The future is looking good for Aurora, Oregon’s potential growth and jobs.
The Oregon Department of Aviation recently recommended moving forward with the extension of the Aurora State Airport’s runway. While more work remains, the flight path for this local economic boost seems clear. Read more here!
A common Aurora homeseller question is ‘How much will it cost to sell my home?’ Hear the audio podcast presentation of this article by clicking here or on the ‘play’ button below.
Multiple Factors
As is usual with the sale of anything, there are a few factors for Aurora, Oregon homesellers to consider. Local homeseller costs typically include a real estate commission, plus items like title insurance, escrow and recording fees. There are other attendant costs, too, like the ‘hassle factor’ and moving expenses.
Spoiler Alert: The answer to the question of how much it costs to sell your home is, ‘it depends.’
Why is this the case? Well, for starters, Realtors frequently work using different commission rates. On top of that, you don’t always know with precision every single cost you may incur as a homeseller, such as negotiated home repairs. Yet despite all this variability, sellers can still receive an estimate of the cost to sell their home from a Realtor and while sometimes it’s within a given range, that figure is typically close to reality.
First, let’s focus on specific hard costs to actually sell your home. When considering your ‘bottom line,’ it’s important for homesellers to include in their calculations any liens (like an existing home loan, home equity line of credit, or unpaid property taxes) that need to be paid at closing.
Price vs. Cost
In selling a home, it’s helpful to understand the difference between price and cost. Here’s a summary for homesellers to consider when looking at most efficiently selling their home for the least cost:
Price = The ‘sticker’ amount of what you’re buying, like hiring a Realtor to sell your home.
Cost = What you stand to lose if you don’t consider your return-on-investment. For example, if the agent you hire does a poor job, you can:
1. Lose time (say goodbye to opportunities like that home purchase you planned to make, since you expected your home to quickly sell).
2. Receive less buyer activity and fewer offers.
3. Experience frustration (lost sleep and more).
For example, if you find a dentist to work cheaply, but end up with an infection or need to pay another dentist to get the job done to your satisfaction, the case can be made that a cheaper price is hardly a bargain. That’s because the cost can be significantly higher than the price you initially agreed upon.
Commissions Are Negotiable
The Realtor fee to sell a home is usually called a ‘commission.’ Regarding the real estate commission amount, because Realtors are independent contractors, if you ask more than one real estate agent, you may receive a few different answers. This article gives one attorney’s view of a Realtor’s value. A Realtor fee is truly the free market in action. Cream ‘rises to the top,’ so better agents usually are paid as much (sometimes more) than less experienced brokers, who may be less successful and/or offer fewer services.
Give Me A Number
By far the most common commission arrangement is that unless your home actually sells and closes, no real estate fee is paid. According to this 2017 Realtor.com article, the average prevailing commission for a home sale is about 6%. That said, you can expect the majority of professional agents to approximate each other. The commission amounts quoted are likely to be different, but so is the service and expertise of the agent. Like you, Realtors only have 24 hours in a day. When an agent is working with you, that’s time he or she could be spending with another client. And because commission sales are a results-based, expect to pay a competitive rate to hire a successful Realtor.
This isn’t so surprising, since if you were to pay for a doctor’s visit, a home furnace service call, or a mechanic to fix your lawn mower, there is usually a range of what is considered reasonable. Similarly, throughout our region that range can vary. This explains why it’s difficult to provide a precise and accurate dollar figure on seller costs when selling a home. It can also depend on the property itself.
Feeling The Burn
Expect ‘bargain’ commission rate quotes from less experienced or desperate agents. Also expect a low quote from less diligent agents who may simply stick a sign in the yard and either hope it sells, or intend on ‘beating the seller down in price’ in order to increase their odds of eventually being paid. If a ‘churn and burn’ attitude is not what you want, consider working with a helpful, consultant type Realtor who actually represents your best interests and doesn’t use ‘strong arm’ tactics. To summarize, if a commission seems to good to be true, it probably is. In the end, you may pay considerably more than you bargained for to become someone else’s ‘on the job’ training.
