Close It! nominated for Tabby Award

We've got exciting news to share! Our iOS app is one of three finalists for a Tabby Award in the Business Products and Services category.

Launched in May of this year, Close It! has already received more than 5,000 downloads. The app is available for iPad and iPhone (the former is the version that's in the running for this particular award).

Close It! is like Turbo Tax for real estate transactions. If you've downloaded the iOS app, you know already know how easy it is to accurately calculate your buyer's total cash to close or your seller's total cash in pocket.

If you haven't downloaded Close It! yet, what are you waiting for?! Download Close It! >>>

For those who have never heard of the Tabby Awards, it's a worldwide competition for the best iPad, Android and Windows 8 tablet apps.

At least a dozen countries are represented this year. More than 40 apps, including Close It! were selected as finalists in 18 categories.

An international panel of judges will choose the winners on November 13 in New York City.

How to choose a really good real estate agent

The idea of buying a home is simultaneously enchanting and daunting. For instance, it's fun to daydream about color palettes and kitchen / bathroom renovations and coming home to your very own Home Sweet Home. It's less fun to think about what the transition from daydreaming and dream home entails.

A really good real estate agent can walk you through the steps of homebuying and even help you negotiate an offer that might lower your upfront and ongoing costs of home ownership.

Really good real estate agents are familiar with the neighborhoods where you'd like to live. They know how long houses have sat on the market and can tell you the difference between listing prices and recent purchase prices.

The question is how do you find a really good real estate agent?

Talk to friends & relatives

Whether through Facebook or other social media platforms or (gasp!) face-to-face, ask your friends and relatives who've had recent homebuying experiences what real estate agents they recommend. And find out why.

Was their agent especially skilled at contract negotiation? Did he or she have encyclopedic knowledge about the local market? What about their communication skills? Did their agent return phone calls and emails in a timely manner?

These kind of details will help to paint a colorful picture of what it's like to work with a real estate agent. And presumably, if it's coming from your friends and relatives, it's coming from a source you know well and one you can trust.

Read online reviews

If you don't have friends or relatives with recent homebuying experiences in your area, the Internet may be the next best thing. Sites like Angie's List (paid subscription required) and Yelp (no subscription necessary, but be sure to check the "filtered reviews) have tons of reviews about local real estate professionals.

Real estate sites like Redfin, Zillow and Trulia post agent reviews as well. The downside of online reviews is you most likely don't know who the source is. More than likely the review is bias, but reading multiple reviews should allow you to get a fairly balanced picture.

Contact top prospects, interview them

Once you've made a short list of prospects, call them and ask more questions. For added peace of mind, find out if your prospective agents have additional references.

Pick their brains about the neighborhoods where you'd like to live. Find out, on average, what percent of the listing price do their clients typically pay. Obviously a real estate agent who negotiates deals for less than the asking price is someone you want negotiating your home purchase.

The more research you do at the beginning of the agent selection process, the better your chances of finding a really good real estate agent and having a pleasant homebuying experience.

Once you've made it through the all the steps, consider posting your own agent review to give future homebuyers an idea of what it was like to work with your agent selection.

And if these tips don't help to ease your mind about how to select a real estate agent, feel free to reach out to our office and ask for even more agent recommendations. We closed roughly 1,500 deals last year, so we know a lot of real estate agents (mortgage lenders, too).

FHA issues new rule on foreclosure, bankruptcy and short sale waiting period

In its August 2013 Mortgagee Letter, the Federal Housing Administration (FHA) issued updated guidelines for giving an FHA-insured mortgage to borrowers who may otherwise be ineligible as a result of its post-bankruptcy, foreclosure or short sale waiting period.

