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Tag: Homebuyer Tips

  • Seller Concessions 101: What They Are and How They Can Help You Save

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    Seller concessions are closing costs or fees that a seller agrees to cover to help reduce a buyer’s upfront expenses. These costs are negotiated during the offer process, and seller concessions can make a home purchase more affordable without lowering the home’s sale price. In the first quarter of 2025, 44.4% of U.S. home sale transactions included seller concessions — the highest share in several years.

    Buyer demand and market conditions determine how likely you are to receive seller concessions, but knowing how they work gives you an advantage when you’re preparing an offer. Instead of focusing only on price, understanding seller concessions helps you evaluate the true cost of buying a home and identify opportunities to reduce your upfront expenses. This guide explains what seller concessions typically include, when buyers benefit most from them, and how to use them strategically in today’s housing market.

    What are seller concessions in real estate?

    Seller concessions are financial contributions a seller makes to help reduce a buyer’s out-of-pocket expenses at closing. These contributions can cover a range of fees, including lender charges, title and escrow costs, prepaid taxes, homeowners insurance, or even the cost of a home warranty.

    An example of seller concessions: Covering closing costs

    A buyer might negotiate $5,000 in seller concessions to help offset closing costs. If the seller agrees, the amount is included in the purchase contract and applied at closing, lowering the buyer’s upfront expenses while being deducted from the seller’s proceeds.

    An example of seller concessions: Buying down the interest rate


    A buyer may also request seller concessions to buy down their mortgage rate. For instance, a seller could contribute $7,500 toward discount points, allowing the buyer to secure a lower interest rate and reduce their long-term monthly payments. This type of concession can make the home more affordable over time, especially when rates are elevated.

    What closing costs do seller concessions cover?

    The seller may be able to cover part or all of these closing costs:

    • Property taxes: Prepaid property taxes through the end of the year at closing.
    • Title insurance: Title insurance protects you and your lender if someone comes forth with a claim for the home’s title.
    • Loan origination fees: These origination fees cover your lender’s charges for processing your loan.
    • Inspection fees: Inspection fees cover the cost of inspections required for the loan. For example, in some states and on some loans, a pest inspector must evaluate your property before a sale can go through.
    • Recording fees: Recording fees cover the expense of documenting your home’s purchase with your local government.
    • Appraisal fee: This covers the cost of getting a licensed third-party appraisal of the home to determine the market value.
    • Attorney’s fees: In some states, you need an attorney to review closing documents. Attorney’s fees cover the cost of a real estate attorney.
    • Points: Mortgage points (also known as discount points) are upfront interest you pay to reduce your interest rate.

    Once you apply for your loan, your lender will provide you with a Loan Estimate, which outlines all your estimated closing costs. You can then work with your real estate agent to decide which ones to ask the seller to pay for.

    Why do sellers offer concessions?

    Sellers might agree to concessions to:

    • Help a buyer afford the home
    • Attract more offers in a slow market
    • Offset issues found during the home inspection
    • Speed up the closing timeline

    In a buyer’s market or when a home has been sitting for a while, concessions can make the difference between closing a deal and continuing to wait.

    Who benefits from seller concessions?

    Seller concessions can create advantages for both buyers and sellers during a home sale. For sellers, offering concessions can make their home more appealing in a competitive or buyer-friendly market. A concession can help attract more offers, shorten time on market, or encourage a buyer to choose their home over similar listings.

    Buyers also benefit from seller concessions, especially those who need help covering upfront costs. Many first-time buyers underestimate how much they’ll need at closing, and seller concessions can reduce expenses like lender fees, taxes, and insurance. By lowering the cash required at closing, seller concessions can make the overall purchase more affordable and accessible.

    Seller concession limits by loan type

    Loan Type Max Seller Contribution
    Conventional (<10% down) 3% of the purchase price
    Conventional (10–25% down) 6%
    Conventional (25%+ down) 9%
    FHA Loan 6%
    VA Loan 4%
    USDA Loan No formal limit (but should be reasonable)

    These limits are set by the loan program, not the seller, so both buyers and sellers should work with a lender to ensure compliance.

    Pros and cons of seller concessions

    For buyers

    • Lower upfront costs when buying a home: Seller concessions can significantly reduce the cash a buyer needs at closing by covering expenses like lender fees, taxes, and homeowners’ insurance. This makes buying a home more affordable, especially when buyers are also saving for their down payment. 
    • More financial flexibility for buyers: By lowering out-of-pocket closing costs, seller concessions allow buyers to keep more money set aside for moving expenses, home repairs, furniture, or emergency reserves. This added flexibility can be especially helpful after making a sizeable down payment. 
    • Easier loan approval in some cases: Reduced cash-to-close requirements can help some buyers — particularly first-time homebuyers — qualify more easily for a mortgage. With fewer upfront costs, seller concessions can help bridge the gap between available savings and the total cost of buying a home.

    For sellers

    • Attracts more buyers: Offering seller concessions can draw in buyers who may not have enough cash for closing costs. 
    • Helps protect the sale price: Instead of lowering the list price, sellers can use concessions to keep the contract price intact while still offering value. 
    • Useful in shifting or slow markets: Seller concessions can help a property stand out when inventory is high or demand is softer.

    Potential downsides

    Possible drawbacks of seller concessions

    • Risk of appraisal issues: If the sale price is increased to include seller concessions, the home may not appraise at the higher amount. 
    • Reduces seller’s net proceeds: Any concession provided lowers the seller’s bottom line at closing. 
    • Less effective in strong seller’s markets: When demand is high and competition is strong, sellers typically don’t need to offer concessions.

    >> Read: Disadvantages of Sellers Paying Closing Costs

    Tips for negotiating seller concessions

    • Understand how much you’ll need for closing costs before submitting an offer.
    • In competitive markets, offer a slightly higher price to offset the seller’s concession.
    • Be prepared to justify the request with your financing needs or inspection findings.
    • Work with an experienced Redfin real estate agent to guide your strategy.

    FAQs about seller concessions

    What is the meaning of seller concessions in real estate?

    Seller concessions are costs the seller agrees to pay on behalf of the buyer, typically to cover some or all of the buyer’s closing costs.

    Are they negotiable?

    Yes, they are typically negotiated as part of the initial offer and finalized in the purchase agreement.

    Do they affect the loan or appraisal?

    They can. If the concessions push the sale price above market value, the home may not appraise at the agreed price.

    Can they cover the down payment?

    No. Concessions can only be used for allowable closing costs and fees, not for the buyer’s down payment.

    Are they common?

    They are especially common with FHA, VA, and USDA loans or when the market favors buyers.

    A final note

    Seller concessions are more than just financial assistance — they’re a strategic negotiation tool that can benefit both buyers and sellers. Buyers can use them to lower upfront costs and make a purchase more affordable, while sellers can use concessions to attract stronger offers or move a home faster without reducing the list price. Understanding how seller concessions work and when to request or offer them can give you a meaningful advantage in today’s real estate market.

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    Jasica Usman

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  • You’ve just bought a new house. What will you pay in taxes? Don’t be misled

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    Here’s When a Reverse Mortgage Could Make Sense for You

    First-time and new-home buyers face escrow adjustments and potential back taxes after closing.

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    Most homebuyers figure that their property taxes will be the same as those paid by the house’s previous owner. That’s a common mistake.

    They might be the same for a few months, or even a year, but eventually they’ll be recalculated. And when they are, they’ll most assuredly increase — sometimes substantially.

    But what if it’s a new house that no one has ever owned before you? How can you know what the tax levy will be?

    Most homebuilders make a good-faith estimate of the taxes their buyers can expect to pay. But some notoriously underestimate these fees to make their estimated mortgage payments appear more affordable.

    Some builders go even further, basing their tax estimates not on the finished house, but on the value of the lot before a shovel was ever turned. And now a class-action suit protesting that practice has been filed in Florida.

    Filed by a group of unhappy buyers, the suit charges the nation’s largest homebuilder, D.R. Horton, and its mortgage affiliate, DHI Mortgage, with a “deceptive scheme” that led to unexpectedly higher mortgage payments.

    The buyers didn’t learn that their payments would be hundreds of dollars higher until after they closed on their mortgages and the loans were sold to new servicers on the secondary market, the lawsuit maintains. Once the new servicers took these loans under their wings, they adjusted the monthly payments so that they were based on the property tax assessment of the finished house — not the empty lot.

    In one instance, the suit alleges, a Horton homebuyer chose DHI Mortgage because the estimated monthly payment was lower than comparable houses with similar sales prices. But less than a year later, the new loan servicer conducted an escrow analysis that included all property taxes — as well as back taxes to cover the previous shortfall.

    The buyer’s monthly payment jumped nearly $1,000.

    The lawsuit alleges that the builder and lender were “running a ‘Monthly Payment Suppression Scheme’ to mislead first-time homebuyers into thinking their total monthly housing costs would fit their budgets,” Jennifer Wagner, an attorney at the National Consumer Law Center, said in a statement. The NCLC is co-representing the buyers in this case.

    Only time will tell what becomes of the lawsuit. But it should stand as a warning to all homebuyers to make sure their property tax estimates are as accurate as possible. Buyers should try to determine on their own what their taxes will be. You can call the local assessor’s office to find out, or you can ask for the tax rate and do the math yourself.

    Realize, too, that your tax levy is not static. It’s going to go up — if not right away, then the next time the local tax assessor reviews your house. Housing prices are still rising, and property tax assessments are rising right along with them.

    Part of the problem with underestimated property taxes lies with loan officers, who should make a concerted effort to determine what borrowers will pay prior to closing. Lenders should qualify borrowers for a mortgage based on the taxes at closing, not on what the seller is currently paying. But some don’t, and as a result, their clients’ monthly charges will definitely go up, sometimes by hundreds.

    Although you can pay your taxes annually on your own, most borrowers set up escrow accounts at closing to collect one-twelfth of their property taxes and homeowner’s insurance fees each month. Then, when those charges are due, the loan servicer pays them on the homeowner’s behalf, thereby removing the burden of coming up with that lump sum every year.

    Eventually, the servicer will run an escrow analysis to make sure your payments are accurate. If not, it will adjust them accordingly. If you haven’t been paying enough since you took on your loan, you will be required to make up the difference.

    You may be required to pay it all at once, or the servicer may agree to divide what you owe into equal amounts and add it to your monthly payment. Either way, the hit could be devastating to someone on a tight budget.

    The tax collector will reassess your property at least once every three years. If values are rising in your area, you should expect your taxes to rise. But you also should expect your servicer to make annual adjustments to your escrow accounts.

    If you disagree with either the tax assessment or your servicer, you can ask for a review. But in the end, there’s no way to avoid an increase, and it is your responsibility to pay it. It is one of the costs of owning a house.

    To guard against unexpectedly large increases, some people pay a little extra every month into their escrow accounts. Others deposit money into a separate savings account so they’ll have funds set aside when the new bill arrives.

    Lew Sichelman
    Lew Sichelman

    Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.

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    Lew Sichelman

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  • 8 Simple Tips For Unpacking After a Move

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    Moving into a new home is exciting, but that feeling can quickly be replaced with dread when you’re faced with a sea of moving boxes. Whether you’ve relocated across town or across the country, having a clear plan for unpacking will help you settle in faster. Here’s a practical step-by-step guide to make unpacking after a move as stress-free as possible.

    1. Clean your space before unpacking

    Before you start opening boxes, take time to clean your new home from top to bottom. Even if the previous owners or builders cleaned before you arrived, dust and debris can easily collect during open houses or construction. Wipe down shelves, cabinets, and counters, and vacuum or mop all the floors. It’s also a good idea to sanitize bathrooms and the kitchen before putting items away. A freshly cleaned space gives you a blank slate, and an empty house is easier to clean than one that has already been fully furnished.

    2. Set your furniture up first

    When deciding how to unpack after moving, start by setting up your furniture. Large pieces like beds, sofas, and dining tables define the layout of each room and make it easier to visualize where smaller items will go. Once the big pieces are in place, you can rearrange them to make the most of your space. Getting furniture set up early also helps you feel more settled and establishes a sense of normalcy.

    3. Locate your essentials

    Packing an essentials box is one of the most useful moving hacks any homebuyer can utilize, and this is where that comes into play. Before diving into the main unpacking process, find your essentials box or bag. This contains the items you’ll need immediately, including items from toiletries and medications to chargers and important documents. Having these essentials within reach makes the first day or two in your new home much more comfortable and allows you to focus on unpacking without having to search for key items.

    4. Place boxes in their respective rooms

    As you move your boxes into the house, make sure each one ends up in the correct room. If you labeled your boxes while packing, this step will be straightforward. Putting everything in its designated space from the start keeps your home organized and saves time later since you won’t need to move boxes repeatedly. This also helps anyone assisting you, such as friends or movers, know where things belong without having to ask.

    5. Unpack one room at a time

    A smart approach to unpacking after a move is to focus on one room at a time. It’s easy to get distracted and start opening boxes all over the house, but that often leads to confusion and clutter. Start with one area, finish unpacking it completely, and then move on to the next. This strategy keeps you from becoming overwhelmed and makes it easy to track progress.

    6. Focus on the most important rooms first

    Prioritize the rooms that matter most to your daily comfort. Most people start with the bedroom, bathroom, and kitchen. Setting up your bathroom, kitchen, and bedrooms first will make your home feel livable right away. Once these areas are settled, you can take your time with the rest of the house.

    7. Break down boxes as you unpack

    Anything you can do to reduce clutter during the moving process will make your life so much easier. As you empty boxes, break them down and stack them neatly out of the way. You can recycle them, save a few for storage, or offer them to someone else who’s moving soon and wants some free boxes. Keeping clutter under control as you go makes unpacking feel more manageable and less stressful.

    8. Don’t feel pressured to do everything at once

    Remember that there’s no need to rush a move. It’s perfectly fine to take your time and unpack at a pace that feels comfortable. Tackle a few boxes each day, take breaks, and enjoy the process of arranging your new home. Moving is a huge life change, and unpacking is part of settling into that change. By pacing yourself, you’ll create a space that feels thoughtfully organized rather than hastily thrown together.

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    Chibuzo Ezeokeke

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  • Setting Up Utilities for A New House: How to Prepare Your Home

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    Moving into a new home is exciting, but an often-overlooked step of the homebuying process is setting up utilities for your new house. Whether you’re a first-time homebuyer in Phoenix or relocating to a new house in Detroit, making sure your electricity, water, gas, and internet are ready to go will make for a much smoother move. Here’s a complete guide on how to set up utilities so your new home is move-in ready.

    1. Identify the utilities you need to transfer

    When learning how to set up utilities, start by listing the services you’ll need at your new address. The most common utilities include:

    • Electricity: powers your lighting, appliances, heating and cooling systems
    • Natural gas or propane: used for stoves, furnaces, and water heaters
    • Water and sewer: typically managed by your city or local utility district
    • Trash and recycling: may be arranged through your city or a private provider
    • Internet, cable, or phone service: important for communication and entertainment
    • Home security systems: contact your provider to transfer or reactivate service

    2. Research local utility providers

    If you’re moving long-distance or simply relocating to a new area, your current utility companies might not service your new address. Researching local providers is one of the first steps in setting up utilities for your new house.

