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Continuing the Real Estate Education Away from my Real Estate Agent ;-)


By BayArea   Follow   Tue, 10 Apr 2012, 11:16am PDT   5,691 views   30 comments
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Hi folks,

This site has been quite a big help to me in seeing the real estate market from different angles and I'm looking forward to continuing the education.

As a bit of background, I have been actively hunting for real estate in the Bay Area for the past 5 months and targeting a region that has an attractive Rent:Buy ratio (~7-9% or so). I'm interested in sparking some debate about several items:

a.) First, I have submitted offers on three properties thus far, all above asking, all that were indicated as having multiple offers (I can see the realtor haters lowering their brows on this one, lol), and all unsuccessful despite pre-approval, excellent credit, and evidence of available funds. I'm looking at this objectively and the reason that my offers are not getting accepted may be due to the following:

- I'm coming in at 25% DP with the need to finance and perhaps others are bringing more cash to the table? As far as I understand it, there are absolutely no obligations for the seller or the bank (if REO or short sale) to take the highest offer. Cash and familiarity with the buyer/buyer's representatives may go a long way despite a lower overall offer. Seems like a nice lead-in for fraud, but what do I know?

- I'm wondering if I am competing with situations where more experienced buyers are bidding well above asking to get their offer accepted. They know that the house must appraise or the transaction freezes. Say an REO has an asking price of $200K and the comparables show $190-210K over the past 3-6 months for example. If I am ready to purchase that house for market value, and it's desirable with multiple offers (which is what I have been experiencing), why shouldn't I offer $210K, or $250K, or even more! Once the appraisal comes in, the bank will have to work with me in allowing me to drop my initial price to the appraised value or there is no deal and both parties are back where we started. Of course this is only in the case that financing is needed and a cash offer needs no appraisal. I want to stress that this is different than a situation where I make an offer that is too high with the intention of nit-picking during the inspection to negotiate the price down. Afterall, I don't influence the "independent" appraisal right? Assuming I have 25% down, along with pre-approval, excellent credit, etc. What can be done to give yourself the best chance of having your offer accepted?

That brings me to my next point, what methodology do appraisal companies use to appraise homes? I've heard 3 months back and then what? I would hope there is some structured way that this is done, and if so, it should be public information. I'd imagine for cookie-cutter "tract" homes, this should be straight forward? Again, seems like a lead-in for fraud if this methodology cannot be explained.

b.) Correct me if I am wrong, but appraisals are not needed with cash offers, correct, as assumed above? Appraisals are needed to prove to MY financing company that whatever home they are lending me money for is worth at least 80% of the purchase price assuming 20% DP for instance? So then if something happens and I can't make payment, at least they take back the asset and can sell it for what they lent me in the first place (assuming the market doesn't tank during that time).

c.) If I make an offer on an REO for example, and my inspection finds issues that I didn't see at the time of making my offer, what is the best way to go about negotiating down my offer price? Any recommendations?

d.) When purchasing a home, you have to select a settlement agent (ie: escrow agent). There are typically two options: The first is to use the seller's settlement agent. The other is to select your own. Is there any reason not to use the seller's escrow agent? Any disadvangtage for me in doing this?

e.) What order does the following happen: Inspection, Appraisal... and how do these influence eachother?

f.) Closing cost estimates of a $175K home in the Bay Area is what? I've found quite a bit of varying results depending on what online calculator I use. Everything for $3500-6500... Seems like a huge window.

I look forward to your reply folks!
Thank you,
BayArea

Comments 1-30 of 30     Last »

FortWayne   Tue, 10 Apr 2012, 12:47pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 1

In this market whoever waits the longest for the best deal will win out. CA is one of the few states that has a long way to go down.

At some point the pretend stimulus will run out, as of now government is still making payments for many californians. At least one of my neighbors gets his mortgage paid by keepyourhomecalifornia.com On top of that a lot of foreclosures aren't out yet...

With REO all cash doesn't make a difference as banks don't care if it's FHA, conventional, or all cash as long as they can get the money.