The Volume Discount
If a property is priced very low, such as a vacant lot located in a small and distant town, commissions frequently are higher to help make up for an agent’s considerable time and effort. Why? Consider that the real estate commission on a $25,000 lot can be around 1/10th of a $250,000 home, yet both require plenty of paperwork and attention to detail. Marketing the $25,000 lot may even take considerably longer and involve more sheer work. To attract a good, diligent agent may require paying a bit more in the real estate commission to adjust for the reality of that Realtor’s lost opportunities with other more lucrative properties while selling yours.
How A Lower Commission Hurts Homesellers
The thought that sellers are potentially damaged by a lower commission paid to their Realtor is counter-intuitive, right? Think again. Here’s an example using that 2017 Realtor.com statistic of 6% as the ‘average’ Realtor commission.
Real estate is a business. And because Realtors are salespeople, they expect to be paid what they’re worth. This is especially true of experienced agents who are typically among the best at their profession. So let’s consider a seller, Mr. Jones who wishes to save some money. As a result, he talks with several Realtors and finds one willing to work not for 6%, but 4%. Great for Mr. Jones, right? Possibly not and here’s why, looking at just one of numerous reasons.
Doing ‘The Split’
It’s helpful to understand that the Realtor representing Mr. Jones doesn’t typically get the entire commission, regardless of the amount. In our region, it’s common for commissions to be split four ways. There are exceptions, but here’s how the commission distribution usually breaks down and each part can vary, depending in large part upon the total commission:
1. Part to the seller’s Realtor
2. Part to the seller’s real estate company
3. Part to the buyer’s Realtor
4. Part to the buyer’s real estate company.
Given such a ‘split,’ no one is getting rich and compared to the national average of 6%, suddenly a 4% commission is looking pretty skinny. Here’s why that matters.
False Economy
Commission ‘splits’ or distribution can vary, but if the Realtor and company working for Mr. Jones receive around half of the commission, or around 2%, that leaves a less-than-common 2% commission to be shared between the buyer’s Realtor and the firm they represent.
Why does that matter?
Because the buyer’s Realtor can easily look at the listing sheet and see precisely what commission is being offered to the buyer’s Realtor who writes an acceptable offer for the home of Mr. Jones. If the commission structure pays a percentage or two less than what that buyer’s Realtor is accustomed to receiving for selling a home, expect a tepid response, or possibly no response at all. After all, there are frequently other homesellers who ‘pay the going rate’ whose homes are just as easy to sell.
It’s simply too easy for a buyer’s agent to observe those homes that pay what is seen as a competitive commission. So much for Mr. Jones ‘saving’ money. That’s because the end result of a ‘bargain’ commission could instead be fewer showings, a longer market time and diminished offer activity on his home. Remember, a main reason for multiple listing is to get more offers for a seller’s property. It’s generally a good idea not to work against that principle. Pay professionals the market rate and you usually won’t regret it.
Homeselling Methods
There are different ways to sell your home. The most common and (usually most profitable) is to hire a full service Realtor. Another method is to go it alone, ‘by owner.’ Yet one more alternative is to work with a ‘discount broker.’ Let’s look at each of these scenarios to see which might be right for you.
Homeselling ‘For Sale By Owner’
If you do decide to try selling your property by yourself, you will soon realize there are good reasons why even real estate agents pay a commission to sell their own homes. That’s because in addition to taking on a second job, from a ‘bottom line’ standpoint, hiring a Realtor is usually by far the most profitable way to go.
The irony for ‘by owner’ homesellers is that in their attempt to save money, they usually leave the most money on the table. That’s because ‘by owner’ is often the least effective and most expensive way to sell your home. Since your property isn’t in the Realtor’s multiple listing system, you can expect to have far fewer qualified buyers aware of your property. Fewer buyers means less competition and less offer activity.
