Homeowmers

mamie329 · March 2010

I posted this on the Buying a Home board, but, per usual, need to request advice from my J9 crew.

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Looking for advice, reality doses, virtual hugs... something.I just heard that the house we're buying appraised for 6K under the contract price (119K vs 125K). My realtor is contacting the seller's agent now, and I'm just waiting.Though we are putting 6K down, we'd be technically eligible for the mortgage, though I realize it would be stupid to pay more than the house is worth and start off with negative equity.In an ideal world, the seller would just drop the price to the 119K, but she's already giving us 3750 in seller assist, plus putting 5K in escrow for the township's sewer lateral upgrade, and another $500 in inspection repairs. I just don't know how much more of a hit she's going to take at this point.I'd love to hear from any other buyers/sellers with low appraisals and what your experience has been.

megs1383 · March 2010

hmm, sorry mamie I can't really help ya there. Our selling and appraisal prices were only $100 difference, in our favor. Though the seller did not help pay closing cost, so that ran us about $11,000 on top of the house cost.

I'd definitely get the realtors advice on this.

Savy _05 · March 2010

I'm not much help on this one either, our house appraised at right what we were buying it for.

I will say, my parents recently went through a divorce and were itching for a quick sell of their home. The inspection and everything went fine, my parents and the buyers agreed on a price and everything was great until the appraisal came back at 45 thousand!!! LESS than the price that had been decided on, my parents were furious. They obviously hadnt thought about the crappy economy and the horrible effect it has on the appraisal value of homes. The buyers ended up getting the house for the appraisal price.. the buyers just stood their ground and wouldnt go a cent over the appraisal value. It was crappy for my parents but the buyers got an amazing price for their home. So maybe standing your ground and letting the sellers know that the bank will not let you pay more than appraisal value on a home is the best way to go.

vhcoleman09 · March 2010

This happened to us when we bought our house a year and a half ago. Our house appraised for $3K less than what we were planning to pay, and sellers had already agreed to pay some of the closing costs. At that point, the sellers offered to split the difference with us, basically lowering the price by $1500. We should've taken it, but instead we attempted to stand our ground and get everything we had before but paying $3k less. Long story short...it didn't work. I didn't realize this was possible, but by our declining their offer to split the difference, it basically took us out of contract to the point of negotiation and opened the house up for other bids. So we actually had to submit another contract and were up against other offers on the house. It sucked and was super stressful! We ended up paying what the house appraised for, but didn't get any closing costs. I'd say it all depends on your market what you want to do. Ideally, you'd just pay what the house is appraised for and still get all the agreed-upon extras too.

mamie329 · March 2010

Thanks for the stories! I'm still waiting to hear back from my realtor. I did note that in the pictures of the house in the appraisal report, the seller has boxes in some rooms, which means she wants to sell and move, right???

MAJOR HOUSE DUST PLZ!

hawkilady · March 2010

I haven't had to deal with this problem but ideally the seller drops the price to the appraisal value. If not, I would try to end up somewhere in the middle since it seems like the seller is already doing a lot for you. To VHColeman's point, are you willing to lose the house over it? Its not that much money in the long run so as long as your mortgage is still approved and everything I wouldnt worry too much about it.

mamie329 · March 2010

Ideally yes, she'd drop to 119 and keep everything else the same, but like you mentioned, the "extras" have me nervous. Overall she'd be losing money in this deal (I know what she paid 3 years ago, and then you factor in the realtor fees, etc).

I REALLY don't want to lose the house.

mofe · March 2010

Who appraised the house? The city or an actual appraiser? This is a tough one, I would probably pay 121 for it. Especially if she is doing everything else with is. Another question how desperate are they to sell? Has the house been on the market awhile?

I would love to buy a house in such nice shape for 125k!

mamie329 · March 2010

An actual appraiser.

I think I'd be willing to bring another $2k to the table if that's what took to close the deal.

I'm bewildered on the seller's motivation. She's planning to rent an apt in the same school district for two years until her daughter graduates HS and then move South. But I don't sense it's that urgent. House was on the market a week before we bid.

Leigha12 · March 2010

I have no advice, but just wanted to wish you luck! I hope it all works out! We've done way too much decorating to lose it now

mofe · March 2010

I think coming with the 2k is a good compromise. I wonder why she is going to live in an apartment for kid to finish school. crazy!

Leigha12 · March 2010

mofe:
I think coming with the 2k is a good compromise. I wonder why she is going to live in an apartment for kid to finish school. crazy!

Especially in this economy? If she's sticking around, but selling now anyways while the market is down, I think she's motivated. My guess is she is looking forward to the cheaper payments of rent or needs to cash out her equity. She may be more motivated than you think.

mamie329 · March 2010

Leigha, I know, right!! I HAVE MOOD BOARDS!

What's even weirder is I know the apt she's looking to rent, and her rent would be more than her mortgage payment. Does not make sense.

But did I mention there are boxes in the house as of Monday?? She's already packing. I hope that's a good sign that she's just ready to leave.

mamie329 · March 2010

Update:

Realtors discussed us meeting in the middle - 3k/3k... but now seller wants to take away 1500 of my closing. Therefore I'd be paying 4500 upfront and only taking 3k off my mortgage.
Realtor and I both agree that extra 1500 is pushing it.