APOCALYPSEFUCKisShostikovitch   Tue, 10 Apr 2012, 3:38pm PDT   Share   Quote   Permalink   Like (4)   Dislike     Comment 2

Likely, on any worthwhile property, your offer is never seen by the seller who is told the market is fucked, there was only one bid (hehehe, from guess who) and handed a relatively low-ball 'offer' made by a straw or collaborators of the Realtor® who'll flip it to the next sucker, speculator, co-conspirator, etc.

RentingForHalfTheCost   Tue, 10 Apr 2012, 4:46pm PDT   Share   Quote   Permalink   Like (4)   Dislike     Comment 3

APOCALYPSEFUCK is Tony Manero says

Likely, on any worthwhile property, your offer is never seen by the seller who is told the market is fucked, there was only one bid (hehehe, from guess who) and handed a relatively low-ball 'offer' made by a straw or collaborators of the Realtor® who'll flip it to the next sucker, speculator, co-conspirator, etc.

Yup, you might get lucky if you want to buy the place from the Realtors 14 year old kid in a few months for about 50K more. That is after they throw on a few coats of paint and get a couple newspapers talking about how smart the young realtor in training is becoming. Or, maybe even then she will just sell it to her brother first.

My feeling is that if the house is a good buy, the realtor conspirators will have their friends or relatives come to the table. You can bet that your offers is never considered at that point. Corrupt I tell yah. Peel this onion back and you'll see greed deeper than you thought was possible. It has taken decades of stupidity and secrecy for us to get here. It'll take decades to beat off the ones that got the taste for the blood.

APOCALYPSEFUCKisShostikovitch   Tue, 10 Apr 2012, 5:58pm PDT   Share   Quote   Permalink   Like (5)   Dislike     Comment 4

Mr Renting

It is systemic and as long as easy money lending instruments are available, nothing will change. You can't outlaw stuff like this - you can but the scum-sucking weasels work 24/7 to end run those laws because they have no other way to make a living besides purse snatching or blowing truck drivers at truck stops.

Time to outlaw mortgage lending and disband the NAR.

Robber Baron Elite Scum   Tue, 10 Apr 2012, 9:09pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 5

APOCALYPSEFUCK is Tony Manero says

Likely, on any worthwhile property, your offer is never seen by the seller who is told the market is fucked, there was only one bid (hehehe, from guess who) and handed a relatively low-ball 'offer' made by a straw or collaborators of the Realtor® who'll flip it to the next sucker, speculator, co-conspirator, etc.

+1

RentingForHalfTheCost says

Yup, you might get lucky if you want to buy the place from the Realtors 14 year old kid in a few months for about 50K more. That is after they throw on a few coats of paint and get a couple newspapers talking about how smart the young realtor in training is becoming. Or, maybe even then she will just sell it to her brother first.

My feeling is that if the house is a good buy, the realtor conspirators will have their friends or relatives come to the table. You can bet that your offers is never considered at that point. Corrupt I tell yah. Peel this onion back and you'll see greed deeper than you thought was possible. It has taken decades of stupidity and secrecy for us to get here. It'll take decades to beat off the ones that got the taste for the blood.

+1

APOCALYPSEFUCK is Tony Manero says

Mr Renting

It is systemic and as long as easy money lending instruments are available, nothing will change. You can't outlaw stuff like this - you can but the scum-sucking weasels work 24/7 to end run those laws because they have no other way to make a living besides purse snatching or blowing truck drivers at truck stops.

Time to outlaw mortgage lending and disband the NAR.

+1

___________________________________________________________________________

It is still a seller's market. If anyone reading this needs to sell...

Do NOT wait or try to be a smart aleck by speculating that prices are going to rise back up again to 2005 levels eventually. They will NOT rise back up to that level.

A time will eventually come where the prices will collapse so low that many people will not take a mortgage to buy. They will pay either fully in cash or majority in cash.

The game is rigged all the way from the appraisers to the agents to the brokers to the NAR to the media to the lobbyists to the politicians to the government agencies to the smallest banks to the biggest banks.

Everyone from A to Z is working hard day in & day out to fuck the home buyer over as much as they can.

