In today’s housing market inventory is low and buyer demand is high.  In such a market, many buyers need to get creative in structuring their offer on a home, and many sellers (future buyers) need to consider the fact that they, too, will soon encounter the same challenges that buyers vying for their home face.  One common consideration in today’s seller-friendly market is a rent back.  Simply put, a rent back is an offer that allows a seller to remain in their home after settlement on their property, as renters, for an agreed upon amount of time.  This can be a huge bonus for sellers, as it allows them to obtain the cash for their home sale to complete the purchase of another property.  Often, this gives sellers the flexibility needed to find their next home without the stress of needing to leave their home immediately upon settlement.  For buyers, a rent back is a beneficial way to offer a seller some benefit, while reaping benefits of their own!  Even while not moving in, a rent back allows a buyer to begin enjoying the perks of home ownership – in terms of tax perks, appreciation, and amortization – prior to actually moving in.  A rent back, like most aspects of home buying, some with some perks, and some draw backs.

The perks of a rent back

A rent back can be a big deal to a seller.  It allows them time to find a new home and orchestrate a move without having to worry about the stresses that come with a home sale – staging, keeping things around the house perfect for potential buyers, and avoid the time crunch that can come with simultaneously trying to sell and buy at the exact same time.  For buyers, they can officially take ownership of a property, enjoying perks like home appreciation, tax write offs, and paying off their mortgage without having to wait for an extended settlement.  In a time of rising rates, it also may help lock in better financing terms instead of paying extra for an extended rate lock or leaving fate in the hands of the markets.  All other things being equal, a rent back option can offer the flexibility needed to make an offer stand out and get accepted over offers that don’t include this option.  Another perk is that buyers can be compensated for the time a seller is renting from them.  While in a competitive market it’s not uncommon to see “Free rent back” as part of an offer, buyers have the option of demanding rent for the time they’ll be out of their new home.  Since their is a “gap month” when getting a mortgage (for example, if you settle on a home at the end of April, the first mortgage payment would be due not in May, but in June), this can help a buyer recoup some money spent on their purchase and get their finances in order.

Drawbacks?

A rent back, as with all things, doesn’t come without risk.  During a rent back, risks are assumed similar to any landlord-tenant relationship.  Since the sellers still live in the property, the potential for property damage, refusal to leave the property at the end of the rent back period, and other risks can still be present.  If traditional mortgage financing is being used by a buyer, most loans will require a buyer to take occupancy of an owner-occupied home within 60 days of settlement as well, so while a rent back can offer some flexibility, there’s still a deadline on when the move into a new home needs to take place without breaching the financing contract.

Another thing to consider is that toward the end of a rent back, a new owner will need to do a walk through and ensure the property is left in as-agreed-upon shape by the seller/now tenant.  The assistance and obligation of a real estate agent may or may not continue through the rent back period, so a new owner should be aware of their rights, expectations of the seller/tenant, and execution of all terms of a rent back.

Consider your market and your options

If you’re a buyer in today’s competitive landscape, we recommend having professional representation from a real estate agent to help you best structure an offer in your market, but a rent back is certainly something worth considering if you have the flexibility available to you.  Price is certainly important, but taking into consideration a seller’s circumstances and structuring an offer that’s competitive in price, but also provides some additional conveniences and stress relief for a seller can help your offer stand out amongst others that don’t offer the same considerations.  Every market is different, some consult with your agent to see if a rent back is something to consider in an offer, but make sure you’re aware of both the potential benefits and drawbacks of such an arrangement.

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With Buyer’s Advantage, MasonMac not only preapproves customers through a fully documented vetting process, they actually submit a preapproval file to an underwriter for review.  This means underwriting approves the buyer for a predetermined purchase price, issuing an approval (read that again – not a PREapproval, but an APPROVAL) to purchase a home!  This is extremely important for sellers because with financed offers, many fall out due to a failure in the financing.  This is why ‘cash’ is often a preference amongst sellers, even though cash buyers often come with lower offer prices or a boatload of contingencies of their own.  With MasonMac’s Buyer’s Advantage program, buyers relying on financing are as strong as cash, since the only things not yet approved are property related.

Yes, that means that with an appraisal (unless there’s a MasonMac appraisal waiver!), title work, insurance, and any other property-related documents (HOA documents, for example), it’s on to the closing table with minimal processing times.  This allows our buyers to move faster, and give sellers the assurance that not only are they a serious buyer, but they’re a buyer that has very slim chances of not making it to the closing table, and making it there on time.