Home & Personal Security
Before offers, come showings. This brings the security of yourself and your possessions into play. Realtors routinely scrutinize buyers before agreeing to represent them. Don’t like the idea of unscreened and unaccompanied strangers in your house? Then selling ‘by owner’ may not be for you. The simple fact is that working with a Realtor provides one more layer of scrutiny and seller security.
Sellers ‘by owner’ routinely must deal with ‘tire-kickers’ who are unqualified to buy and therefore can be a significant waste of time. And if you do happen to get an offer when selling ‘by owner,’ there’s no Realtor to deal with under-handed offer tactics, contingency ‘landmines’ and other potential pitfalls, plus no documents to help protect your interests, such as the arbitration and mediation clause. As a result, lawsuits can become more of a likelihood. Didn’t complete a property disclosure or lead paint form? Don’t know a good repair contractor? Dislike ‘legalese’ in documents you’ve never seen? If you plan to sell ‘by owner,’ be prepared for some expensive surprises.
Convicted fraudsters can appear very unassuming. Some ‘sketchy’ buyers take advantage of ‘for sale by owners’ too. That’s because there is often less buyer competition, since you’re not in the Realtor multiple listing system and therefore buyers typically have both time and less buyer activity working for them. If you happen to be a real estate attorney with a ‘hot property’ that has buyers knocking on your door and you have it priced right, plus you don’t mind doing a lot of legwork, going ‘by owner’ may work for you.
Want A Second Job?
But if you have a full time job, want maximum exposure, plus an experienced professional to assist in pricing, marketing and transactional minutiae, including a Realtor simply makes sense. Sellers with a Realtor net a better return at closing compared to ‘for sale by owners.’ Some of the most parsimonious banks realize this and as a result, financial institutions routinely hire real estate agents to sell their REO (real estate owned), which are often foreclosed properties.
Homeselling by Discount Broker
For homesellers, a step up from ‘for sale by owner’ is the ‘discount broker.’ Some consider it akin to a low budget buffet, the kind where the food and service may find you walking away wishing you’d gone somewhere else. You could get lucky, but don’t be surprised if you get heartburn, instead.
That’s because while you’ll now probably be placed in a Realtor multiple listing system, a potential downfall is a possibly reduced commission paid to buyer’s Realtor. Unless you’re paying the buyer’s Realtor a competitive rate, don’t expect agents to rush to your door and sell your property. On top of that, some discount broker agreements require the seller to handle showings, negotiate the transaction on their own and even handle much of the paperwork. So much for being easier!
Homeselling by Full Service Realtor
This is the ‘full meal deal.’ You’re in at least one multiple listing system, have full representation, plus the abundant resources of a licensed professional at your disposal. Showings are followed up on, paperwork is handled on your behalf and you can expect priority to be made for your questions and scheduling.
The Bottom Line
Because any commission charged by your Realtor is only one piece of the seller’s ‘net at closing’ puzzle, it’s a good idea to request an estimate of closing costs, including real estate commission, prior to listing your property. This provides you with a better picture of what to expect at closing. This is a free service provided by Realtors and helpful in gauging an approximation of the funds you can expect at closing.
See Additional Articles Like This:
10 Reasons Why Homesellers Hire a Realtor
Why Does My Realtor Do That?
7 Strategies to Sell Your Your Home Sooner!
The Art of War for Homesellers
3 Steps to an Oregon Home Sale
Thinking About Selling?
Consider working with full service Realtor Roy Widing at Oregon’s Certified Realty. For a free consultation of what your Oregon property could sell for in today’s market and your ‘bottom line’ of seller’s proceeds at closing, use the convenient contact form below or call 800-637-1950.
