I have been a pretty diligent lurker here for the past several years or so...with a few posts under my belt..anyway I am going to take the plunge in the next couple of months and purchase a house.
I have actually bid on two homes in the last three weeks, and jjust got word tonight that the bank isnt taking my final offer. The other house was owner occupied well priced house and there was another offer. I was outbid. Anyway, the area I am looking in SC (Tega Cay) is relatively small but within 20 miles of downtown Charlotte. The older section has all that I am looking for and advertised rents are screaming its a great time to buy (>30% over what PITI would be) The problem is it is a small area and of the homes that are for sale in my price range (lets say there are 30) 90% of them are overpriced. Of the remaining 10%, 2 I bid on, the other one my wife wont do because it has some radon issues.
My strategy has been to go without buyer representation, figuring that the listing agent would be sitting at his desk calculating what his commission would be if somehow my offer did go through..and then plotting ways in which he can make that happen. So far hasnt worked out in my favor.
But on to the question: Do you think this is a sound strategy?
Also, the bank wanted 3% earnest money deposit AND wanted contigencies to fall off on 12/31(30 days). I wasn't about to risk $6600 on getting financing to close within 30 days and all of the other title/inspection work done too...especially since I know no underwriter is going to be working from about December 15 on this month. They also wanted 10K more than I offered. Is this standard for a bank to ask for such a high earnest deposit and make it non-refundable after 30 days? I cannot believe anyone would risk 3% of the purchase price with no contigencies after 30 days...especially since the house needs about 20K of rehab work or so. (maybe more because it has plumbing issues of unknown severity) I countered that I would give that earnest deposit but contingencies would stay in place until the close...and they rejected. I am less worried about the ten grand than the contingency issues..I mean I wont go higher...but I am really more curious for the future. Will I be encountering taking such a huge risk with all REOs that I bid on? Is this something that this listing agent is doing or is it the bank? My last purchase was done with a earnest deposit of $750 I think, but it was a while ago (2002) and I knew the agent personally.
Also, does this seem as foolish to all of you as it does to me? This house has been listed for 70 days, just lowered 20K, they have an offer that is within 8% of their asking price and 4% of their counter offer, all the while it is the beginning of December so it is likely if I dont buy it, it will sit for at least a month before they get another offer and probably until the spring. Also, this listing agent is going to get about 13K if I buy it but another buyer who may come along in 1-3 months will probably have a buyers agent, so he will get 6500 then...and the average DOM in this area is about 200 or so...I cant believe they didnt take a 92% offer...I really cant.
Where am I going wrong here?
Thanks for any help you can give.
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FollowBefriend (4)159 threads2,826 comments
1) People can't get financing even though interest rates are at all time low.
2) Prices are falling
Take your time and look for the most house for the less money.
Make sure you're committed to a house or the market. It is, or was for me, a rough road once you are ready to buy. I got approved end of last year through the begging of this year. Then couldn't find the house I was looking for, for what I wanted. After having my offer countered on a house that was just above the max I was willing to go.
It wasn't until July before I saw several houses that were in my range, or anything I was interested in. By then my Finance Commitment was expired, and had to start the process all over again. The second time around I applying for a loan that was 50K less than the loan I was approved for earlier. The guy dropped the price 25K the day I made my offer, the bank appraised it for 10K less than my offer. I told him I wasn't paying more than the bank will value it for at this point. Expecting that further price declines are a possibility. He sold it to me for the adjusted price.
My wife and I were sitting in our back patio looking over our 9000 sq ft back yrd, thankful that the Sisters didn't take our offer on the other house, in February of this year. We're far happier here than we would have been there. And in retrospect we were settling because we were so pent up to buy, and get out of the house we had been renting since 99.
Ironically, the other house, is around the corner from me on my block. FWIW it's still for sell.
Make sure you've got financing, and don't take those Phish Houses too seriously. As I often expected, the house I would end up buying would be from a person. Who is actually selling it, because he is leaving town or some other motivation other than trying to unload a failed investment. And that's exactly what happened. Or I would still be out there following up on listings that are all MLS sources from CL to Zillow, the exact same list the Realooters(R) send me.
Who knows, this is why I'm glad I bought regardless what the market does, it's just more stupid crap I don't have to sweat.
But keep in mind if you get financing, you've got the bargaining power, there are less of you so you aren't bidding against anyone, you know it and they know it. Don't let them insult you.
You can always point out fact number TWO.
FollowBefriend (2)9 threads790 comments 33 maleFort Mill, SC
Thanks Tenounce. Just to clarify, I am pre-approved for the financing and submit that documentation with every offer I make. That should speed up the process..but friends who are "in the business" say that even given pre-approval (which is a step up from pre-qualification) closing a loan in 30 days is a 50-50 proposition even when it isnt December. They say add 15 days to that because of the holidays. So Right now it is a 50-50 proposition to close in 45 days.
I have no doubt I can get financing, I am just not going to limit contigencies when the deposit is 3%. They can have one or the other...restricted expiring contingencies and less than $1000...or $6600 but contignecies that last until the close...but not both. I figure.
FollowBefriend7 threads18 comments
From what I've heard, there's no rhyme nor reason to the way banks sell REOs. They seem to have a set of internal rules that they must follow regardless of whether it would make more sense to do things differently. Dealing with short sales or REO's is an exercise in patience.
A couple of things... I don't think the selling agent has any clout with the bank so you might as well have a buyer's agent to help you deal with the paperwork. The bank pays a fixed commission and they don't care if it gets split. Second, if you're worried about the thirty day closing being impossible just because of the Christmas holidays, retract your offer and wait until January to resubmit. You could also get creative. Offer to finance through the selling bank in exchange for a longer closing period. Put a clause that extends the closing date if any problems are found during inspection and then find something that'll take a couple of weeks to fix.
The bottom line is that in any situation where you're buying something, if you are unable to walk away during the negotiations, you'll always be at the mercy of the seller.