For the majority of FHA-insured mortgages, the guidelines are fairly straightforward:
  • The borrowers monthly debt should not exceed 45% of their household income, unless exceptional cause is shown,
  • The borrowers must put down at least 3.5% of the purchase price or appraised value (whichever is less),
  • The borrowers must have a credit score of at least 580 or higher, and
  • The amount of the loan cannot exceed the local FHA loan limits.
However, under the prior guidelines, if a borrower filed for Chapter 7 Bankruptcy, or underwent a foreclosure or short sale, the mandatory waiting period for borrowers to obtain another FHA-insured mortgage were as follows:
  • Foreclosure: Must wait for 3 years before eligible
  • Short Sale in Default: Must wait 3 years before eligible
  • Chapter 7 Bankruptcy: Must wait 2 years before eligible
Due changes in the housing market, these mandatory waiting periods have now essentially been waived.  The FHA will, however, require that borrowers prove:
  • That any major credit issues have been cleared from their credit history,
  • Completion of housing counseling, and
  • They meet all other HUD requirements.
This has the potential of introducing more buyers into the housing market, thereby driving demand for more housing inventory and increasing home values.  However, it also begs the question……is this opening the door for another housing crisis in the years to come?

The bait 'n' switch continued...

Part 2 of 2

In Part 1, we looked at a scenario where a purchaser (Offer B) was attempting to switch from an “all cash” purchase to using lender financing under the GCAAR Regional Sales Contract, after the contract had been ratified. We concluded that such an act by a purchaser would be a breach of the contract.

Here we will look at how courts might view the matter and what remedies a seller faced with such a situation might have.

The key question is whether such a breach would be considered “material.” This is because if a purchaser’s breach is material, this will excuse further performance by the seller, which means that the seller can get out of the contract. 3511 13th St. Tenants’ Ass’n v. 3511 13th St., N.W. Residences, LLC, 922 A.2d 439, 435 (D.C. App. 2007) (citing cases).

The question of whether a particular breach is material has been called a “classic issue of fact” and involves an inquiry into issues such as whether the breach worked to defeat the bargained-for objective of the parties. Id. These issues are of the type that courts normally rely on juries to decide. Id.
There are no published cases in the District of Columbia (or Maryland) that deal with a switch from all cash to financing situation.

The case cited above, 3511 13th Street Tenants’ Association, involved the failure of the purchaser to tender an earnest money payment. In that case, the court refused to express an opinion on materiality of the breach, because that issue was one for the jury.

In our hypothetical, the fact that the offer was all cash was one of the key factors in causing the seller to accept the offer. While the purchaser might still be able to get to closing with lender financing, there is a good argument that the bargained-for objective of the parties has been defeated: namely, the seller’s objective of not having a transaction with the potential delay and uncertainty that comes with financing. In fact, the seller was willing to leave $5,000 on the table for that peace of mind. These factors weigh in favor of a finding that the breach was material.

This means that a seller who is on the receiving end of a bait and switch move by a purchaser should consider notifying the purchaser that such an act would be a material breach of the contract, and that if the purchaser proceeds with the financing, the seller will declare the contract to be rescinded. The seller could demand that the purchaser immediately provide a written assurance that the purchase would not be financed. If the purchaser did not comply with this demand, the seller could sell the property to someone else – possibly Offer A, if they are still around. A purchaser who wanted to stop such a sale would need to file an action in D.C. Superior Court for an injunction and specific performance. In the court case, the key issue would be the materiality of the breach.

Normally, in cases of rescission, the parties are returned to where they were before entering into the contract. See, e.g., Wright-Dean v. Garland, 779 A.2d 911, 915 (D.C. App. 2001) (case involving action for rescission). Accordingly, the purchaser may have a good argument that they should get their deposit back.

The seller’s alternative to rescission would be to go to closing and then sue the purchaser for breach of the contract. Id. Here, one could argue that the damages from the breach are $5,000, as that was the difference between Offer A and Offer B, and if it hadn’t been for the “all cash” term contained in Offer B, the seller would have accepted Offer A instead of Offer B. In the District of Columbia, claims for $5,000 or less may be brought in the Small Claims and Conciliation Branch of the Civil Division, where the process is more informal and, many times, the parties are not represented by counsel.

