Close to making an offer on a home

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sman09
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Close to making an offer on a home

Post by sman09 » Sat May 25, 2019 7:28 am

Dear BHs

We are first time home buyers with little knowledge of the process. Thanks to the support and guidance we got here, got the confidence to start the process (that we had put off for several years now), visited several homes while keeping the advice we got here in mind, shortlisted a few and are moving close to making an offer in the next couple of days (possibly as early as today). Need help/clarification on some aspects to proceed forward confidently

1. Room for negotiation in a fast-selling market
We found a home in a location that's our top choice come up just a day ago. The home looks great inside (some very minor issues there) but the price looks steep. As per our agent, the home would go fast and there are already offers on the home. Personally, we would feel comfortable if the house was $10 - $15K less. Our agent said it's possible that people may even be offering higher than the asked amount due to the location. Due to relocation of the owner a third-party company is handling the selling process.

A few aspects that stood out were (that to our mind seemed the house price should be a bit lower):

- Although most other homes (except for a couple) in the community have a basic fence (to the back yard), this house despite being a corner one does not have one, exposing the entire side and back yard to the street.

- the only inclusions are the range hood and ceiling fan. as first-time home buyers with no appliances of our own, we would have to purchase them, if we go with this home. IMHO, for the price premium, they could have included washer/dryer/...

- the home has been projected as the cleanest the selling agent has seen in the description. To a large extent, the inside of the house indeed is clean. But one-half of the driveway in front of the garage has large oil stains (as seen from listing pics). What came across as little unethical was strategic positioning of a car right on top of it, during the visit. Having seen this oil stain in the online pictures (that too in the very first one), i was keen on seeing in person (during our visit) as to how severe it was (esp given the claim of very clean), and seeing a car positioned right on top of it.

Given this backdrop, is there any scope to negotiate the price and if so, how could we go about? From the looks of it (the condition of the house, the gadgets/furniture in there), it seemed the owner was in well to do condition and the home price itself has appreciated heavily in the last few years. The reason i include this information is just to convey that while the $10 - $15,000 (that we desire to get a reduction on the list price) may not be of a great consequence to the seller (i agree, who does not like some extra money), to us it really matters.

2. Role of earnest money

While we definitely are not inclined to offering higher than the list price, we are okay with offering a higher earnest money. Should we ask for say $15,000 less on the asking price (which is about 3% off the list price) but put down an earnest money of $10,000 or even higher (if that would serve any purpose), would that give us any edge, esp given what our agent told about the likelihood of higher bids coming in. And just to confirm, does the earnest money go towards down payment or the closing cost?

3. down payment

As much as we would love to go with the above home, in the event of higher bids should we miss it, we have another choice as well. The price on this home has been lowered by $10 k recently and it's a nice home and at a price point we are comfortable - just that there are tiles and we live in a place that's quite cold in winters. It's also a much longer commute to work and in a gated community (with a not too high HOA). As per our agent, there are no bids at this time on this home.

We intend to put well above 20% on either of these homes that we may go with. Possibly even as high as 35 - 40% (which would mean tapping in to literally all the savings in our bank account except for emergency funds), as the money is just sitting in bank and we would rather use it to lower our monthly payments. If emergency funds are in place, are there any downsides to putting down a higher amount, other than not having that money at hand to invest in the market?

4. any downside of tapping in to 401k to further increase the down payment?

apart from not having the funds in the market and let them appreciate, is there anything else to be aware of, in trying to bring down the monthly payment using a large down payment? any penalties even if it's for first-home purchase?

4. 15-yr vs 30-yr loan for a buyer who may not be in the home for that duration

as much as we love the place where we are, we are also in a modest income bracket and given the nature of the job and the opportunities in our location, there is some chance that there may not be much growth in the family's income itself. there is a chance that in say 5 years from now we may even consider other locations (states) for a better career opportunity. Given this backdrop, does the lower interest rate from a 15-yr loan really matter? or could we go with a 30-yr loan and make smaller payments until the time comes to sell the home?

5. points

Also, given the backdrop that there is some chance that we may not be in the home we buy for as long as 15/30 years, should we focus on higher interest rate with zero points (or negative) to lower the closing cost or lower interest rate with higher points?

6. things to be aware of should we have to sell the home

if we were to sell the home well before the 15/30 year loan period, what are some things we need to be aware of? does putting down a higher down payment (in the 35 - 40% range) and being on a 15-yr loan duration really matter if we sell in say 3 - 5 years from now? Just to confirm we have got it right, once we sell whatever money proceeds we get, we can use it to close the loan on the home right? if i recall right, i think the lender said, no penalties for early closing.


I know these are lot of questions, but honestly needed some hand holding and inputs at this point as we are very close to making an offer.

Greatly appreciate your time and help!

dallasjava
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Re: Close to making an offer on a home

Post by dallasjava » Sat May 25, 2019 8:37 am

1. Do not offer more than you think the house is worth. In my opinion it is better to wait for the next one than force the deal. If you keep get outbid, then you will have to decide if the market prices are above your expectations. I have not gotten appliances included when buying a house. You can add them to offer, but if you are offering less, then I would lean not too. Adding a fence will be expensive if you elect for a privacy fence. There are going to be a ton of items you will to get for your first house so be prepared.

2. Earnest money is show the buyer you are serious. I am not sure where you are, but here in Texas, you have an inspection period so you can walk without much penalty.

3. I would put as much down as you can afford keeping in mind the unexpected expenses you will have. Owning a house means you are responsible for everything associated with the house.

4. I would not touch a 401k for anything other than a true emergency. I would personally pick a 15 year loan. The interest rate will save you a lot even if you are in the house for less than 15 years.

5. I paid points on my first mortgage and then refi'ed a year or so later. I do wish I had paid the points on my current mortgage since the rates were at near historic lows. Points are a future projection so your guess is as good as mine.

6. It is always better to owe less on the house no matter what. It would be terrible to be upside down in any asset.

In summary, offer what you think it is worth and put the largest downpayment you can safely afford; however, keep at least 10K to 15K for items to purchase and repairs.

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grabiner
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Re: Close to making an offer on a home

Post by grabiner » Sat May 25, 2019 8:42 am

sman09 wrote:
Sat May 25, 2019 7:28 am
4. 15-yr vs 30-yr loan for a buyer who may not be in the home for that duration

as much as we love the place where we are, we are also in a modest income bracket and given the nature of the job and the opportunities in our location, there is some chance that there may not be much growth in the family's income itself. there is a chance that in say 5 years from now we may even consider other locations (states) for a better career opportunity. Given this backdrop, does the lower interest rate from a 15-yr loan really matter? or could we go with a 30-yr loan and make smaller payments until the time comes to sell the home?
If you can afford the payments on the 15-year loan, it's probably a better deal for short-term ownership. You will pay less in interest on the 15-year loan because of the lower rate, and you will get back the higher principal payments when you sell. The bank charges more for a 30-year loan because it gives you the right to lock in borrowing at current rates for 30 years (which might be a bad deal for the bank if rates rise in the future), but you lose that benefit if you sell early.

