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Category: Real Estate
New Home Construction Earnest Money
I completed the previous post writing about earnest money. In this second post about new construction, I will specify six way a buyer can possibly get his or her earnest money returned from the builder or seller.
The first reason buyers can potentially get their earnest money returned is if the house appraises for less than expected. So, if the builders agrees to put an appraisal contingency in the contract then the buyer may be able to get his or her earnest money returned if the home appraises for less than the original purchase price or the buyer can agree to only purchase the house at the appraisal value.
The second reason buyers can potentially get their earnest money returned is if the builder agrees to a financing contingency. This means that if you cannot get financing, then you can potentially get your earnest money returned. This one is harder for obvious reasons.
The third reason buyers can potentially get their earnest money returned is if the builder agrees to a sell of buyer’s previous home contingency. This means that if your old home doesn’t sell, then you don’t have to purchase the new construction.
The fourth and probably most important reason buyers may be able to get their earnest money back is if you find out the new construction has major flaws. Many minor flaws can be fixed and the deal can go through, but if there are major flaws buyers can get their earnest money returned. Make sure there are no major flaws.
The fifth reason buyers may get their earnest money returned is that the house isn’t finished. So, if the home isn’t finished a buyer can get his or her earnest money returned.
The sixth reason a buyer can get his or her earnest money back is if the seller backs out. This will not typically happen in new construction unless the builder decides not to complete the subdivision that is being developed.
The caveat to the above six approaches is that the builder will have to agree to put the contingencies in the contract. Not all builder will agree to write all of the above or any of the above contingencies in the contract. If the contract says none refundable you will not probably get the earnest money back without a lawsuit. Check back to the blog for part three of the series on new home construction. Please feel free to share this post on your social media page, leave comments below, and subscribe to this blog.
Purchasing a New Construction Home
I have decided to write multiple post to provide valuable information to assist in the buying of new construction. This will be the first post in the series of posts. I plan to write three post in this series. I will add more post if necessary . The first new construction home I bought was over 13 years ago. The other three homes, I purchased were pre-existing homes, but recently, in the last few years(2014-2016) with the improving economy, builders have been developing new communities in my area; so, I’ve been thinking about new construction again. This first post will focus on two topics, location and the term earnest money.
There is a catch phrase that goes location, location, location. In my experience, most new construction for single family homes are developed in desirable locations for people to live. With that being said, in considering where to build new construction, you want to make sure the area where the new construction is being developed has the amenities that are important to you and or your family. What is considered an important amenity can vary from person to person and from family to family. So, location, location, location does not have a universal meaning. For example, if you’re married with a family, being under three miles from a grocery store may be a high priority on your amenities list. If you’re single and don’t cook this may not be high on the priorities list. A more universal desire may be the desire to have the shortest commute as possible to your job. Those are pretty simple examples, but do your due diligence. Find out what’s important to you and or your family to help you decide if the location of the new construction will work for you.
The next topic that will be introduced is “earnest money.” Some new construction for single family homes require earnest money before the builder will start to build a home for you. Earnest money is in its most simplest terms is money to confirm a contract. Earnest money is paid at the time you sign the contract to have your new home built. For the most part the earnest money in none-refundable. This means that if you decide that you don’t want to purchase the home after it’s built because of a reason like “change of heart”, then you forfeit your earnest money to the builder. My real world example is when I purchased new construction. I paid the builder $6000 earnest money to build my home up front at the time I signed my contract. I ended up purchasing the home once the builder completed construction because I loved the home, but if I had decided not to purchase the home because I had a “change of heart”, the builder would have kept my $6000 earnest money. Do not get alarmed, you are not required to have $6000 for earnest money on all single family construction. I’ve seen earnest money as low as $500. Also, don’t get alarmed there ARE ways to get your earnest money back if the builder or seller agrees to put them in the contract! In the next post, I’ll discuss ways to get your earnest money back, if necessary, if the builder or seller agrees to put the contingencies in the contract. Read my next post for those. Feel free to share on your social media page, leave comments, and subscribe to this blog.
Foreclosure to Buying Again
A lot of good families got swept up in the housing market bubble build up during the years of 2000 to 2006. Everyone was trying to keep up with the Jones. Unfortunately a lot of these same good families were victims of the housing market bubble busting. Good families were put in unfortunate positions where they had to foreclose on their homes. We decided to provide information for the families who were forced to foreclose on their dream home during and after the real estate bubble burst. Most families are curious about when they can buy after a foreclosure. Three of the biggest determining factors are the type of new loan you qualify for, has your credit been reestablished, and the reason why you unfortunately had to foreclose.
After you’ve reestablished your credit here are the lengths of time you will have to wait before you can acquire a new mortgage.
Conventional loans require the longest length of time to wait before applying for a new mortgage. Conventional loans have a waiting period of seven years from completion. Conventional loans also come with stricter debt to income ratios and stricter credit qualifications.
VA loans require you to be a veteran or currently serving in the military; so, not everyone can qualify for a VA loan. The wait time for the VA loan after a foreclosure is two years. This is appropriate because our soldiers are deserving of everything for their sacrifices.
FHA loans typically requires at least a three year wait after a foreclosure.
In general banks can require a larger down payment after the foreclosure; so, keep that in mind.
Home ownership is not for everyone. Some people understandably find it’s easier to rent instead of buying. It’s much less responsibility. No maintenance of the home is required if you rent. No home owners associations dues nor head ache to deal with from HOAs. Renting gives more mobility and flexibility because in this job market, families may be asked or forced to relocate. Home ownership can be a financial burden. So, determine if home ownership is right for you after you’ve waited the required amount of time after your foreclosure. Check back for more real estate articles. Feel free to leave a comment below. Feel free to post on your social media page and to subscribe to this website.