Tag Archives: real estate

About Earnest Money Deposits

article image

When a buyer and seller agree on a purchase price and terms, the buyer shows the seller a sign of good faith in the form of earnest money. This money, typically 1% to 3% of the sales price or whatever is customary for the local market, is deposited with an escrow agent or title company, a neutral third-party that serves to finalize the transaction for both sides.

Earnest money is designed to protect the seller. It shows the buyer is serious, but if the buyer doesn’t follow through with the contract, the seller could lose valuable marketing time when the transaction doesn’t close. They’ll have to start all over again to market the home. There are also opportunity costs – the seller could have possibly sold the home to a different buyer and perhaps for better terms. For that reason, the seller can keep the earnest money.

This also protects the buyer. The buyer can get out of a sales contract and get their money back if contingencies outlined in the purchase agreement aren’t met. Typical contingencies are that the buyer’s lender agrees to make the loan, the appraisal meets or exceeds the sales price of the home, the home passes inspection or that the buyer sells their current home before closing on the seller’s home.

Earnest money paid upfront in the transaction means the buyer has to come up with less money at closing or the deposit can be used as part or all of the down-payment.  

Decreasing Demand or Supply Constraints?

article image

In 2021, existing-home sales rose 8.5% during 2020, the highest level since 2006 as supplies of homes for sale fell to an all-time low of 910,000, equivalent to 1.8 months of available inventory.

In December 2021, housing sales declined 7.1% over December 2020. The National Association of REALTORS (NAR) explained that the dip was likely due to supply constraints over decreasing demand from homebuyers. Employment in December rose by nearly 200,000 and the unemployment rate was 3.9%. Also favoring homebuyers, salaries rose 4.7% year-over-year, even while those gains were countered by the highest rate of inflation since 1982, a 7% increase from 2020.

The cost of housing, including owner-occupied and rented homes, rose 4.1%, the fastest rate since 2007. Meanwhile, the U.S. Bureau of Labor Statistics reported that building costs rose nearly 19% in 2021 which slowed construction, along with materials and labor shortages. For these reasons, the housing industry is unlikely to increase supplies of new homes by only 2% in 2022, which will make existing homes more coveted.  

Homeownership is an excellent hedge against inflation, primarily because buying a home at a fixed price and interest rate where it applies. While home prices and interest rates continue to rise, the cost of housing decreases as long as the homeowner retains the property.

With signs positive that housing demand will continue, NAR predicts that mortgage interest rates will stay under 4% and that home prices will rise 3% to 5% by the end of 2022. 

Blended Paint Shades for 2022

article image

Paint color palettes for 2022 seem to lean toward soothing neutrals or bright, cheerful tones. Gone are the dark, moody colors of the past few years, as people cope with COVID and its variants, rising inflation, and political uncertainty. The trend this year is blended colors that offer serenity and good cheer in one perfect shade.

The most-watched Color of the Year is Pantone, the leader in digital, industrial and graphic design color mixtures. Instead of choosing a hue from its vast library, Pantone created a new color called Pantone 17-3938 Very Peri – a blend of soothing blue and exciting red that stimulates individuality and creativity and is a welcome antidote to neutrality.

Benjamin Moore’s Color of the Year for 2022 is October Mist 1495, a grayed green that’s the central hue composed of vibrant neutrals inspired by nature in the brand’s 2022 Color TrendsSherwin-Williams’ Color for 2022 is called Evergreen Fog SW 9130, a deeper gray-green statement shade the company calls a “chameleon color” that’s both versatile and calming. Better Homes and Gardens introduced Laurel Leaf as the company’s first entry for Color of the Year. Laurel Leaf “mimics the soothing hues found in nature such as dusty green eucalyptus.

As consumers try to strike the right decorative note as they spend more time at home, these colors for 2022 are serene, natural and easy to pair with cozy neutrals or they can be popped with cheerful accents like oranges and golds.