Another alternative would be a 5-year ARM, but check the interest-rate caps to confirm that you will be able to make the payments when the rate resets.
5. points

Also, given the backdrop that there is some chance that we may not be in the home we buy for as long as 15/30 years, should we focus on higher interest rate with zero points (or negative) to lower the closing cost or lower interest rate with higher points?
The break-even for points depends on the expected time you stay in the home. If X points reduce the interest rate by Y, you need to stay slightly more than X/Y years to come out ahead. (The reason it is more than X/Y is that the points are paid on the full principal but the lower rate is charged only on the current balance.) This makes low-points rates more attractive, but an absolute zero may not be the best. For example, some lenders charge a fixed number of points for every 0.125% reduction in the rate, but not below zero, so you might get 3% with 2.5 points, 3.125% with 1.75 points, 3.25% with 1 point, 3.375% with 0.25 points, and 3.5% with no points (not minus 0.5 points). In that situation, the first quarter-point is worth paying, but no more than that unless you expect to stay in the home more than eight years.

I did exactly that math when I bought my current home six years ago. I estimated an eight-year break-even for paying points, and the rate was so low I was unlikely to refinance, so I paid the maximum points and am now close to making them up in interest savings.
Wiki David Grabiner

cherijoh
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Re: Close to making an offer on a home

Post by cherijoh » Sat May 25, 2019 8:42 am

sman09 wrote:
Sat May 25, 2019 7:28 am
Dear BHs

We are first time home buyers with little knowledge of the process. Thanks to the support and guidance we got here, got the confidence to start the process (that we had put off for several years now), visited several homes while keeping the advice we got here in mind, shortlisted a few and are moving close to making an offer in the next couple of days (possibly as early as today). Need help/clarification on some aspects to proceed forward confidently

1. Room for negotiation in a fast-selling market
We found a home in a location that's our top choice come up just a day ago. The home looks great inside (some very minor issues there) but the price looks steep. As per our agent, the home would go fast and there are already offers on the home. Personally, we would feel comfortable if the house was $10 - $15K less. <-- I think everyone would love to pruchase a house for $10 - 15K less, but that isn't helpful in determining if the house is fairly priced

Our agent said it's possible that people may even be offering higher than the asked amount due to the location. Due to relocation of the owner a third-party company is handling the selling process.

A few aspects that stood out were (that to our mind seemed the house price should be a bit lower):

- Although most other homes (except for a couple) in the community have a basic fence (to the back yard), this house despite being a corner one does not have one, exposing the entire side and back yard to the street. <-- Fencing a corner lot may be an issue since fences may need to be a certain distance from the street; are other corner lots fenced?

- the only inclusions are the range hood and ceiling fan. as first-time home buyers with no appliances of our own, we would have to purchase them, if we go with this home. IMHO, for the price premium, they could have included washer/dryer/... <-- this is usually a matter of local convention. In my area only built-in appliances (like wall oven, garbage disposal and dishwasher) typically come with the house. You could negotiate with the owner, but it may not be successful without added $$ if you are competing with others who don't want or need the consession. FYI, washer & dryer are the least likely appliances to be included in a sale IMO.

- the home has been projected as the cleanest the selling agent has seen in the description. To a large extent, the inside of the house indeed is clean. But one-half of the driveway in front of the garage has large oil stains (as seen from listing pics). What came across as little unethical was strategic positioning of a car right on top of it, during the visit. Having seen this oil stain in the online pictures (that too in the very first one), i was keen on seeing in person (during our visit) as to how severe it was (esp given the claim of very clean), and seeing a car positioned right on top of it.

Given this backdrop, is there any scope to negotiate the price and if so, how could we go about? From the looks of it (the condition of the house, the gadgets/furniture in there), it seemed the owner was in well to do condition and the home price itself has appreciated heavily in the last few years. The reason i include this information is just to convey that while the $10 - $15,000 (that we desire to get a reduction on the list price) may not be of a great consequence to the seller (i agree, who does not like some extra money), to us it really matters. <-- Sorry, but you are being very naive. The owners are going to go for the best offer they can get which usually involves the highest price. The best tools you have in this negotiation are that you don't currently own a home that you need to sell. Have you gone through the hoops with a lender to be pre-approved for a mortgage of this size? See this article for the difference between pre-qualifying and pre-approval.

2. Role of earnest money

While we definitely are not inclined to offering higher than the list price, we are okay with offering a higher earnest money. Should we ask for say $15,000 less on the asking price (which is about 3% off the list price) but put down an earnest money of $10,000 or even higher (if that would serve any purpose), would that give us any edge, esp given what our agent told about the likelihood of higher bids coming in. And just to confirm, does the earnest money go towards down payment or the closing cost? <-- I don't know if extra earnest money would help in making your bid more attractive; it definitely would count towards down payment or closing costs.

3. down payment

As much as we would love to go with the above home, in the event of higher bids should we miss it, we have another choice as well. The price on this home has been lowered by $10 k recently and it's a nice home and at a price point we are comfortable - just that there are tiles and we live in a place that's quite cold in winters. It's also a much longer commute to work and in a gated community (with a not too high HOA). As per our agent, there are no bids at this time on this home.

We intend to put well above 20% on either of these homes that we may go with. Possibly even as high as 35 - 40% (which would mean tapping in to literally all the savings in our bank account except for emergency funds), as the money is just sitting in bank and we would rather use it to lower our monthly payments. If emergency funds are in place, are there any downsides to putting down a higher amount, other than not having that money at hand to invest in the market? <-- I would not recommend cleaning yourselves out. There are lots of unexpected expenses related to being a 1st time home buyer. I would set aside a decent amount for things like window treatments, a lawn mower, weed whacker, etc. Also you will be expected to bring money to closing to fund your escrow account and pay some interest on the mortgage.

4. any downside of tapping in to 401k to further increase the down payment? <-- Yes, you are setting yourself up to be house poor with too much of your net worth invested in illiquid home equity.

apart from not having the funds in the market and let them appreciate, is there anything else to be aware of, in trying to bring down the monthly payment using a large down payment? any penalties even if it's for first-home purchase?

4. 15-yr vs 30-yr loan for a buyer who may not be in the home for that duration <-- If you aren't sure you are going to stay in the area for at least 10 years, I would rethink buying a house at this time. If you do buy a house, find one where you can afford the payment with a down payment of 20%. If you need a larger down payment to make the monthly payments work then you are buying too much house IMO

as much as we love the place where we are, we are also in a modest income bracket and given the nature of the job and the opportunities in our location, there is some chance that there may not be much growth in the family's income itself. there is a chance that in say 5 years from now we may even consider other locations (states) for a better career opportunity. Given this backdrop, does the lower interest rate from a 15-yr loan really matter? or could we go with a 30-yr loan and make smaller payments until the time comes to sell the home?

5. points

Also, given the backdrop that there is some chance that we may not be in the home we buy for as long as 15/30 years, should we focus on higher interest rate with zero points (or negative) to lower the closing cost or lower interest rate with higher points? <-- You can play with a mortgage calculator to see how long you would have to stay in a house to break-even if you buy down the interest rate with points. I always stuck with 0 points loans but that was in a falling interest rate environment where the opportuntiy existed to refinance the loan to a lower interest rate.

6. things to be aware of should we have to sell the home

if we were to sell the home well before the 15/30 year loan period, what are some things we need to be aware of? does putting down a higher down payment (in the 35 - 40% range) and being on a 15-yr loan duration really matter if we sell in say 3 - 5 years from now? Just to confirm we have got it right, once we sell whatever money proceeds we get, we can use it to close the loan on the home right? if i recall right, i think the lender said, no penalties for early closing. <-- Having all that money tied up in your house can make it difficult to relocate for a new job. You would need top dollar to recoup all the closing costs, but that usually means needing more time to sell. You might not have the liquidity to move until you sell. This could be critical if you lose your job and can't sell your house.


I know these are lot of questions, but honestly needed some hand holding and inputs at this point as we are very close to making an offer.