Before entering into a business relationship, it’s helpful to know your Aurora, Oregon real estate agent is nice, patient, available when needed…and honest. So while many of us assume we’re ‘safe’ in the hands of our doctor, attorney or pastor, what about your Aurora Realtor? Find out more in the audio podcast of this program here, or use the audio player below.
Due Diligence
Sadly, as seen in this TV news report, not all real estate agents are trustworthy. However, some preliminary work has already been performed by the state of Oregon to ensure a real estate agent is sufficiently trustworthy to work with the public. This includes a state screening, which involves a criminal background check, fingerprinting and mug shot. This data is submitted for review by the Oregon Real Estate Agency (OREA), which also provides regular updates about investigations in their insightful publication Oregon Real Estate Agency News Journal.
Of special note is the OREA ‘Administrative Action’ section, which provides information about decisions regarding Oregon real estate violations. The resulting consequences to untrustworthy real estate agents could include a reprimand, license suspension, license revocation and/or a civil penalty. So while no screening process is foolproof (as witnessed by crimes committed by doctors, attorneys and other professionals), the state of Oregon does considerable due diligence to vet real estate agents.
As part of the application process to become an Oregon real estate agent, any felony and misdemeanor convictions and arrests must be disclosed. The disclosure requirement is fairly high, because in addition to any criminal activity, also requiring disclosure are any administrative proceedings, plus civil and even financial issues. For example, if a prospective Oregon real estate agent has an unsatisfied judgment or bankruptcy, each must be disclosed.
A Matter of Trust
Trust is an important factor when buying or selling Aurora, Oregon real estate. Thankfully, trusting your Realtor is not super risky. That’s because consumer surveys consistently reflect a high level of satisfaction with Realtor performance. One study by Forbes magazine revealed 96% satisfaction for the real estate industry. So if many real estate agents were dishonest, we could expect that figure to be much lower.
This doesn’t mean blindly signing off on every suggestion one receives from their Realtor. But obsessively hand wringing over transaction minutiae is one sure way to make the process less enjoyable. A recommended approach is for Aurora area homebuyers and homesellers to carefully read all documents, ask plenty of questions and work with a recommended professional with a solid track record.
Trust For Homesellers
Looking at trust from a Aurora homeseller’s perspective, for starters there’s significant trust needed to deal with buyers. For instance, significant trust is needed to allow strangers in your house. There’s also trust in taking your property off the market, in the hope a sale will go through. And trust in finding a replacement home.
Trust For Homebuyers
Trust is needed for Aurora area homebuyers, too. Trust is necessary in working with a lender and that the discomfort of prequalifying will be worthwhile. Trust they’ll find a home they like and can afford. Trust their lender will come through.
Trust For Both Homebuyers & Homesellers
So what do Aurora, Oregon homebuyers and homesellers share in common? Trust. And there is perhaps no greater trust that homebuyers and sellers have in common than in their Realtor.
After all, your Realtor is someone you expect to be there to help navigate your way through what is frequently the largest financial transaction of a lifetime. Similar to an attorney or priest, Realtors are expected to keep confidences.
But let’s first look at a few situations which underscore why it’s important to be able to trust your real estate agent.
Relationship Chemistry
Trust is easier when there is good ‘chemistry’ between a Realtor and their client. When seeking an agent to refer for out of area homebuyers or homesellers, there are many things that a Realtor can readily confirm. These include an agent’s years in business, designations earned, coverage area, plus areas of specialty like homes, farms or commercial property.
As a result, I’m frequently able to locate a very good Realtor to ‘match’ with an out of state homebuyer or seller and it’s not always difficult. That said, the one challenging element to know with certainty is the ‘chemistry’ that even a highly qualified, out-of-area Realtor will have with a new client.
People are different and that includes real estate agents. Most times relationships work out swimmingly with the referred agent. On rare occasions, it doesn’t work out. But going in and at least on paper, the homebuyer or homeseller who interviews a previously unknown, yet vetted Realtor, knows the agent is qualified and experienced, along with some important other facts about him or her. Plus, knowing these facts up front is typically less risky than taking a ‘shot in the dark’ with an unknown agent.