    • Visit your city or county website to find information on water, sewer, and trash collection.
    • Search online for electricity and gas providers. If you live in a deregulated market like parts of California or Texas, you can choose between companies.
    • Compare plans and rates for internet and cable to find the best fit for your household needs.
    • Ask your real estate agent for local recommendations since they often know which companies are most reliable in your area.

    Starting this research early helps you avoid delays and ensures service starts on time.

    3. Schedule utility setup at your new home

    Once you’ve identified your providers, the next step in getting your utilities set up is scheduling service transfers or new installations.

    • Notify your current utility providers of your move-out date to stop billing at your old address.
    • Contact new providers to establish service at your new home. Schedule activation at least a few days before move-in.
    • Confirm connection requirements. Some utilities, like gas or internet, may require a technician to visit your home.
    • Ask about deposits or credit checks. Some companies require a deposit to start new service, especially if you’re a new customer.

    Scheduling service early prevents gaps in coverage and ensures your home is move-in ready.

    4. Prepare for utilities to be set up

    Before your scheduled setup date:

    • Make sure you’re at home when utilities are being set up. Utility representatives may need access to your home’s meters, outlets, or appliances.
    • Label any breakers and shutoff valves. Knowing where your main water valve, gas shutoff, and electrical panel are located can help you address issues later.
    • Test all connections as they’re activated. Verify that lights turn on, faucets run, and appliances operate correctly.

    5. Finalize on move-in day

    On move-in day, take a few minutes to confirm that everything is working:

    • Flip switches and test outlets for electricity.
    • Turn on taps to ensure water flow and pressure.
    • Test heating, air conditioning, and hot water systems.
    • Connect to your Wi-Fi and check internet speeds.

    Keep a list of all your utility account numbers, billing information, and customer service contacts for easy access later. You’ll want to have these on hand if you experience any issues down the road.

    FAQs about transferring utilities

    How far in advance should I start setting up utilities for a new house?

    Start about two to three weeks before moving day to allow time for scheduling and any required inspections.

    Can I set up utilities online?

    Yes. Most providers offer online portals where you can start, stop, or transfer service with just a few clicks.

    Do I need to pay deposits for utilities?

    This depends on the provider, as some might require you to make a small deposit or go through a credit check, especially for first-time customers.

    What if I forget to transfer a utility?

    If you forget, you might move into a house with no power, water, or internet. Contact providers immediately, but expect possible delays or fees.

    Can renters use the same process for how to set up utilities?

    Yes. Renters generally follow the same process unless utilities are included in rent. Always confirm this with your landlord.

    If you are represented by an agent, this is not a solicitation of your business. This article is for informational purposes only, and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any agency or service mentioned will meet their needs. Learn more about our
    Editorial Guidelines here.

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    Chibuzo Ezeokeke

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  • Is Down Payment Included in Closing Costs?

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    Key takeaways

    • Your down payment is not included in your closing costs; they’re two separate expenses you pay during the homebuying process.
    • The down payment goes toward your home’s purchase price and helps build equity from the very beginning.
    • Closing costs cover all the fees and services needed to finalize the sale, such as the appraisal, title insurance, and lender fees.
    • You’ll typically pay both the down payment and closing costs at the same time, but they serve different purposes.
    • Reviewing your closing disclosure carefully before signing helps you understand exactly where your money is going.

    If you’re buying a home, you’ve probably asked yourself this question. The short answer: No, your down payment isn’t included in your closing costs. They’re two separate expenses that come up at the same time in the homebuying process, which is why so many buyers confuse them.

    Think of it this way: your down payment is the money you contribute toward the home’s purchase price; it’s your personal investment in the property. Your closing costs, on the other hand, cover the fees and services needed to finalize the sale, such as the appraisal, title insurance, and lender fees.

    Both are major upfront costs, but they serve different purposes. Understanding the difference helps you budget more confidently.

    Closing costs vs. down payment

    So what’s the difference between closing costs and a down payment? Let’s break it down clearly.

    Down payment

    What it is: The down payment is the portion of the home’s purchase price that you pay out of pocket; it’s your personal investment in the property and typically a percentage of the total cost.

    Purpose: A down payment reduces the amount you need to borrow from your lender. Putting more money down can help you qualify for a smaller loan, potentially lower your interest rate, and even help you avoid private mortgage insurance (PMI) if you put down at least 20 percent.

    Where it goes: The money goes directly toward the home’s purchase price, helping you start building equity from day one.

    Closing costs

    What they are: Closing costs include the fees and expenses required to finalize a home sale; they’re essentially the cost of completing the transaction.

    Purpose: These fees cover the professional services and administrative work needed to process your loan and legally transfer ownership of the property.

    What’s included: The list can be lengthy, but common closing costs include:

    Where it goes: The money is distributed among all the different parties involved in the transaction, such as the lender, title company, and local government.

    While both your down payment and closing costs are paid around the same time at the closing table, it’s important to budget for them separately. Your lender will give you a closing disclosure at least three days before closing, which provides a detailed breakdown of these costs.

    Understanding the closing process

    Let’s walk through what happens as you move toward closing and what to expect at each step.

    What happens before closing day?

    Before your closing date, you and the seller will agree on a specific day to finalize the sale. Your lender will then provide a document called a closing disclosure; this outlines the final details of your mortgage, including your loan terms, interest rate, and all related fees and costs.

    Take the time to review this document carefully. If anything looks unclear, ask your lender or real estate agent to explain it. Understanding these details ensures there are no surprises when you sit down to sign.

    What happens on closing day?

    On closing day, you, the seller, and your real estate agents typically meet at a title company or an attorney’s office to complete the paperwork. If meeting in person isn’t an option, you can usually sign with a mobile notary who comes to you.

    Your agent can confirm if this option is available and help you schedule enough time to review everything before signing. Once all the documents are signed and the funds are transferred, you’ll receive the keys to your new home; congratulations, you’re officially a homeowner.

    Bottom line about down payments and closing costs

    To sum it up, your down payment and closing costs are two separate expenses that you pay at roughly the same time, but they serve very different purposes. The down payment is your personal investment in the home; closing costs cover the fees and services needed to make the transaction official.

    Understanding how both work helps you plan and avoid last-minute surprises at the closing table. When you know what to expect, you can budget more confidently and focus on finding the right home for your needs.

    If you’re ready to start your home search, connect with a Redfin real estate agent who can guide you through the buying process and help you find a property that fits your budget and lifestyle.

    Frequently asked questions

    1. Do closing costs include the down payment?
      No. Your down payment and closing costs are two separate expenses. The down payment goes toward your home’s purchase price, while closing costs cover the fees for processing the loan and transferring ownership.
    2. How much are closing costs on a home purchase?
      Closing costs typically range from 2% to 5% of the home’s purchase price. The exact amount depends on factors such as your loan type, lender fees, and local taxes.
    3. Can closing costs be included in the mortgage?
      In some cases, yes. You may be able to roll certain closing costs into your loan, but doing so increases your loan balance and interest over time. It’s best to talk with your lender about your options before closing.
    4. How much should I save for a down payment?
      A common goal is to save 20% of the purchase price to avoid private mortgage insurance (PMI). However, many loan programs allow down payments as low as 3%, depending on your credit score and eligibility.
    5. Who pays closing costs — the buyer or the seller?
      In most transactions, the buyer pays the majority of closing costs, but the seller may agree to cover part of them through a concession or negotiation. Your Redfin agent can help you understand what’s typical in your area.       

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    Jasica Usman

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  • How to Win a Bidding War on a House Against Builders

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    Key Takeaways
     • Builders often win bidding wars because they can pay cash and close quickly.
     • You can still compete by learning how to make a strong offer on a house, securing solid financing, and staying flexible with terms.
     • Partnering with an experienced local agent gives you a major advantage in teardown markets.

    You’ve been house hunting for weeks, maybe months, and you’ve finally found a home that feels just right. You put in what seems like a strong, fair offer and wait for the seller’s reply, only to learn you’re not the only one interested. Even in today’s cooler housing market, certain properties still attract multiple offers and spark fierce competition.

    If you’ve been searching in a hot teardown market, you’ve probably felt that frustration firsthand, finding the perfect home, making an offer, and losing to a builder or investor with deep pockets. Builders often target older homes to demolish and rebuild, which gives them the advantage of speed and all-cash flexibility. That is why knowing how to make a strong offer on a house is essential, especially when competing against cash buyers. 

    According to Redfin data, about 29% of home purchases in competitive markets involve all-cash buyers, many of them investors or developers. It can be tough for traditional buyers using financing, but with the right strategy, you can still come out on top in a bidding war on a house.

    What is a bidding war?

    A bidding war is a real estate term for when a seller receives multiple offers on their home in a short amount of time. Unfortunately, it also means the seller can wait to see whether buyers are willing to raise their offers—and by how much—along with other concessions to make their offers more attractive. 

    It’s a tight spot for a homebuyer. However, with representation from an experienced real estate agent, you can navigate the bidding war process wisely and win the house.

    1. Strengthen your offer beyond price

    You might not be able to match a builder’s cash offer dollar for dollar, but you can make your offer stand out in other ways.

    • Get fully underwritten before you shop. A pre-approval is good, but full underwriting shows sellers you’re serious and ready to close quickly.
      • Shorten contingencies when possible. If your lender is solid and you’re confident in your inspection, tightening timelines can make your offer more appealing.
      • Offer a higher earnest money deposit. It signals financial stability and commitment.

    Tip: Work with your lender and agent to present your financing like cash, fast, secure, and reliable. If you’re wondering how to make a strong offer on a house, start by focusing on these financing details first.

    2. Talk to the seller (if you can)

    Even in today’s more balanced housing market, competition can still arise for the right home. When all else fails, it may help to connect personally with the home seller. While buyers and sellers usually communicate through their agents, a genuine message can sometimes make a difference. If appropriate, and if allowed in your state, consider writing a short, heartfelt letter to the seller explaining why you love the home and how you plan to care for it.

    Builders and investors often focus only on the property’s land value, which means they lack the personal connection many sellers still appreciate. Some homeowners prefer to sell to someone who will actually live in the home they’ve maintained and cherished. By pairing an authentic note with a strong, well-prepared offer, you can stand out even if your bid isn’t the highest.

    You can also strengthen your offer by adjusting terms that appeal directly to the seller, such as:
     • Allowing them to choose the closing date
     • Offering a rent-back period after closing
     • Covering minor repairs or agreeing to purchase the home “as is”

    Engaging in a bidding war on a house can be stressful, but being flexible and personal can often tip the scales in your favor. The key is to prepare early, stay calm, and keep your emotions in check. With the right combination of strategy and sincerity, you can still win the home that feels meant for you.

    3. Use an escalation clause in your offer

    Another tip in the offer arsenal is to include an escalation clause to tell the seller how much you are willing to raise your offer if competing bids come in. The escalation clause would set a cut-off price that you won’t exceed. Real estate agents don’t typically recommend this, since it tips your hand for future negotiation, but it can help you cut to the chase in an extremely competitive market.

    4. Target properties that builders overlook

    Builders usually focus on large lots, corner properties, or homes in zoning areas that allow new construction. You can gain an edge by searching for homes that don’t fit their typical criteria.

    Your agent can filter listings to find:
     • Homes with smaller or irregular lots
     • Houses already updated or move-in ready
     • Properties just outside the builder “hot zones”

    Redfin real estate tools like Map Search and Hot Homes alerts can help you spot opportunities faster than competitors.

    5. Work with a local expert who knows builder patterns

    In teardown-heavy markets, knowledge is power. A Redfin Agent who’s experienced in local bidding dynamics can help you anticipate builder moves, time your offers, and use data to your advantage.

    They might know:
     • Which builders are currently active in specific neighborhoods
     • What price per square foot builders are willing to pay for land
     • How to identify homes that are undervalued or under the radar

    That insight can help you submit a winning offer before a builder even spots the listing.

    6. Consider homes that need cosmetic updates

    Builders usually want clear teardown opportunities, not minor fixer-uppers. Targeting homes that need only cosmetic work can open more doors. You’ll face less competition and often get better pricing.

    Even small improvements, fresh paint, updated fixtures, refinished floors, can make these homes feel brand new without the high price tag of a total rebuild.

    7. Increase the amount you’re willing to put down

    If the bidding war heats up and you can’t increase your offer amount, perhaps you can increase your down payment or the amount you put down in earnest money. This shows the seller that you are very serious, and your lender will not need to approve you for a higher loan amount. This tactic can put you ahead of other homebuyers who may appear less serious about buying the home.

    8. Be flexible on your closing date

    Flexibility around specific details in a real estate deal is nearly as good as coming to the table with cash. If you don’t need to move by a specific date or can give the seller more time to fix repairs, being flexible on a closing date can be as attractive to the seller as a higher offer. It can especially work in your favor if the competing offers come in with hard deadlines.

    9. Stay patient, but stay ready

    Winning a bidding war on a house isn’t about luck; it’s about timing, preparation, and persistence. You may lose a few offers, but every experience makes you sharper.

    Keep your financing updated, your paperwork ready, and your strategy flexible. When the right home appears, you’ll be able to move confidently and compete, even against builders.

    Frequently asked questions

    1. Why do builders usually win bidding wars?
      Builders can make fast, all-cash offers with no financing contingencies, making them more attractive to sellers looking for quick closings.
    2. How can I compete with a cash offer?
      Get fully underwritten, shorten contingencies, and work with an experienced agent who can position your financed offer as nearly risk-free.
    3. What kind of homes should I target to avoid builder competition?
      Look for move-in-ready homes or properties that need only light updates, builders prefer clear teardown opportunities or large lots.
    4. What is the hardest month to sell a house?
      The hardest months to sell a house are generally December and January, due to cold weather, holidays, and a general slowdown in buyer activity. Other challenging months include late fall, particularly November, as people focus on the holidays and getting settled before winter, leading to fewer serious buyers.

    The bottom line

    Going up against builders can feel intimidating, but it’s definitely possible to win. Focus on making your offer as strong as possible, work with a great agent who knows the local market, and remember what matters most to sellers. If you’re heading into your next bidding war on a house, knowing how to make a strong offer on a house could be the key to finally landing your dream home.

     

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    Jasica Usman

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  • 10 Home Improvement Projects to Tackle Before Moving Into a New House

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    Moving into a new home is exciting – but before you unpack, it’s worth tackling a few projects that are easier (and cheaper) to do in an empty house. From changing locks to refinishing floors, here are 10 projects to complete before move-in day to save time, money, and stress down the road.

    1. Change your new home’s locks

    First and foremost, it’s important to keep your family and your new home safe. So before moving in, be sure to change your locks, whether that means calling a locksmith or doing it yourself. Don’t forget the back door and garage door locks, as well as any sheds or other buildings on your property.

    2. Remove popcorn ceilings

    Older homes may have textured “popcorn” on the ceiling, an unsightly older trend that gives your home’s interior a dated look. It’s important to note that these types of ceilings may contain asbestos. If it does, you’ll need to hire a professional asbestos removal company to remove it from your home. If your home was built before the 1980s and has popcorn ceilings, it’s highly recommended to call a professional for testing and removal.

    3. Deep clean the whole house

    Whether you do it yourself or hire a service, all homes can benefit from having every nook and cranny scrubbed, especially the bathrooms and kitchen. Don’t forget to include cleaning the cabinets and drawers, too. This may also be a good time to install shelf liners and any drip-protectors to preserve the life of the cabinets.

