what would MM do?

CuriousKiddosMama · July 2014

We got an offer on the house tonight. I'm really happy because it means we can move forward, but there are 2 questions we need to figure out.

They offered 6k above asking, but are asking for 7k in closing- I'm unsure of this because we were warned that appraisals are coming in low right now because appraisers haven't figured out that the market is on a huge uptic in the area. So what would you do there? Accept that, or ask for list with no closing?

Also, they want us out August 15- and our new house won't be ready by then, We are thinking it will be ready sometime between then and the end of August. Would you ask to push closing, or just move out early and move in with my sister and get a storage unit. Mind you, I have a one year old- so that complicates matters a bit, but not entirely. Also if the closing for our current house is AFTER the new house then we would have to have the mortgage 'recast' to include the money we get from the sale. This is a $500 fee so not entirely major, but something to consider.

So what would you do contract and closing wise? They want an answer tomorrow, so this is time sensitive, but I appreciate any responses!!!!

hoffse · July 2014

Well a few thoughts:

1) The reason they want closing costs is because it's more immediate for them than a higher asking price. You are essentially coming out within $1,000 of asking either way. That said, if the house doesn't appraise then it's money out of your pocket and not theirs. As I recall, you JUST listed the house, didn't you? If so, I probably wouldn't offer closing costs at this point. That's something to offer post-inspection if/when the inspector finds stuff. Sellers who sell within a couple weeks really don't need to compromise much at the beginning, at least in my opinion. Of course you don't want to piss them off, but still.... $7K of closing costs is sort of demanding for them to start with.

2) If you ask them to delay closing, it seems reasonable that you would pay the delay/extension fee (if any). Odds are their bank will have a 30 or 60 day lock on their rate, and pushing it back might cost money. Pushing ours back would cost $1,000. We're discussing that with the sellers right now because they haven't found a house and so they want to stay in the house longer. But we aren't going to pay the $1,000 fee ourselves if they really want to push back closing.

3) You could try to do a lease-back instead of pushing closing. I wouldn't be willing to do that as a buyer (we opted to decline that from our seller), but I don't think most buyers are going to contemplate the implications of being a landlord for a few weeks like we did (insurance, taxes, liability, etc.). Our realtor was remarkably blase about it actually - they were all, "Oh people do this all the time!" And I'm like, "Yeah... I would want to write the lease myself." My point is, if the buyer went for it then you could close on time but still stay in the house for a couple more weeks.

CuriousKiddosMama · July 2014

We listed it Monday, so that's part of the reason I'm just not feeling this. The offer is good except for that part. The appraisal is a big worry for me because of what our realtor said about them being behind the market right now. But that also means we may get a good appraiser who is up on the market.
They just got approved for their loan on Monday so I would assume there will be no issue with that. Although I'm glad you pointed it out. One more thing to ask the realtor.
We aren't really wanting to do the lease back because we have no closing date for the new house and will only know 30 days in advance. So if we agree to a month lease back we may end up paying them and only staying for a week.
Thanks hoffse!

Xstatic3333 · July 2014

I'd hold out longer, too. Honestly the first thing that comes to mind with this offer is "these people don't have much extra cash in the bank." It seems like they basically just want to finance their closing costs. We asked for closing credit right off the bat, but our house had been on the market a while. We didn't compensate by offering a higher purchase price. We also had some info on the seller (she wasn't underwater and had already moved across the country) that made us think she'd want a quick and easy sale. None of this seems to apply in your situation. You could also counter and see how it goes.

Good luck!

CuriousKiddosMama · July 2014

I think you may have hit the nail on the head xstatic3333. Got to the end of the document and she is approved for a loan with only 3.5% down. I didn't even know they did that anymore- I thought there was a minimum of 5 or 10% down to be honest. So she may not have the $ for closing costs- in which case we may lose this deal if we counter tomorrow- but it has only been on the market for 4 days so I'm sure we will get another offer.

Honestly though- we did get a second offer today, that I pretty much laughed at. It was an investor and they offered us 1/2 of list price. Must have thought we were desperate to leave or something. It was insane!

smerka · July 2014

Can you handle two mortgages if you pass on this offer? We haven't bought a house since 2008, but $7,000 seems ridiculously high for closing costs. It sounds like they are padding for the appraisal.

CuriousKiddosMama · July 2014

Our current house is paid for, so yes that's not a deal breaker for us. I think you may be right on padding for the appraisal- and like hoffse said if it doesn't appraise and we said we would pay closing, we still have to pay closing costs.

Xstatic3333 · July 2014

vikingsfan711 said:

I think you may have hit the nail on the head xstatic3333. Got to the end of the document and she is approved for a loan with only 3.5% down. I didn't even know they did that anymore- I thought there was a minimum of 5 or 10% down to be honest. So she may not have the $ for closing costs- in which case we may lose this deal if we counter tomorrow- but it has only been on the market for 4 days so I'm sure we will get another offer.

Honestly though- we did get a second offer today, that I pretty much laughed at. It was an investor and they offered us 1/2 of list price. Must have thought we were desperate to leave or something. It was insane!

