Real Estate Weekly April 7, 2023

WHAT IS EARNEST MONEY AND WHY IS IT IMPORTANT?

PAGE 5

“WHEN EDITED LISTINGS DRAW HOME BUYERS”

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CLASSIFIEDS P7

All real estate advertised in Real Estate Weekly is subject to the Federal Fair Housing Act, which makes it illegal to advertise “any preference, limitation, or discrimination because of race, color, religion, sex, handicap, familial status, or national origin, or intention to make any such preference, limitation or discrimination.” We will not knowingly accept any advertising which is in violation of the law. All persons are hereby informed

that all dwellings advertised are available on an equal opportunity basis.

For further information call HUD Toll Free at 1-800-669-9777.

All Houses subject to prior changes without notice. Neither advertisers nor Skagit Publishing are responsible for any errors in the ad copy. Skagit Publishing reserves the right to refuse any advertising, which we deem unsuitable for our publication.

Unless otherwise noted, all photographs, artwork and ad designs printed are the sole property of Skagit Publishing and may not be duplicated or reprinted without express written permission.

Skagit Publishing is not responsible for typographical or production errors or the accuracy of information provided by advertisers.

Real Estate Stat

15.3%

Total housing inventory2 registered at the end of February was 980,000 units, identical to January and up 15.3% from one year ago (850,000).

Source: National Association of Realtors ®

517E.FairhavenAve - Burlington,WA98233(360)416-4902www.npsar.realtor

BrandonKoetjeMemorialScholarship

TheNorthPugetSoundAssociationofREALTORS®iscurrentlyacceptingapplicationsfortheBrandonKoetjeMemorialScholarship, establishedin1992.Thepurposeistoassistadeservingstudentfrom SkagitCountyandsurroundingareasfurtheringtheireducationatan accreditedWashingtonStateschool.

ApplicantQualifications:

• MinimumGPA:3.0

• UndergraduateStudent(minimum1-yearsecondaryeducationrequired)

• Letterofrecommendationfromfacultymember

• LetterofrecommendationfromsponsoringREALTOR®Member ApplicationsmustbereceivednolaterthanApril15th,2023,andcan befoundatwww.npsar.realtororbycallingtheNorthPugetSound AssociationofREALTORS®at(360)416-4902.

MissionStatement: TheNorthPugetSoundAssociationofREALTORS® advocatesforREALTORS® andtheir clients,andpromotestheprotectionofpropertyrights.

WINDERMEREREALESTATE/SKAGITVALLEY 360-424-4901•WindermereSkagit.com

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Why advertising matters

No matter the size of your business, good and thoughtful promotion will always help you grow awareness about your brand, get in front of more serious prospective clients, and ultimately boost your revenue. Advertising has been shown to be worth the investment, and we’re taking a deeper dive into why it really matters and what you can do to spread the word about your business.

• It creates brand awareness. • It provides credibility. • It helps you reach potential clients.

It drives lead generation.

It produces more continuous business.

It improves your digital presence.

It encourages customer engagement.

It keeps your consumers up to date.

It leads to repeat business.

The bottom line? Advertising really works. It’s a key component to building your brand, growing your earnings, and maintaining a successful real estate business. Our marketing solutions can help you get lots more eyes on your business with targeted online advertising.

Let us help you meet your marketing goals by advertising your listings in Real Estate Weekly.

What is earnest money and why is it important?

by Erik J. Martin

ey say having “skin in the game” is important when you are serious about purchasing a home. Typically, this involves making a pledge of sorts, in the form of cash. But your cash pledge can come in two forms: a down payment and earnest money.

Earnest money is a gesture of good faith in the form of funds that are put down before closing on a home to demonstrate to the seller your intent on buying the property. While earnest money is considered a deposit, it’s not the same as your down payment on a home for sale.

“Earnest money represents

the funds used to lock up the home, while the down payment is the difference between the purchase price of the house and the amount buyers are mortgaging,” says Peter McCarthy, head of mortgage for PNC Bank.

Realtor Daniel Brewer, senior vice president of Compass in Washington DC, says your earnest money deposit matters a great deal.

“It can be used to show financial security and strong desire for the home,” he says.

“In a competitive situation, a higher earnest money deposit can set a buyer apart from competitors.”

Often, an earnest money deposit equates to 1% to 2% of the purchase price. ese funds are paid usually by a

personal or certified check, or a wire transfer, to an escrow or trust account owned by the real estate brokerage, title company or legal firm involved. e money is kept in that specific account until closing, after which the funds are applied toward your down payment and closing costs.

“Say the buyer is purchasing a home for $300,000 and the earnest money agreed to is 2%. at means they would make an earnest money deposit, held in the broker’s escrow account, of $6,000. Meanwhile, assume the buyer agrees to make a down payment of 20%; that means they will finance the remaining 80%. In this case, their down payment would

be $60,000.”

To safeguard both the seller and the buyer during a real estate transaction, earnest money comes with a set of contingencies that are typically listed within the purchase agreement/contract. When you make an offer on a home and the seller accepts, commonly the sale is finalized only when these contingencies are met, subject to state laws and requirements. Contingencies could include things like having a home inspection done, getting an appraisal and being approved for mortgage financing.