Does The Company Matter?
Because Oregon real estate agents are independent contractors, the individual Realtor is who typically matters most. After all, you don’t expect a faceless corporation to answer your late night question, or go over the details of your settlement statement. For example, I don’t care that much about what hospital I go to, but I want to have a say in the surgeon who will do the operating. Similarly, it’s the individual agent who is in a position to make the most difference, whether from a small or large office. However, longevity of a real estate firm can be helpful in determining that they are probably doing something right. So if a company you’re considering has been in existence for half a century or more, they’re likely not a ‘fly by night’ outfit.
Alternative Agent Finding Methods
One of the ‘little-known secrets’ about real estate online, including agent ratings, is that placement is frequently purchased. Realtors frequently buy what are known as ‘leads.’ Examples include Zillow and even Realtor.com. Sometimes this is done by the agent buying incoming inquiries regarding a specific zip code. Sometimes, the agent pays for better placement on a real estate website page in order to stand out.
If you decide to use a magazine or the Internet to locate an agent, it may be best to consider that as a first step of information gathering. Promotional materials can be misleading and if carefully crafted, can leave out a lot of important information. For example, if an Realtor is brand new, he or she may focus on how many agents their company employs, personal community involvement like donations to charity, or sponsorships. While these could be nice facts, they may not have a lot to do with the agent’s proficiency, professionalism, or even trustworthiness.
Referrals Are Built on Trust
One good way to find a trustworthy Realtor is to ask people you trust and get a referral. The ‘proof is in the pudding,’ so if your friend or family member is happy with a specific real estate agent, there’s a good chance for a similar repeat performance.
White Hat or Black Hat?
One area where certain real estate agents are sometimes revealed to be wearing either a ‘white hat’ or ‘black hat’ is in the area known as ‘dual agency’ or ‘disclosed limited agency.’ This is a situation when an agent with a listed property also works with the buyer. To be clear, most Realtors are aboveboard and honest, continually looking out for their client’s best interests.
That said, the challenge to some agents comes when the agent attempts to ‘elbow aside’ other buyers, their agents and/or offers, in order to push his or her offer through. Why on earth would a Realtor push hard to get their offer accepted, since it’s all about simply selling the house, isn’t it? Not exactly. That’s because if the listing Realtor also sells your home, they typically get paid more.
Dual agency is well known as a potential minefield among ethically challenged agents and as a result, the State of Oregon, the National Association of Realtors and the Oregon Association of Realtors all have rules in place to help prevent its abuse.
Dueling with Dual Agency
In Realtor circles, the topic of dual agency has proponents and detractors. As a result, don’t expect every real estate agent you run into to have the same opinion. In reality, dual agency can be a very good thing, as seen in our previous article titled “5 ‘Insider Oregon Real Estate Tips.’ There, the topic ‘Having A ‘Double Agent’ Can Be A Good Thing‘ ranks as item #1 out of the five items listed. The advantages to having an agent on both sides of a real estate transaction are clear.
The result, good or bad, can significantly depend on your agent’s trustworthiness. For example, hurriedly accepting the first offer can work out. That’s because sometimes the first offer is the best offer. Alternatively, acting without as much available information as possible sometimes comes at significant expense to the seller, who may be urged to quickly accept the offer their listing (seller’s) agent has written. The problem is that the listing Realtor can be expected to reasonably know how much activity there is on the property for sale. Again, trust is key here.