Greatly appreciate your time and help!

stan1
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Re: Close to making an offer on a home

Post by stan1 » Sat May 25, 2019 8:59 am

It is a competitive market for houses. If you want to win the World Series you have to play the game. Most important thing you need to know is data from recent comparable sales so that you know within 5% what you should be paying for a house.

If the first house has multiple offers on it you can put in a bid. What will typically happen is that after several days you'll be told "there are multiple offers, give us your best and final offer". At that point you'll have to decide how high you are willing to go. The value of a house isn't determined by the seller's list price or what a buyer offers; it is determined by what the buyer and seller agree to accept. You may not be able to get the seller to pay for the oil stains and lack of fencing. Every house that's 10 or more years old has signs of use or age.

As for the second house if the market is fast paced and it has been sitting there for a long time the house is overpriced or there's something wrong with it. Make sure there are no incurable defects like airplane or highway noise. Dropping it by $10K may not be enough. You need to understand what similar houses have sold at (recent comparable sales). Your agent should be showing you that data but remember agents make money when they close a sale. Many agents want to help you find the right house but they want you to buy not keep shopping. How long is the commute? If its over 30 minutes each way personally I would NOT buy it. I have a 13 minute commute right now which is worth a lot to me.

Thegame14
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Re: Close to making an offer on a home

Post by Thegame14 » Sat May 25, 2019 10:59 am

I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...

The second house if it is a long commute, I would just keep looking there is no rush to buy, if anything housing prices are likely to go down interest rates are likely going to stay the same so I would keep saving and keep looking. Also the summer is usually a "hot" housing and better to buy in the winter as there are less buyers.]

I would always go with a 30 year and you can make extra payments vs having a 15 year and higher payment each month for liquidity and safety purposes.

I would never get points if you have good credit and 20% down.

dont see a point in earnest money, they will take the highest cleanest offer.

I dont think you have taken enough time and are in a rush to buy which is a bad thing, we looked for houses for probably 9 months before buying. You need to get to know the market, see different style houses in different towns, one or two towns over may make a HUGE difference with school systems, taxes and commute.

harrychan
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Re: Close to making an offer on a home

Post by harrychan » Sat May 25, 2019 11:09 am

Don't be penny wise pound foolish. Imagine if you missed out on a home because of oil stains on the driveway that could've been taken care of by a $50 pressure washer. Focus on the big items that can cost over 5 figures or things that cannot be fixed such as location. Everything else can be fixed. There will not be a perfect home with zero issues. Even brand new construction homes will have issues. When I bought a home, the same went for the price. We had to be flexible. We initially thought we had a top line but very soon we knew we had to go a bit over. We made it work and hindsight, it was a great decision. We knew we were going to stay in this home for years and years to come and haggling over $10k wasn't going to matter.
This is not legal or certified financial advice but you know that already.

delamer
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Re: Close to making an offer on a home

Post by delamer » Sat May 25, 2019 11:27 am

The house is worth what qualified buyers are willing to pay for it.

It doesn’t matter if you think it is overpriced or you would have to buy appliances.

That said, you have nothing to lose by making an offer at a price you are comfortable offering.

Don’t borrow from your 401(k) to lower your monthly payment. If the payment is higher than you want on your preferred house, then buy a less expensive one. Remember that you’d have a payment for the 401(k) loan.

bsteiner
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Re: Close to making an offer on a home

Post by bsteiner » Sat May 25, 2019 11:29 am

A house is worth what someone will pay for it. What's included and who pays for what repairs and expenses are essentially price adjustments.

The broker's job is to sell houses.

I would finance as much as I could at regular rates, usually 80%. Interest rates are low now. You can always prepay or pay down the loan but you can't always go the other way.

The procedures vary from state to state, and sometimes within a state. In New York, it's typical for a buyer to put 10% down when signing the contract, to be held in escrow. But this may be different elsewhere.

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Kenkat
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Re: Close to making an offer on a home

Post by Kenkat » Sat May 25, 2019 11:49 am

You are not likely to be successful in offering a below asking price on a house that just came into the market one day ago. You can either put in a full price offer and see if it gets accepted or wait for 30-60 days and make a below asking price offer if the house is still available.

JoeRetire
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Re: Close to making an offer on a home

Post by JoeRetire » Sat May 25, 2019 1:29 pm

sman09 wrote:
Sat May 25, 2019 7:28 am
We are first time home buyers with little knowledge of the process.
Hopefully you are using a good local real estate agent that you trust? Most of these questions should be directed to them.
We found a home in a location that's our top choice come up just a day ago. The home looks great inside (some very minor issues there) but the price looks steep. As per our agent, the home would go fast and there are already offers on the home. Personally, we would feel comfortable if the house was $10 - $15K less. Our agent said it's possible that people may even be offering higher than the asked amount due to the location.
We sold our home a few months ago.

The house went on the market on a Thursday. We had open house on Saturday and Sunday. We closed offers on Tuesday and picked the "winner" on Tuesday night.

We got 9 offers - all of them were over the listing price.

Real estate is hyper-local. Your agent should be able to advise you.
A few aspects that stood out were (that to our mind seemed the house price should be a bit lower)
Never pay more than you could afford. Never pay more than you think the house is worth.
Let others pay more if they feel the house is worth more to them.
while the $10 - $15,000 (that we desire to get a reduction on the list price) may not be of a great consequence to the seller (i agree, who does not like some extra money), to us it really matters.
If you are the only buyer, then this makes sense.
If you will be competing with other buyers, then the relative value of $10-15k to you versus the sellers is immaterial.
While we definitely are not inclined to offering higher than the list price, we are okay with offering a higher earnest money. Should we ask for say $15,000 less on the asking price (which is about 3% off the list price) but put down an earnest money of $10,000 or even higher (if that would serve any purpose), would that give us any edge, esp given what our agent told about the likelihood of higher bids coming in. And just to confirm, does the earnest money go towards down payment or the closing cost?
This strategy won't work if your agent is correct that higher bids will come in. There is no value to the seller of earnest money, unless they somehow think you will be backing out of the offer.

If you were offering a cash purchase, that might have more value and get a seller to accept a slightly lower sales price. Similarly, if you were willing to skip an inspection contingency. However, I wouldn't advise doing either.
As much as we would love to go with the above home, in the event of higher bids should we miss it, we have another choice as well. The price on this home has been lowered by $10 k recently and it's a nice home and at a price point we are comfortable - just that there are tiles and we live in a place that's quite cold in winters. It's also a much longer commute to work and in a gated community (with a not too high HOA). As per our agent, there are no bids at this time on this home.
Tiles can be replaced. Commutes cannot.
We intend to put well above 20% on either of these homes that we may go with. Possibly even as high as 35 - 40% (which would mean tapping in to literally all the savings in our bank account except for emergency funds), as the money is just sitting in bank and we would rather use it to lower our monthly payments. If emergency funds are in place, are there any downsides to putting down a higher amount, other than not having that money at hand to invest in the market?
You wouldn't have money to replace the tiles.

