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August, 2001 Newsletter

+++++++++++ August 2, 2001 +++++++++++++++++++

Introduction: Home Sales Remain Brisk
Mortgage Rate Update: A Break in Rate Increases
Recent Site Updates: Timeline for Buying a Home
Quick Links
This Month's Tip: Changing Your Mind

Welcome to the August edition of the Home Buyer's
Information Newsletter.
Continuing to defy many forecasts, home sales (both
new and resale) have remained strong through the
early summer. Fortunately, though, we have seen
a bit of easing in the price appreciation runups
of the last year. This stability works in the
buyer's favor in a couple of ways: First, it
means that less buyers get overpriced out of
the market and second, it means fewer of the
crazy "bidding wars" that were common in some
areas of the country. When prices get out of
control due to bids that take the sales price
considerably over the listing price, the "winner'
is frequently the loser.

Mortgage Rate Update: A Break in Rate Increases
Late July has seen a break in the upward mortgage rate
trend seen thus far this summer. Mortgage company
Freddie Mac reports that as of July 26th, 30 year fixed-
rate mortgages averaged 7.03%, down from 7.11% one
month earlier and down considerably from the 8.13%
rate of one year ago. 15 year fixed rates averaged
6.58%, down slightly from the 6.63% rate of late June.

Many analyists are predicting that rates will stay
in the same general range (low 7.00% range for 30-
year fixed-rate mortgages) for at least the forseeable
future, regardless of what happens with the Federal
Discount Rate. Be aware, though, that if the economy
begins to re-energize, rates will likely rise in step
with economic conditions.

For more information on mortgages, visit the Mortgage
Section at:
Mortgage Information

Recent Site Updates:
Timeline for Buying a Home
A sample guide for how much time is needed to buy a home,
from the initial decision to purchase all the way through
the time of closing.
Home Buying Timeline

Quick Links
Quick access to many of the resources available on
The Home Buyer's Information Center
Quick Links

You can always find out "Whats New" at the Home Buyer's
Information Center at the following location:
Site Updates

Get a Copy of Your Credit Report

IPlace.com, the largest supplier of credit reports
on the Internet, has a number of options to quickly
get a copy of your report. You can get a single
report, your credit score, a full 3-bureau report or
even a free copy of your credit report, quickly and
easily. See more information at:
Sources of Credit Reports

This Month's Tip: Changing Your Mind

Several times a week, we get questions from visitors
to the Home Buyer's Information Center that go along the
lines of "We've made an offer on a house and the seller
has acccepted it. We've now found a house that we like
better. What are the procedures for getting out of the
first deal?"

Ouch. There really aren't many opportunities to get out
of a legally binding contract (which this would likely be)
and none of them involve a simple change of mind or heart.

Many of these potential buyers are convinced that there is
some sort of law or regulation that will allow them to
back out of the deal simply because they have changed
their mind. Some will say "we have a friend who told us
that we have 3 days (or 3 weeks or 3 months) to cancel a
Real Estate contract if we have decided not to proceed."
Simply put, such a law does not now (and never did)
exist. We're fairly certain that this misconception comes
from the 3-day Right of Recission law that only applies
to contracts for purchases made in your home (this is a
protection against pushy door-to-door salespeople). It has
absolutely no effect on Real Estate purchase transactions.

An offer to purchase a home, then, should never be taken
lightly. With the approval of a seller, the offer, in the
majority of cases, becomes a binding and enforceable contract.
An offer should never be made to "test the waters" unless
a buyer is absolutely certain that they want to purchase
the home. With the simple stroke of a pen, a seller can
accept the offer and, unless there are conditions or
agreements to the contrary, the buyer will be required to
complete the purchase.

NOTE: This legal contractual protection applies to both
sides of the agreement: A seller, likewise, cannot negate
a contract due to change of mind, which is protection for
the buyer.

More information on the site:

The Potential Consequences

Due either to ignorance of contract law or bravado, some
buyers will still attempt to walk away from a legal and
binding contract. They may attempt to do this either
without an Attorney's advice or, sometimes against it.
Although there are no absolutes (occasionally a seller
will allow a buyer to back down) the potential consequences
can be severe. Not only is any deposit tendered with the
offer at risk, such a buyer can be subject to further legal
proceedings. These can include judgements for damages due
to the fact that the seller was unable to market (and find
another buyer for) the home during the time that the contract
was in force.

None of the above is meant to imply that a buyer will be
forced to purchase a home with defects, for example, or
one for which they are not able to secure a mortgage--if
such concerns are specifically addressed in the offer and
the contract. Any offer should reference such items as
a whole house inspection to the buyer's approval or
financial considerations such as approval of a mortgage
acceptable to the buyer including a maximum interest
rate and number of points. Once these contingencies or
conditions are accepted as part of the contract, they
become a safety valve that protects the buyer from being
forced to proceed with a purchase that is clearly not in
their best interests.

It is of utmost importance, then, to incorporate any
such conditions into any offer, since they give the
buyer some breathing room. If, for example, a qualified
home inspector finds a major defect such as a cracked
foundation and the seller refuses to make repairs (or
to monetarily make compensation) the buyer would not be
required to buy the home. Likewise, if the offer and
contract had a provision for a mortgage rate under 8%
with no more than 2 points, a buyer would not be forced
to accept a 10% mortgage plus 3 points. Any offer should
also reference mortgage approval, so that a deposit would
not be lost if the buyer cannot be approved for a

An important note: Most contracts will have wording that
will limit these contingencies to prevent, for example,
a buyer not securing mortgage approval simply because they
never applied. Or, doing something (like not producing
requested tax returns) to torpedo the application. A buyer
must make every reasonable effort to live up to their end
of the agreement. Intentionally sabatoging an element of
the contract as an attempt to negate it can leave the buyer
exposed to legal proceedings.

Summing Up

Buying a home has very little in common with most other
consumer purchases, which frequently can be negated. When
making a purchase offer for a home, a buyer must understand
that they are making a legal--and enforceable--commitment
that cannot be made to disappear simply because there was
a change of heart or mind. This is why it is critically
important to have all "homework" done BEFORE entering into
an agreement. Also, since there are so many legal
considerations involved, it is important to have professionals
such as Agents and Attorneys on your team. With so many laws,
regulations and disclosures involved, it can be foolhardy
for a buyer to attempt the process alone.

Next months topic: Mortgage Qualifying

As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
access our feedback page at:
HomeBuyers Information Center Feedback

A special thanks to all those who have written to let us know
that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great month of August and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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