For our real estate partners and the agents of our customers, this also adds a layer of assurance when it comes to crafting a competitive offer!  Need a fast closing?  Well, with Buyer’s Advantage, the time from signing a contract to closing is drastically reduced.  Need to offer without a financing contingency to be more competitive?  While we never recommend waiving protective contingencies, where it’s needed, there isn’t much a buyer can do to be more assured than to have our Buyer’s Advantage approval certificate.  This gives our buyer customers and their agents additional layers of assurance that when it comes to the financing, the job will get done and get done fast!

“2 weeks?!?”, the agent on the other end of phone proclaimed.  Yes, as long as we can get the appraisal and title work back with a few days to spare – our buyer’s advantage program is making lives easier for buyers agents and adding additional assurance to sellers and listing agents that with our offers, the financing is as good as it gets in terms of getting done and done on time.

How does Buyer’s Advantage work?

As with a normal pre-approval, buyers need to apply with their MasonMac loan officer, and from there, the loan officer and their team will request any and all documentation needed for buyer’s advantage, then pass the loan to an actual underwriter for approval, before a property is even located!.  This does mean that the earlier in the process your loan officer is involved, the better!  Our underwriters are working hard to keep turn times FAST, but reviewing a complete file takes time, so requesting Buyer’s Advantage the same day an offer is being made doesn’t do anyone much good – but when you (of if you’re an agent, your clients) know you’ll be buying a home in the near future, getting in touch early will allow us to give you a Buyer’s Advantage certificate to submit with your offer.

Of course, other contract terms are important – price, the timing of closing, contingencies, and other aspects of your offer are all important considerations for a seller, but all other things being equal, Buyer’s Advantage offers a sure thing amongst other offers that may just have standard preapprovals or (worse) prequalifications, and will certainly stand out from those buyers who have chosen to make offers without a preapproval.

Want an advantage in today’s market?  Talk with your MasonMac loan officer about MasonMac’s Buyer’s Advantage program today!

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Buying a home during the holidays is easier and more stress-free than most people realize

The Timeline

Anyone buying a home during the holidays should factor those holidays into their timeline, especially once they find a home and it’s time to structure a contract.  Holidays mean banks (and lenders) are generally closed, staffs run a bit thinner as people take vacation and travel to be with family), and many one day holidays lead to more than single-day delays.  For example, with Veteran’s Day on a Monday, many banks and lending operations will close early on the preceding Friday.  With Thanksgiving being on a Thursday, many businesses will be closed or will be working with short staffs Friday.  This doesn’t mean a long process, but it does mean a few extra days should be anticipated.

The Deals

When buying a home during the holidays, many people think they’ll get a steal on their new home, or a Black Friday-esque price tag on their new home.  While there is less competition and prices often see a small lag during the winter months, the market is still the market.  In a hot area with limited inventory, buyers shouldn’t expect firesale prices on their new home.  With less competition out, though, they may have less stress from competing offers.  It’s important to make a strong offer to ensure if you love a house, you’ll be able to get your offer accepted and turn it into your home.

Your Schedule

While the mortgage process is easy for most buyers (we’d argue, easiest when you work with MasonMac), it’s important to take into consideration that you will have to do some legwork – providing documents, returning disclosures, and actually going out to see homes during the holiday season will need to fit into your schedule.  If you’ll be traveling or MIA for any period of time, it’s important to communicate that to your real estate agent and lender in advance so that your time away won’t shake up the process.

Know your Deadlines

If you want to be in your new home before Christmas, you should have found your new home by Thanksgiving.  The purchase process generally takes anywhere from 3-4 weeks, so it’s important to keep that timeline in mind when planning to make a move.  Everyone involved in the process will likely have some type of travel or time away from the office planned – that includes appraisers, title/escrow companies, and yes, even sellers – so keep this in mind as scheduling showings may even take a bit longer if you need a seller or seller’s agent to let you access a home.

The Big Picture

Overall, winter is a great time to buy or sell real estate, and buying a home during the holidays typically means less competition, more motivated buyers and sellers, and a process that doesn’t vary much from buying a home at any other time of year.  Timing, expectations on people, and communication about time in or away from the office (or for buyers, time that will be spent out of time or unavailable) is important to maintaining timelines and ensuring all contractual dates are met. With this post coming at the end of October, there’s still plenty of time to find and settle on a new home in time for the holidays, and certainly time to find a new home before the new year.

The post 5 Things To Keep In Mind When Buying A Home During the Holidays appeared first on Mason-McDuffie Mortgage Corporation.