(And why do you have money just sitting in a bank rather than earning real returns?)
any downside of tapping in to 401k to further increase the down payment?
Never tap into retirement funds for a home down payment.
apart from not having the funds in the market and let them appreciate, is there anything else to be aware of, in trying to bring down the monthly payment using a large down payment? any penalties even if it's for first-home purchase?
If you cannot handle the monthly payments except by committing funds to an overly-large down payment, consider that you may well be purchasing too much house. Find a less expensive house instead.
15-yr vs 30-yr loan for a buyer who may not be in the home for that duration
How long do you plan to be in this home?
as much as we love the place where we are, we are also in a modest income bracket and given the nature of the job and the opportunities in our location, there is some chance that there may not be much growth in the family's income itself. there is a chance that in say 5 years from now we may even consider other locations (states) for a better career opportunity. Given this backdrop, does the lower interest rate from a 15-yr loan really matter? or could we go with a 30-yr loan and make smaller payments until the time comes to sell the home?
If you really think you would move in 3-5 years, and you still feel compelled to purchase now rather than rent, then don't bother with a big down payment or a shorter loan.
Also, given the backdrop that there is some chance that we may not be in the home we buy for as long as 15/30 years, should we focus on higher interest rate with zero points (or negative) to lower the closing cost or lower interest rate with higher points?
Don't pay any points if you will be moving in 3-5 years. And minimize your closing costs in any way that is available.
if we were to sell the home well before the 15/30 year loan period, what are some things we need to be aware of? does putting down a higher down payment (in the 35 - 40% range) and being on a 15-yr loan duration really matter if we sell in say 3 - 5 years from now?
No. Your down payment doesn't matter. Nor does the loan duration matter. The entire mortgage must be paid off when you sell anyway.
Just to confirm we have got it right, once we sell whatever money proceeds we get, we can use it to close the loan on the home right? if i recall right, i think the lender said, no penalties for early closing.
If the lender indicated that there is no penalty for pre-payment of your mortgage, then this is correct. Mortgages must be paid off when you sell the home. You can use the sales proceed and/or whatever other cash you have.
I know these are lot of questions, but honestly needed some hand holding and inputs at this point as we are very close to making an offer.
If you have a financial adviser, run these questions by them first. They should already be aware of your overall financial situation and goals and can guide you accordingly.

I may be reading too much into your words here. But I'm seeing a big concern about reducing monthly payments and about $10-15k mattering a lot to you. Are you sure you are able to afford the houses you are considering purchasing? Additionally, I would never advise someone who may be moving in 3-5 years to purchase a home. I would advise renting instead for anyone planning to move in less than 7 years or so.
Last edited by JoeRetire on Sat May 25, 2019 1:45 pm, edited 1 time in total.

JoeRetire
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Re: Close to making an offer on a home

Post by JoeRetire » Sat May 25, 2019 1:42 pm

Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?

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DanMahowny
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Re: Close to making an offer on a home

Post by DanMahowny » Sat May 25, 2019 3:31 pm

sman09,

I don't think you need any hand holding here. It seems to me that you are completely capable.

Trust your gut. You'll arrive at the correct answer(s).
Funding secured

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Re: Close to making an offer on a home

Post by chevca » Sat May 25, 2019 4:12 pm

sman09 wrote:
Sat May 25, 2019 7:28 am
1. Room for negotiation in a fast-selling market
I'm guessing you're about to learn this one very soon, or have already. In a fast-selling market where a house goes up for sale and immediately gets multiple offers, you are not going to be able to negotiate them down any and hope they take your offer. Especially for, IMO, nit picky stuff like you brought up. Guarantee there is a better offer in front of them and they're not going to take yours just because you really like the house. Guess what? So do the other buyers. And, the seller only cares about taking the best offer they get.

I mean, it doesn't hurt to put in an offer. The worst they can say is, no. I wouldn't get your hopes up if you plan to try to negotiate, or under-bid in a hot market though.

Look into new construction houses. Then you know exactly what you're getting, it's all new with no stains, and there's no bidding wars with other buyers. If you like the house and the price, it's as simple as signing a contract and it's yours. At least initially for the new build.

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Watty
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Re: Close to making an offer on a home

Post by Watty » Sat May 25, 2019 4:42 pm

A lot of your questions depend on your local housing market and even the specific houses so there is no way to give good suggestions.

A few things though.
sman09 wrote:
Sat May 25, 2019 7:28 am
6. things to be aware of should we have to sell the home
on that.

In a hot housing market it will be easy to find a buyer even when a home has issues like a mediocre school, long commute, or it is on a busy street.

In a bad housing market things like these can be critical and it is not uncommon for houses to be on the market for a long time without selling.

Even if you don't plan on having kids pay a lot of attention to the schools. Houses in a bad school district can be very hard to sell.
sman09 wrote:
Sat May 25, 2019 7:28 am
4. any downside of tapping in to 401k to further increase the down payment?
Don't even think of using your retirement accounts for that. If you can't afford it without doing that then don't buy a house now.
sman09 wrote:
Sat May 25, 2019 7:28 am
Possibly even as high as 35 - 40% (which would mean tapping in to literally all the savings in our bank account except for emergency funds), as the money is just sitting in bank and we would rather use it to lower our monthly payments.
Keep an ample cushin of cash for unexpected expenses. The costs of owning a home will add up and you will need to furnish it and do things like buy a lawnmower.
sman09 wrote:
Sat May 25, 2019 7:28 am
4. 15-yr vs 30-yr loan for a buyer who may not be in the home for that duration
If you have a 15 year loan then could you easily max out all your retirment accounts and live on one income if you needed to? If not then go with a 30 year loan.
sman09 wrote:
Sat May 25, 2019 7:28 am
Although most other homes (except for a couple) in the community have a basic fence (to the back yard), this house despite being a corner one does not have one, exposing the entire side and back yard to the street.
A corner lot does not really have a backyard. It has two front yards and two side yards. To me they tend to feel like they are too exposed and you are living in a goldfish bowl with no privacy. It may be personal preference but to me at least a corner lot is much less desirable.
sman09 wrote:
Sat May 25, 2019 7:28 am
there is a chance that in say 5 years from now we may even consider other locations (states) for a better career opportunity.
If you are serious about this then don't buy a house now. In addition to all the costs of selling and buying a house it you may find it easier to relocate if you can easily move. There have been a number of times when I have seen promotions or job offers go to someone in part because they could easily relocate. In once extreme case there was a rare promotion for an unexpected opening for a facility manager position that went to someone on a Wednesday because they could be there Monday morning. They came back and packed up their apartment a few weeks later.

If you are renting an apartment now then consider renting a house until you decide what you want to do.
sman09 wrote:
Sat May 25, 2019 7:28 am
It's also a much longer commute to work.....


If it is a 30 minute commute to work that likely means 30 minutes on a good day but there will also be not so good days, terrible days, and the occasional commute from hell.

I you have a job where you need to be there at a set time then you will have to leave for work extra early just so you can be there if the commute is less than ideal that day. If you will need to pick up a child from daycare then the commute can be a problem too. I have heard of people being dropped by a daycare center because they were repeatedly late in picking up their kid.

I relocated to a city where I bought a house that was about a 30 minute commute to work and it was pretty consistent. By the time I retired about 13 years later the commute was 45 minutes on a good day and more often than not it was not a good day. Most areas are still growing and the commutes will be worse in the future.

Be very cautious about buying a house with a long commute.

runner540
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Re: Close to making an offer on a home

Post by runner540 » Sat May 25, 2019 6:29 pm

sman09 wrote:
Sat May 25, 2019 7:28 am

- the only inclusions are the range hood and ceiling fan. as first-time home buyers with no appliances of our own, we would have to purchase them, if we go with this home. IMHO, for the price premium, they could have included washer/dryer/...

..... The reason i include this information is just to convey that while the $10 - $15,000 (that we desire to get a reduction on the list price) may not be of a great consequence to the seller (i agree, who does not like some extra money), to us it really matters.