Plus, given the amount of agent and buyer activity, along with the quality of inquiries (such as highly motivated, qualified buyers), the seller’s Realtor may have even heard comments from other agents about possible future offers. So by pushing his or her own offer, is the listing Realtor providing the seller with all known information in order to truly serve the seller’s best interest? Sometimes the only person to seemingly know the answer is the listing agent. A Harvard Business Review article notes why this situation can be a problem:
“Take cheating. Claremont McKenna psychologist Piercarlo Valdesolo and I have conducted many experiments on the topic, and one surprising (if disheartening) result we have found, time and again, is that 90% of people—most of whom identify themselves as morally upstanding—will act dishonestly to benefit themselves if they believe they won’t get caught. Why? Anonymity means no long-term cost will be exacted. Even more startling is the fact that most of those who cheat also refuse to characterize their actions as untrustworthy; they rationalize their behavior even while condemning the same in others…”
More than once, an honest real estate agent working with a highly qualified and motivated buyer has inquired about a property, even written up that buyer’s offer, only to have the listing agent hurriedly put together his or her own offer and submit it to the seller in order to ‘tie up’ the property (and presumably make more money), before other offers can be considered. It’s a fact of the real estate business and as a result, unethical agents develop a reputation and are often viewed warily by others in the business.
The ‘Commission Effect’
If all these elements don’t sufficiently complicate the task of finding a trustworthy Aurora, Oregon Realtor, there is also a phenomenon you might call the ‘commission effect.’ This is outlined in a previous article titled ‘5 little Known Realtor Insider Tips:’ Realtors Can Calculate Their Paycheck by Viewing a Property Listing Sheet. This means that for agents truly focused on maximizing their payday, you might expect them to guide you toward homes that pay a higher commission structure. The listing sheet is typically only seen by multiple listing members. Thankfully, most Realtors simply don’t do business in this manner.
The Bottom Line
During high level negotiations, President Ronald Reagan sometimes used the term ‘Trust, but verify.’ This old Russian proverb could be a helpful approach to grant you peace of mind in finding a trustworthy agent for your next real estate transaction. Do your research and ask family and friends for Realtor references. Be open and forthright, then make your best decision based on relevant, reliable information for your situation.
Questions?
Thinking about selling your Aurora property, or have real estate questions? Contact your Aurora real estate specialist Roy Widing with Certified Realty today for a free consultation. Roy has been selling Aurora properties since 1988 and he can sell yours, too. Simply use the convenient form below, or call him at (800) 637-1950.
Sometimes absorbing the sea of Aurora, Oregon real estate information is more like drinking from a fire hydrant. Yet, out of all the seemingly helpful real estate data bandied about, there is one especially helpful number, which when understood, can provide near-magical clarity to both Aurora, Oregon homebuyers and homesellers.
What is this ‘magic’ number and what does it represent? Simply put, it’s the current figure for housing inventory, typically expressed in months of projected home supply.
Listen to the audio podcast presentation of this helpful program on Aurora, Oregon real estate by clicking here or on the above link.
Normal Home Supply
Among real estate experts, a ‘normal’ range for home supply in parts of Oregon-including Aurora-is frequently cited as somewhere between three to six months. For example, if the home supply figure is three, then hypothetically our market would be ‘out of homes’ in three months, provided no new homes were placed for sale. In other words, if our regional home inventory figure is within three to six months, we’re typically experiencing a normal market, meaning one not far from a balance of supply and demand, also called equilibrium. In a way, it’s kind of like an absorption rate for how fast supply is used up.
Your Mileage May Vary
It’s helpful to understand that home inventory figures are more of an average for a region. In Oregon, major real estate regions include Portland, Bend, Eugene, Salem and the Oregon Coast. Aurora is equidistant between Portland and Salem, so the market might be considered a ‘hybrid’ of sorts. Schools can also be a driver for many homebuyers and given the Clackamas County/Marion County ‘divide,’ it makes sense to consider this factor when analyzing Aurora’s unique Oregon real estate market niche.