The FHA program still only requires 3.5% down. Honestly, I have a lot of friends who have done FHA and they're perfectly responsible, just not MM in a way that makes them think about the repercussions of the PMI. H's work buddy, for example, just got an FHA loan and swears he doesn't pay PMI at all. I'm assuming he does one escrow payment and doesn't realize what it includes.

The FHA thing also explains why the $7,000 seems high. Your house is selling in the mid-100s, right? When I initially asked about closing costs, my lender laughed when I said I'd been told $6,000 by friends (I'm a mid-100s buyer, though I know these things vary a lot by state). He said, "I bet your friends had FHA loans," and he was 100% correct. Apparently closing costs are higher because they need to pay a year of PMI in advance.

Either way, good luck as you proceed!

ETA: Both of "my states" also have state programs that require only 3.5% down for first time homebuyers below a certain income threshold. And there's also Rural Development and VA loans which I believe are still zero DP required. It's not necessarily FHA, just seems most likely.

vlagrl29 · July 2014

7k in closing seems really high to me. We only paid 2k in closing when buying our house. Also, I wouldn't want to do 2 moves. I would just want to move into your next home and not with a family member, especially with a 1 year old.

CuriousKiddosMama · July 2014

It is an FHA loan, so that may explain the closing costs.
I'm really hoping this morning we hear from the builder first otherwise I think we may ask to push closing until the end of august

purplehaze11 · July 2014

I would say you are in huge driver seat on this since you just recently listed. I wouldn't think pushing closing should be a deal breaker,

Wulfgar · July 2014

I always thought that it was 30 days at minimum from the day that the papers were finally signed if not longer. It seems like the one buyer is in a rush to get your house so they maybe willing to deal.

MommyLiberty5013 · July 2014

I think it varies, but generally a conventional buyer doing bank financing will take 30 days to close. A buyer doing a government loan like FHA (in this case) typically takes 45-60 days to close. I don't think the buyer dealing with OP is realistic in closing on August 15th with a FHA loan.

Also, I would NOT do a lease back. This means you have people that you don't know in a home you own and pay insurance on while you aren't there. Seems like it's a liability insurance disaster waiting to happen.

CuriousKiddosMama · July 2014

Well we got a second offer this morning, so that is making things more interesting. They are both FHA- so they both have the same potential issues. We asked both buyers to give us their best offers, and we will see what we get from them, and if anything else comes in during that time. Apparently FHA loans are complicated for both the seller and the buyer since the mortgage crisis, and that is what worries me. I'm kind of hoping we get a 3rd offer this weekend that is conventional mortgage. Otherwise we will accept the one that nets us the most I guess and hope it works out.

We found out from the builder that we won't be closing until the end of August, so we will definitely be moving in with my sister for a week or two. Not ideal, but that's okay.
Thanks for the advice and thoughts everyone! I appreciate it!

Wulfgar · July 2014

My parents sold there house with an FHA mortgage and they had to do repairs. Luckily the person buying it was my brother's classmate so he helped fix it up to get the mortgage.

CuriousKiddosMama · July 2014

Wulfgar said:

My parents sold there house with an FHA mortgage and they had to do repairs. Luckily the person buying it was my brother's classmate so he helped fix it up to get the mortgage.

That's what we are afraid of. We have another showing this morning, so maybe something comes of it that's not FHA in the mean time we are taking our time negotiating just in case something else does come in. I know the repair could be very small and not end up being anything at all, but who knows until you get there- and when you are a week before closing or so that's a rough spot to be in. And I'm really hoping we don't have to go there.

ToastieSimons · July 2014

Wulfgar said:

My parents sold there house with an FHA mortgage and they had to do repairs. Luckily the person buying it was my brother's classmate so he helped fix it up to get the mortgage.

We bought our last house with an FHA mortgage. And they required a ridiculous list of repairs. The house was owned by an old lady who couldn't really afford to do them so we did them.

It was replace the garage window because it had a crack. (an old farmhouse, this was not a nice window). So the lady had a piece of plexiglass which we cut down and put in there. Peeling paint on a section of the house. So DH and I sat there and scraped the paint off and put a new coat up. And get an inspection of the garage wall because of a settlement crack. Thankfully, we new someone and it only cost us like $50. I couldn't even believe the paint, it's cosmetic. Then an FHA person had to come reinspect it. It really seemed like they just wanted to make sure we were serious about buying it.

CuriousKiddosMama · July 2014

@toastieSimons that is completely my fear. I can understand a repair if it's something needed- but paint is completely cosmetic (at least until the siding starts to rot, but even then). I don't know if this was the same before the mortgage crisis, but I don't know how this is helping things any! I'm afraid that something big is going to come back just because they can, and then we will be walking away from the house losing money. And we thought we were at a good time to sell so we could walk away and not have to leave anything behind, up until we learn about this type of crap.

I guess the only thing now is to wait and see. We signed the contract last night, so hopefully it works out. If they come up with something rediculous- we may not do it and put the house back on the market and wait for a conventional loan. I just canceled 3 showings for today that people have requested since I went to bed- so hopefully the market won't slow down too much in the next month.

what would MM do?

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