    4. Paint your home’s interior

    Adding a fresh coat of paint is a simple and affordable home improvement project that can add color and bring new life into your space. It also helps defend your home’s surfaces from wear and tear. Whether you do the work yourself or hire someone to do it, it’s a lot easier to paint without having to navigate around furniture. Painting before you move in also means you don’t have to deal with the smell of drying paint.

    5. Add storage options in closets

    Installing shelving before settling into your home gives you more space to store your belongings and helps prevent clutter from the start. The pantry and storage closets may need extra shelving and organization, too. If you have a smaller home, additional shelves up to the ceiling can help you keep organized and your space less cluttered.

    6. Make electrical upgrades

    While you can make these upgrades at any time, everything will be easier to get to in an empty space. If you’re moving into an older home, especially one built in the mid-1990s or earlier, consider installing extra electrical outlets or upgrading the existing ones. Many older homes don’t have the electrical capacity for the number of electronics and powerful devices that we use today. Additional outlets in your rooms can make it easier to arrange furniture, including speakers, gaming systems, and light fixtures, while making room for everyone to plug in their phones.

    7. Replace the flooring

    If you’re moving into a brand-new home, you may not need to make any improvements to your floors. However, if you’re not a fan of carpet or tile, or the existing wood floors need to be refinished, this is a perfect time to make changes. If you put it off, you’ll have to deal with moving all of your furniture out of the way. And who wants to move furniture twice? There are many unique and eco-friendly flooring options to consider, from reclaimed hardwood to concrete. As the flooring is being updated, contractors can also replace baseboards and any other trim work to match.

    8. Install fencing around your property

    The house you’ve just purchased may not have adequate fencing for your pets or children. If so, this is a great time to consider adding it. Installing fencing can provide safety for your family, conceal a swimming pool or hot tub, reduce traffic noise, protect landscaping, give you privacy, increase your home’s curb appeal, and much more. It’s also a desired feature by many homebuyers. So when it comes time to sell your home years down the line, this home improvement project may increase its value and make it stand out in the local housing market.

    9. Call pest control to address and prevent infestations

    Even if you don’t see bugs, mice, or other pests in your home, that doesn’t mean they aren’t there or that they won’t decide to move in. You can prevent ants, roaches, and other insects from making your home theirs by bringing in a professional pest control company. Keep in mind that if your neighbors all have chemical pest barriers and you don’t, colonies of insects may target your home instead.

    10. Take care of remodeling projects in high-traffic areas

    Anyone who has renovated a frequently used area like a kitchen or bathroom knows how inconvenient it can be. So if you already know you’ll be remodeling these high-traffic spaces, consider doing so prior to move-in, whether it’s simple fixes like replacing outlet covers or updating window treatments, or larger fixes like changing out an old door, switching out old windows, or updating a ceiling fan. Also, before moving forward with your remodel, be sure to discuss with your contractor if your home improvement project will require a building permit.

    Home improvement project FAQs

    If I’m looking to increase my home’s value, which projects should I consider?

    If you’re looking to boost resale value as well as comfort, prioritize upgrades that improve functionality and curb appeal, such as:

    • Installing a new garage door
    • Replacing existing windows or roof
    • Refresh your home’s landscaping
    • Update flooring or kitchen fixtures

    Which home improvement projects don’t add value?

    While some renovations are purely for aesthetic reasons, many homeowners take on home improvement projects to increase the value of their homes. If this applies to you, don’t prioritize the following projects that don’t add value:

    • Converting a bedroom to a closet
    • Installing high-end fixtures
    • Painting with bold colors or patterns
    • Elaborate landscaping and outdoor features

    Which projects can I do for under $1,000?

    Home improvement projects don’t have to break the bank. Here are some renovation projects under $1,000 that can improve the look and feel of your home:

    • Update cabinet knobs and handles
    • Update your kitchen backsplash
    • Plant flowers and trees
    • Add safety measures like security cameras

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    Chibuzo Ezeokeke

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  • What Is a Financing Contingency, And How Does It Work?

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    Contingencies are an essential part of any home purchase contract, protecting buyers from financial risk if things don’t go according to plan. The financing contingency, also known as a mortgage contingency, is especially important for buyers who need a loan to purchase a home.

    It gives you the right to cancel the sale and keep your earnest money if your financing falls through before closing. Without this clause, you could lose your deposit – or worse, be legally required to close on the home without financing. 

    Whether it’s your first time buying a home in Seattle, WA or you’re looking to invest in a condo in Austin, TX, understanding how a financing contingency works can help you navigate the process and avoid costly mistakes. In this Redfin article, we’ll break down exactly what a financing contingency is, why it’s important, and how it can protect you throughout the homebuying process.

    What is a financing contingency?

    A financing contingency, sometimes called a mortgage contingency, is a clause in a home purchase agreement that protects buyers who need a mortgage to complete the purchase. It gives the buyer the right to cancel the deal and keep their earnest money if the mortgage application is denied or they are unable to secure financing under the terms outlined in your contract.

    Even if you’re pre-approved for a mortgage, unexpected issues can prevent loan approval, such as a low appraisal, changes to your credit, or a change in employment. The financing contingency gives you a legal “out” if one of these issues prevents you from closing.

    How does the financing contingency work?

    Once the seller has accepted the buyer’s offer and both parties have signed the purchase agreement, the financing contingency period begins. It typically lasts 30 to 60 days, though the exact timeline is set by the terms agreed to in the contract.

    Here’s a step-by-step look at how it typically works:

    1. Apply for a mortgage
    Even if you have pre-approval, you must submit a formal loan application to your lender.

    2. Submit financial documents
    This usually includes tax returns, pay stubs, bank statements, and credit information. The lender uses these to verify your ability to repay the loan.

    3. Lender review and appraisal
    The lender reviews the application, conducts underwriting, and orders an appraisal to ensure the home’s value is equal to or more than the mortgage loan amount. The home appraisal typically occurs within 48 hours of the lender’s request.

    4. Loan decision and next steps
    Once underwriting is complete, the lender either approves or denies the mortgage.

    If the loan is approved:  The lender issues a clear-to-close mortgage commitment letter that the buyer will usually share with the seller. This letter confirms the loan is approved and ready to fund, and the sale moves toward closing.

    If the loan is denied or issues arise: If financing problems occur, like a low appraisal, credit changes, or employment changes, buyers have several options, provided the contingency is still active and all contract terms are met:

    • Request an extension: If more time is required to secure financing, the buyer can ask the seller for an extension. The seller may accept or reject the extension.
    • Seek alternative financing: The buyer may pursue different lenders or loan types.
    • Cancel the contract: The buyer may choose to walk away without losing their earnest money.

    Example scenario of the financing contingency

    You’re buying a $450,000 home with a 45-day financing contingency. During this period, your lender denies your mortgage because of a recent vehicle purchase that substantially increased your debt-to-income ratio. Because the contingency is active and all contract conditions were met, you can cancel the deal and retain your earnest money deposit – protecting you from a major financial loss.

    What is included in a financing contingency?

    The financing contingency is only effective if it remains active and all terms in the contract are met. Waiving the contingency, missing deadlines, or failing to act in good faith can eliminate these protections.

    A financing contingency can vary from contract to contract, but most include several key components that define the buyer’s rights and obligations:

    Timeframe: Usually 30 to 60 days to secure financing. If the buyer can’t get a loan by the deadline and hasn’t requested an extension, they risk losing their earnest money.

    Loan type: Specifies whether the buyer is using a conventional, FHA, VA, or jumbo loan. This matters because each loan type has different requirements and approval timelines.

    Loan amount: The buyer must be approved for a loan amount that covers the purchase price. If the loan comes in short (often due to a low appraisal), they may need to renegotiate or walk away.

    Interest rate cap: Some contingencies include a maximum acceptable interest rate. If mortgage interest rates spike above that number, the buyer can cancel the deal.

    Earnest money protection: This is the core of the clause – it ensures the buyer can walk away and keep their earnest money deposit if financing falls through.

    Closing costs: Occasionally, this section outlines who pays which closing costs, though that’s often negotiated separately.

    Why the financing contingency matters

    Including a financing contingency is important because it protects buyers from being legally obligated to complete a home purchase if they can’t secure a mortgage. Purchase agreements are legally binding contracts, so without this clause, failing to close could expose you to legal or financial penalties. 

    According to a recent survey of Redfin agents, 27.8% of canceled home-purchase agreements were due to buyer financing falling through, and 14.9% were due to a change in the buyer’s financial situation. The financing contingency is a crucial protection for buyers, especially those using a loan to purchase a home.

    Real-world example

    Sarah waived her financing contingency to win a bidding war. But when the appraisal came in $40,000 below the purchase price, her lender reduced the loan amount. Sarah didn’t have enough cash to cover the difference and ended up losing her $10,000 deposit when she couldn’t close on the home sale.

    Situations where waiving the financing contingency may be riskier

    Even in a competitive market, there are situations where waiving this protection could put you at serious financial risk. You may want to keep the financing contingency in place if:

    • You’re a first-time homebuyer. If you haven’t gone through the mortgage process before, you may not be aware of potential delays or surprises that can derail financing. 
    • You have a low down payment. Smaller down payments may trigger stricter lender requirements or private mortgage insurance (PMI), increasing the chance of financing issues. 
    • Your income is variable or recently changed. If you’re self-employed, just changed jobs, or have inconsistent income, lenders may take longer to approve your loan—or deny it altogether. 
    • You’re buying a unique or hard-to-appraise property. Unusual homes can cause appraisal challenges that impact loan approval. 
    • You’re using a government-backed loan. FHA or VA loans often have longer processing times and stricter property standards, which could create unexpected delays.

    In these cases, keeping the financing contingency gives you critical protection if something doesn’t go as planned.

    Situations where waiving the financing contingency may make sense

    In hot housing markets, buyers sometimes waive contingencies to strengthen their offer, but that comes with risk. Here are a few scenarios where waiving your financing contingency might make sense:

    • You’re paying in cash. If you’re not relying on a mortgage to finance the home, the financing contingency becomes irrelevant. Cash buyers have a significant advantage in a competitive market because they eliminate the risk of financing falling through. 
    • You have a strong pre-approval. If your lender has already given you a solid pre-approval, you may feel confident that your loan will be finalized. Strong pre-approvals often come with assurances that your financing is nearly certain, reducing the risk of backing out. 
    • You’re making a large down payment. A substantial down payment can reduce the chances of financing complications. Lenders may see buyers with larger down payments as lower risk, making the loan process smoother and more likely to close without issues.
    • You’re confident in your financial situation. If you’re in a stable job, have a high credit score, and have no significant changes expected to your financial situation, you might be more comfortable waiving the contingency, as the chances of your financing falling through are low.

    Even if one or more of these factors apply to you, waiving a financing contingency still carries risks. If your loan falls through, you could lose your earnest money or even be legally obligated to follow through with the purchase. For this reason, it’s essential to evaluate your situation and the market conditions carefully before deciding to waive this common contingency.

    How to protect yourself if you waive the financing contingency

    If you decide to waive this clause, here are a few ways to lower your risk:

    • Work with a reliable lender: Partnering with a lender known for efficiently closing loans can help avoid issues later in the process. 
    • Increase the down payment: A larger down payment can improve the chances of loan approval and lower the risk of financing falling through. 
    • Have a backup plan: In the event that financing is not secured, having alternative options such as a bridge loan or private lending in place can help protect the buyer.

    FAQs: Financing contingency in real estate

    How long does a financing contingency last?

    A financing contingency typically lasts 30 to 60 days, giving the buyer time to secure a mortgage approval. If the buyer is pre-approved, the process may move faster, possibly shortening the contingency period. However, if more time is needed or unexpected issues arise, the buyer can request an extension, but this depends on the seller’s approval. If financing isn’t secured by the end of the contingency period, the buyer can cancel the deal and walk away with their earnest money, as long as the terms of the contingency are met.

    What happens if the financing contingency period expires without securing a loan?

    If the buyer is unable to secure financing by the end of the contingency period and does not have an extension in place, they can walk away from the deal without losing their earnest money, as long as the financing contingency terms are met. However, the buyer must notify the seller that they are backing out due to financing issues. After the contingency expires, the buyer may no longer have the option to cancel for financing reasons.

    Can a buyer renegotiate the terms of the loan during the financing contingency period?

    Yes, during the financing contingency period, if the buyer faces issues with the loan, such as a lower-than-expected appraisal or a change in interest rates, they may try to renegotiate the terms with the seller. In some cases, they may ask the seller to lower the purchase price or offer concessions to make the loan more affordable. However, the seller is not obligated to agree to these changes.

    What happens if a buyer’s financing falls through after the contingency period?

    If the buyer’s financing falls through after the contingency period has ended, they are typically in breach of contract. Without the protection of a financing contingency, the buyer risks losing their earnest money and may be required to proceed with the purchase or face legal consequences. It’s essential for buyers to meet the terms of the contingency and secure financing within the set timeframe to avoid this scenario.

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    Mekaila Oaks

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  • Am I Ready to Buy a House? 8 Signs You’re Ready to Own

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    Key takeaways: You may be ready to buy if you have steady income, manageable debt, savings for a down payment and emergencies, and plan to stay in your home for at least five years.

    Wondering if you’re truly ready to buy a home? It’s one of the biggest financial decisions you’ll ever make, and the answer depends on more than just your savings. Whether you’re thinking about buying your first home in Austin, TX, or settling down in a house in Seattle, WA, this homebuying readiness check breaks down eight signs that show whether now’s the right time to buy a home – plus a quick checklist to see where you stand 

    Sign 1: You’ve saved enough for a payment

    Key takeaway: If you’ve saved at least 3% for a conventional or FHA loan, and have an additional cushion for closing costs and emergencies, you’ve cleared one of the biggest hurdles to homeownership.

    Saving for a down payment is one of the clearest signs you’re ready to buy a home. Most buyers think they need 20% down, but the minimum down payment for a house depends on your loan type and eligibility:

    • Conventional loan: As little as 3% down with good credit.
    • FHA loan: Minimum 3.5% down, ideal for first-time buyers.
    • VA or USDA loans: 0% down options for qualified borrowers.

    A larger down payment can lower your monthly costs and help you qualify for better rates. If you put down less than 20% on a conventional loan, you’ll likely pay private mortgage insurance (PMI) each month until your loan balance drops below 80% of your home’s value.

    Quick tip: The more you put down, the less you’ll pay monthly, and you can avoid PMI entirely once you reach 20%.

    Example: How down payment size affects monthly payments

    Home price Down payment % Loan amount Est. monthly payment* PMI required?
    $400,000 3% ($12,000) $388,000 ≈ $2,680 Yes
    $400,000 10% ($40,000) $360,000 ≈ $2,475 Yes
    $400,000 20% ($80,000) $320,000 ≈ $2,200 No

    Estimates assume a 6.5% interest rate, 30-year fixed mortgage, property taxes, and insurance included.

    Sign 2: You have an emergency fund and budget for upfront costs

    Takeaway: If you’ve saved for your down payment and have an extra cushion for closing costs and emergencies, you’re financially grounded and ready for the next step toward homeownership.

    Being financially ready to buy a home means planning beyond your down payment. You’ll need enough savings to cover closing costs, move-in expenses, and a healthy emergency fund for homeowners once you’re settled.

    Most buyers spend about 6%–9% of the purchase price upfront when you include down payment and fees.