4. any downside of tapping in to 401k to further increase the down payment?

apart from not having the funds in the market and let them appreciate, is there anything else to be aware of, in trying to bring down the monthly payment using a large down payment? any penalties even if it's for first-home purchase?
Here's the tough love: You don't mention your income or the house prices, but if $10-15k makes it unaffordable, it was unaffordable to begin with. Same for appliances: if buying those makes things too tight, you are looking at too much house. (If the house prices is $100k, then 10-15k is a bigger deal).

4. Yes, lots of downsides - you don't get to put that money back, and you'll pay penalties and taxes. I am not aware of any allowances to use 401k for first time home purchase.

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8foot7
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Re: Close to making an offer on a home

Post by 8foot7 » Sat May 25, 2019 7:45 pm

Time for some tough love.

The types of questions you are asking along with some of the details you have posted lead me to conclude you are not yet ready to buy any home, not just this one.

The mentality of “this seller seems well to do so they must not need 10-15k like we do so we will submit a low offer and comment on things” is not productive and will get you disappointed and/or eaten alive. The seller does not owe you a washer dryer because his house appreciates over the past few years. Sorry. That’s juvenile thinking.

As someone else said, if 15k is the threshold of affordability then you are trying to punch above your weight.

It also sounds like your second choice home is a poor choice with a long commute.

And pulling money from a 401k to put more than 20% down is frankly absurd.

Not buying is an OK thing, even a preferable option. Don’t let your agent pressure you into things. It just doesn’t seem to
me you are ready or have found the right place for you at the right price.

veindoc
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Re: Close to making an offer on a home

Post by veindoc » Sun May 26, 2019 8:11 am

8foot7 wrote:
Sat May 25, 2019 7:45 pm
Time for some tough love.

The types of questions you are asking along with some of the details you have posted lead me to conclude you are not yet ready to buy any home, not just this one.

The mentality of “this seller seems well to do so they must not need 10-15k like we do so we will submit a low offer and comment on things” is not productive and will get you disappointed and/or eaten alive. The seller does not owe you a washer dryer because his house appreciates over the past few years. Sorry. That’s juvenile thinking.

As someone else said, if 15k is the threshold of affordability then you are trying to punch above your weight.

It also sounds like your second choice home is a poor choice with a long commute.

And pulling money from a 401k to put more than 20% down is frankly absurd.

Not buying is an OK thing, even a preferable option. Don’t let your agent pressure you into things. It just doesn’t seem to
me you are ready or have found the right place for you at the right price.
+10000

You are not ready. A house with no appliances with multiple offers on it on the first day is underpriced. Over priced for you but underpriced for the market.

I can’t believe you would even consider taking retirement money to pay for a house. That’s what downoayment funds are for. I would also hesitate to wipe out your savings for the house.

Moving costs money as does deep cleaning the new house. We spent a couple of thousand cleaning the house which was already pretty clean with a deep clean from a cleaning company, plus steam cleaning carpets and window treatments, scrubbing the grout as well as duct cleaning. Plus furniture and the appliances.

Move on.

Keep in mind, some corner lots can not have fences per the city. In my city this is the case. I learned this from a good friend of my sons. They erected a fence and the city made them take it down. I believe it is to reduce the amount of obstruction to oncoming traffic.

blackholescion
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Re: Close to making an offer on a home

Post by blackholescion » Sun May 26, 2019 8:21 am

Don’t put down more than seller requests for earnest money. That’s usually 500-1k. If you get cold feet and you’re past the inspection period, you will lose that money to the seller. There’s literally no good reason to go past the recommended amount and your realtor will work out with their realtor what that amount is.

cdu7
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Re: Close to making an offer on a home

Post by cdu7 » Sun May 26, 2019 8:46 am

You said there is a high chance you would need to move in the next few years for work reasons. If that really is the case then I would seriously reconsider the need to buy. Also there are many markets (especially VHCOL areas) in which renting is a better financial deal than owning most of the time. That is because rents do not increase proportionally to property values causing a major cost differential between new owners and renters. This may not apply in your specific market, and if property values rise fast enough you can come out ahead in the end (what all those people buying are hoping for), but if you move within a few years chances are that buying will be a bad deal.

snowman
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Re: Close to making an offer on a home

Post by snowman » Sun May 26, 2019 9:17 am

8foot7 wrote:
Sat May 25, 2019 7:45 pm
Time for some tough love.

The types of questions you are asking along with some of the details you have posted lead me to conclude you are not yet ready to buy any home, not just this one.

The mentality of “this seller seems well to do so they must not need 10-15k like we do so we will submit a low offer and comment on things” is not productive and will get you disappointed and/or eaten alive. The seller does not owe you a washer dryer because his house appreciates over the past few years. Sorry. That’s juvenile thinking.

As someone else said, if 15k is the threshold of affordability then you are trying to punch above your weight.

It also sounds like your second choice home is a poor choice with a long commute.

And pulling money from a 401k to put more than 20% down is frankly absurd.

Not buying is an OK thing, even a preferable option. Don’t let your agent pressure you into things. It just doesn’t seem to
me you are ready or have found the right place for you at the right price.
My thoughts exactly. Not really sure why the need to buy a house. Seems like renting is the best option here.

Thegame14
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Re: Close to making an offer on a home

Post by Thegame14 » Sun May 26, 2019 9:32 am

JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain

Leemiller
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Re: Close to making an offer on a home

Post by Leemiller » Sun May 26, 2019 9:33 am

In hot housing markets, you don’t really have the luxury of spending so much time thinking about small issues and how much down you’re going to put. All your financing should be ready to do. The concern over 10k seems to indicate this house is out of your comfort zone financially, but maybe you’re just nervous. I would not make this a choice between two houses, one with a terrible commute. Just be patient if this doesn’t work out but understand that you will have to move more quickly.

We lost out on a very unique home early in our home buying process. In retrospect, we spent too much time quibbling and might have gotten it had we put in an offer quickly and with a short expiration date. Instead we lost in a bidding war.

Leemiller
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Re: Close to making an offer on a home

Post by Leemiller » Sun May 26, 2019 9:34 am

Thegame14 wrote:
Sun May 26, 2019 9:32 am
JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain
You are going to have an extremely hard time buying a used home when this bothers you so much.

CurlyDave
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Re: Close to making an offer on a home

Post by CurlyDave » Sun May 26, 2019 10:07 am

I have lived with long commutes and I have lived with short commutes. You would be amazed by how much more comfortable life is with a short commute. That is worth a lot to me.

Stop obsessing over the oil stain. Get a gallon of paint thinner and a big bag of cat litter. Spread cat litter, then pour paint thinner on it. Move it around with a push broom -- most of the oil will get sucked up into the cat litter. Repeat as necessary.

You are never going to get a desirable house with anything less than the highest offer. If the house you want is out of your price range, look at lower priced ones with short commutes.

You really do not want appliances included in the sale price of the house. You will be buying used appliances with a 30 year loan.

stan1
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Re: Close to making an offer on a home

Post by stan1 » Sun May 26, 2019 10:10 am

Thegame14 wrote:
Sun May 26, 2019 9:32 am
JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain
Thing about it this way. The oil stain is there because a car was parked in that spot. You saw the house with a car parked there. Maybe that's the normal situation and there's no deception?

quantAndHold
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Re: Close to making an offer on a home

Post by quantAndHold » Sun May 26, 2019 10:19 am

Thegame14 wrote:
Sun May 26, 2019 9:32 am
JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain
The oil stain was in the pictures in the listing. It would be hard to assume that they’re trying to hide it.

quantAndHold
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Re: Close to making an offer on a home

Post by quantAndHold » Sun May 26, 2019 10:28 am

blackholescion wrote:
Sun May 26, 2019 8:21 am
Don’t put down more than seller requests for earnest money. That’s usually 500-1k. If you get cold feet and you’re past the inspection period, you will lose that money to the seller. There’s literally no good reason to go past the recommended amount and your realtor will work out with their realtor what that amount is.
This is a local thing, dependent on market conditions. The seller doesn’t set the amount of the deposit. In slow markets, you could get by with $1000, but in a seller’s market, it’s going to be closer to 2-3% of the sales price.

