Getting Your Ducks in a Row

July 24, 2023

Many of the buyers who have been checking out homes over the last few months are at a point where they have target neighborhoods and a good idea of what they want. But when they find it, a lot of them won’t be ready! It’s those pesky “ducks” that you must have lined up to be ready to make a successful offer’

Here’s how it works.

First, and most important, you need to be fully pre-approved by a lender, and it’s probably better to use someone your agent recommends. Going to any of the online companies that advertise heavily on TV may work well for a refinance, but if you bring in an offer with a letter from one of them, your offer could be dead in the water. ¬†You also need a letter, not just saying that you’re looking good, but that this company has fully examined your information and a human underwriter has fully pre-approved your loan application for whatever amount they are willing to lend.

Second, look at your lender’s estimate of the funds you’ll need to close on the house or condo. This includes your down payment, as well as lender fees and local property and transfer taxes – closing costs.

Third, you will need to have a substantial earnest money check that will go into an escrow account. At settlement, it will be applied to your down payment and closing costs. If you don’t settle because you default, the earnest money could go to the sellers as damages for your failure to perform according to your contract. The custom in this area is 5 percent of the price of the property you’re buying, and if you’re in a bidding war, you might need to make the amount more than this to make your offer competitive.

Fourth, you’ll need to show “proof of funds” in the form of statements from your bank or, if you’ll be liquidating stocks, your brokerage account.

It’s important to have your funds readily available and all of your documentation ready to go at the time your offer is made, especially if you are planning to make an offer on a house with other buyers in the mix.