    What to include in your home-buying budget

    Use this quick checklist to make sure you’ve planned for every major expense before closing:

    Budget item Typical range Why it matters
    Down payment 3%–20% of purchase price Lowers your loan amount and may remove PMI.
    Closing costs 2%–5% of purchase price Covers lender fees, appraisal, title insurance, and taxes.
    Move-in expenses Varies Includes movers, utilities setup, and immediate repairs.
    Emergency savings 3–6 months of expenses Helps cover repairs, income gaps, or other unexpected costs.

    Quick tip: Build your emergency fund before buying. It ensures you can handle a leaky roof, appliance repair, or income gap without relying on credit cards.

    Sign 3: Your credit score and debt are mortgage-ready

    Takeaway: If your credit and debt levels meet these benchmarks, you’re well-positioned to qualify for a loan and manage your mortgage with confidence.

    A strong credit score and low debt show lenders you’re financially ready to buy a home. Most conventional loans require a minimum credit score of 620, while FHA loans allow scores of 580 or higher with a 3.5% down payment for qualifying buyers – or 500–579 with 10% down. Meeting these thresholds helps you qualify for a mortgage and secure better rates.

    Your debt-to-income ratio (DTI), the portion of your income that goes toward monthly debts, is just as important. Lenders typically prefer DTI below 43%, though keeping it closer to 35% or less offers more flexibility and long-term comfort. You can use a DTI calculator to measure your ratio and check where you stand.

    Quick tip: Paying down revolving debts like credit cards before applying can boost your score and lower your DTI, improving your approval odds.

    Sign 4: Your income is stable and documented

    Takeaway: Reliable, well-documented income – whether from a salary or self-employment – is one of the clearest signs you’re financially ready to buy a home.

    Lenders look for steady, verifiable income before approving a mortgage. Demonstrating job stability and income verification helps prove you can make consistent payments over time.

    Most mortgage programs want to see at least two years of continuous employment in the same field or, for self-employed buyers, two years of documented business income. Pay stubs, W-2s, and tax returns are typically required to verify your earnings.

    If your work history includes a recent job change within the same industry, that’s usually acceptable as long as your income level has stayed consistent or increased.

    Quick tip: The more organized your income documents are, the faster the approval process moves and the stronger your application looks to underwriters.

    Sign 5: You’ve budgeted beyond the mortgage

    If your budget comfortably covers more than the mortgage, accounting for taxes, insurance, utilities, and maintenance, you’re prepared for the real costs of homeownership and less likely to face financial strain after moving in.

    Buying a home isn’t just about affording the mortgage; it’s about managing every recurring cost that comes with ownership. Before you buy, make sure your monthly home expenses include not only principal and interest, but also property taxes, utilities, insurance, and long-term home maintenance costs.

    Quick tip: Budget an extra 1% of your home’s value per year for maintenance. On a $400,000 home, that’s about $4,000 set aside annually for repairs and upkeep.

    Typical monthly home expenses

    Expense What it covers Typical range
    Mortgage Principal + interest on your loan Depends on loan size and rate
    Property taxes City or county real-estate taxes ~1–2% of home value per year
    Homeowners insurance Protection against damage or loss $100–$200 per month
    HOA fees Community or condo maintenance $100–$400 per month (varies)
    Utilities Electricity, gas, water, trash, internet $200–$400 per month
    Maintenance & repairs Routine upkeep, systems, and appliances ~1% of home’s value per year

    These figures are general estimates for educational purposes only. Actual costs vary by location, property type, loan terms, and usage. Always review your lender disclosures, insurance quotes, and local tax assessments for personalized numbers.

    Sign 6: You understand the market and mortgage landscape

    Knowing what’s happening in the housing market can help you decide whether now is the right time to buy a house. Keeping an eye on current mortgage rates and local buyer vs. seller market trends helps you understand what kind of competition and affordability you’ll face.

    Even small changes in interest rates can make a big difference in your monthly payment and long-term costs. When rates rise, affordability decreases, meaning the same budget buys less home.

    Example: How mortgage rates affect monthly payments

    Home Price Loan Amount Rate Est. Monthly Payment*
    $400,000 $380,000 5.5% ≈ $2,160
    $400,000 $380,000 6.5% ≈ $2,400
    $400,000 $380,000 7.5% ≈ $2,660

    Estimate assumes a 30-year fixed-rate mortgage including principal and interest only.

    Timing also matters. In a buyer’s market, you may have more room to negotiate price or closing costs. In a seller’s market, you’ll need to act fast and come in strong with your best offer.

    Pre-approval Insight

    Getting pre-approved before you shop shows sellers you’re serious and gives you a clear picture of your buying power. It also locks in your rate for a short time — a big advantage if you expect rates to rise soon.

    Quick tip: Instead of trying to “time” the market, focus on when your finances, job stability, and long-term plans align. A well-timed purchase is less about perfect rates and more about lasting affordability.

    Sign 7: Your lifestyle and long-term goals align with homeownership

    Buying a home isn’t just a financial milestone, it’s a lifestyle shift. Before trading renting for ownership, think about how your job mobility, family plans, and long-term goals fit with the realities of maintaining a property. If you’re planning to settle in a specific neighborhood or want more control over your space, homeownership can offer stability, freedom, and stronger community ties. 

    If your career or lifestyle still requires flexibility, renting may remain the smarter move until you’re ready to settle down.

    Sign 8: You plan to stay put and build equity

    If you’re planning to stay in your home for several years, you’re in the right mindset for ownership. Many realestate experts often reference the “five-year rule of homeownership.” It typically takes about five years to break even on buying costs once you factor in closing fees, property taxes, and maintenance. Staying longer allows you to build home equity through mortgage payments and potential appreciation, giving you a stronger financial return when you eventually sell. 

    Am I ready to buy a house? A quick readiness checklist

    • You have a down payment and emergency savings
    • You’ve managed debt and built solid credit
    • Your job and income are stable
    • You’ve budgeted for taxes, insurance, and maintenance
    • You understand current mortgage rates and market trends
    • You’ve reviewed your credit report and corrected any errors
    • You’re pre-approved for a mortgage and know your price range
    • Your lifestyle and long-term goals align with homeownership
    • You plan to stay at least five years
    • You’re ready for repairs and ongoing upkeep
    • You’ve researched neighborhoods and compared commute, schools, and amenities
    • You’ve considered future costs like property taxes, insurance changes, or renovations

    Score Yourself: Are you ready to buy a home?

    Green: You meet 8 – 12 signs → ready to buy

    Yellow: 4 – 7 signs → almost there, strengthen finances and plans

    Red: 0 – 3 signs → focus on saving, credit, and long-term stability before buying

    Buying readiness FAQs

    1. How do I know if I’m financially ready to buy a house?

    You’re financially ready when you have steady income, manageable debt, solid credit, and savings for your down payment and closing costs.

    2. Should I wait until mortgage rates go down?

    Only if higher rates significantly affect your budget. Otherwise, buy when your finances and long-term plans align.

    3. Can I buy a house with debt or student loans?

    Yes, you can buy a house with student loan debt as long as your debt-to-income ratio is within lender limits and you can comfortably afford the monthly payment.

    4. What if I don’t have 20% down?

    You can still buy with a smaller down payment. Many conventional loans start at 3%, and FHA loans require just 3.5%.

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    Holly Hooper

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  • How Often Do Contingent Offers Fall Through?

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    If you’re buying or selling a home, you’ve probably heard about contingencies – contract terms that must be met for the sale to move forward. But how often do these conditions actually cause a deal to fall apart?

    The short answer: it’s not as often, but it depends on the market. According to the National Association of REALTORS® (NAR), only about 6% of home purchase contracts were terminated in the three months leading up to June 2025. However, recent trends show cancellations are rising, with buyers and sellers being more cautious amid higher mortgage rates, shifting inventory, and economic uncertainty.

    Below, we’ll break down how often contingent offers fall through, why some contracts get derailed, and what buyers and sellers can do to keep a deal on track.

    The likelihood of a contingent offer falling through often depends on the housing market itself. When conditions shift – interest rates rise, inventory changes, or buyers gain leverage – the risk of a deal falling through changes, too. In today’s market, buyers are more price-cautious and hold greater negotiating power, which has contributed to an uptick in home-purchase cancellations.

    A recent Redfin report found that roughly 56,000 U.S. home-purchase agreements were canceled in August 2025, equal to 15.1% of homes that went under contract – the highest August rate on record since 2017. The report also included a survey of 443 Redfin agents who handled cancellations in the prior three months, highlighting the main reasons deals fell through:

    These findings show that inspection and repair issues are the top driver of recent home-purchase cancellations, followed by financing and home-sale challenges, reflecting a market where buyers are increasingly selective and cautious.

    What is a contingent offer? 

    A contingent offer is a purchase agreement that only moves forward if certain conditions are met. These conditions – called contingencies – act as safety nets, giving buyers protection if something doesn’t go as planned or issues are uncovered. If these conditions aren’t met, the buyer can back out of the deal without losing their earnest money deposit.

    Example: Imagine buying a home built in the 1940s. You make your offer contingent on the electrical system being updated because knob-and-tube wiring is outdated and unsafe. If the inspection confirms the wiring hasn’t been updated and the seller refuses to fix it, the contingency allows you to walk away without penalty.

    Common reasons why contingent offers fall through

    Contingent offers are designed to protect buyers, but some deals still fall apart. Most commonly, this happens because of issues tied directly to specific contingencies:

    • Inspection findings: Major repairs or safety concerns that the seller won’t address.
    • Financing issues: Changes in employment, debt, or credit during underwriting.
    • Home sale delays: The buyer’s existing home doesn’t sell on time.
    • Low appraisals: Buyers and sellers cannot agree on price adjustments.
    • Title problems: Liens, taxes, or property ownership disputes that aren’t easily resolved.

    How key contingencies can impact the deal

    Let’s walk through some of the common contingencies that get written into real estate contracts. These will give you a better idea of what to expect for your own homebuying or selling process.

    Financing contingency

    A financing contingency is one of the most common contingencies. It just means that the buyer’s offer is dependent on their lender approving their home loan.

    Even if a buyer is pre-approved, lenders conduct a detailed underwriting process after a contract is signed. During this process, lenders verify income, credit history, employment, and debt-to-income ratios.

    If something changes, like a new job or an increase in debt, the loan could be denied. In that case, the financing contingency allows the buyer to back out and recover their earnest money. While financing issues are one of the most common causes of delays, they aren’t the main culprit for a contingent offer falling through.

    Appraisal contingency

    An appraisal contingency ensures the home is worth the purchase price and protects both buyers and lenders. Before finalizing a mortgage, lenders require an independent appraisal to confirm they’re not lending above market value.

    Appraisers consider factors such as:

    • Square footage
    • The home’s condition
    • Location
    • Recent sales of comparable homes

    If the appraisal comes in low – say a $450,000 home appraises at $440,000 – the buyer can bring extra cash or ask the seller to reduce the price. If no agreement is reached, the buyer can walk away without penalty.

    Appraisals are a common reason closings get delayed. NAR data shows appraisal issues caused about 6% of delays, making them one of the most important contingencies to watch, especially in markets where bidding wars push prices above value.

    Inspection contingency

    An inspection contingency lets buyers hire a professional to check the home’s condition, including the roof, foundation, plumbing, electrical, and HVAC. If major issues are found, buyers can request repairs, negotiate a credit, or walk away.

    Inspection and repair issues are the top reason deals fall through today, according to the Redfin survey: 70% of agents reported that inspection-related problems led to cancellations. Many buyers are leveraging contingencies to negotiate repairs or concessions, reflecting a market where buyers are cautious and selective after the pandemic-fueled buying frenzy.

    Title contingency

    The title of a home is essentially a record of its ownership. It shows who has owned it in the past, in addition to its current ownership. A title contingency ensures the home’s ownership is clear and free of legal claims. A title search can uncover liens, unpaid taxes, or disputes over property ownership.

    If a problem arises that cannot be quickly resolved, the title contingency allows the buyer to step away from the contract. This is less common than financing or inspection issues, but it’s a critical safeguard that prevents a buyer from inheriting legal complications after closing.

    Home sale contingency

    For buyers who already own a home, a home sale contingency can provide breathing room. It gives the buyer a set period of time to sell their existing property before moving forward with the new purchase. If their current home doesn’t sell in time, they can walk away without losing their earnest money.

    While this contingency protects buyers, it’s not very popular with sellers. From the seller’s perspective, it adds a layer of uncertainty. To make it more manageable, sellers sometimes include a kick-out clause or a first right of refusal. These clauses let sellers keep the home on the market and move forward with another offer if the original buyer can’t sell their home quickly enough.

    Should you submit a contingent offer?

    Contingencies are protections, not obstacles. They give you the option to back out or renegotiate if issues arise. Waiving them can be risky – without inspection, financing, or appraisal contingencies, you could face unexpected repairs, lost deposits, or covering appraisal gaps.

    If you’re considering waiving, be sure your finances are strong and you understand the risks. A common compromise is shortening contingency timelines instead of removing them, which can make your offer more competitive while still providing protection.

    How buyers and sellers can keep a deal on track

    Even with contingencies, deals can fall apart, especially in today’s market where buyers are cautious and sellers may need to adjust expectations. Here are some strategies to help both sides reduce risk and keep the transaction moving.

    For buyers:

    • Confirm your financing: Make sure you are fully pre-approved for a mortgage and understand your monthly payment before making an offer. Avoid large purchases that could impact your credit during the process.
    • Take a second look: Tour the home more than once to ensure you’re comfortable with your decision.
    • Do your research: Ask about previous contracts, past inspection reports, and any potential issues before committing.
    • Expect some negotiation: Inspections often reveal minor or major concerns; be prepared to work with the seller.
    • Check costs and fees ahead of time: Get insurance quotes and review any HOA fees or condo special assessments to avoid surprises.

    For sellers:

    • Address potential issues early: Consider a pre-inspection so buyers are aware of any major repairs upfront.
    • Plan for backup options: If multiple buyers are interested, ask your agent about securing a backup offer in case the first buyer cancels.
    • Be willing to negotiate: Adjusting the price or completing requested repairs can help avoid cancellations.
    • Manage timelines and deposits: Shortening inspection periods and ensuring a meaningful earnest money deposit can make it harder for buyers to walk away, particularly in balanced or seller’s markets.

    FAQS: How often contingent offers fall through, and more

    What happens if a contingent offer falls through?

    If a contingency cannot be met, then the buyer can walk away from the deal and receive their earnest money back. Unless the seller has accepted a backup offer, the home will return to the market, and the seller will need to find a new buyer.

    Does the market affect how often a contingent offer falls through?

    It can. The market shapes how contracts are written — like how long contingency periods last or how much earnest money is required — which can make deals either more or less likely to fall through. In a competitive market, buyers sometimes stretch financially to win a home, which can increase the risk of financing or appraisal issues. Contingencies are more likely to be resolved successfully in balanced or slow markets.

    Will a seller accept a contingent offer?

    Yes, but it depends on the market. In slower markets with fewer buyers, sellers are more likely to accept offers with contingencies. In competitive or seller’s markets, they may favor offers with fewer strings attached.

    Can sellers back out of a contingent offer?

    Technically, a seller can change their mind, but it’s rarely simple or without risk. Once a purchase agreement is signed, they’re legally bound to its terms. If they back out without a valid reason, they’ll usually need to return the buyer’s earnest money and could face legal or financial penalties.

    Do contingent offers take longer to close?