If you are a purchaser thinking about making an “all cash” offer and then trying to obtain financing after your offer is accepted, you should consider the possible risks before taking this course of action.

The bait 'n' switch: From an all-cash offer to not

Part 1 of 2

Consider the following scenario: It’s a bidding war, and the seller of a property is choosing between multiple offers. It comes down to the two highest offers:

Offer A: $505,000, FINANCING of 20% down and 80% loan, $5,000 earnest money deposit, closing date 30 days, no home inspection contingency.

Offer B: $500,000, ALL CASH, $5,000 earnest money deposit, closing date 30 days, no home inspection contingency.

The seller chooses Offer B. To the seller, the fact that Offer B was all cash was the deciding factor, because of all of the uncertainties and possible delays that can come along with a buyer getting financing these days. In fact, the all cash aspect was so important that the seller was willing to take $5,000 less. 

Then a few days go by, and the listing agent gets a call from the buyer’s agent asking to schedule an appraisal of the property, because the buyer is going to be financing the purchase with a loan, despite the fact that the offer had said all cash.

Can the buyer do that under the GCAAR contract?

Actually, no, not really.

In some of the deals we have heard about recently, the buyer’s explanation is that this is permitted under the GCAAR contract because the loan would be considered "Alternate Financing" under Paragraph 12.

That paragraph provides:

Paragraph 12, Alternate Financing "Purchaser may substitute alternative financing and/or an alternative lender for Specified Financing provided: (a) Purchaser is qualified for alternative financing; (b) there is no additional expense to Seller; (c) the Settlement Date is not delayed; and (d) if Purchaser fails to settle except due to any Default by Seller, then the provisions of the DEFAULT paragraph shall apply."

So, under Paragraph 12, in order for the above explanation to fly, the loan must be substituted for "Specified Financing." The problem is that "Specified Financing" means "the loan type(s) and amount(s), if any, specified in the PRICE AND FINANCING paragraph" (emphasis added). In an all cash offer, there are no loan types and amounts specified in that paragraph, so there is no Specified Financing, and a loan cannot be substituted as "alternate" financing.

The way the GCAAR Regional Sales contract is set up is further proof that cash is not considered financing under that contract. Paragraph 3, Price and Financing, has three blanks to fill in for “Financing” information in B:

  1. First Trust
  2. Second Trust
  3. Seller Held Trust

The cash information is put on a separate line called "Down Payment" in A. 

The GCAAR Conventional Financing Addendum also does not consider cash to be "financing," because it provides for a contingency wherein the buyer delivers to the seller a "firm written commitment(s) for financing from Lender" OR "Delivering evidence to Seller that Buyer has sufficient funds available to complete Settlement without obtaining financing" (emphasis added). In other words, there is lender financing, and then there is settling without lender financing, i.e., all cash.

All of this means that a buyer who wishes to get a loan to finance a purchase after making an all cash offer needs to get the seller to agree to amend the purchase and sale agreement to allow for that. A smart buyer would include in this proposed addendum that if the financing does not go through for some reason, then the buyer will close with cash.

Of course, the seller does not have to agree to such an amendment to the contract. What other rights does a seller have? In my above example, can the seller back out of the contract with Offer B, retain the earnest money deposit from Offer B, and enter into a contract with Offer A?

In the Default paragraph of the GCAAR Regional Contract (paragraph 23), the only buyer default that is specifically listed is the buyer’s failure to complete the settlement. This might lead a buyer to think that as long as he or she can meet the settlement date in the contract using the lender financing, that he or she is okay, but, in fact, that is not the case. The buyer is in default of a term of the agreement, which says that they are purchasing the property with cash.

The question is whether this default rises to such a level that it would allow the seller to rescind (i.e., back out of) the contract. Stay tuned for Part 2 where I look at this issue and what courts have said on the subject.

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Our blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. Rate tables and figures that appear on our blog are deemed reliable but not guaranteed. For current rates & policies, refer to our Quick Quote and Consumer Guide. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on our blog.