06-10-2012 10:59 PM
A few months ago we found the perfect house, except it was a short sale. Because of our extreme interest in the property, we decided to make an offer. Here are the order of events.
Day 1: Property is listed at $489K (amount owed to bank). Seller and buyer's agents say home is valued around $450K. We go ahead and make an offer of $450K, and the seller accepts our offer - we move on to inspection and P&S.
Day 5: We go through inspection - all goes well... Sign P&S and make 5% deposit. Offer is submitted to seller's bank for approval.
Day 20: We order an appraisal to start underwriting process. Appraisal comes in exactly at offer price, $450K.
Day 73: We heard nothing for well over 2 months from the seller's bank. On this day bank comes with a counter offer of $460K.
We are confused what we should do at this point. If we offer an extra $10K, we can't get all the proper financing. My attorney advised we don't pay the $10K in cash as this would show our lender we are not responsible borrowers. The seller's agent says it makes sense to pass on our appraisal to the seller's bank to contest and possible challenge the counter offer.
We don't want to wait another couple of months to get a response from the seller's bank.
06-11-2012 02:37 PM
In many ways, this comes down to whether it is worth it to you to wait for the 10K reduction. You will probably get it (though NO guarantees, especially if they have their own appraisal at the 460K). You will, more than likely, have to wait a long time for it, if that has been the nature of the transaction so far.
Consider yourself purchasing milk late night for morning coffee. The convenience store is the only thing open - but you are out already, and there. Milk is 5 bucks a gallon. You can pay the 5 bucks and be done. You know you might be overpaying, but your time and convenience and sanity are worth the couple extra bucks.
Or, you can get up 20 minutes early, go to the grocer and pay what you think it should cost - closer the 3 bucks, not 5. But it requires getting up early, going out early, and hassling around for a while to get what you wanted, possibly being late, and not being able to enjoy the coffee nearly as much as you might have had you had the milk already. Worth it? To some it would be. To some, it wouldnt.
Consider the 10K surcharge a convenience fee. Do you have it available to you? Are you willing to pay it to be able to move in and start your life earlier than you might otherwise be able to? Yes, you will pay it in cash. The lender will only finance based on the 450K value. That said, it is not unusual in many markets for buyers to pay a premium for a home they really want - because to THEM, it is more valuable (due to timing, location, uniqueness, you name it) than to the average person. It does not make you irresponsible, necessarily, and your lender doesn't care - they are looking only at the numbers for their position. Your cash input is irrelevant, provided it doesn't deplete your savings so much that it affects the strength of your application.
Would you rather send back the appraisal, stall out, and wait for what is probably a more "market correct" price for the short, based on the appraisal? You can certainly do that. It may save you money. It may take "forever", it may not. There is the possibility that after all is said and done, the bank says "460K or bust" anyway. They are the ones losing their shirts to sell the home, and so they get to say that if they want to. Whether or not it would be wise of them (probably not) doesn't really factor in . . .
Consider what you may lose during the waiting time. Are you paying rent? Are you stuck in limbo? Are you likely to have to pay for more rush services, or be inconvenienced more later on than now? How does that factor in?
Is the "principal of the thing" meaningful to you? Getting the appraised value as price, and nothing more? Appraising is part art, part science and 10K on a 450K home is pretty minimal - another appraiser may give it a value of 440K or 460K, instead of 450K . . .but that said, we rely on the appraisers to be the final say. And this one says 450K. Do you want to dig in your heels for that? You have the right to do it.
Are there other buyers? were there multiple offers? what is the chance that you are up against someone else who is willing to pay that extra 10K? Are you at risk of losing the property entirely, the property you love so much? Is it worth it to you?
In the end, this is a pretty personal decision. . . . carefully weigh your OWN priorities (and finances), and decide accordingly. Dont let anyone else tell you that you make the "wrong" decision - there are strong arguments for both.
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06-12-2012 06:24 PM
This is a tough situation.
The bank is losing 40k on your offer. On the other hand, they lent half a million on a low downpayment, so they set themselves up for the risk.
If I were you I'd probably come back with a final counter-offer of 450k along with the appraisal (ie don't budge). If not, I'd walk. I would not pay an extra 10k. If I counter-offered I would give the bank at most 2 weeks (put an expiry date on your final offer). Maybe the seller can pony up 10k on his loan and save himself some trouble. Or the bank will decide that your offer will save them the most time and money. If I walked, I'd keep my eye on the house (it may eventually be foreclosed), but I would do my best to find something else and put that house behind me.
06-13-2012 05:14 AM - last edited on 06-13-2012 08:35 AM by GabeV
I would suggest showing the lender the appraisal and explain to them that you can not come in higher....your agent should be able to convince them to accept the offer...and it shouldn't take a couple of months...just a week or 2
12-07-2012 04:43 AM
If that extra 10k will ruin my budget, I'd probably let go. Why? It's because I can't afford to extend more. Yes you really want the property but I assure you there are other properties out there who will definitely suit the money you have now. In buying a property especially a home, one should be patient about it. It needs a lot of time for research and double that when it comes to decision making. Goodluck and hopefully you do the right decision.