Any moron these days that calls themselves a "financial expert", "financial consultant", "financial analyst", "financial advisor" "economist", "market researcher", "real estate expert", "real estate analyst", "real estate consultant", "realtor", "real estate broker", "stock broker", "stock analyst", "stock consultant", "stock advisor", "hedge fund manager" etc etc etc...

IS A FUCKING SHILL LOOKING TO FUCK YOU OVER...

Some of them are even shills without knowing it because they just eat whatever misinformation from their masters up top and take it as fact without verifying the soundness of it. Basically, brain-dead minions being used as pawns for the higher-ups as shills.

But by far a great number of these people know exactly what they are doing: FUCKING YOU OVER FINANCIALLY AS MUCH AS THEY CAN!

My financial advice and analysis for the current real estate market: BUYER BEWARE!

Take my word as truth... I'm a Robber Baron Rockefeller who is running the whole con circus in the financial world at the top.

We the Rockefeller's, Rothschild's, Dupont's, Vanderbilt's & Morgan's are going tear you fucking sheeple a new hole before we are done with you idiots. All of it will be done with the help of our stupid minions used as pawns to serve as our shills.

Anyway, it's time for me to go golf with the rest of the banking aristocracy while we discuss our next business con-game to implement on you peasants.

Robber Baron Elite Scum   Tue, 10 Apr 2012, 9:29pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 6

Any sellers that must eventually sell but is waiting in speculation of a rebound: SELL NOW!

And take the best offer you can get.

Otherwise, I'd love nothing more than to have one of the many banks that I own... Foreclose your overpriced cardboard & sell that junk to another sucker so I can repeat the process all over again.

Eventually my ponzi scheme will collapse and that's when the home prices will finally go back to sane levels.

Once the shit hit's the fan on our scam, no problem.... We already bought off Washington and we have an escape plan to an offshore private secluded mansion with all our wealth kept offshore.

They only ones picking up the tab when my ponzi falls apart is you dumb sheeple.

Bernie Madoff fucked over the wrong people. That's they only reason we pwned that motherfucker...

Robber Baron Elite Scum   Tue, 10 Apr 2012, 9:39pm PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 7

FUCK YOU SHEEPLE

StoutFiles   Tue, 10 Apr 2012, 10:15pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 8

BayArea says

Once the appraisal comes in, the bank will have to work with me in allowing me to drop my initial price to the appraised value or there is no deal and both parties are back where we started.

I was always under the assumption that the banks had influence over the appraisal companies. Appraisals always seem to conveniently fall right at the seller's asking price.

investor90   Tue, 10 Apr 2012, 10:32pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 9

APOCALYPSEFUCK is Tony Manero says

Likely, on any worthwhile property, your offer is never seen by the seller who is told the market is fucked, there was only one bid (hehehe, from guess who) and handed a relatively low-ball 'offer' made by a straw or collaborators of the Realtor® who'll flip it to the next sucker, speculator, co-conspirator, etc.

YES! Robber Baron Elite Scum ! Thats exactly what happening....only the Realtards are more than facilitators...they are calling the plays.

Try this strategy! Have some else, related or trusted friend --- I have my wife with different last name involved. Each of us is PREAPPROVED for a good loan with lots of cash in a savings account---different banks for loans and savings. Make so-called Realtard "clean" offers---ie NO contingencies except the walk through 10-17 day contingency if accepted. And get ready to rock....slowly start rolling out offers and document the LIES that you hear. Sometimes the 'tards will get so screwed up they don't know WTF is going on. Use multiple different agents in different offices---different escrow companies, LARGE earnest deposits made pout to xyz escrow company. AND WATCH THE fireworks...
LIE lie lie lie lie ....sometimes I use two other "buyers"....NONE OF US IS A STRAW BUYER....all real offers...only two of us want the dump for sale....the other is OUR SHILL/ NOT ILLEGAL....Realtards play this game....only WE EACH TELL THE OTHER the lies of the buyer/listing agent...if you REALLY want to have fun ONLY DEAL WITH THE LISTING AGENT...they will be attracted to the "dual ended" dial agent commish no matter what the offers. The seller is a stooge in the scam...its all about max commish for minimum work. Seller also gets screwed on these deals. Pick the counter offer you want.....if you don't like the deal.... WALK....that's YOUR CONTINGENCY. If an REO...the only person who gets squeezed like a grape is the Realtard. They wanttheir BPO to support their offers. Its all about the REAL TURD....and their extraction of bucks from the deal. These are NOT straw buyers...they just SHARE THE WRITTEN OR Tape recorded lies they hear ....the R Tards are very worried about this...reverse #$%$-job..!