If someone had only written a check for $1k on the last house we sold, we would have thrown out the offer, even if it had been the best offer otherwise. Part of what we were looking for was a deal that was going to close without fuss. We would have assumed that the $1k deposit people were going to find a reason to back out. The offer we took had a $25k deposit.

fru-gal
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Re: Close to making an offer on a home

Post by fru-gal » Sun May 26, 2019 10:59 am

You really don't need to buy your first choice house. Even if prices are going up rather quickly, take your time to look at a bunch of houses before deciding. Unless it's a truly spectacular house, you don't need make a quick decision you may regret.

You said the sale is handled third party. Perhaps the owners had nothing to do with parking the car.

I'm baffled about the appliances. If the owners have already relocated, they would not seem to need them. Are the appliances mega expensive and so the owners are trying to get more money for including them?

Check with the city about restrictions on fencing on corner lots and fence heights in particular. I think you will wind up with open yards, bad for kids, bad for pets.

I would not make an offer on your first choice house. My gut feeling is it has problems and you don't have enough experience looking at houses yet.

Katietsu
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Re: Close to making an offer on a home

Post by Katietsu » Sun May 26, 2019 11:18 am

Please try not to get caught up with “house fever” and put yourself in a financially stressful situation. When deciding how much you can afford to buy, remember that comparing a mortgage payment to rent is not a direct comparison. If you purchase a home, you will have guaranteed costs of taxes and insurance. You will undoubtedly have costs of maintenance and repairs. You will likely want to spend a few thousand dollars on appliances, window treatments and other items to fit your needs. A $1000 mortgage payment could easily be more like a $1500 rent, more if taxes are high, there is an HOA, etc. Then , if you sell, the rule of thumb I have seen is to expect costs of 10% - 15% of the property value for the selling process.

This is not to say that buying a home is a horrible idea for you. Just that one can get caught up in the process and end up making choices they later regret. The real estate agent is a commissioned salesperson and can sometimes “help” create the sense of urgency in purchasing the home. Take a deep breath. HUD and FHA used to have some good guides to first time home ownership. I would see if you can find anything there.

JoeRetire
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Joined: Tue Jan 16, 2018 2:44 pm

Re: Close to making an offer on a home

Post by JoeRetire » Sun May 26, 2019 11:43 am

Thegame14 wrote:
Sun May 26, 2019 9:32 am
JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain
The same oil stain you saw in the listing photos? If somehow you feel deceived by that, you will likely never find a house completely lacking in perceived deception.

I think you are too new to the process to understand how selling and buying works. And I think your current expectations are rather unrealistic. That's okay - we all have to start somewhere. Spend more time with your (hopefully trusted) agent. Ask more questions. Learn what the process is really like in your locale.

Good luck.

JoeRetire
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Re: Close to making an offer on a home

Post by JoeRetire » Sun May 26, 2019 11:48 am

Katietsu wrote:
Sun May 26, 2019 11:18 am
Then , if you sell, the rule of thumb I have seen is to expect costs of 10% - 15% of the property value for the selling process.
Having just sold our house a few months ago, I think this is far too high.

veindoc
Posts: 556
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Re: Close to making an offer on a home

Post by veindoc » Sun May 26, 2019 12:26 pm

JoeRetire wrote:
Sun May 26, 2019 11:43 am
Thegame14 wrote:
Sun May 26, 2019 9:32 am
JoeRetire wrote:
Sat May 25, 2019 1:42 pm
Thegame14 wrote:
Sat May 25, 2019 10:59 am
I think the first house is going to get into a bidding war and likely go 20-25K over asking and I dont like the deception no matter how small...
What deception?
about the oil stain
The same oil stain you saw in the listing photos? If somehow you feel deceived by that, you will likely never find a house completely lacking in perceived deception.

I think you are too new to the process to understand how selling and buying works. And I think your current expectations are rather unrealistic. That's okay - we all have to start somewhere. Spend more time with your (hopefully trusted) agent. Ask more questions. Learn what the process is really like in your locale.

Good luck.
We spent three years looking for a home because we were obsessed with the details. This was mostly because we had zero DIY skills and got spooked by everything. We also went through five different agents. Our last agent was our landlord who was as sweet as pie and very accommodating. But when we were just about to make an offer on a home, I asked to look at more houses and she basically talked me down from the ledge with a slap in the face. Glad she did. We’ve been here 8 years and counting. No regrets. Good luck. I hope you find the home of your dreams.

Dottie57
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Re: Close to making an offer on a home

Post by Dottie57 » Sun May 26, 2019 1:05 pm

Lots of people are very naive whenbuying and first timers often want a dream home.

A nearby suburb was working with a developer to build condos designed for first time buyers. My mom urged me to go look at models. I did. Reported back to mom thatI was disappointed.

Mom: how is your kitchen? Is it bigger than your apartment?
Me: yes bigger and counter for 2 to eat at.
Mom: Appliances?
Me: refrigerator, stove, microwave, dishwasher.
Mom: new?
Me: yes
Mom: you have 1 bdrm appartment. How many bedroom?
Me: 2
Mom: How is the bathroom?
Me: one. Toilet and tub in one room. Attached room with sink and small linen closet. Bigger than yours.
Mom: so what are you expecting - a palace?
Me: :shock: But my furniture won’t fit.
Mom: everything you have is from garage sale or used from my house. Go back and look again.


I signed papers the next week. Corner unit with fewer neighbors with connected walls/floors. Still here after 30+ years.

Moral of story: Don’t look for a dream home. Look for something that meets your needs (not want). and may be 1step up from what you have. Owningis not magical. It has responsibilities.
Last edited by Dottie57 on Sun May 26, 2019 1:12 pm, edited 1 time in total.

student
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Re: Close to making an offer on a home

Post by student » Sun May 26, 2019 1:11 pm

Dottie57 wrote:
Sun May 26, 2019 1:05 pm
Mom: everything you have is from garage sale orused from my house. Go back and look again.
Funny. Thanks for the story.

cherijoh
Posts: 5778
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Close to making an offer on a home

Post by cherijoh » Sun May 26, 2019 1:54 pm

Dottie57 wrote:
Sun May 26, 2019 1:05 pm
Lots of people are very naive whenbuying and first timers often want a dream home.

A nearby suburb was working with a developer to build condos designed for first time buyers. My mom urged me to go look at models. I did. Reported back to mom thatI was disappointed.

Mom: how is your kitchen? Is it bigger than your apartment?
Me: yes bigger and counter for 2 to eat at.
Mom: Appliances?
Me: refrigerator, stove, microwave, dishwasher.
Mom: new?
Me: yes
Mom: you have 1 bdrm appartment. How many bedroom?
Me: 2
Mom: How is the bathroom?
Me: one. Toilet and tub in one room. Attached room with sink and small linen closet. Bigger than yours.
Mom: so what are you expecting - a palace?
Me: :shock: But my furniture won’t fit.
Mom: everything you have is from garage sale or used from my house. Go back and look again.


I signed papers the next week. Corner unit with fewer neighbors with connected walls/floors. Still here after 30+ years.

