Daily News And Advice
Septic or Sewer: What's the Difference?
Septic systems or sewer systems: what's better? What's the difference? Homeowners flush their toilets, run their sinks and take showers without putting a second thought into the sewer systems that allow for this luxury.
All of these functions rely on one of two things:
1. Sewer system
2. Septic system
Sewer systems are different than a septic system because one relies on the local government, while the other relies on the homeowner.
Why Many Homeowners Rely on Sewer Systems
A sewer system requires no maintenance, but you'll need to pay monthly fees for using the system. Local governments allow the homeowner to hook up the local sewer system, which will ensure all of your waste is gone forever.
You'll pay monthly, but you never have to worry about septic system costs and repairs.
Sewers can become clogged and they may backup over-time. This happens when neighbors and others in the community are flushing wet wipes or pouring grease down their drains. When major blockages occur, everyone is impacted.
You may not pay for the unclogging upfront, but your fees may rise to cover the expenditures.
Why Homeowners are Moving Back to Septic Systems
A septic system is your own system, and this is a tank system that's often able to hold 1,000 gallons of water. The three-layer system connects to the home, and the system is placed in the ground on the home's property.
Often seen as an eco-friendly option, you won't pay monthly fees to use your septic system.
Clogging of the system is also your fault. If the system becomes clogged, this is due to your actions: i.e. you're flushing items that cannot breakdown in the system.
Septic systems can be costly to install, and all of the maintenance and repair fees must be paid by the homeowner.
But "sewer betterment" fees are often imposed on homeowners, with some fees being in the $10,000+ range. This may include fees for installation and repairs. When these fees are considered, this is often higher than the cost to install a septic system on the land.
Septic systems do need to be pumped, and this can cost $200 - $300 every 3 – 5 years.
Concrete tanks can last 40 years with proper maintenance, while steel tanks have a lifespan of 15 – 20 years.
"Septic systems should be inspected and pumped a minimum of once every three to four years. You may not be experiencing any problems now, but a full septic tank may allow unwanted solids to flow into the drain field, which is the part of the system that consists of a distribution box and a series of connected pipe," explains Apollo Drain.
Septic systems also offer the benefit of being able to build a home in a remote area, which may not have a sewer system connection close by. But when sewer systems are close to the home, they're often chosen because they can handle large amounts of waste at a time. During storm periods where heavy rains occur, sewer systems are able to handle the water with much greater ease than a septic system.
What To Do When An Appraisal Comes in Low
When someone is buying a home and they’re going to use financing in the form of a mortgage, they need an appraisal to cement the deal. Before a bank is going to extend credit, they want to make sure they’re not giving someone a loan that’s more than the fair market value of the house.
That’s where an appraiser will enter the scene. An appraiser will give their unbiased opinion on the value of the home.
If the appraisal is less than what your offer is, then you may feel frustrated and even a little devastated.
This isn’t an uncommon situation, however. One of the big reasons for contingency issues is the appraisal.
An appraisal goes over the condition of a property, and they have to be certified in the state where they’re working. Appraisers look at a wide variety of features like the year the home was built, zoning details for the neighborhood, construction details like the type of foundation, and the utilities and amenities.
An appraiser will come up with a report for the lender in around a week or so, but for VA and FHA loans, the appraisal report can take longer to finish because it has to be more detailed.
There are a lot of reasons an appraisal can come in low. A lack of comps can be one reason. For example, the market might be moving faster than appraisers, so home values in a hot market could be going up rapidly, but appraisals might not be matching that pace. There’s also an issue if for example there have been a lot of remodels in a neighborhood to bring the overall value of the comps up.
So what if your appraisal comes in low? What can you do?
Cover the Difference in Cash
If you’re worried a pending sale won’t go through, both a buyer and a seller have options.
The buyer might be able to make up for the difference in the appraised value and the sale price using cash.
The reason a lender even cares about the appraisal value is that it impacts the loan-to-value ratio.
In some instances, a lender won’t let a buyer make up the difference in cash, so there could be another option here which is a buyer covering some of the closing costs on the seller’s end.
The simplest solution, when possible, is to reduce the price if it was priced too high. The lender will be happy, and so will the buyer and then the deal can go through. You have to think that if you let one buyer walk away over the issue, that there’s certainly a high likelihood the next buyer’s lender could have the same issue.
Dispute the Appraisal
You don’t have to accept an initial appraisal. That doesn’t mean that your lender won’t go with the first one, but it’s worth a shot to dispute it or to ask for a second one.
You should always ask for a copy of the appraisal report as a seller, so you can go over it and make sure there are no glaring mistakes.
Only a lender can technically demand another appraisal, and they may or may do that, but it’s worth trying.
You can ask the real estate agents who are working on the deal to create a list of comps that would highlight the justification for the sale price that’s been agreed on. Once that’s compiled, you can give it to an underwriter and ask them to review the appraisal.
Finally, aside from flat-out canceling the transaction, you might be able to negotiate and come to an agreed-upon middle point. For example, a seller might agree to pay some of the difference between the sale price and the appraisal.
There are options, but you have to find what’s going to work for you, and if you’re working with a good agent, they should be able to help you find a solution if an appraisal comes in low.