APOCALYPSEFUCKisShostikovitch   Tue, 10 Apr 2012, 10:39pm PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 10

Mr Investor

Great stuff and comprehensive scheme.

But it needs an exit plan that ends in a referral to law enforcement for fraud, professional malfeasance, criminal conspiracy, etc.

You should, if you're really taping stuff, look into the laws governing life and telephone recording in your state. They vary to an extraordinary degree.

Putting Realtor®s in jail is a vital part of the recovery process. The more of them that are raped and dismembered by neonazi serial killers in state and federal penitentiaries, the safer America will be.

Robber Baron Elite Scum   Tue, 10 Apr 2012, 11:20pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 11

APOCALYPSEFUCK is Tony Manero says

The more of them that are raped and dismembered by neonazi serial killers in state and federal penitentiaries, the safer America will be.

My grandfather, John D. Rockefeller funded & financed the operations of Adolf Hitler along with the Nazis.

I don't mind my nazi soldiers exterminating our pawns. Pawns are meant to be used and then thrown away when obsolete.

jerrypap   Wed, 11 Apr 2012, 1:28am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 12

Most Real Estate agents do not truly understand (or care) Real Estate.
I did not start making real money in Real Estate until I became a Real Estate Broker and got FULL access to the Regional MLS.
So if you are serious about Real Estate and would like to truly understand the market, get your license.

gregpfielding   Wed, 11 Apr 2012, 1:56am PDT   Share   Quote   Permalink   Like   Dislike     Comment 13

BayArea says

Say an REO has an asking price of $200K and the comparables show $190-210K over the past 3-6 months for example. If I am ready to purchase that house for market value, and it's desirable with multiple offers (which is what I have been experiencing), why shouldn't I offer $210K, or $250K, or even more!

People do this and banks will almost always come down to the appraisal price. Also, a lot of people will tie-up REOs and then try to hammer the price down with problems that come up during inspections.

gregpfielding   Wed, 11 Apr 2012, 2:00am PDT   Share   Quote   Permalink   Like   Dislike     Comment 14

BayArea says

That brings me to my next point, what methodology do appraisal companies use to appraise homes? I've heard 3 months back and then what?

Appraisers will generally look 3 months back (but often 6 months if it produces better comps). They will start with a 15% variance in age, size (lot and structure), and price. They will want 3-4 sold comps and 3-4 active comps, including prices in the neighborhood both above and below the subject property. They will start with a 1-mile radius, preferring closer properties if they exist.

This is where they start their analysis. Often, they will need to extend their 15% variances or search radius to find the most appropriate comps.

gregpfielding   Wed, 11 Apr 2012, 2:02am PDT   Share   Quote   Permalink   Like   Dislike     Comment 15

BayArea says

Correct me if I am wrong, but appraisals are not needed with cash offers, correct, as assumed above?

Not necessarily true. In California, the "cash offer" check-box and the "no appraisal contingency" check-box are two separate things. I know investors who will pay for an appraisal, hoping they can use it to get the price down.

gregpfielding   Wed, 11 Apr 2012, 2:05am PDT   Share   Quote   Permalink   Like   Dislike     Comment 16

BayArea says

If I make an offer on an REO for example, and my inspection finds issues that I didn't see at the time of making my offer, what is the best way to go about negotiating down my offer price? Any recommendations?

Generally speaking, everyone knows that inspections are going to find a lot of little things wrong and the bank won't have much sympathy. But, if you find any individual issues that cost big $$, then the bank will absolutely listen. This includes section 1 pest repairs (the total), HVAC repair/replacement, roof repair/replacement, and foundation work.

