Tag: real estate investor resources

When Can You Back Out of a Real Estate Contract?

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Before buying a home or investment property this fall, here is what you need to know about your real estate contract and how to get out of it if necessary. Each real estate contract is unique and may apply to certain circumstances, so always ask your REALTOR® beforehand. 

During Due Diligence

The due diligence phase in the home buying process is the negotiation period when the buyer can review the house and ensure everything is good before deciding to move forward. We’re in a seller’s market now, so buyers are competing against each other. As a way to close quickly and appeal to sellers, some buyers are skipping this phase and the inspections tied with it. But this is the easiest time to back out of a real estate contract. 

Contingency

After the due diligence phase, the only way to get all your money back is if a contingency is not met. A contingency is a condition that must be met before the closing date. They’re called contingencies because the closing is contingent on these specific requirements. 

Contingencies are a form of protection as they will protect you if something is found during the home inspection, title process, or if the appraisal goes too high. Again, since we’re in a seller’s market, there might not be time to include these contingencies. 

Another common contingency is a financing clause. The clause will indicate that the buyer will use all good faith to obtain a loan, but if they are not able to qualify for a mortgage, then they can get out of the deal with no consequence. This is why getting pre-approved is so important in today’s market! Sellers fear this financing contingency, which is why they prefer cash offers, even if it’s lower than their original price. 

Earnest Money

If everything goes right and you’re on track to buy the property, you can still back out of the real estate contract, but it will cost you money when it’s this late in the game. Part of what’s included in a real estate contract is how much each side would be compensated if the other party backed out. This is called earnest money. It’s usually 1% to 3% of the agreed-upon sale price but can be as high as 10%, depending on the real estate market. 

Homebuyers will put this earnest money into an escrow account at the contract signing. This deposit will apply to the down payment or closing costs once the sale goes through. If the deal doesn’t go through, though, the seller keeps the earnest deposit as compensation. 

Today’s Market

There might not be time for these contingencies in today’s hot real estate market, which is why you have to be careful. Many buyers are waiving contingencies as a strategy to close on a house faster. With this route, it’s common for buyers to make up the difference if there’s a difference between the offer price and home appraisal. 

As your real estate agent, I’ll help you navigate through this hot market. Contact me! Reach out to TALK Property Management– We are here to help: (512) 721-1094 or dbrown@talkpropertymanagement.com. 

Real Estate Investments: How Does a Duplex Compare to a Single-Family Home?

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When investing in real estate, it’s crucial to understand the differences between common types of properties and how these properties can help investors achieve their financial goals in varied ways. Today, we’re going to examine how a duplex compares to a single-family home as a real estate investment, and there are many things to consider.

Expectations

Duplexes are typically more expensive than single-family homes, and there is higher demand for single-family residences than for duplexes, so selling a duplex may take longer than expected. However, duplexes produce more cash flow over time, and this is very appealing to real estate investors.

Vacancy and Monthly Rental Income

A vacant single-family home will significantly affect your monthly return on investment (ROI) more than a duplex. With a duplex, the chances of both units being vacant simultaneously are low, which means you’ll have a better chance of consistent monthly rental income. With a single-family home, you are responsible for 100 percent of the mortgage if it is vacant.

Property Insurance

Property insurance for a duplex is typically 15 to 25 percent higher than policies for a single-family home.

Return on Investment (ROI)

This is the most important deciding factor when purchasing an investment property, and it’s important to weigh which type of property will generate a better long-term investment return. Several factors contribute to ROI, including property condition, how well tenants care for your property, location, and appreciation potential, just to name a few.

Crucial Questions to Ask When Considering a Duplex

Ask yourself:

  1. How much do I want to spend?
  2. What condition am I willing to accept? (fixer-upper or move-in ready?)
  3. What areas or neighborhoods should I consider for my duplex investment?
  4. Do I want to live on one side of my duplex or rent out both units?

These questions will help guide your duplex purchase. Be sure to do your homework.

At the end of the day, duplexes often offer a wide range of advantages. The critical takeaway is to buy a quality property. Crunch the numbers, do your homework, and select a real estate investment gives you the best chance for a higher return.

Have questions about real estate investing? Reach out to TALK Property Management anytime. We’re always available to help.