    They can. Standard contingency periods typically run anywhere from 10 to 30 days, depending on the type – such as inspection, appraisal, or financing. Each adds steps to the process, which can extend the closing timeline. That said, some buyers choose to shorten contingency deadlines to make their offer more appealing and keep the deal moving forward.

    What’s the difference between a contingent offer and a pending sale?

    A contingent offer means the deal is still waiting on certain conditions to be met. Once contingencies are resolved, the home moves to pending status, which is one step closer to closing.

    >> Read more: What is Contingent vs. Pending? Find Out the Difference

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  • What Happens to Your Earnest Money at Closing?

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    When you make an offer on a home, you usually put down earnest money to show the seller you’re serious. This money is held in escrow until the sale is finalized, protecting both you and the seller during the transaction.

    So what happens to that money at closing? In most cases, your earnest money is applied toward your down payment or closing costs, reducing the cash you need to bring to the closing table.

    Still, what happens to earnest money at closing can vary depending on the terms of your contract. In this Redfin guide, we’ll walk through how it works, when you might get it back, and what to expect in different scenarios.

    In this article:

    What is earnest money?

    Earnest money is a deposit you make after your offer on a home is accepted to show the seller that you’re serious about buying. Think of it as a good-faith payment that tells the seller you’re committed. 

    This deposit is usually between 1% and 3% of the home’s purchase price, but the amount can vary based on the local market and the agreement between you and the seller.

    The earnest money is typically held in an escrow account — a neutral third party, such as a title company or real estate brokerage, holds onto the funds until the sale is finalized. This ensures that neither the buyer nor the seller can access the money prematurely, protecting both parties during the transaction.

    What happens to earnest money at closing?

    In most real estate transactions, your earnest money is applied directly toward your home purchase at closing. This means it can either reduce your down payment or be credited toward closing costs like lender fees, title insurance, and other expenses.

    Here’s a closer look at what typically happens to earnest money once you reach closing:

    Earnest money can be applied toward your down payment

    In most cases, if you’re making a down payment on your home, your earnest money is subtracted from the total down payment you owe. For example, if your down payment on your dream home in Boston is $20,000 and you’ve already put $5,000 in earnest money, you’d only need to bring $15,000 more to closing to cover the remainder of your down payment.

    Earnest money can be applied to closing costs

    If your down payment is already covered or you’ve paid a smaller portion upfront, the earnest money can go toward closing costs, which include fees like lender charges, title insurance, and other closing expenses. This reduces the amount of cash you need to bring to the closing table.

    Potential refund of earnest money

    In certain situations, such as loans with little or no down payment (like VA or USDA loans) or when seller concessions or lender credits reduce your total costs, the earnest money may exceed what you owe at closing. In these cases, the leftover portion is refunded to you.

    Do you get your earnest money back at closing?

    In most cases, you don’t typically get your earnest money back as a separate payment or cash refund at closing. Your earnest money is applied to your homebuying expenses, so while you’re not handed a check, that money still goes toward your home purchase.

    That said, there are a few instances where receiving your earnest money back at closing is possible:

    • You paid more than you owe. If your earnest money exceeds what you owe at closing, the difference will be refunded.
    • You’re using a no-down-payment loan. VA and USDA loans don’t require a down payment. If your closing costs are less than your earnest money, you’ll get the extra back.
    • You received seller concessions or lender credits. These can lower your out-of-pocket costs, potentially leaving some of your earnest money unused, resulting in a refund.

    Example: You put down $4,000 in earnest money for a house in Portland, OR. Thanks to seller concessions and lender credits, your final amount due at closing is just $3,000. You’ll receive the remaining $1,000 back after closing.

    Other possible outcomes for your earnest money

    While earnest money is usually applied to your purchase at closing, there are situations where the sale doesn’t make it that far. In these cases, your earnest money could either be refunded or forfeited, depending on what caused the deal to fall through:

    1. You back out due to a contingency → you get your earnest money back

    Most purchase agreements include contingencies that allow you to cancel the deal without penalty. If you back out for one of these protected reasons, you’ll get your earnest money back.

    • Inspection contingency: If the home inspection reveals serious issues and you decide to walk away (within the agreed timeframe), you can get your money back.
    • Financing contingency: If your loan falls through despite your best efforts, you can typically back out and recover your earnest money.
    • Appraisal contingency: If the home appraises for less than the purchase price and you can’t negotiate a lower price, you might be able to walk away with your deposit.

    2. You back out for no valid reason → seller keeps earnest money

    If you decide not to go through with the purchase without a contract-protected reason, the seller will likely keep your earnest money as compensation for lost time and effort.

    3. The seller backs out → you get your earnest money back

    If the seller cancels the deal (without a reason allowed in the contract), you should get your earnest money back in full. In some cases, you may even have legal grounds to sue for damages.

    4. The closing is delayed → money stays in escrow

    If closing is pushed back due to title issues, financing delays, or other factors, your earnest money stays in escrow until the sale is finalized.

    5. The deal falls through due to an appraisal gap → depends on your contract

    If the home’s appraisal is lower than the purchase price (an appraisal gap) and you don’t have an appraisal contingency, you may have to make up the difference or lose your earnest money.

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  • What Does Homeowners Insurance Cover? Understanding Your Coverage, Costs, and More

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    Buying a home is one of life’s biggest investments, and protecting it should be a top priority. That’s where homeowners insurance comes in. Homeowners insurance helps protect your investment by covering unexpected damage, loss, or liability.

    If something happens – like a fire, burst pipe, or break-in – your homeowners insurance helps pay for repairs, replaces lost belongings, and can even cover temporary housing while your home is being fixed. It’s one of the smartest financial protections a homeowner can have.

    Whether you’re a first-time homebuyer or simply reviewing your current coverage, this guide will help you better understand what homeowners insurance is, what it covers, and what isn’t typically covered in standard policies.

    What is homeowners insurance?

    Homeowners insurance is a policy that helps cover the cost of repairing or replacing your home and belongings. It typically covers damage to your property, liability for injuries or damage you cause to others, and sometimes additional living expenses if your home becomes uninhabitable after a covered event.

    If something happens, your homeowners insurance can help you recover from the unexpected without wiping out your savings. You pay a monthly or annual premium, and in return, your insurance company agrees to cover certain types of losses, up to the limits outlined in your policy.

    How homeowners insurance works

    When you purchase a homeowners insurance policy, you agree to pay a set premium in exchange for financial protection against specific types of losses. If a covered event happens, you file a claim with your insurer. They’ll review the details, possibly send an adjuster to assess the damage, and then pay for repairs or replacements minus your deductible (the amount you pay out of pocket).

    What does homeowners insurance cover?

    Homeowners insurance covers the cost to repair, rebuild, or replace your home and belongings after certain unexpected events, called covered perils. It also helps protect you financially if someone is injured on your property or if you can’t live in your home temporarily after a covered loss.

    A standard homeowners insurance policy provides a combination of property protection (for your house and belongings) and financial protection (for liability and living expenses). Below is a breakdown of the main types of coverage included in most policies and how each one works.

    1. Dwelling (structure) coverage

    This is the core of your policy as it protects the physical structure of your home. Dwelling coverage pays to repair or rebuild your house if it’s damaged or destroyed by a covered event, such as fire, lightning, wind, hail, or vandalism.

    It includes major parts of your home like the roof, walls, floors, foundation, and built-in systems such as plumbing, heating, cooling, and electrical wiring.

    When choosing your dwelling coverage limit, aim for the amount it would cost to rebuild your home from the ground up at current construction prices, not its market or assessed value. Rebuilding costs often exceed what your home could sell for, especially when you factor in materials, labor, and local building codes.

    2. Other structures coverage

    This portion of your policy covers detached structures on your property, so think structures that aren’t physically connected to your main home. That includes things like:

    • Fences and gates
    • Detached garages
    • Garden sheds or workshops
    • Guesthouses or gazebos

    Other structures coverage usually equals about 10% of your dwelling coverage, but you can increase that amount if you have significant detached buildings or outdoor features that would be expensive to replace.

    For example, if your home’s dwelling limit is $400,000, you might automatically have $40,000 to cover other structures. If a windstorm knocks down your fence or a fallen tree crushes your shed, this coverage helps pay to repair or replace it.

    3. Personal property coverage

    Your home isn’t just the structure – it’s everything inside it. Personal property coverage protects your belongings if they’re damaged, destroyed, or stolen. That includes furniture, clothing, electronics, appliances, décor, and more.

    Most policies automatically set personal property coverage at 50% to 70% of your dwelling coverage, but you can adjust it to match your lifestyle and possessions.

    It’s also important to know that your belongings are typically covered even when they’re not at home. For example, if your suitcase is stolen while you’re traveling or a bike is taken from your car, personal property coverage can likely help replace it.

    However, there are limits. Most policies cap payouts for certain valuables like jewelry, artwork, collectibles, and firearms. If you own high-value items, you can add a scheduled personal property endorsement to list them individually for their full worth.

    4. Loss of use coverage

    If your home becomes unlivable due to a covered loss, loss of use coverage – also called additional living expenses (ALE) – helps cover the cost of temporary housing and day-to-day expenses while repairs are made.

    This can include:

    • Hotel or short-term rental costs
    • Meals and restaurant expenses
    • Laundry, pet boarding, or storage fees
    • Increased transportation costs

    For example, if a burst pipe causes damage and forces you out of your home for a month, ALE can cover your hotel stay and extra costs that go beyond your normal living expenses. This coverage typically continues until your home is rebuilt or you permanently relocate, up to your policy limit.

    5. Personal liability coverage

    Homeowners insurance typically includes personal liability coverage, which protects you financially if someone is injured on your property or if you accidentally cause damage to someone else’s property.

    Personal liability coverage helps pay for things like:

    • Medical expenses for injuries
    • Repair or replacement of damaged property
    • Legal defense costs if you’re sued

    6. Medical payments to others

    This coverage is designed for minor injuries that happen on your property, regardless of who’s at fault. If a guest twists their ankle on your stairs or a neighbor’s child gets scratched by your pet, medical payments coverage helps pay for their immediate care.

    It typically covers smaller bills like doctor visits, X-rays, or ambulance fees, and usually comes with limits between $1,000 and $5,000.

    These core coverages form the backbone of most homeowners insurance policies. But what they cover depends heavily on what events the policy includes and what it excludes.

    Events that are typically covered

    Homeowners insurance protects you against many unexpected events, often called “covered perils.” These are the specific causes of damage or loss your policy will pay for. Anything outside that list (or specifically excluded) won’t be covered.

    Most standard homeowners insurance policies cover sudden and accidental damage caused by events that are out of your control. While every policy varies, the most common covered perils include:

    • Fire and smoke damage
    • Windstorms and hail
    • Lightning strikes
    • Explosion
    • Falling objects (like tree branches)
    • Theft or vandalism
    • Weight of snow, ice, or sleet
    • Water damage from burst pipes or appliance leaks
    • Damage caused by vehicles or aircraft
    • Accidental discharge of water or steam from household systems
    • Freezing of plumbing or HVAC systems
    • Sudden electrical surges or short circuits

    If one of these events damages your home or belongings, your insurer typically helps pay for repairs or replacements, up to your policy limits.

    For example: If a kitchen fire spreads smoke through the house, your policy covers cleanup and repairs. Or let’s say a heavy windstorm tears shingles off your roof – your insurer pays for roof repairs.

    What’s not covered by standard homeowners insurance policies

    Standard homeowners insurance doesn’t protect against every type of loss, especially those caused by long-term issues, lack of maintenance, or major natural disasters that require separate coverage.

    Here are the most common exclusions:

    • Floods: Damage from rising water, overflowing rivers, or heavy rainfall is not covered. You’ll need separate flood insurance for that.
    • Earthquakes and land movement: Earthquakes, sinkholes, and landslides require an earthquake policy or endorsement.
    • Normal wear and tear: Aging roofs, leaky plumbing, and general deterioration aren’t covered because they’re part of regular home maintenance.
    • Pest infestations: Termites, rodents, and insects are considered preventable and not covered by insurance.
    • Sewer or drain backups: Water that backs up through drains or sump pumps isn’t included unless you add a sewer backup endorsement.
    • Mold or rot: Often excluded unless it results from a covered event, such as a sudden pipe burst.
    • Neglect or poor maintenance: If the insurer determines the damage was preventable, your claim could be denied.
    • War, nuclear hazards, or government action: Broad catastrophic risks like these are universally excluded.

    Because every home and location are different, it’s important to review your policy carefully and talk with your insurance agent about add-ons or separate policies that fill these gaps, especially if your home is in a flood zone or if you live in a high-risk area.

    This is also where the amount of coverage you carry becomes crucial. Even with the right types of protection, being underinsured can leave you paying thousands out of pocket after a major loss. Your policy should include enough dwelling coverage to fully rebuild your home, not just cover its market value, plus sufficient personal property and liability protection to safeguard your finances.

    >> Read more: How Much Homeowners Insurance Do I Need?

    Cost of homeowners insurance

    The average cost of homeowners insurance in the U.S. ranges from $1,500 to $2,500 per year, but your rate depends on your home, location, and coverage choices.

    Here’s what usually affects the price of homeowners insurance:

    • Location: Homes in areas prone to storms, wildfires, or high crime cost more to insure.
    • Home details: Size, age, and construction materials impact risk and price.
    • Coverage and deductible: More coverage or a lower deductible increases your premium.
    • Claims and credit history: Frequent claims or a lower credit score can raise rates.
    • Safety features: Alarm systems, smoke detectors, and newer roofs often earn discounts.

    Your premium reflects the risk your insurer takes on, and small adjustments to coverage, deductibles, or home safety can make a big difference in what you pay. A few ways you can lower your premium include:

    • Bundling home and auto policies with the same insurer
    • Raising your deductible if you can afford a higher out-of-pocket cost
    • Maintaining good credit and a clean claims record
    • Upgrading your home’s safety features, like storm shutters or security systems

    Is homeowners insurance required when buying a home?

    Legally, homeowners insurance is not required by federal or state law. However, most mortgage lenders require it before finalizing a home loan. Lenders want to protect their financial interest in your property – if your home is damaged or destroyed, they need assurance that it can be repaired or rebuilt.

    Even if your home is paid off, keeping an active homeowners policy is a wise decision. Without insurance, you’d be fully responsible for repair, replacement, or liability costs that can easily total tens or hundreds of thousands of dollars.

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  • A Buyer’s Guide to the 8 Most Common Real Estate Contingencies

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    Contingencies are an important part of the homebuying process, giving buyers a safety net during the transaction. They are conditions written into the purchase agreement that must be satisfied for the sale to move forward, allowing either party to back out without penalty if specific terms aren’t met.

    Although not required, contingencies are standard in most real estate contracts, and some are especially important depending on the location. For example, in wildfire-prone areas like Los Angeles, including a homeowners insurance contingency can ensure the property is insurable before you commit.

    This Redfin real estate article explains how contingencies work, which ones to expect, and how they can help you avoid costly surprises during the homebuying process.

    What are contingencies in real estate?

    In real estate, a contingency is a condition written into a purchase agreement that must be met for the sale to move forward. In other words, it’s a clause that makes the deal dependent on certain requirements being satisfied – like the home passing inspection, appraising at value, or the buyer securing financing.

