywhere in the U.S., like the existence of lead-based paint, asbestos, or other clear health and safety risks. However, states and counties also have their own particular laws on which issues must be disclosed. For instance, some states require sellers to disclose nearby sexual offenders, while others do not. Some require a death on the property to be disclosed, especially if it was a murder, while others leave you to do that kind of sleuthing yourself.
If buyers (and their real estate agent) read a disclosure document and see nothing to worry about, they sign off on it before moving one step closer to sealing the deal. If, on the other hand, buyers spot something worrisome, it’s in their interests to delve further.
What to do if a disclosure reveals something bad
If you spot something on a disclosure statement that you don’t understand or that raises concerns, have your real estate agent bring it up with the sellers (or their listing agent). In some cases, they might have an explanation that puts you at ease (i.e., “we had bedbugs back in 2012 but hired an exterminator and have been free and clear ever since”). Or, if the issue makes you seriously question whether you want to move forward, this could be an opportunity to renegotiate the sales price to compensate for the added risk you’re taking on buying this home.
At worst, you can always back out of the deal without penalty—meaning you won’t have to forfeit your earnest money deposit. And if you happen to find a problem that should have been disclosed but wasn’t, that’s all the more reason to consider carefully whether you want to move forward. After all, if sellers covered one thing up, what else could they be hiding?
However, keep in mind that the sellers are required to reveal only all known problems. That’s key. Sellers aren’t typically held responsible for problems they aren’t aware of. And that’s just one more reason why buyers absolutely should get a home inspection to root out any potential problems themselves.
But all in all, smart sellers inform buyers of everything they need to know upfront. While property disclosures exist mainly to protect the buyer from getting a lemon, this paperwork protects the seller, too.
“If sellers disclose everything they know about the house, a buyer can’t come back to them later saying they weren’t told about an issue,” says Golden.
Property disclosure statements save everyone time, hassle, and expense by preventing deals from falling apart—and that benefits both buyers and sellers.
We understand the appeal of moving into a newly constructed home. After all, it’s hard not to be enticed by brand-new appliances, floors, and heating, cooling, and electrical systems. Plus, buying an old place that needs work can be intimidating, especially for those of us whose only brush with restoring a house has come from watching reruns of “Fixer Upper.”
However, home buyers can see all the beauty and potential in older houses. What some view as eyesores, others see as charm—four walls full of history that can’t be duplicated. Besides the nostalgia factor, an old house can be a smart purchase for the sake of your wallet.
Take a look at the top reasons why buying an old house might just be the best decision you’ll ever make.
1. Old homes are cheaper than new homes
What classifies as an older home? In general, if a home does not use or contain modern materials such as high-performance concrete, it qualifies as “old.” Normally, these homes would have been built before 1970.
Shelley Cluff, a real estate broker and owner of Park Place Homes, in Midland, MI, explains that an older home gives you substantially more bang for your buck.
“On average, a comparably sized new construction can sell for 10% to 20% more than an older, updated home,” she says. While newer homes might cost less to maintain, they are also built with different materials such as energy-efficient products that drive up the cost of building them and, by extension, the cost of buying them.
2. Old homes have better-quality construction
Every house hunter hopes to move into a new home with as few hitches as possible. And that largely depends on how eager (or, let’s be frank, desperate) a homeowner is to sell. And while it’s gauche to ask outright why someone is selling—Divorce? Job transfer? Downsizing?—there are ways to sniff out the answer.
Here are some subtle signs a homeowner wants to find a buyer ASAP—and hopefully that buyer is you!
Sign No. 1: The listing begs ‘buy me!’
Granted, it won’t say that exactly, but read between the lines and you can pick up some valuable clues. The most obvious, of course, is multiple price reductions. But there are other signs, too, like an asking price below market value or a note that the seller is looking to unload the home “as is.” Another indicator that bodes well for you? A note that the seller is looking for a “cash” transaction.
“That could indicate a homeowner isn’t willing to wait around four months for a traditional bank mortgage,” explains Lucas Machado, president of House Heroes LLC a real estate investment firm in Sunny Isles Beach, FL.
Sign No. 2: The curb appeal isn’t up to snuff
“A lot of times motivation for a homeowner really means distress,” says Ed Laine, a real estate specialist with Miller Laine Properties in Bellevue, WA. “And when someone is in distress, they’re no longer focused on maintaining their yard or picking up their newspapers, so much so that they even try to close out the outside world.”
You might see an overgrown lawn or garden beds that could use a good weeding. Or there might be more subtle signs like closed blinds, even on a gorgeous day, or a stack of unread newspapers on the porch.
Sign No. 3: The closets are only half-full
“When showing a family home with three to four bedrooms or a finished basement, I’ll peek in the closet,” says Bob Gordon, a Realtor® with Berkshire Hathaway in Boulder, CO. “If it’s partially empty and only has a man’s or a woman’s clothing, it can be an indication of a divorce.”
And while you don’t want to benefit from someone else’s pain, the truth is that “divorcing sellers may be in a hurry to unload and be apart,” Gordon notes.
Other signs your home sale may go quickly because of a broken heart? Mismatched furnishings or empty spaces on the walls where art was recently taken down.
Sign No. 4: There’s been an addition to the family
A crib that barely fits in the parents’ bedroom. A hospital bed or oxygen tank in the living room.
“Small homes where there has been a recent birth or a family member who’s moved in for medical reasons can create a sense of urgency,” says Glenn Phillips, CEO of Lake Homes Realty in Pelham, AL. Here’s a family that needs more room, and fast.
Sign No. 5: The property is listed by an estate
When a house is listed by an estate—that is, the people who inherited it from the original homeowner—you might find that it’s more eager to give it up. That’s because the estate is likely looking to liquidate assets.
“There are exceptions, particularly if family members are not all in agreement about the sale,” Phillips says. “But if the family members are all out of town, then they’re usually more anxious to get the property sold.”
If you want to confirm this detail, check public records—or politely ask the listing agent, who might be at liberty to share.
Sign No. 6: The homeowners answer questions quickly and candidly
So there’s a leak in the roof? The basement flooded last year? Home sellers are rarely eager to disclose such information—but desperates seller won’t beat around the bush, because they know this could come back and bite them later by slowing down the sale.
“A seller’s willingness to disclose information about the property is one of the strongest indicators they’re eager to sell,” says Machado. “For people who are truly motivated, there’s a problem they’re looking for you to help solve, and so they’re more willing to be open and honest about their situation.”
Sign No. 7: The seller’s already moved on
If the house is vacant and the owner has already settled into a new home, then most likely they’re primed to sell, says Sacha Ferrandi, founder of Source Capital Funding, which offers real estate lending in California, Arizona, and Minnesota.
“Often, when a seller buys a home without selling the old one, their new mortgage is contingent on selling their old property,” he explains, “and every day that their home doesn’t sell puts stress on their current financial situation.”