“Among other reasons, earnest money is typically refundable if the seller terminates the home sale without a valid reason,” continues

McCarthy. “Conversely, earnest money can be forfeited if the buyer ignores contract timelines and/or contingencies. For instance, a buyer can lose their earnest money if they do not complete the purchase of the home within the timeline that was outlined in the homebuying contract.”

Usually, buyers can get their earnest money back if they are unable to obtain a loan, if they are legally unable to purchase the property or if the seller defaults on the agreement, according to Boyd Rudy, associate broker with MiReloTeam Keller Williams Realty Living in Brighton, Michigan.

“In some cases, the buyer may even be able to get the

earnest money refunded if they change their mind within a certain timeframe. is is negotiable and can depend on the terms of the agreement,” Rudy says. Work closely with your real estate agent and/or attorney before committing to make an earnest money deposit. e funds should be substantial enough to indicate that you are a serious buyer but be prepared to possibly forfeit the money if you don’t live up to the terms of your agreement.

“It is essential to have a written agreement outlining the terms of the deposit and any contingencies that would allow for a refund,” recommends Mike Qiu, a home flipper and real estate agent.

Ways to lower your insurance premiums

Question:

Is it true that FHA mortgages have become less expensive? How did they do that at a time when higher mortgage rates are an affordability problem?

Answer:

Yes. FHA costs have gone down.

e FHA program is an insurance plan. It’s a favorite with first-time buyers because with federal backing it can be used to borrow with little down and liberal qualification standards.

e money for FHA financing comes from private-sector lenders. ey’re willing to make loans with 3.5% down in most cases because – if the borrower cannot repay the debt – the federal government will step in and make good on the obligation.

Insurance is not free and that’s where the new discount comes in.

FHA borrowers have been paying two forms of mortgage insurance.

First, there has been an up-front mortgage insurance premium (the upfront MIP), equal to 1.75% of the loan amount. e upfront MIP amounts

to $4,375 for a $250,000 mortgage. Borrowers, however, need not pay this money in cash, it can be added to the loan amount instead.

Second, there is an annual mortgage insurance premium (the annual MIP) equal to .85% of the mortgage amount. For a $250,000 mortgage, the annual MIP would cost about $180 per month.

e FHA collects the insurance premiums and puts the money in a reserve account called the Mutual Mortgage Insurance Fund (MMI Fund). e MMI Fund is required to equal at least 2% of the loans insured by the FHA. e 2% represents the Fund’s capital reserve ratio.

e Fund’s latest capital reserve ratio is 11.11%. In other words, the FHA is a huge financial success and because it has so much money held in reserve it can afford to reduce insurance premiums.

e premium reduction will take effect on March 20 and works like this:

e annual MIP will remain unchanged at 1.75%.

e annual MIP will fall from .85% to .55% for most FHA borrowers.

What does this really mean for new borrowers?

ASK OUR BROKER

By Peter G. Miller

According to HUD, the typical new borrower will save $800 a year – about $75 a month. However, borrowers with bigger loans will save larger amounts. HUD estimates that someone with a mortgage of $467,700 – the national median home price as of December 2022 – will save $1,400 in the first year.

ese case savings add up to real money over time – $4,000 over five years for the typical borrower. However, there is another benefit as well.

When borrowers apply for mortgage financing, they must meet debt-to-income (DTI) requirements. In other words, only so much of the borrower’s gross income can be used to pay such monthly expenses as auto loans, student debt, credit card debt and housing costs. HUD has effectively made home buying more affordable by knocking down the upfront MIP.

Speak with local loan officers for details and specifics. If you have not qualified for FHA financing in the past, you might want to take a second look.

Email your real estate questions to Mr. Miller at peter@ctwfeatures.com.

“When Edited Listings Draw Home Buyers”

Marilyn Kennedy Melia

Buyers like home sellers with nothing to hide. At the same time, sellers benefit if their property isn’t hastily discarded from a buyer’s list of homes worthy of a tour. A study recently published in e Journal of Real Estate Finance and Economics finds that more information [words and photos] in online listings usually correlates with better sales results.

Maureen McDermut, a Montecito, CA real estate broker agrees: “In my experience, the more you can showcase in the typical listing, the more buyers will be interested in the home.”

However, “properties with more taste specific attributes” can benefit with less information, says Bennie Waller, a professor at the University of Alabama, and one of the study authors.

Features like unique architectural elements or unusual floor plans can be more effective with less documentation – since some buyers will eliminate a home simply because of an unusual characteristic.

e goal isn’t to hide features, Waller says, but rather to “bring more buyers in to see the home.”

is “less is more” strategy also is effective for high-end homes, which are also more likely to have custom, taste-specific attributes.

Deciding on which and how many images to include in a listing is a nuanced question, says Bret Ceren, of Corcoran Platinum Living Realty, Scottsdale, AZ. “Previews for movies and shows are not the full experience, just enough so that we know if we want to see it all.”

Once a buyer is touring a home, Julie Roback, agent with Baird & Warner, Glen Ellyn, Il., believes that written information should be available that answers any question she anticipates buyers might pose, from the age of appliances to where light fixtures were purchased.

Supplying information at the home itself is “probably smart to make sure there’s nothing surprising that comes up on an inspection report,” agrees Waller.

REAL ESTATE FOR SALE

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