So if your property is located in or near Aurora within Clackamas County, the Portland area inventory figure is frequently cited as a bellwether for housing backlog. If your home is located in or near Aurora within Marion County, the Salem inventory figure provides an alternative approximation of local home supply. It’s also likely that your specific area could be somewhat different altogether, based on a variety of hyper-local factors affecting both demand and supply. That said, home inventory is an undeniable and convenient ‘thumbnail’ sketch to help assess what kind of market you’re in.
What’s The Practical Impact of Housing Inventory?
Consider real estate and inventory like a pipeline. If more flows through it, the product is plentiful and therefore the cheaper it is to buy. So with a lower, dwindling home supply and the spigot turned down, the reverse is true. That’s when the local real estate environment favors sellers, because there are more buyers and it’s considered a ‘seller’s market.’ In that case, expect a short market time and an environment where homesellers receive multiple offers, often at or above listing price. If the supply of homes is higher, it’s considered a ‘buyer’s market.’ This means you can expect a longer market time, with homesellers seeing few, if any offers…and frequently for less than the asking price.
One reason housing inventory is so important is because it helps buyers and sellers to better manage expectations. Most buyers are interested in how long it may take to find the ‘right’ house. Inventory affects this. Alternatively, most sellers are interested in how long it may take to find a qualified buyer. Inventory affects this, too.
Another reason housing inventory is crucial is because it can significantly impact so many other important factors. In other words, inventory is a ‘driver’ for market time, selling price, appraisal results, lendability and more.
Okay, So Inventory Is Important. What Does It Look Like?
Thinking about selling your Aurora, Oregon property? Know the market before diving in! Contact Certified Realty with your questions and for a free consultation on what your property could sell for today using the contact form below, or call (800) 637-1950.
While there is a case to be made for homeselling in each of the four seasons, Winter is one of the most powerful times that Aurora, Oregon sellers can place their home on the market and for ten very good reasons.
Click here or the play button below for the audio podcast presentation of this article.
And given the pleasant, even emotional attachment so many have during that time of year, expect some homebuyers to fully embrace the holiday theme of ‘Peace on earth, good will toward men.’ As a result, such positive feelings can spill over into the home selling process and make it easier.
Thinking about selling your Aurora, Oregon house this Winter? Call our AuroraOregon.com sponsor, Certified Realty at 800-637-1950 for a FREE consultation!
Simultaneous/Consecutive Home Transactions
Selling your Aurora, Oregon home and buying a replacement property are frequently linked activities. In this article and related audio podcast, we reveal how to maximize the efficiency and minimize the bother when simultaneously home buying and home selling.
We’ll also examine options to help decide if either simultaneous or consecutive real estate transactions may be best for you.
Timing
The singular act of buying or selling a home is often the foremost concern of many. Whichever immediate task you may be considering, it’s common to have twice the activity anticipated, but in two steps. That’s because Aurora, Oregon home buyers often not just have a home to sell…in addition, Aurora, Oregon home sellers are frequently seeking a home to buy. So what’s the best way to navigate this potential real estate quagmire without getting entangled in a morass of stress and needless extra costs?
First Steps
To begin, it helps to examine three common dual home sale/home purchase options:
Your challenges, benefits and results will largely depend upon which of these three decisions you settle upon. Here are three quick takeaways for these three usual options:
Option #1. Selling your existing house first, then buying the next house
This option usually requires a ‘double move.’ Yet one advantage of this approach is that you won’t have double house payments. One disadvantage is that you may have to move twice. An added benefit of this ‘selling first’ approach can include negotiating with strength in the purchase of your next home. That’s because your purchase needn’t be contingent upon the sale or closing of your sold home. As a result, you are seen as a ‘cash in fist’ buyer, or at the very least, a buyer who is considerably more likely to qualify for a home purchase, given that you ostensibly now have access to the equity in your now-sold home. This helps you negotiate with more power in the purchase of your next home.
Option #2. Buying the next house first, then selling your existing house
When first buying a house, then selling yours, one advantage is that you know where you’ll be moving. The reduced stress of ‘knowing where you’ll land’ is empowering.
