The home buying process can be complicated, especially in the current Colorado Springs real estate market. Our team has your back for every step of your home buying journey. Today we’ll reference the Colorado Contract to Buy and Sale and discuss some lesser-known aspects and details of buying a home in Colorado.
1. Sellers can write an offer to a buyer
Buyers usually write offers to submit to sellers. But did you know that sellers can submit offers to buyers? This can be a creative and unique strategy for sellers to reengage a buyer that has not yet agreed to a counteroffer. It will definitely catch the attention of the buyers and their agent. Just keep in mind that the software systems that the real estate industry utilizes get a little cranky with this situation.
2. You can assign the contract to a new buyer
If you’d like to substitute your name with another buyer it’s considered an assignment. An assignment needs the agreement of the seller, and the seller will likely request proof of qualification for the new buyer.
Real estate wholesaling is a segment of the real estate industry that focuses on assigning contracts. In wholesaling, a buyer will put an offer on a home that specifies that the buyer is allowed to assign a home during the contract. The buyer then looks for a substitute buyer and charges them a fee. They are essentially selling the contract to buy the home to the end buyer. Wholesaling fees can be $3000-5000. It can feel a bit shady, but it is legal.
Related Reading: Steps to Buy a Home
3. Do sellers pay for the buyer’s closing costs anymore?
The second half of 2022 has brought a shift to the real estate market. Mortgage interest rates increased significantly, inventory started increasing, and excess buyer demand faded away. This shift means that seller contributions to buyer closing costs are making a come back. These seller contributions are commonly called “seller concessions” and can be applied toward many of the buyer costs. Keep in mind that there are limits for the utilization and amount of these funds depending on the loan, so it’s important for buyers to keep their lender in the loop. With interest rates on the rise, many homebuyers use seller concessions to buy down their interest rate and keep their monthly payment as low as possible.
4. Buyers can split their earnest money into separate payments
Why would that be beneficial? In a market that favors sellers, buyers can promise more earnest money to make increase the offer’s appeal for a seller. But buyers don’t necessarily have to offer earnest money all at once. For example, buyers could promise to provide $5000 after the offer is accepted, and then make an additional earnest money payment after a specific time during the contract period (like after the Inspection Resolution Deadline). This could make your offer more appealing if the sum of the two payments is higher than the seller’s earnest money requirement. But you can protect the extra money by offering some of it at a later point during the transaction. If it is a more buyer friendly market, you could split the seller’s earnest money request as long as it does not have a negative effect on the acceptance of your offer.
Related Reading: Steps to Sell a Home
5. A VA or FHA loan can be a disadvantage
Sellers tend to not prefer VA and FHA lending programs for a few reasons:
- The sellers might be responsible for charges that the VA doesn’t allow the buyer to pay for. This hasn’t happened in a long time during this sellers market, but it is important to keep in mind if the market shifts.
- VA and FHA appraisers tend to be stricter about a home’s condition than conventional loan appraisers. In order to put the seller at ease, VA/FHA buyers could offer to carry any required repairs or improvements to a certain amount. The most common item flagged by VA and FHA loans is flaking paint.
- FHA (and sometimes VA) loans require that certain condo units need to be approved. This can be a potential can of worms.
Related Reading: Tips for Choosing a Lender
6. Disclosure of a death in a home is not required
Colorado law states that facts or suspicions regarding psychologically stigmatizing events “are not material facts subject to a disclosure requirement in a real estate transaction.” This means incidents like a felony, homicide or suicide do not have to be disclosed. Another good reason to do your research and talk to the neighbors if you get a chance.
7. Builders have their own contracts.
Since builders will use their own contract, there are several items that buyers should pay close attention to. Seek legal advice if something is unclear. Once buyers sign the contract, it is not fully executed until the builder has signed which can be up to 5 days or even longer. Keep following up if you have not yet received the seller signatures after a few days. You’ve usually provided earnest money to the builder by this point so they know that you are serious. But a contract isn’t binding until both the buyer and seller have signed.
Related Reading: Where to Find New Construction in Colorado Springs
8. What happens if the house isn’t clean or empty at final walkthrough?
It’s more common than you would think: a buyer is doing a final walkthrough before closing and the house is dirty or there are items like trash or furniture left behind. If the seller refuses to rectify the situation, unfortunately the only thing a buyer can do is refuse to close. A delay like this needs to be discussed with a real estate attorney so the buyer doesn’t potentially lose the house AND the earnest money. Sellers will usually clean the house (somewhat), but we’ve seen situations where the seller and the seller’s agent basically shrug their shoulders and do nothing. This can be very frustrating for buyers, but try to keep things in perspective so you don’t lose your new house.
Be aware that the seller does not have to extend the appraisal objection deadline if the buyer’s lender does not have the appraisal done on time. It is not in the seller’s best interest to extend this deadline because they could lose the buyer’s earnest money if the buyer decides to terminate due to appraisal issues (with the exception of VA/FHA/USDA loans).
10. Backup Contract
Depending on the market cycle, about 10-15% of real estate contracts fall through. If you want to be in backup buyer position, you will need to submit a written backup contract or backup counter. A simple “listing agent should call us if their current contract falls through” will not be enough if you are serious and want to scoop up the property if a contract fails. You have all the rights to back out yourself, but you do not have to go through the competing offer process again. Your contract will seamlessly fall into place provided that it is written up properly. This is another reason to have an experienced agent or team assisting you.
What part of the home buying process has been surprising to you? Having an experienced real estate agent on your team is the best way to navigate the home buying process. They will help you learn details like the ones listed above so you can find your dream home in today’s competitive market. Are you ready to buy a home? Give us a call 719-219-9739 or email firstname.lastname@example.org to get started today!