    Contingencies act as a safety net. They protect buyers by allowing them to renegotiate or walk away without losing their earnest money deposit if a critical condition isn’t met. At the same time, they provide sellers with a clear framework and timeline, so everyone knows what steps need to be completed and by when.

    For example, an inspection contingency might give a buyer ten days to review the property and request repairs or cancel the contract. During that time, the seller knows the process is moving forward and has a defined window to address any concerns.

    What is a contingent offer, and how does it work? 

    When a buyer submits a contingent offer, it means they’re making an offer to purchase a home that depends on certain conditions being met, such as inspections, appraisals, or securing financing. The sale can only move forward if these conditions are satisfied.

    Once the seller accepts the contingent offer, the home is usually listed as contingent, showing there’s an active offer but the sale isn’t final. Each contingency has a deadline, called the contingency period. Buyers must complete their due diligence and meet conditions during this set timeframe. Missing a deadline can put their earnest money at risk.

    During the contingency period, buyers have opportunities to negotiate. For example, after a home inspection, they can request repairs, a reduced price, or credits to address any issues found.

    If a contingency isn’t met within the agreed-upon timeframe, the buyer can terminate the contract and typically receive their earnest money back.

    The top 8 most common contingencies to consider in your offer

    When submitting an offer on a home, including the right contingencies is crucial. Contingencies give buyers the ability to confirm important aspects of the property, financing, and legal ownership before fully committing. 

    Below, we’ll explain how the following common real estate contingencies work and the protections they provide:

    1. Home inspection contingency

    The home inspection contingency is one of the most frequently used contingencies in real estate. It gives the buyer the right to have the home professionally inspected, usually within 7 to 10 days after the offer is accepted. If the inspection uncovers significant issues, such as foundation damage, roof problems, or mold, the buyer can:

    • Request repairs or credits from the seller
    • Renegotiate the purchase price or contract terms
    • Cancel the contract and retain their earnest money deposit

    ➤ The home inspection contingency protects buyers from unexpected repair costs and ensures they know the true condition of the property before closing.

    2. Appraisal contingency

    The appraisal contingency comes into play when a buyer is financing a home. Lenders require an appraisal to confirm the property’s value supports the loan amount. If the appraisal comes in lower than the agreed purchase price, the buyer can:

    • Cover the difference in cash
    • Renegotiate the price
    • Exit the contract

    Renegotiation is common, giving both the buyer and seller a chance to adjust the price or terms to reflect the home’s appraised value.

    ➤ The appraisal contingency protects buyers from overpaying and lenders from financing more than the home is worth.

    3. Financing (mortgage) contingency

    A financing contingency, also known as a mortgage contingency, allows the buyer to back out of the sale if they’re unable to secure mortgage approval, usually 21 to 30 days. Reasons for denial can include credit issues, job changes, or changes in loan terms.

    If financing falls through, the buyer can withdraw from the contract and get their earnest money back. However, many buyers work with their lender to explore alternative financing options before canceling.

    ➤ This contingency protects buyers from being contractually obligated to purchase a home they can’t afford to finance.

    4. Title contingency

    A title contingency gives the buyer the right to review the results of a title search and cancel the contract if any issues related to ownership or property rights are discovered. The title company usually conducts this search shortly after the contract is signed.

    Common title issues include:

    • Unpaid property taxes or contractor liens
    • Boundary disputes or easements
    • Undisclosed heirs or prior claims of ownership
    • Errors in public records or deeds

    If a problem is found, the seller is generally given a window to resolve it, such as clearing a lien or correcting a legal error. If they can’t deliver a clear title by the closing date, the buyer can back out and recover their earnest money.

    ➤ This contingency protects buyers from inheriting legal, financial, or ownership complications tied to the property.

    5. Home sale contingency

    A home sale contingency makes the purchase dependent on the buyer selling their current home within a specified period. If the buyer cannot sell their home in time, they can cancel the contract without losing their earnest money.

    This contingency is often used by buyers who need the proceeds from their existing home to complete the purchase. Sellers may view these offers as less attractive because they can introduce uncertainty or delays.

    Contracts with this clause typically specify key details, such as whether the buyer’s current home is already under contract and the timeframe for completing the sale. Sellers may include a kick-out clause, which permits them to continue marketing the home and accept backup offers.

    ➤ The home sale contingency protects buyers from being obligated to purchase a new home before they’ve sold their current one.

    6. Homeowners insurance contingency

    A homeowners insurance contingency allows the buyer to confirm they can obtain adequate homeowners insurance for the property at a reasonable cost. If the buyer is unable to secure coverage – due to factors like location, condition, or risk exposure – they can cancel the contract without penalty.

    This contingency is especially important in areas prone to natural disasters, such as floods, wildfires, or hurricanes, where insurance may be limited or expensive.

    ➤ The homeowners insurance contingency protects the buyer from being locked into a purchase they cannot insure or afford to insure.

    7. Kick-out clause/contingency

    A kick-out clause is a contingency used by sellers when accepting an offer that includes a home sale contingency. It allows the seller to continue marketing their property and accept backup offers even after entering into a contract with a buyer. 

    If another buyer submits a stronger offer, the seller can notify the original, bumpable buyer, who typically has 24 to 72 hours to either:

    • Remove their home sale contingency and proceed with the purchase, or
    • Walk away and allow the seller to accept the new offer

    This clause must be clearly outlined in the purchase agreement, including the required notice period and response timeframe.

    ➤ The kick-out clause protects the seller from being locked into a lengthy contract with a buyer who may not be able to close, giving them the flexibility to pursue better-qualified offers.

    8. Homeowners association (HOA) contingency

    A homeowners association (HOA) contingency applies to homes or condos governed by an HOA. It gives buyers the right to review HOA agreements, rules, and financial documents before fully committing to the purchase.

    If the buyer doesn’t receive the necessary documentation in time, or if they disagree with the HOA’s obligations or restrictions, they can cancel the contract without losing their earnest money.

    ➤ The HOA contingency protects buyers from unexpected fees, rules, or restrictions that could affect their ownership experience.

    What happens if a contingency isn’t met?

    If a contingency isn’t satisfied within the agreed-upon timeframe, the buyer typically has the right to terminate the contract and get their earnest money back. Buyers can also choose to renegotiate instead of walking away. For example, after an inspection reveals issues, the buyer might request repairs, credits, or a price reduction.

    Remember: deadlines are critical. Buyers must complete all contingency-related tasks within the specified periods. Missing a deadline without an extension could result in losing the earnest money or other legal consequences.

    If a contingency isn’t met and the buyer terminates, the seller will typically relist the home or put it back on the market, opening the door for other buyers to submit offers.

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    FAQs about contingencies in real estate

    What does contingent mean in real estate?

    In real estate, contingent means a home is under contract, but the sale depends on certain conditions (called contingencies) being met. If those conditions aren’t satisfied, the buyer can usually back out without losing their earnest money.

    What contingencies should I include when buying a house?

    Which contingencies you should include will ultimately depend on factors such as the home’s condition, location, and your financial situation. That said, most buyers benefit from including inspection, appraisal, and financing contingencies, especially if they’re receiving a mortgage loan.

    In certain areas, additional contingencies may be especially important. For example, if you’re buying a home in St. George, UT where wildfires are a risk, or in coastal Florida cities like Fort Lauderdale or Naples that are prone to hurricanes and flooding, it can be wise to include a home insurance contingency.

    Are contingencies required in a real estate contract?

    No, but they’re common. Buyers often include them to protect against risks like failed financing or major home defects. Waiving contingencies can strengthen an offer but increases the buyer’s exposure to risk.

    What’s the difference between pending and contingent?

    A contingent listing is still under contract but waiting for specific conditions to be met. A pending listing means all contingencies have been cleared and the sale is in its final stages before closing.

    Is it risky to waive contingencies?

    Yes. Waiving contingencies, like the inspection, can make an offer more competitive, but it increases the buyer’s financial and legal risk. If problems arise, the buyer may have no contractual way out.

    Can you remove contingencies after an offer is accepted?

    Yes, contingencies can be removed or waived after the offer is accepted – either voluntarily by the buyer or after certain deadlines pass. In some cases, buyers may be required to formally remove them in writing to keep the contract moving forward.

    Can a seller accept another offer while a property is contingent?

    In most cases, no, unless the contract includes a kick-out clause. Without one, the seller is typically obligated to honor the original agreement while the contingencies are being resolved.

    Is it common for contingent offers to fall through?

    Most contingent offers still make it to closing. That said, when deals do fall through, common reasons include issues with inspections, appraisals, or financing.

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  • What Is “Close of Escrow”? Timeline, Process, and What To Expect

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    When you buy or sell a home, the close of escrow is one of the most important steps in the process. It’s the point when the sale is finalized, funds are disbursed, all necessary documents are signed, and the deed is recorded, officially transferring ownership from the seller to the buyer.

    While it may sound straightforward, reaching this stage involves multiple deadlines and responsibilities for both parties, as well as coordination with the lender and escrow officer. Understanding how close of escrow works and what to expect ensures a smooth transition from contract to homeownership. 

    What does “close of escrow” mean?

    Escrow is a neutral arrangement in which a third party – often a title company or escrow company – holds money, documents, and possibly other assets until both buyer and seller meet all obligations of the contract.

    The close of escrow is the moment when the transaction is officially complete. At this stage, all contractual obligations have been fulfilled, funds are disbursed, the deed is recorded, and the buyer becomes the legal owner of the property. It serves as the final checkpoint between signing the purchase agreement and taking possession of the home.

    Escrow closes when:

    • The buyer’s lender funds the loan.
    • All required payments, including closing costs, are collected and distributed.
    • Both buyer and seller have signed all necessary documents.
    • The deed is officially recorded with the county or local jurisdiction.

    Once escrow closes, or “ends,” the seller receives payment, the buyer becomes the legal owner of the property, and the escrow account tied to the transaction is closed.

    Are the close of escrow and the closing date the same?

    These terms are often used interchangeably, but close of escrow and closing day don’t always mean the same thing.

    • Closing date is the date specified in the purchase agreement when the parties agree to finalize the sale. On this day, buyers and sellers typically sign their closing documents.
    • Close of escrow is the legal completion of the process, when funds are disbursed and the deed is recorded.

    In many cases, these steps occur on the same day. In others, escrow may close a day or two later, depending on local practices and recording times. For instance, all necessary materials might be exchanged ahead of time before the title transfer, so escrow technically closes before the official closing. In that case, the buyer could receive the title without the seller even needing to attend the final closing.

    Some states follow a “wet” closing, where funds are transferred and documents signed at the same time, while “dry” closings allow escrow to close once all requirements are met except for the disbursement of funds. Knowing which type is standard in your state is important, since it affects when the title and funds officially transfer – always check with your agent or escrow officer.

    Timeline and process of closing escrow

    The escrow process typically lasts 30 to 45 days from the time an offer is accepted to closing escrow. A cash purchase can be much quicker, often closing in as little as one to two weeks.

    While timelines vary by state and lender, here’s how the escrow process generally unfolds:

    1. Offer accepted and escrow opens

    Once the purchase agreement is signed, escrow is officially opened. The buyer deposits earnest money into a neutral escrow account, and the escrow or title company begins preparing necessary documents and coordinating the next steps, such as ordering a title search and outlining the timeline for the transaction.

    2. Title search and insurance

    The title company verifies that the property has clear ownership and no liens or claims, and prepares title insurance for both the lender and buyer.

    3. Loan processing and contingency period

    The buyer finalizes their mortgage application while the lender orders an appraisal to confirm the property’s value. The buyer also completes inspections, and any issues discovered, such as necessary repairs, are negotiated. Other contingencies, like financing or the sale of the buyer’s current home, are addressed.

    4. Final loan approval and disclosures

    The lender issues final approval, often called a “clear to close,” and delivers the Closing Disclosure, which details all costs and the exact cash needed to close. By law, this disclosure must be provided at least three business days before signing.

    This step generally signals that the escrow process is entering its final phase, with the transaction fully prepared to move toward closing.

    5. Final walkthrough

    The buyer inspects the home to confirm it is in the agreed-upon condition and that any requested repairs are complete. Usually, this occurs the day before closing day.

    6. Closing day/signing appointment

    The buyer and seller sign all required documents, including loan papers, the promissory note, the deed, and any affidavits or disclosures required by law. The buyer wires pays their down payment and closing costs, typically by cashier’s check or proof of wire transfer.

    7. Funding, recording, and verification

    In most transactions, the lender wires loan funds to escrow on the same day, and escrow confirms that all payments – including the buyer’s funds, lender funds, and closing costs – are received. The deed is then recorded with the county, legally transferring ownership to the buyer.

    8. Disbursement and close of escrow

    Escrow distributes funds to the seller, agents, and other parties, completing the transaction. Keys are delivered according to the contract, marking the official close of escrow.

    Why the close of escrow matters in your real estate transaction

    The close of escrow is the point at which a real estate transaction is officially complete. It ensures that both buyer and seller have met all contractual obligations, funds are properly disbursed, and the deed is recorded with the county, legally transferring ownership.

    This step protects everyone involved: buyers can be confident the property is free of liens, and sellers know they will receive their proceeds. It also triggers post-closing processes, like setting up an escrow account for taxes and insurance. In short, close of escrow turns the contract into reality, marking the legal transfer of the home and the conclusion of the transaction.

    FAQs: Close of escrow

    Can escrow close early?

    Yes, if all conditions are met, documents are signed, and funds are ready, escrow can close earlier than scheduled. Early closing requires coordination among the buyer, seller, lender, and escrow officer. However, closing escrow early doesn’t necessarily mean you’re able to move in sooner – always confirm with your agent and escrow officer.

    What type of issues can occur during close of escrow?

    Several issues can delay or complicate the close of escrow. Common problems include last-minute title or lien issues, appraisal or inspection discrepancies, incomplete repairs, missing documents, or delays in lender funding. Any of these issues may require additional negotiation, documentation, or an escrow extension to resolve before the transaction can be finalized.

    What happens if funding is delayed?

    If the lender doesn’t wire funds on time, closing is postponed until the money is received. This can affect recording and key delivery, so the buyer doesn’t officially own the home until escrow is fully closed.

    What happens if the closing date changes?

    Closing dates can be moved up or pushed back if all parties, including the lender and escrow officer, agree. Even if escrow closes early, possession and key delivery may still follow the terms outlined in the purchase contract.

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  • What to Know if You’re Using Gift Money for a Down Payment: Rules to Follow

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    Key takeaways

    • Mortgage down payment gift rules allow family members and close relatives to help buyers with home purchases.
    • Lenders require a gift letter documenting the source and amount of gift funds.
    • IRS gift tax rules set annual and lifetime limits for tax-free giving.
    • Gift money can’t come from anyone with a financial interest in the sale.

    Buying a home is one of the biggest financial steps most people will ever take. With the U.S. median home price hovering around $420,000 as of 2023 (National Association of Realtors), saving for a down payment can feel overwhelming. For many buyers, especially first-timers, help from family or friends makes the dream possible. But before accepting gift money, it’s important to understand the mortgage down payment gift rules required by lenders and the IRS.

    What are the mortgage down payment gift rules?

    Mortgage down payment gift rules outline how funds given by someone else can be used toward your home purchase. Lenders want to ensure the money is truly a gift—not a loan that adds hidden debt. Documentation is required to verify this.

    Most lenders allow gifts to cover:

    • All or part of the down payment
    • Closing costs
    • Reserves (in some cases)

    Who can give a down payment gift?