You can absolutely negotiate for repairs and/or credits from the banks. There is no such thing as an "as-is" offer.

gregpfielding   Wed, 11 Apr 2012, 2:09am PDT   Share   Quote   Permalink   Like   Dislike     Comment 17

BayArea says

When purchasing a home, you have to select a settlement agent (ie: escrow agent). There are typically two options: The first is to use the seller's settlement agent. The other is to select your own. Is there any reason not to use the seller's escrow agent? Any disadvangtage for me in doing this?

For the most part, the pricing and service they provide are pretty darn similar. REOs will demand that you use their person because they've had a relationship from back when the NOD was first filed. And they'll usually pay for it. The escrow officer is involved early on with short sales too.

Agents push escrow officers they have personal relationships with who will A) not charge bs fees to their clients and B) go the extra mile to solve problems when things go wrong.

Generally speaking, there is nothing wrong with using the Seller's recommended (or demanded) people. But if your agent has someone they would prefer that's fine too.

gregpfielding   Wed, 11 Apr 2012, 2:10am PDT   Share   Quote   Permalink   Like   Dislike     Comment 18

BayArea says

Closing cost estimates of a $175K home in the Bay Area is what? I've found quite a bit of varying results depending on what online calculator I use. Everything for $3500-6500... Seems like a huge window.

The variance could be pre-paid property taxes (depending on what month you close), and loan fees. Or if the seller is paying escrow and title fees, which you can ask for with an REO and even sometimes a short sale.

BoomAndBustCycle   Wed, 11 Apr 2012, 3:36am PDT   Share   Quote   Permalink   Like   Dislike     Comment 19

Robber Baron Elite Scum says

A time will eventually come where the prices will collapse so low that many people will not take a mortgage to buy. They will pay either fully in cash or majority in cash.

Let's pretend your scenario happens... Home prices drop to a level where most people pay in cash for a home.

If say I have a $200K mortgage on a home bought in 2006. The house down the street sells for $40K in 2015... What's to keep the $200K mortgage holder from buying the home next door and walking from his existing mortgage?

This is why this scenario will not occur. Home prices may fall another 10-20%, but unless rents collapse that is the bottom.

It's just as likely that home debtors will get principal reductions and/or be gifted their homes in a giant reset before a mass liquidation scenario occurs.

APOCALYPSEFUCKisShostikovitch   Wed, 11 Apr 2012, 4:37am PDT   Share   Quote   Permalink   Like (4)   Dislike     Comment 20

BoomAndBustCycle says

It's just as likely that home debtors will get principal reductions and/or be gifted their homes in a giant reset before a mass liquidation scenario occurs.

Hahahahahahahahahahahahaha!

The plan is to foreclose them all and sell them all to hedge funds for pennies on the dollar. The HFs will kick out the occupants, cartelize rentals and set rents at monopoly levels and set about buying the survivors' properties.

From debt slavery to serfdom.

David9   Wed, 11 Apr 2012, 5:37am PDT   Share   Quote   Permalink   Like   Dislike     Comment 21

RentingForHalfTheCost says

Yup, you might get lucky if you want to buy the place from the Realtors 14 year old kid in a few months for about 50K more

Yes. I get email updates every day and I see these 50K plus flips and I cannot recall ONE of them being on the MLS.

Robber Baron Elite Scum   Thu, 12 Apr 2012, 2:18am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 22

BoomAndBustCycle says

If say I have a $200K mortgage on a home bought in 2006. The house down the street sells for $40K in 2015... What's to keep the $200K mortgage holder from buying the home next door and walking from his existing mortgage?

This is exactly what they want to occur.

They want people to default regardless whether strategic or not.

When the sheep will default, they will have more homes under their possession. They want control over real estate.

Most people will not buy because they will be unable too. But most people who do buy will pay mostly in cash.

Most people will rent from monopolized rents in properties that were liquidated for pennies on the dollar.

Most people also do not have even $40,000 in cash. That's how deep in peasantry America is in.