Unless you’re a cash buyer, you’ll likely need to qualify with a lender. And if you have an existing loan in place on the house you’ll be selling, this may mean you need to qualify for two loans, your current home loan and the loan on the house you’re buying.
As long as your current Aurora, Oregon home sells in a timely manner, added financial obligations can be minimized. For more information about bridge loans, see the below ‘A Bridge Too Far?’ discussion.
Option #3. Simultaneously moving from your existing house to your next house
This situation is very common. Provided your activities are clearly thought out, well-executed and contingencies are in place for protection, it’s also one of the more affordable options.
Think far ahead and shoot for impeccable timing, in order to make your move the smoothest possible. In order to have sufficient time to move out soon after closing on your current home’s transaction, you will need to locate your next home, write an accepted offer, have the home inspection and if you’re getting a home loan, likely an appraisal…all before you close on the purchase and can actually move in.
One advantage of this approach is that you won’t have double house payments. You also know where you will be landing, and you won’t likely have to move twice. One disadvantage is that your timing needs to be good and possibly have a little extra ‘cushion’ to allow for emergencies, like delays with appraisals, inspections and repairs. Otherwise it’s easy to feel ‘squeezed’ by your being in the middle of two time-sensitive transactions.
That’s one challenge of going this route; It’s complicated by not knowing with precision the timeline of certain key activities. That’s because while home inspections can usually be completed within a set time frame, like 10-14 business days, other requirements like appraisals, can take much longer, with less certainty of the completion date. On top of that, most transactions involve two appraisals, one on the house you’re selling and another on the house you’re buying. So if you plan on a simultaneous sale/purchase, huddle up with your Realtor to create a well planned timeline, then build in some extra breathing room, as necessary.
A Bridge Too Far?
One way to do purchase a house without first selling your Aurora, Oregon home is with what’s called a ‘bridge loan.’ This is effectively a loan against the equity on your existing home. There are plenty of added details, but for the sake of simplicity, just understand that if you use a bridge loan to buy your next home, until your current home is sold, you will likely have double house payments. So if your current home doesn’t sell in a timely manner, hopefully the squeeze on your wallet won’t be more stressful than if you were to have simply sold your existing home first.
Tools of the Trade
To accomplish the job of simultaneously buying and selling homes, among the most common protective tools is called a contingency. Consider contingencies as akin to safety goggles. They’re designed to prevent a mishap, only in this case, the mishap could be losing your earnest money.
Earnest Money
Earnest money is usually a certain dollar figure placed on deposit as a sign a buyer is earnest, and later applied to the home purchase. This helps convince sellers that a buyer is serious and take their property off the market. Earnest money essentially helps to ‘hold’ a property for a buyer. Earnest money is not often the total down payment, although it can be applied as part of the down payment. Earnest money is important to homesellers, because without it, a buyer could otherwise tie up the seller’s property with virtually no obligation.
A large part of contingencies relate to a buyer keeping their earnest money, or the initial deposit showing the buyer is ‘earnest’ in proceeding to closing on a home sale. If a homebuyer does not have a sufficient contingency in place during a home sale, forfeiture of a buyer’s earnest money becomes possible. It’s not terribly common, but it can and does sometimes happen.
Types of Contingencies
Home inspection contingencies provide buyers with the right to have a house inspected for a variety of conditions, all within a specified time frame. Another common contingency is the loan contingency, so if for some reason a lender does not approve a buyer or the property for a home loan, the earnest money deposit is returned to the buyer. Buyers have lost out on qualifying for a home loan because they went out and bought a car during the home purchasing process, thereby disrupting their loan ratios.
The Reality of Earnest Money Deposit Risk
As long as appropriate contingencies are in place and they’re followed in a time-conscious manner, it’s relatively uncommon for buyers to lose their earnest money. It’s always a good idea to keep an eye on your timeline.
Buying And/Or Selling?
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