    Gift money must typically come from someone with a close personal connection. Most lenders accept funds from:

    • Parents or grandparents
    • Siblings or children
    • A fiancé, fiancée, or domestic partner

    Funds usually can’t come from:

    • Friends without a close relationship
    • The home seller
    • Real estate agents, builders, or anyone with a financial stake in the sale

    A couple sits on the floor amidst moving boxes, intently reviewing paperwork related to a down payment gift for their new home.

    How much can be gifted for a mortgage down payment?

    There is no universal lender cap on how much can be gifted, but the IRS sets rules for tax-free giving:

    • Annual exclusion limit (2023): $17,000 per giver, per recipient
    • Lifetime exemption: $12.92 million

    This means a parent can give a child up to $17,000 without filing a gift tax return. Larger gifts are allowed, but the donor may need to file IRS Form 709.

    Mortgage gift letter requirements

    Every lender will ask for a gift letter confirming that the money is a gift. The letter must include:

    • Donor’s name, contact information, and relationship to the buyer
    • Exact dollar amount of the gift
    • The date the funds were transferred
    • A statement that the money is not a loan and does not need to be repaid

    Tip: Ask your lender if they have a template you can use. Many provide a standard form.

    Pros and cons of using gift funds

    Pros

    • Reduces the amount buyers must save themselves
    • Can help buyers qualify for better loan terms
    • Makes homeownership possible sooner

    Cons

    • Requires extra documentation and lender approval
    • Large gifts may trigger IRS reporting requirements
    • Not all loan types accept unlimited gift funds

    Frequently asked questions

    Can gift funds cover closing costs?
     Yes. Many lenders allow gift money to be used for closing costs, but check your specific loan program.

    Is gift money taxable for the buyer?
     No. If taxable, the gift is the responsibility of the giver—not the recipient.

    Do all lenders accept gift funds?
     Most major lenders do, but restrictions vary by loan type (conventional, FHA, VA). Always confirm before transferring funds.

    The bottom line: Your path to homeownership with gifted funds

    Gift funds can make buying a home far more achievable, but it’s important to follow the rules. Lenders require proof that the money is a gift, and the IRS has limits on tax-free giving. With proper documentation and planning, a mortgage down payment gift can help you unlock homeownership sooner.

    Looking for your next home? Use Redfin’s home search tool to find listings in your area

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  • Is Earnest Money Refundable? When You Can (and Can’t) Get It Back

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    When you make an offer on a home, you’ll usually include earnest money – a good-faith deposit between 1% to 3% of the purchase price that shows you’re committed to the purchase. If the sale goes through, it’s applied to your down payment or closing costs. But what happens if the deal falls apart – is earnest money refundable?

    Short answer: Yes, earnest money can be refunded, but only if contingencies in your contract cover the reason the deal didn’t close.

    This Redfin real estate article will explain when you can expect to get your earnest money back, when you might lose it, and how contingencies safeguard your deposit.

    When is earnest money refundable?

    Earnest money is typically refundable if the buyer backs out of the deal for a reason covered by contingencies in your purchase agreement. These clauses are designed to protect your deposit, but they only apply if you meet the required deadlines and uphold your end of the contract.

    Here are a few common scenarios when a buyer can usually expect to get their earnest money refunded:

    1. Home inspection uncovers major issues

    If the offer includes a home inspection contingency and the inspection reveals serious problems, like foundation damage, mold, or an outdated electrical system, the buyer can back out of the deal within the inspection period. This allows them to have their earnest money refunded while avoiding a home with unexpected and costly issues.

    2. Buyer is unable to secure financing

    A financing or mortgage contingency protects buyers who are unable to secure a home loan. Even with pre-approval, unexpected financial changes or lender decisions can prevent final approval. When this contingency is in place, the buyer can typically back out of the deal and have their earnest money refunded.

    3. The home appraises for less than the purchase price

    An appraisal contingency lets buyers back out of the contract if the home appraises for less than the offered price and the seller refuses to adjust it. Without this contingency, the buyer could be responsible for the difference or risk forfeiting their earnest money if they walk away.

    4. Title issues are discovered

    During the home-buying process, a title search is conducted to ensure the property is free of ownership disputes, liens, or other legal claims. If the search uncovers unresolved issues that can’t be cleared before closing, a title contingency allows the buyer to cancel the contract without penalty. In this case, the buyer’s earnest money is refunded, protecting them from financial risk tied to hidden claims on the property.

    5. Seller backs out of the deal

    If the seller withdraws from the contract without a valid reason – such as deciding not to sell or failing to meet agreed-upon terms – the buyer is generally entitled to a full refund of their earnest money. This protection ensures the buyer isn’t penalized for circumstances outside their control and can pursue other properties without losing their deposit.

    When is earnest money not refundable?

    In most cases, earnest money becomes non-refundable when the buyer breaches the contract or backs out for reasons not covered by the agreement. Even if contingencies exist, failing to follow the contract’s requirements can result in forfeiture of the deposit.

    1. Buyer waived contingencies

    In competitive markets, buyers may choose to waive protections like the inspection or financing contingency to strengthen their offer. However, doing so limits their ability to cancel the contract without penalty. If problems arise later, the buyer may be unable to recover the earnest money.

    2. Buyer misses a deadline

    Contingencies only protect buyers within the time frames specified in the contract. If a buyer fails to complete an inspection, secure financing, or take other required steps on time, they may forfeit their earnest money – even if the reason for backing out would normally be covered.

    3. Buyer changes their mind

    If a buyer simply decides not to proceed with the purchase – whether they got cold feet, found a different property, or another reason not covered by a contingency – the seller is typically entitled to keep the earnest money deposit. This compensates the seller for time lost and potential offers missed.

    Common mistakes that can cost buyers their earnest money 

    Even when buyers include contingencies, certain missteps can still put their deposit at risk. These are often overlooked but can have real consequences:

    Failing to clarify the inspection scope

    Buyers sometimes assume that an inspection contingency covers all possible issues. If the contingency language is too vague or doesn’t include specific areas (like septic systems, pools, or roofing) and specialty inspections, the buyer may be unable to back out for problems discovered later.

    Not fully understanding appraisal conditions

    Appraisal contingencies may only allow the buyer to cancel if the home appraises below a specific threshold. Buyers who don’t confirm the terms may assume they’re protected for smaller discrepancies or negotiation gaps, and lose their earnest money deposit if the seller refuses adjustments.

    Failing to properly request deadline extensions

    Even if a buyer has valid reasons for needing more time – such as completing inspections or securing financing – missing a contingency deadline without a formally approved extension can be treated as a contract breach. This mistake can result in forfeiting the earnest money, even when the underlying reason for the delay is legitimate.

    Assuming seller delays or mistakes automatically protect the deposit

    Buyers sometimes believe that if the seller misses a deadline, they can cancel without consequence. Most contracts include provisions outlining how buyer deadlines are affected by seller actions, and misreading these can result in losing the deposit.

    How buyers can protect their earnest money

    Buyers can take several steps to keep their earnest money refundable and reduce the risk of losing it. Staying organized, following the purchase agreement, and documenting each step can help ensure the deposit remains secure.

    Key steps include:

    • Include clear contingencies in the contract
    • Meet all contract deadlines for inspections, financing, and other contingencies.
    • Document everything in writing, including contract changes, deadline extensions, etc.

    For example, a buyer who completes inspections late without requesting an extension could lose their deposit even if serious issues are found.

    FAQs: Earnest money and refunds

    Do buyers always have to put down earnest money?

    No, earnest money isn’t legally required, but in most markets, it’s standard practice. Without it, the offer may appear less serious, and the seller might choose a buyer who includes a deposit.

    When is earnest money due?

    Typically within 1-3 business days after the seller accepts the offer, as specified in the purchase agreement.

    Where does earnest money go?

    Held in a neutral escrow account, the deposit is applied to the buyer’s down payment or closing costs if the sale closes.

    What happens if I accidentally miss a deadline in the contract?

    Failing to meet deadlines can breach the contract, putting the earnest money at risk. The seller may have the right to keep the deposit if the buyer fails to meet the agreed-upon terms.

    Can a buyer extend a contingency deadline to protect their earnest money?

    Yes. Most purchase agreements allow buyers to request extensions for inspections, financing, or other contingencies. To protect the earnest money, the extension must be documented in writing and agreed to by the seller. Missing a deadline without a formal extension could result in forfeiting the deposit, even if the reason for the delay is valid.

    What happens if the inspection contingency expires?

    If the inspection contingency expires and the buyer hasn’t raised concerns or formally requested an extension, the right to cancel based on inspection findings is lost. At that point, backing out of the deal due to inspection issues would likely be considered a breach of contract, and the buyer could forfeit their earnest money deposit.

    When can the seller keep the earnest money deposit?

    The seller can keep the earnest money if the buyer cancels the contract for a reason not covered by contingencies, fails to meet deadlines, or defaults on the agreement.

    How can I get my earnest money back?

    To receive a refund, the buyer must cancel the contract according to the terms of a valid contingency and do so within the specified timeframe. The escrow holder will release the funds once both parties sign a release agreement or the cancellation terms are legally resolved.

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  • Can You Close On a House in Less Than 30 Days? Yes, Here’s How

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    If you’ve ever wondered whether it’s possible to close on a house in less than 30 days, the answer is yes – it can be done in under a month. Achieving a fast closing requires careful planning, organized documentation, and clear communication among all parties. Buyers often need to move quickly due to factors like job relocations, expiring leases, or competing in a fast-moving housing market.

    With a motivated seller and the right professionals – agents, lenders, and title companies – a 30-day closing, or even faster, is entirely possible. In this Redfin real estate article, we’ll explain how buyers can streamline the process and increase their chances of closing in less than 30 days.

    How quickly can you close on a house?

    In certain situations, particularly all-cash transactions, a home can close in as little as one to two weeks. The timeline ultimately depends on factors such as financing, seller preparedness, and how efficiently inspections, appraisals, and paperwork are managed.

    In most cases, closing on a home takes about 30 to 60 days when a mortgage is involved. That window allows time for the lender to process your loan, verify income and credit, and order an appraisal. Cash purchases often move the fastest, since there’s no loan approval or underwriting required. allowing some buyers to close in less than 30 days.

    It’s important to note that the closing date is specified in the purchase agreement and agreed upon by both buyer and seller. While the contract sets the target, the actual speed depends on the circumstances of the transaction and how smoothly each step comes together.

    Factors that influence a fast closing

    • Financing type: Cash purchases close fastest with no lender approvals or contingencies. Conventional, FHA, or VA loans typically take 30-45 days (or slightly longer for government-backed loans) due to underwriting, income verification, and appraisals.
    • Seller preparedness: Sellers with a clear title, completed disclosures, and minimal repairs allow for a faster closing. In competitive markets, sellers often favor buyers who can meet a tighter timeline.
    • Team expertise and responsiveness: Quick, efficient communication from agents, lenders, and title companies helps prevent delays in inspections, appraisals, and document processing.
    • Document readiness and scheduling: Having pre-approval, proof of funds, and all necessary paperwork ready, along with promptly scheduling inspections and appraisals, keeps the process on track and can significantly shorten the timeline.

    How buyers can improve their chances of closing in less than 30 days

    Closing on a house in under 30 days requires careful planning, proactive communication, and strategic decision-making. While every transaction is unique, there are several practical steps buyers can take to improve their chances of a fast closing.

    1. Get pre-approved early 

    A full pre-approval involves a thorough review of your income, assets, credit history, and employment, completing much of the mortgage underwriting before you submit an offer. This speeds up the loan process and strengthens your position with sellers. 

    To keep the closing on track, avoid taking actions – like opening new credit accounts or making large purchases – that could jeopardize your mortgage approval.

    >> Read more: How Often Does an Underwriter Deny a Loan?

    2. Shop around for lenders before submitting an offer

    Not all lenders move at the same speed, and for a fast closing, the choice of lender can make a huge difference. Research and compare lenders ahead of time to find one known for fast turnaround and responsive communication. Choosing the right lender before submitting an offer can prevent bottlenecks once your offer is accepted and help keep a fast closing on track.

    3. Organize necessary documents ahead of time

    Having your paperwork ready allows the lender, title company, and other parties to move quickly. Delays often occur when buyers scramble to provide documentation after an offer is accepted. 

    Buyers should prepare: 

    • Pay stubs, and W-2s or 1099s
    • Bank statements
    • Tax returns
    • Proof of funds
    • Employment verification
    • Identification

    >> Read more: What to Bring to Closing Day: A Checklist for Homebuyers

    4. Schedule inspections and appraisals promptly

    Once your offer is accepted, immediately arrange the home inspection and appraisal if needed. Prompt scheduling ensures that any issues or adjustments can be addressed without slowing down the closing timeline.

    5. Be flexible with contingencies and move-in dates

    While it’s important not to skip critical inspections, shortening timelines for contingencies – like repairs or appraisal reviews – can help speed up the process. Similarly, being flexible on move-in dates (if possible) can make sellers more willing to accommodate a fast closing.

    6. Maintain clear and frequent communication

    Fast closings require coordination among all parties involved. Stay in regular contact with your lender, real estate agent, and title company to confirm deadlines and follow up on any outstanding items. Proactive communication can prevent small issues from becoming major delays.

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  • Assessed Value vs. Market Value Explained: What is My Home Actually Worth?

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    When you own or are buying a home, you’ll encounter assessed value and market value. While they both measure what your home is worth, they’re used for very different purposes. 

    Assessed value: The value your local government assigns to your home for tax purposes.

    Market value: The price a buyer would realistically pay for your home in the current real estate market.

    This Redfin real estate article dives deeper into the differences between assessed value vs. market value, helping you understand how each is determined, why they matter, and how they impact your finances.

    What is assessed value?

    The assessed value, also known as tax-assessed value, is the official value your local government assigns to your property for tax purposes. It’s not what you could sell your home for today – it’s a value used primarily to calculate your property tax bill.

    County or municipal tax assessors calculate this value using a combination of property details and market data. Factors often include:

    • Lot size and square footage
    • Home type (single-family, condo, multi-family, etc.)
    • Age and condition of the home
    • Location and neighborhood desirability
    • Recent renovations or improvements
    • Comparable home sales in the area

    Most jurisdictions apply an assessment ratio (a percentage of the home’s market value) to determine the assessed value. For example, if your home’s market value is $250,000 and your county uses a 60% ratio, your assessed value would be $150,000.

    This number is used to calculate your property tax bill. Your tax rate, often called a mill rate or levy rate, is then applied to the assessed value. Because assessments are tied to taxes – not necessarily the real estate market – assessed value is often significantly lower than market value.

    Example: If your assessed value is $150,000 and your county’s tax rate is 1.2%, your annual property tax bill would be $1,800.

    What is market value?

    The current market value of a home is the price it would sell for in today’s real estate market. Unlike assessed value, this figure is shaped by what buyers are willing to pay rather than a tax assessment.

    Market value is shaped by several key factors:

    • Comparable sales (“comps“): Recent sales of similar homes in your neighborhood.
    • Housing demand: Competition among buyers and the number of homes available.
    • Property features: Size, layout, upgrades, curb appeal, and amenities.
    • Economic conditions: Mortgage interest rates, inflation, and employment trends.
    • Timing: Seasonal market shifts or broader economic cycles.