What to Know About Earnest Money
Earnest money is just one of the many terms to know when it comes to buying a home. It’s something you might initially overlook, but not understanding earnest money can create roadblocks in your process to buy a home once you’re ready to make an offer.
The Basics of Earnest Money
In simple terms, the earnest money is a deposit that you put down to show that you’re serious about buying a house. You want to show the seller that you really do want the home, and earnest money might be anywhere from 1% to 5% of the total purchase price.
It helps sweeten your offer to a seller and shows them that you want to take the necessary next steps to buy their home.
Then, in exchange for the earnest money, the seller will take their home off the market. They’ll start to work to arrange things like inspections.
Earnest money goes into an escrow account while you wait on your closing. The escrow account is with either the seller’s broker or title company, or an escrow company.
They’re essentially securely storing your money until your closing. Then, that earnest money is subtracted from the total you owe, and it goes toward your closing costs.
How Much Earnest Money Should You Offer?
Again, earnest money is typically anywhere between 1% and 5% of the price you agree on with the seller to buy the house. There’s a lot of variance in this, though. For example, in some locations, you might do a fixed amount and in others you could pay a percentage.
In very popular housing markets, you can see very high earnest money deposits. Your real estate agent will help you know what’s in line with your area.
Earnest Money Is Not a Down Payment
This can be an area of confusion for some buyers—earnest money is not a down payment. Your down payment is fully separate from earnest money and is anywhere from 10-20% of your home’s purchase price.
You need to make sure that when you’re thinking about how much a house will be, you’re adding up your earnest money and your down payment. Your earnest money is due when you make an offer, while your down payment and closing costs are due later.
Is It Refundable?
When you enter into a purchase agreement, it will outline contingencies. These are situations that are agreed upon where you can walk away from a deal and still get your earnest money back.
For example, you might have an appraisal contingency in case the appraisal is lower than the sale price.
Your real estate agent will help you decide the contingencies to put in your contract.
If you’re in a highly competitive market, you might agree to nonrefundable earnest money. That’s very risky because if your sale falls through, the seller gets to keep your money.
If you break the terms of whatever your purchase agreement is or you decide you don’t want to buy a house anymore, then the seller can keep your earnest money.
This is why it’s important to work with a qualified real estate agent. They’ll help you understand what you need to know before you sign anything because otherwise, you could end up giving up a lot of money that you potentially can’t afford.
As a final note, earnest money isn’t required. If you’re buying in a market that’s not very competitive, you may not need to worry about it. It’s instead a good way to beef up an offer, especially if you’re worried there could be multiple offers on the house you want.
Pending vs. Contingent: What’s the Difference?
When you’re looking for a new home to buy, you’ll often see on listing sites that they’re marked as either pending or contingent.
There are differences between the two, and understanding those differences can help you know if a house is worth trying to pursue.
First, there’s contingent. Contingent means that a seller has accepted an offer. These listings are still active, so you can see them when you’re searching online, for example. They could fall out of contract if all the provisions aren’t met.
The closing on a contingent house doesn’t happen until certain things happen, and they have to happen in a particular period of time.
Some of the contingencies that are common include:
• A home inspection contingency: When an offer has been accepted, the buyer puts down earnest money as a deposit on a home. Then, there’s almost always a contingency that the home inspection goes well, done by a professional inspector. If there’s an issue that arises that the buyer didn’t know about, then the deal needs to be revisited, and sometimes, the buyer and seller can’t come to an agreement.
• Mortgage contingency: This happens when a buyer isn’t pre-qualified for a loan, and so there’s a contingency depending on the buyer being able to get financing. If the buyer can’t, the home goes back on the market.
• Appraisal contingency: With this situation, the mortgage lender for the buyer might hire an independent appraiser to determine the home’s fair market value. That then shows the lender that it makes sense for the loan to go through, based on that value.
• Home sale contingency: This common scenario happens when a home buyer already owns a home, and they make an offer that’s contingent on them being able to sell the home they currently own.
It’s fairly common for deals to fall apart because of contingencies. If you’re selling a home, you can accept a backup offer in case your first offer and deal don’t go through.
What Does Pending Mean?
You might see a home marked as pending. That means that there is an agreement, and all the contingencies are dealt with. In that case, the home is much closer to actually being sold.
The deal could potentially fall through still at this stage because of something with financing or the inspection, but it’s a lot less likely than it is at the contingency phase.
Most real estate agents won’t accept additional offers when a home is pending, but there’s not a legal reason for that. It’s more preferential.
What About Under Contract?
Finally, you might also see that a house is under contract. That means the terms are agreed upon, but the deal is new and could break down. A house under contract can go back on the market pretty easily, and you can make a deal on a property.
If the deal falls through, then you may still be able to buy the home.
Essentially what this all means is that you shouldn’t let contingent or under contract scare you from making contact with a seller or their agent. There are often situations where deals fall through, although if a home is pending, there’s a much lower likelihood you would have a chance.
|Mortgage Rates |
Averages as of May 2021:
30 yr. fixed: 2.97%
15 yr. fixed: 2.29%
5/1 yr. adj: 2.83%