I'm supposed to think about it. If I have to walk over 4500.... UGHHHHHHH

keb270 · March 2010

Oh no Mamie! That's awful. I really do think she should come down though, it's not your fault that house is worth less than she wants. Let us know what you decide!

vhcoleman09 · March 2010

Really think about if you'd walk away from the house for $1500. Given that the house was only on the market for a week (ours was only on market for 3 days), she may think she can get other offers on it. Depending on how desirable this house is to other buyers, if you ask for the extra 1500 you're taking a gamble. That said, if she's packed up, she may be willing to negotiate to still pay that 1500 of closing to get out of the house quicker. It's hard to know...

mamie329 · March 2010

But really... now that the house is appraised, what other buyer would even entertain the idea of spending more than it's worth when I'm sitting here like a lame duck for saying, "Yeah, I'll have $3k negative equity in my house to start with!"

vhcoleman09 · March 2010

It really depends on the market there and how much other potential buyers like the house. Our house was a hot commodity apparently and there were several offers (the only reason we got the house the second time is because of the closing date), but I know the market has changed a lot overall since then. It is possible that someone could offer to pay the appraised cost but not ask for any closing costs or other extras. I don't want to scare you if you and your realtor think it's okay to ask for more, but I thought you should know of the other possibilities.

mofe · March 2010

Go with your gut. As much as you love this house, there are others out there. One thing that may be hard is when you go to sell a 1 car garage (not sure if that's an issue where you are from). We hav a 1 car garage and it will reduce the amount of people to come and look at it when do do plan to sell.

mamie329 · March 2010

We looked at so many houses, and there's really nothing else here I would even want to put a bid on. I'm sick of the looking, the stress, the decisions, the offers, the inspections, the mortgage applications, sick of it all.

But yes, you're right - is 4500 or 1500 enough to make me walk away.

ETA: not to mention the $625 we've already sunk into this house we won't get back.

stephriz · March 2010

mamie329:

ETA: not to mention the $625 we've already sunk into this house we won't get back.

Forget the $625. It's absolutely negligible when you are talking about a lifetime purchase price of hundreds of thousands of dollars. It's a cost of buying, and it would be silly to spend hundreds of thousands because you're worried about wasting six hundred.

That said, you want the house. Try to negotiate on their portion of the closing costs. They want to pull out all of it, so ask them to put in half of the original offer.

Figure out if $3000 of negative equity is really that big of a deal. Is the house undervalued because of the market? Do you think it will recover? Do you have the money? Can you chalk it up to sunk costs?

mamie329 · March 2010

It's not just the $625 -- it's all the time, stress, tears, etc. Our market is steady and 1. I don't want to start the process over again with a house I don't like as much, and 2. There's no other houses on the market that I'd even entertain offering on.

Latest update is realtor tried to negotiate with the appraiser - no dice. Seller's best and final is to lower another $750. Which leaves us $3750 in the hole.

We're most likely just going to agree it to save the deal and get the house. :-/

I have the money in savings, but it'd be quite a hit to our meager funds. Until we get the 8k tax credit we'd have 3 months of expenses leftover.

I'm not worried too much about the negative equity because per my mortgage broker, house values will go up soon because of the gas and oil drillers coming into town (or something).

Leigha12 · March 2010

If my math is right (and I'm totally confused so it might not be), you're paying more than it's worth, but technically due to your down payment, you won't have negative equity when you start out, but you won't have the full 6K you would have had if the purchase price had been the same as the appraisal (more like $1500). Small consolation?

mamie329 · March 2010

Well, you don't have to think of it as "negative equity" if you forget that I'm pumping $3750 into its value and just consider that wasted money.

vhcoleman09 · March 2010

First, I'm sorry you're having to go through this. I remember how stressful it was for us too, and we ended up eating about $2K from the original deal that we weren't too happy about either, BUT our mortgage was lower.

So, there are a couple of points: 1) your mortgage will be $6,000 lower than what you originally thought it would be (or $3K if you can or decide to roll the cost over the appraisal into the mortgage). That means you'll be saving at least some interest on mortgage payments each month--especially if you got a 30-year fixed mortgage, 2) if you still have 3 months of e-funds, that should last you until you get the $8K from the government even in a worst case scenario, and 3) the cost of your sanity is probably worth at least that $3750.

Also, is the $625 you were talking about earnest money? If so, that went towards closing costs for us. And, I'm not sure if you know, but usually your closing costs are estimated on the high side so when you actually go in they're lower than what you expect to pay.

mamie329 · March 2010

I don't think we can roll that 3K into the mortgage... that's the whole issue with it being appraised low, right?

And yes, I'm hoping my sanity is worth $3750! Because right now I'm absolutely insane and having troubles mentally adjusting to this change.

The $625 was what we spent between appraisal and inspection.

vhcoleman09 · March 2010

I think it's pretty rare that you can roll it in. I've only heard of it from a friend at one specific bank a long time ago, but didn't know if that was bank-dependent or not.

I know it's a huge mental adjustment, but once you get into your house, the memory of that $3750 will fade over time (and you won't consider the $625 to be wasted either). When you go to sell, you'll probably recoup that and much more if your market goes where your realtor thinks it will.

mamie329 · March 2010

I'm hoping it will fade!

However, with shag's help, and that of my mortgage broker, I think we're going to put less money down to help offset the cost. This will also also cut $10 a month off our original mortgage. So instead of thinking about it as being in the hole almost 4k, it's now like 1500.

What a horrible horrible day. I've shed too many tears over this house to lose it now. It better be damn worth it! I will never buy again!

barbnsteve · March 2010

Hi Mames!

I've been out of town and am just now catching up on things. I'm so sorry to hear that you're going through all this. Sounds like you guys are working it out, even though not so much in your favor. Sending you house dust and hoping that things come together for you. It is stressful, but just think how nice it'll be once all is said and done. If you really want the house, you guys will make it work!

Homeowmers

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