To Accept or Not To Accept A Contigency Offer

To accept a "contingency" or not to accept a "contingency"?  That is a question I've had to answer several times lately.  First, what is a "Contingency"?  In regarding contracts, it is a condition in a contract that has to be fulfilled before the contract is binding.  So "contingency" is really just a fancy word for "condition," but in real estate contracts there are plenty of them, and they are the things that let the buyer or seller cancel the deal.

Some contingencies are common, such as, home inspections, appraisals and financing.  While others are complicated, particularly in contracts that are contingent upon the sale of the potential buyer's existing home.  A seller must proceed with caution when dealing with this type of contingency.  Why?  It is not in the best interest of the seller.  I will usually discourage my seller clients from accepting a contingent offer unless I can foresee a closing date for my client.

The reason, even though the seller still has the right to market the house as "Active Contigency-Continue To Show", most Realtors feel there's no point in showing a listing that has a pending sale. That means sellers could lose out on better offers waiting on a contingency to resolve.

But since it's something more sellers might be considering in today's market, I start digging. I will ask for information on the potential buyers house listing, MLS number, and proof of mortgage approval. I like to physcially view the property myself. I'll go out and look at the wanna-be buyer's house to see if it's a viable sale and that the listing price is consistent with market trends.

Meanwhile, if the seller has chosen to accept a contigent offer, I encourage the seller to accept with a "Binding with Escape Clause".  With an Escape Clause, the seller has the right to continue to market the property and accept offers even though the buyer still has a valid contingent contract. If another buyer comes along, wants the house, and makes an offer that is more acceptable to the seller, the seller has to give the original buyer notice to either pony up or walk away.

They (the buyers) don't get to know the details, just that the sellers have another good offer.  If the original buyer can't come up with a way to remove their contingency, usually in 48 to 72 hours, the contract is terminated without any liability to the buyer, and the seller is free to accept the second offer.

In a perfect scenario, the seller accepts a contingent offer, the buyer sells his or her home in the allotted timeframe, and everybody is happy.

If the listing Realtor has done his or her homework, so they know they've got a viable buyer with a viable contract, it usually goes through.

A good Realtor will be able to explain everything in a contingency contract in a way the client understands, no holds barred.

Some Realtors will say any offer is a good offer, but that's simply not true.  Contingent offers are more complicated than they seem.

Ways To Pay Off a 30 Year Mortgage In Less Time and Save Money

I have sold a lot of homes over the years and most have involved a mortgage.  Buyers usually choose a long-term mortgage, such as, a 30 year mortgage, to lower their payments to a level that's more affordable.  The main differences between 15 and 30 year loans are straightforward. Fifteen-year loans have higher monthly payments, but you pay less interest, while 30-year terms have lower monthly payments, but you pay significantly more for the house in the long run.  In some cases, more than double the initial purchase price.  However, long-term mortgages are good, in my opinion, because they allow options.  For example, you can choose to pay-off your mortgage in 15 years, but if you fell on hard times, you wouldn’t be locked into the higher payment of a 15 year mortgage.  There are several ways to pay off a 30 year mortgage in less time to save considerable money.  Below are some good examples.

• 1)  Pay one extra monthly mortgage payment per year towards your principal. In a scenario with a $100,000 mortgage at 6 percent interest for a 30 year term; the principal and interest payment on this loan would be about $600.00 per month. With taxes and insurance the payment would run closer to $800.00 per month. If you pay an extra $800.00 in principal per year on this mortgage, you would have it paid off in just over 22 years, or eight years sooner.
• 2)  Open a separate checking or savings account to hold your mortgage payment. Deposit one half of your mortgage payment into this account every two weeks. At the first of the month make your normal mortgage payment from this account. There are 26 two-week periods in each year, so at the end of the year there will be the equivalent of another mortgage payment in that account. Use this to pay on your mortgage. Don't spend money on a service that will do this for you. You can do this method on your own.
• 3)  Increase your mortgage payment by a fixed percentage each year. ERA realty calls this the "Three Percent Rule." During the first year you make your normal mortgage payment based on the 30-year note. For the second year, you add 3 percent to the payment amount per month. Add three percent of the prior years payment and make that payment for the next year. If you do this each year, you will pay off a 30 year mortgage in about 15 years. The three percent that you are increasing the payment each year is probably less than the amount that the cost of living increases, so it should only have a minor affect on your finances.
• 4)  Budget your money using a deliberate financial plan each month. By using a financial plan, you can probably find money to allocate to your mortgage to pay it off sooner. Every small amount of money that you pay towards your mortgage helps. Set a goal to pay your mortgage off in a certain amount of time and stick to it.

So you can see by the above it is easier than you think to pay off that 30 year mortgage sooner.  However, the drawback is that most people lack the discipline. According to the Federal Deposit Insurance Corporation (FDIC), 97.3 percent of people do not consistently pay extra on their mortgages. Many people lack the discipline to send in the extra money every month when it’s not mandated by the bank. However, what this statistic doesn’t mention is how many of the 97 percent would have fallen behind on their mortgages if they were locked into a 15-year mortgage.

Which is right for you?In the end, your financial situation will determine the right mortgage term. If you can make the higher payment, have a substantial emergency fund, and can meet retirement and other savings goals, a 15-year mortgage is a good way to own the home in half the time and pay substantially less interest. If just one of those conditions is not met, or if you are somewhat comfortable with debt and risk and wish to get a higher rate of return with other investments, the money saved each month with the 30-year mortgage payment may be better used elsewhere. You can always send in extra payments.

A relative of mine bought a new home 5 years ago and has a 30 year mortgage.  He faithfully pays extra every month.  It's really impressive how his principle is going down so fast and if he keeps it up, he'll have his 30 year mortgage paid in just 10 years.  What about you? Do you have a 15-year mortgage or 30-year mortgage? Do you prepay? What are your thoughts on risk versus higher returns?

Check This Before & After...

I absolutely love looking at before and afters.  I.O. Metro designers did a great job of transforming this blah living room and giving it an MODERN ECLECTIC look.  Check it out here.

I would love to see any "Before & Afters" you have to share.  You can email me pics along with information of what and how you did it to at sheila@neahomes.com

January Numbers Were Up, Up, Up...

All the numbers were up for January compared to January of last year.  The average list price of active listings were up by $37,386.   There were 25 more listings that sold this January compared to last January and the average price sold was up from $92,186 to $129,089.   The MLS Sold Volume for January was also up by $2,819,488. totalling $17,347,789.

These stats do not surprise me at all.  I have been receiving calls and email inquiries daily and am putting deals together.  If you are thinking of selling your home, now is a great time to give me a call.   By placing your home in my aggressive and consistent marketing plan, combined with years of experience, will help get your home sold for the best price with the least inconvenience to you. 

Call me to experience the financial  benefits of working with one of Jonesboro's top 10 Realtors in residential sales.  The difference of working with an experienced and successful agent vs. an average agent can cost you thousands of dollars.

MFA Oil Equals Hundreds of Jobs

On Wednesday, MFA Oil announced its partnership with Aloterra Energy.

Their goal: to produce a renewable energy crop.

That means big bucks for hundreds of farmers, and jobs for hundreds of workers in our area.

Biomass company planting roots in Northeast Arkansas - KAIT-Jonesboro, AR-News, weather, sports, classifieds-