Moral of story: Don’t look for a dream home. Look for something that meets your needs (not want). and may be 1step up from what you have. Owningis not magical. It has responsibilities.
Moral of the story: Listen to your mother! :wink:

quantAndHold
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Re: Close to making an offer on a home

Post by quantAndHold » Sun May 26, 2019 5:02 pm

JoeRetire wrote:
Sun May 26, 2019 11:48 am
Katietsu wrote:
Sun May 26, 2019 11:18 am
Then , if you sell, the rule of thumb I have seen is to expect costs of 10% - 15% of the property value for the selling process.
Having just sold our house a few months ago, I think this is far too high.
This is indeed far too high. 6% to realtor, plus local taxes. In our case taxes were 1.7%. If you’re over the cap gains exclusion limit, then cap gains on the part that’s over the limit.

Katietsu
Posts: 2077
Joined: Sun Sep 22, 2013 1:48 am

Re: Close to making an offer on a home

Post by Katietsu » Sun May 26, 2019 7:13 pm

quantAndHold wrote:
Sun May 26, 2019 5:02 pm
JoeRetire wrote:
Sun May 26, 2019 11:48 am
Katietsu wrote:
Sun May 26, 2019 11:18 am
Then , if you sell, the rule of thumb I have seen is to expect costs of 10% - 15% of the property value for the selling process.
Having just sold our house a few months ago, I think this is far too high.
This is indeed far too high. 6% to realtor, plus local taxes. In our case taxes were 1.7%. If you’re over the cap gains exclusion limit, then cap gains on the part that’s over the limit.
I just mentioned this range as a number I have seen in a few different places. I believe it also includes costs that will be highly variable like repairs and refreshing. And I think expressing it as a % might skew the numbers. But I would say that there are usually costs that first time sellers have not thought.

Topic Author
sman09
Posts: 264
Joined: Fri Mar 23, 2018 12:02 am

Re: Offer responded with counter offer

Post by sman09 » Thu Jun 06, 2019 5:11 pm

Thank you everyone for your inputs that were very helpful!

I read the advice that came in many times trying to internalize the core essence and over the last few days been using them as guidelines in shortlisting homes. The most prominent one i keep recalling is - if putting in a 20% down payment (and not more) does not make the mortgage feel comfortable, then the home is not affordable.

As we kept seeing more homes after this post, we came across one that we liked and made an offer for the list price. Given how competitive the market was said to be, at least per what our agent said, we did not think there was any chance for us - we simply accepted the asking price. Surprisingly, our offer was considered and the seller made a counteroffer which had the following elements:

- the HOA transfer fee will not be paid by the seller (comes to under $2,500)
- the seller will not pay for the home insurance for the first year (which was in the offer stated to be maximum of $500)
- the seller wanted the home for an additional 10 days, over the date of closing that was in our offer

We discussed with our agent regarding asking them to share the expense on the HOA transfer fee. Our agent informed that the seller was very particular that the buyer must pay. When we stated our concern about the possibility of us paying the HOA transfer fee twice if when we sell we don't find buyers who agree to it (then we may have to pay for it again to attract buyers), the agent mentioned that when it comes time to sell, we will not have any issue and that our buyer will also pay the same as the home is in a desirable neighborhood. We were not convinced as we have heard/read of sellers even covering the closing cost (which is not so in our case) and the seller here is not even considering this - also, we felt we could never be so sure.

To our question about the seller being so rigid in demanding so many things at this stage and not budging (including having indicated (after the first round of offer) that they were looking for the best offer and one that waives appraisal contingency - looks like none came through and our's was considered), what was the chance that they would negotiate if the appraisal came lower. Our agent assured us that then we could cancel the contract. We were like, that's true - but we would have lost the time and have to restart all over again and not mention the fees on inspection and appraisal.

As we kept asking questions, including request to show one more home so that we may decide clearly whether to accept the counteroffer or go with this new home, our agent said, even as we speak someone could make an offer and take the home away from us and that if we really like the home we should agree to the counteroffer and then think/discuss and if necessary even cancel the offer later. Also they mentioned the deadline time being a few hours away and saying so, forwarded the mail with the link to sign the amended contract.

Even as we signed, we felt something was not fine as were merely agreeing to all terms the seller put forth without ourselves demanding anything in return. However, as the home was good and there was the possibility of us losing the chance to even consider it further, we signed the paper as is.

Now that about 24 hours have passed, we have completely stepped away from any thoughts about that home and discussed calmly about other possibilities in trying to decide whether to cancel the contract even at this stage without even depositing the earnest money. We even asked our agent to help us visit couple more home and there has been no update.

As we are first-time buyers, wanted some inputs to guide our thinking. While for the sake of additional $2,000 - $3,000 we do not want to lose the possibility of getting a good home, we also don't want to waste money unnecessarily just because the seller is demanding. However, we also don't want to act emotional or buy a home just because it seems like a great one - as good homes keep coming up all the time(reading the inputs on this topic above and other posts gave a lot of perspective and we do not want to act impulsive).

We would like to get your inputs on these

- is it common for sellers, even in a market where property prices have appreciated, to refuse to pay for some of the closing expenses for the seller?

- in which contexts does the seller pay for closing cost or share expense? is it a normal thing in markets with appreciated homes or based on specific case.

- are we correct in our thinking that we made a weak counter-offer. we expected our agent to engage in further negotiation and make another counteroffer from our end proposing sharing the expense on HOA or closing cost etc., Instead we were asked to sign if we want the home and then think later which we did

- could we still raise our concerns and amend the counteroffer? or once we sign is it final?

- any risk in letting the contract lapse without depositing the earnest money if suppose we decide not to proceed?

- would paying the earnest money and having the house as a possible option for a few more days while we consider other homes in the area be a smarter move?

- anything important to keep in mind so that we are in the clear on this or any other homes as we move through subsequent stages after the offer is accepted

- except for the time during the visit when we meet, all other discussions with the agent are happening as text messages - is it normal? we felt being able to sit face to face or at least over phone would be ideal - but being to new to this process we could be desiring things which is not the norm. so just wanted to confirm

Thanks again for your help

Olemiss540
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Re: Close to making an offer on a home

Post by Olemiss540 » Thu Jun 06, 2019 5:47 pm

I am sorry things are not going swimmingly, but I wanted to offer some views from my sofa:

1.) Dont worry about getting a "deal" or 2000 dollars effecting your decisions after the fact. This is an extremely important decision but having second thoughts after the fact is normal.

2.) Is the offer contingent on an inspection? This process should help ease your minds that you are getting exactly the house you agreed to purchase and give you a very simple way to leverage some repairs as another negotiation.

3.) The realtor sounds very concerned about getting commission as quickly as possible. I can NOT imagine being instructed to sign/execute a legal and binding document with the intent it could quickly be cancelled. Seems like a questionable move from the realtors part AT MINIMUM.

4.) The document is signed so try to STOP shopping and start imagining yourselves living in the house you just purchased! Remove the anxiety over the "perfect" home or fringe costs you have already agreed to take as part of the purchase. Being in a hot market makes it much harder to finagle minor charges.

Congrats! If this sale falls through I would consider my options with regards to the realtors tactics. If it feels like a pressure driven sales tactic in person, consider finding a realtor that is better suited to a first time buy and that will be patient as your mindset and desires develop.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

barnaclebob
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Re: Close to making an offer on a home

Post by barnaclebob » Thu Jun 06, 2019 6:03 pm

If you are concerned about having to pay that fee twice then don't worry about it. What matters is the total value of the sale when it comes time to sell. Your future buyers may not have cash to pay for the transfer fee so you would counter with a price $2500 higher and pay the fee and it nets out to no difference for you as long as the house appraises.