BayArea   Thu, 12 Apr 2012, 3:36am PDT   Share   Quote   Permalink   Like   Dislike     Comment 23

E-man says

BayArea,
Why don't you start educating yourself about buying properties at the courthouse steps and forget about dealing with RE agents altogether? Wouldn't that be a better continuing RE education?
It's really easy buying properties at the steps. The hardest part is knowing how to avoid pitfalls and reducing your risks.
RE is like engineering.

I appreciate the suggestion. Internet forums are the most accessible to me and it's web-sites like this that are also pretty good for learning concepts and sharing ideas/experiences.

As far as the court-house steps go, I don't have cash to buy homes in full up-front, which makes it a bit de-motivating to go that route. I have been to the Contra Costa County court-house steps and have watched foreclosure auctions in action. I'm not sure what I stand to gain other than perhaps get some idea of what homes are selling there relative to comparable ones that do reach MLS.

Is it possible to finance a foreclosed home being sold at the court-house? If so, that would be news to me and I'd be interested in exploring it further.

I'm an engineer myself, BSEE UCLA and I work in the Telecommunications industry now and like you, I take a scientific approach to most things since number analysis gives me confidence beyond anything else.

BayArea   Thu, 12 Apr 2012, 3:41am PDT   Share   Quote   Permalink   Like   Dislike     Comment 24

ptiemann says

If you think the property is worth $210k, you could write your offer like this:
Purchase price $210k
Down payment 25%
Subject to appraisal, as long as it appraises at least $190k you will perform. Meaning you will pay up to $20k over appraiser's opinion.
Show cash available to cover 25% of $190k + $20k = $68k plus closing cost..
Imagine the bank gets an offer of $200k with no appraisal contingency at all, and one at $220k that requires to appraise at $180k minimum, and then your offer of $250k which requires full appraisal, and comps have sold $190k-$210k.. which one will they take?

Point well taken and I appreciate the response.

Although I can't help but think, "what kind of investment is this if I am fighting with a dozen other folks for a single family investment home?"

And here is what we are chasing (assumes 4.5% IR, 20%DP, 1.25% prop tax, 10% annual vacancy rate, and 10% management fee, and 10% operating expenses):

Gross Return: 9.8%
Cap Rate: 6%
Net Return: 1.5%

zzyzzx   Thu, 12 Apr 2012, 3:41am PDT   Share   Quote   Permalink   Like   Dislike     Comment 25

BayArea says

b.) Correct me if I am wrong, but appraisals are not needed with cash offers, correct, as assumed above?

Correct.

Haaving said that, IMO any idiot can do an appraisal themselves, especially for a condo or townhouse.

zzyzzx   Thu, 12 Apr 2012, 3:42am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 26

BayArea says

Although I can't help but think, "what kind of investment is this if I am fighting with a dozen other folks for a single family investment home?"

BayArea   Thu, 12 Apr 2012, 3:47am PDT   Share   Quote   Permalink   Like   Dislike     Comment 27

FortWayne says

With REO all cash doesn't make a difference as banks don't care if it's FHA, conventional, or all cash as long as they can get the money.

Key being, as long as they get their money.

The element of a loan having to close is a minor road-block in them getting their money isn't it? And if that's true, some would argue that all cash may in fact make a difference?

BayArea   Thu, 12 Apr 2012, 3:49am PDT   Share   Quote   Permalink   Like   Dislike     Comment 28

StoutFiles says

I was always under the assumption that the banks had influence over the appraisal companies. Appraisals always seem to conveniently fall right at the seller's asking price.

Although I share your skepticism, the "independent" appraisal is primarily to show your lender that the house is worth $X, so if you default, the lender takes back an asset that is worth at least what they loaned you, assuming the market has not changed.

zzyzzx   Thu, 12 Apr 2012, 3:50am PDT   Share   Quote   Permalink   Like   Dislike     Comment 29

BayArea says

e.) What order does the following happen: Inspection, Appraisal... and how do these influence eachother?

I would inspect and appraise in that order and my myself.

BayArea   Fri, 13 Apr 2012, 11:15am PDT   Share   Quote   Permalink   Like   Dislike     Comment 30

gregpfielding says

Generally speaking, there is nothing wrong with using the Seller's recommended (or demanded) people. But if your agent has someone they would prefer that's fine too.

Thank you sir!

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