    Real estate agents, appraisers, and buyers use market value to guide pricing and negotiations. Because it captures what buyers are willing to pay, your home’s current market value may differ widely from its tax-assessed value.

    Key differences between assessed value vs. market value

    Assessed Value Market Value
    Used by local governments to calculate property taxes Reflects the price a property would likely sell for in the current market
    Determined by local tax assessors Determined by market conditions, agents, and appraisers
    Typically reassessed every 1-5 years Fluctuates constantly based on real estate market conditions
    Calculated using a percentage (assessment ratio) of the market value Based on comparable home sales and buyer demand
    Affects property taxes Affects home sale price, refinancing, and home equity

    Why the difference between market value and tax-assessed value matters

    Whether you’re paying property taxes, selling your home, refinancing, or appealing an assessment, each situation depends on a different value.

    For sellers: Market value determines your sale price

    • Buyers and real estate agents ignore assessed value when making offers.
    • Your home’s selling price depends on market value, based on recent sales of similar homes.

    For homeowners: Property taxes are based on assessed value

    • Your assessed value determines your property taxes, not your home’s market value.
    • Even if home prices in your area rise, your property taxes won’t increase immediately because assessed values are updated periodically and are typically lower than market value.

    For refinancing or taking out a HELOC: Market value matters

    • Lenders base refinance terms and home equity loans on market value, not assessed value.
    • A higher market value means more home equity, which can help you qualify for better loan options.

    For appealing property taxes: Focus on assessed value

    • If your property tax bill seems too high, you can challenge the assessed value.
    • Providing evidence that similar homes are assessed for less, or that your assessment is outdated, could lower your property taxes.

    FAQs

    How can I determine the current market value of my home?

    There are several ways to estimate what your home could sell for in today’s market:

    • Online home valuation tools: The Redfin Estimate provides a free and instant estimate of how much your home is worth based on various data points, such as market conditions, your home’s features, location, etc.
    • Comparable market analysis (CMA): A real estate agent can create a report comparing your home to similar recently sold properties to estimate a realistic selling price.
    • Home appraisal: A licensed appraiser conducts a detailed evaluation of your home’s condition, features, and comparable sales, providing an official value often required for mortgages or refinancing.

    Using one or more of these methods gives you a clear picture of your home’s current market value and helps guide decisions about selling, refinancing, or leveraging home equity.

    What is appraisal value, and how is it different from market value?

    An appraisal value is determined by a licensed appraiser, often during the mortgage process. While market value reflects what buyers are willing to pay in the current market, an appraisal provides a professional opinion of value based on the home’s condition, location, and comparable sales. Lenders rely on appraisal value to ensure they’re not financing more than a home is worth.

    Why is my tax assessed value lower than my home’s market value?

    Local governments often set assessed values below full market value to stabilize tax bills and avoid sharp annual increases. This benefits homeowners by keeping property taxes more predictable, even when home prices rise quickly.

    Can you appeal your assessed value?

    Yes. Homeowners can challenge their property’s assessed value if they believe it’s too high. This typically involves filing an appeal with your local assessor’s office and providing evidence, such as recent sales of comparable homes or proof of inaccuracies in the assessment. A successful appeal could lower your property tax bill.

    Do improvements to my home affect assessed value or market value?

    Major improvements like renovations or additions can increase both assessed and market value, but assessed value may take time to reflect changes, depending on your local reassessment schedule.

    Can market value change even if the assessed value doesn’t?

    Yes. Market value fluctuates constantly due to supply, demand, and economic conditions. Assessed value is updated periodically, so it may lag behind market trends.

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  • Are Closing Costs Tax-Deductible?

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    When you buy a home, closing costs can feel like a significant expense, often with thousands of dollars due at the time of signing. Many buyers naturally wonder if any of these costs are tax-deductible. 

    The short answer is that most closing costs are not tax-deductible, though certain items, like mortgage interest, discount points, and prepaid property taxes, may be. Other costs, while not immediately deductible, can be added to your home’s cost basis, potentially reducing your tax liability when you sell.

    This Redfin real estate article explains which closing costs you can deduct, which you cannot, and how to make the most of your home’s cost basis for future tax benefits so you can plan accordingly.

    Which closing costs are tax-deductible?

    Closing costs are the fees and expenses you pay to finalize a real estate transaction. They usually range between 2% and 5% of the home’s purchase price and may include loan origination fees, title insurance, recording fees, prepaid taxes, and more.

    While most closing costs are not tax-deductible, mortgage interest, discount points, and property taxes can usually be deducted, but only if you itemize your deductions on your tax return. If you take the standard deduction, which is the most advantageous choice for many taxpayers, these deductions generally do not apply.

    1. Mortgage interest

    Prepaid mortgage interest, often collected at closing, is generally fully deductible in the year it is paid. This includes interest that accrues between the closing date and the end of the month. Your lender will report this amount on Form 1098, which should be retained for your tax records.

    Keep in mind that there are limits to how much mortgage interest you can deduct – typically on loans up to $750,000 for most new mortgages, or $1 million for older loans taken out before December 16, 2017. Interest on your primary residence is usually deductible, and sometimes a second home may qualify as well. Since tax rules can change, it’s a good idea to check with your tax professional to confirm what applies to your situation.

    2. Discount points

    Mortgage points, also called discount points, are fees paid to a lender to lower your interest rate. Each point usually costs 1% of your mortgage amount and can reduce the interest rate by roughly 0.25% per point. Points may be deductible in the year of purchase, as long as:

    • The points are paid on a loan secured by your primary residence.
    • The amount is clearly stated as points on your settlement statement.
    • The points are calculated as a percentage of the loan amount.

    Points paid on refinancing generally must be amortized over the life of the loan rather than deducted immediately.

    3. Property taxes

    Many lenders require buyers to pay some portion of property taxes upfront through an escrow account, which covers future tax and insurance payments. The IRS treats these payments as if you made them directly, allowing you to deduct them when you itemize.

    Typically, state and local tax deductions (SALT) are capped at $10,000. However, for the 2025-2028 tax years, this cap is temporarily increased to $40,000 for most filers, or $20,000 if married and filing separately. Be aware that this deduction may be reduced for high-income earners, so your ability to claim the full amount could vary depending on your income.

    Closing costs that are not considered tax-deductible

    As a general rule of thumb, fees or expenses you pay for services are not tax-deductible. This applies to many of the costs incurred during closing. While these fees are essential to completing the transaction, they typically cannot be claimed on your tax return.

    Common non-deductible closing costs include:

    • Title insurance premiums
    • Appraisal and inspection fees
    • Attorney or escrow fees not directly tied to deductible items
    • Recording and registration fees
    • Transfer taxes
    • Credit report fees
    • Loan origination or processing fees (unless specifically deductible, like certain points)

    Even though these expenses cannot reduce your taxes immediately, they can provide long-term tax benefits through your home’s cost basis.

    How cost basis works

    The cost basis of your home starts with the purchase price and can be increased by certain non-deductible expenses paid at closing. By adding these fees to your cost basis, you effectively reduce the capital gains tax owed when you sell your home. 

    For example:

    • If you pay $3,000 for title insurance and $500 for recording fees, you can add $3,500 to your home’s cost basis. 
    • Later, if you sell your home for a gain, the higher cost basis reduces the portion of the sale that is taxable, potentially saving thousands in taxes.

    Keeping thorough records of all closing costs is crucial. While these expenses aren’t deductible immediately, properly documenting them can significantly reduce your taxable gain when you sell your home.

    FAQs: More on closing costs and tax deductions

    Can I deduct closing costs on a second home?

    Closing costs on a second or vacation home generally cannot be deducted, except for certain mortgage interest and points, which may have limited rules.

    Can I deduct closing costs if I refinance my mortgage?

    Some closing costs on a refinance, like points, can be deducted over the life of the loan, but most fees (title, appraisal, recording) are not immediately deductible.

    Are HOA fees or home inspections deductible?

    No. HOA fees, home inspections, and similar service-related closing costs are not tax-deductible, though they may be added to your cost basis in some cases.

    What documentation do I need to claim these deductions?

    To claim deductible closing costs, it’s important to keep detailed records of your home purchase. Key documents include your settlement statement (HUD-1 or Closing Disclosure), Form 1098, and escrow statements. Your tax professional can review these documents and advise which costs are deductible or can be added to your basis, helping you maximize tax benefits and remain compliant with current tax rules.

    Can I deduct closing costs if I take the standard deduction?

    No. You must itemize your deductions to claim property taxes, points, or mortgage insurance. Many taxpayers benefit more from the standard deduction.

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  • How Often Does an Underwriter Deny a Loan?

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    Applying for a mortgage is one of the biggest financial steps you’ll ever take – and while many applications are approved, not every loan makes it through underwriting. Naturally, that raises the question: How often does an underwriter deny a loan?

    On average, about 1 in 10 mortgage applications are denied. That means the majority are approved, but there are still a number of reasons why an underwriter might say no. 

    Understanding how underwriting works, why denials happen, and what you can do to avoid them will put you in a stronger position when you apply for a mortgage.

    What is underwriting?

    Mortgage underwriting is a key step in the homebuying process where your lender evaluates your financial health to determine your ability to repay the loan.

    They typically review:

    • Credit: Your borrowing and repayment history, current debts, and credit score. Conventional loans usually require a score of 620 or higher, though other loan types may have different requirements.
    • Income: Documentation of your earnings, such as W-2s, pay stubs, and bank statements. Self-employed borrowers may need to provide tax returns or other proof of income.
    • Assets: This refers to the type of funds you have access to. This includes investments, retirement funds, cash in savings and checking accounts, and more.

    Your lender will order an appraisal to confirm the home is worth the sale price. A licensed appraiser reviews the property’s condition, upgrades, and recent comparable sales to determine its fair market value.

    So, how often does an underwriter deny a loan?

    In 2023, about 9.4% of all home purchase applications were denied, according to data from the Consumer Financial Protection Bureau. That means just under 1 in 10 mortgage applications didn’t make it past underwriting.

    Denial rates vary by loan type, though. FHA loans had a higher denial rate at 13.6%, while conventional conforming loans had the lowest at 7.9%, showing some variation depending on the program you choose. Refinance applications tend to have higher denials, with an overall rate of 32.7% in 2023.

    So while most buyers are approved, underwriters consider factors like loan type, credit score, debt-to-income ratio, and down payment size. 

    6 reasons your mortgage loan may be denied in underwriting

    Why would an underwriter deny a loan? A prospective homebuyer’s loan might be denied during the underwriting process for various reasons, including:

    1. Low credit score

    Your credit score is one of the most important factors in mortgage underwriting. It reflects your history of borrowing and repaying money, including credit cards, student loans, auto loans, and previous mortgages. Scores range from 300 to 850, with higher scores indicating lower risk.

    Recent changes in credit behavior can also affect approval. For instance, suddenly maxing out a credit card or applying for multiple loans may raise red flags during underwriting.

    2. High debt-to-income ratio

    A high debt-to-income ratio (DTI) can reduce your chances of mortgage approval. Each loan program sets its own DTI limits. To calculate it, divide your total monthly debt payments by your monthly income and multiply by 100. A higher percentage means more of your income goes toward debt, which can make lenders hesitant.

    3. Financial issues

    Underwriters may deny a mortgage if they identify financial concerns beyond credit score or debt-to-income ratio. This can include unusual or unexplained bank account activity, such as large withdrawals or deposits that aren’t documented, which may raise questions about your financial stability.

    Past payment history also plays a critical role. Repeated missed mortgage payments, late rent, or other delinquencies can signal risk to lenders. Additionally, outstanding collections, liens, or recent bankruptcies can further jeopardize approval. Essentially, any financial behavior that suggests you may struggle to make consistent mortgage payments can lead an underwriter to deny your application.

    4. Employment change

    Lenders want to see steady income when approving a mortgage. Frequent job changes or gaps in employment can raise concerns about your ability to make consistent monthly payments. Most lenders require proof of at least two years of employment history to demonstrate financial stability.

    5. Low appraisal

    A low appraisal can affect a loan approval and cause it to be denied during the underwriting process because a lender cannot lend more to a borrower than the loan program allows. For example, the appraisal comes back a lot lower than the sales price of the home, the buyer would have to pay the difference or renegotiate to a lower price.

    6. Problems with a property

    Issues with the property can increase the likelihood of a loan being denied. Major problems uncovered during a home inspection, such as foundation damage or structural concerns, can raise red flags for lenders. Getting an inspection early can help identify potential issues before they affect your mortgage approval.

    Should you be worried about underwriting?

    If you’re wondering if you should be worried about underwriting, the short answer is no, as long as you meet the requirements for your loan type.

    Let’s look at different types of home loans and their basic qualifications:

    • Conventional loans: Conventional loans generally require a minimum credit score of 620 and a debt-to-income ratio no larger than 50%. They’ll also consider your financial and physical assets to get a conventional loan.
    • Jumbo loans: Designed for homes above conforming loan limits ($806,500 in 2025, or $1,209,750 in Alaska and Hawaii). Lenders typically require at least a 680 credit score and a down payment of up to 20%.

    On the other hand, government-insured loans have different minimum requirements:

    • FHA loans: Backed by the Federal Housing Administration, these allow approval with credit scores as low as 500. With a 580+ score, you can qualify for a 3.5% down payment.
    • USDA loans: Backed by the U.S. Department of Agriculture, these are limited to designated rural areas. You’ll need a 640+ credit score with most lenders and income under 115% of the area median.
    • VA loans: Available to service members, veterans, and surviving spouses through the Department of Veterans Affairs. Many lenders accept scores as low as 580, allow higher DTI ratios, and require no down payment.

    What to do if an underwriter denies your loan

    Getting denied in underwriting doesn’t mean homeownership is out of reach. It just means you may need to make some adjustments. Here are a few steps to take:

    • Improve your credit score: Check your credit report for errors, pay down existing debt, and reduce high balances to show stronger financial health.
    • Increase down payment: Putting more money down lowers your loan-to-value ratio, reduces monthly payments, and makes you a safer bet for lenders.
    • Consider a co-signer: A co-signer with stronger credit can help you qualify, but both parties share responsibility if payments are missed.
    • Reevaluate your home search: Consider a less expensive property that better fits your finances, and work with a real estate agent to guide your search.

    FAQs

    Can you get approved after being denied in underwriting?

    Yes – if you address the issues that led to the denial, such as improving credit or reducing debt, you may qualify with the same or a different lender.

    Does a loan denial hurt your credit score?

    The denial itself doesn’t affect your credit score, but the hard inquiry from applying for the loan may cause a small, temporary dip.

    How long should you wait after being denied to apply again?

    You can apply again right away, but it’s often best to take a few months to improve your financial profile first.

    What are the chances of getting denied after pre-approval?

    Even after pre-approval, there’s still a chance your loan could be denied in underwriting. Pre-approval is based on preliminary information, but underwriting reviews your credit, income, assets, debts, and the property itself. Changes like new debt, missed payments, job changes, or a low appraisal can affect approval. While most pre-approved buyers move forward successfully, roughly 1 in 10 applications are denied during underwriting, so it’s important to keep your finances stable until closing.

    How often are FHA loans denied in underwriting?

    FHA loans tend to have higher denial rates than conventional loans. In 2023, about 13.6% of FHA home purchase applications were denied during underwriting. Denials can result from low credit scores, high debt-to-income ratios, or other financial issues, so maintaining stable finances and meeting program requirements can improve your chances of approval.

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