Your realtor didn't sound that pushy to me and sometimes first time buyers need a little steering.

If you like the house and the overall price is good then don't worry too much about how the seller acts.

Topic Author
sman09
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Re: Close to making an offer on a home

Post by sman09 » Thu Jun 06, 2019 6:26 pm

Thank you @olemiss540 and @barnaclebob for further inputs to guide our thinking.

Interestingly in our case after signing the accepting the counteroffer, we lost interest in the home, so to speak. As in not looking at the pictures and talking anything about the home and doing everything else. Your inputs are helpful.

Aside, we keep hearing and even reading here on BH that people offer to pay more than the list price. How does it work - given there will be an appraisal stage after this, would not the bank agree to offer a loan for only $x for the loan whereas $x + 10,000 is what may be needed? Do buyers pay for the extra amount beyond the valuation out of pocket (apart from down payment)?

If suppose we proceed ahead and the homes is valued $10 - 15,000 less than asking (our agent said it would be so based on their experience in the field) and we make a demand that the sale price must match the home appraisal and if suppose the seller refuses to relent or agrees to only say $5,000 reduction, would we paying the difference from our side?

Thanks again!
Last edited by sman09 on Fri Jun 07, 2019 8:59 pm, edited 1 time in total.

mortfree
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Re: Close to making an offer on a home

Post by mortfree » Thu Jun 06, 2019 6:30 pm

Sellers counter was perfectly acceptable.

Why would they cover your closing costs or even the home insurance?

I can’t speak to the HOA transfer.

I think you are just looking to WIN. Your win is getting the house.

You should read the thread about the demanding buyer. There’s a link in there about nit picking.

Topic Author
sman09
Posts: 264
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Re: Close to making an offer on a home

Post by sman09 » Thu Jun 06, 2019 6:33 pm

Olemiss540 wrote:
Thu Jun 06, 2019 5:47 pm

2.) Is the offer contingent on an inspection? This process should help ease your minds that you are getting exactly the house you agreed to purchase and give you a very simple way to leverage some repairs as another negotiation.
yes, it is contingent on inspection
Olemiss540 wrote:
Thu Jun 06, 2019 5:47 pm
4.) The document is signed so try to STOP shopping and start imagining yourselves living in the house you just purchased! Remove the anxiety over the "perfect" home or fringe costs you have already agreed to take as part of the purchase. Being in a hot market makes it much harder to finagle minor charges.
Thanks for the perspective!

for some reason paying more for the home as part of the loan payment does not seem that daunting/anxiety inducing as paying out of pocket upfront as closing cost.

Olemiss540 wrote:
Thu Jun 06, 2019 5:47 pm
Congrats! If this sale falls through I would consider my options with regards to the realtors tactics. If it feels like a pressure driven sales tactic in person, consider finding a realtor that is better suited to a first time buy and that will be patient as your mindset and desires develop.
thanks again. we have a 6 month contract with this agent though. hoping there would be no need for such efforts and things get a fine closure

quantAndHold
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Re: Close to making an offer on a home

Post by quantAndHold » Thu Jun 06, 2019 8:29 pm

The seller’s counter is perfectly reasonable. It’s not an everyday thing for the buyer to pay some of the closing costs, but it isn’t unheard of in a seller’s market. If you like the house, I would just move forward.

If you do change your mind, you can always get out of the deal when the inspection turns up something.

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Watty
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Re: Close to making an offer on a home

Post by Watty » Thu Jun 06, 2019 8:57 pm

I didn't follow all the details but a few comments;

1) Most likely the seller does not really care about what closing costs they pay, they just care about the bottom line. If you make a full price offer that included $3K in non-customary closing costs then you made an offer that was $3K below the full price.

2) Even if the seller was Ok with those closing costs your lender may not allow them since people will often try to play with various costs and holdbacks to game the system. During the 2007 housing bubble people played all sorts of games so they revised the lending rules about what costs could be rolled into the mortage. The seller could be concerned about this and wants the transaction to be as straightforward as possible.

3) If the seller paid those extra $3K in costs then your property taxes would be based on a price that is $3K higher and you could be paying higher property taxes as long as you own the house.

bayview
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Re: Close to making an offer on a home

Post by bayview » Thu Jun 06, 2019 9:14 pm

Leave out the emotion.

Do you want this house or not?

If you want it, can you afford it (including whatever you have to do to get it livable) or not?

It isn’t the job of sellers to make homes affordable for buyers. Sellers want the best price/cleanest deal; buyers want THEIR best price. That’s pretty much the definition of market value.

Think about setting your price range lower, and look at homes whose prices won’t have you staring at the ceiling in the middle of the night for the next 5-10 years. Chances are that you’ll be selling it in the next seven or so years anyway. Good luck! :beer
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

rascott
Posts: 232
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Re: Close to making an offer on a home

Post by rascott » Thu Jun 06, 2019 10:20 pm

sman09 wrote:
Thu Jun 06, 2019 6:26 pm
Thank you @olemiss540 and @barnaclebob for further inputs to guide our thinking.

Interestingly in our case after signing the accepting the counteroffer, we lost interest in the home, so to speak. As in not looking at the pictures and talking anything about the home and doing everything else. Your inputs are helpful.

Aside, we keep hearing and even reading here on BH that people offer to pay more than the list price. How does it work - given there will be an appraisal stage after this, would not the bank agree to offer a loan for only $x for the loan whereas $x + 10,000 is what may be needed? Do sellers pay for the extra amount beyond the valuation out of pocket (apart from down payment)?

If suppose we proceed ahead and the homes is valued $10 - 15,000 less than asking (our agent said it would be so based on their experience in the field) and we make a demand that the sale price must match the home appraisal and if suppose the seller refuses to relent or agrees to only say $5,000 reduction, would we paying the difference from our side?

Thanks again!

The list price has nothing to do with market value or the appraised value. Those are entirely based upon sales prices in the immediate area.

Sometimes sellers intentionally list below market price to create bidding wars. No different than an auction of any other product.

I'd advise you to ignore list prices and look heavily at recent sales in your desired areas. That will give you an idea of current market values. Typically RE is based upon $ per sq ft....and then adjusted upward/downward for desirable/undesirable features.


You will pay whatever you and the seller agree to pay. Most contracts that are using financing have appraisal contingency. If the house doesn't appraise, you can try to renegotiate price lower...but seller isn't required to do anything. You can get out of the contract at that point, however.

Appraising is a guesstimate.... Typically it comes back at agreed upon price. Unless it's way overpriced. Which is doubtful here.

softwaregeek
Posts: 153
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Re: Close to making an offer on a home

Post by softwaregeek » Thu Jun 06, 2019 11:11 pm

Also, consider a 10/1 arm mortgage. And be sure to get quotes from at least three lenders. There is a lot of deception in the mortt market and the only way to know if you are really getting a good deal is to get multiple quotes.

mortfree
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Re: Close to making an offer on a home

Post by mortfree » Fri Jun 07, 2019 3:29 am

Watty wrote:
Thu Jun 06, 2019 8:57 pm


3) If the seller paid those extra $3K in costs then your property taxes would be based on a price that is $3K higher and you could be paying higher property taxes as long as you own the house.
You lost me here. Maybe it is location dependent but property taxes in PA are based on the assessed value which doesn’t change at purchase time for an existing home. People can actually challenge the assessed value if they feel it is too high.

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