Crappy real estate market

[Deleted]

I am sorry to hear! In what part of the country are you in?
Maybe if you are not in a rush you can take a 3-6 months brake and then go back to looking at houses.

[Deleted]

May 13, 2011 8:32:08 GMT -5 @wrongsideof30 said:

Thanks Cawiau. I'm not in a rush. I'm in the metro Detroit area.

Then take a brake and come back after 3-6 months... I can see how 3 deals falling thru might start taking a toll on you.

[Havoc]

Writing a letter to the sellers is a good idea - that way they can contact you if they get a change of heart... or decide that they can work a more palatable deal w/o realtor commissions if their contract runs out and they still haven't sold their house.

There is another way to breathe life into your pursuit of housiness if you are really, really, set on this house.

Bank sez its worth 98k, will only lend on that amount. You were willing to pay $120k for it, and presumably had the cash flow to support payments for that amount. You could offer the $120k - or maybe a lesser amount - with the terms of financing that you get a conventional mortgage for the 98k (so you cover the downpayment the bank reqs for that), and the current owners offer financing to you in the form of a second mortgage for the balance. Bank is still in primary position in the mortgage pecking order and hasn't loaned more than their risk assessment dept has deemed proper, current owners get an upfront chunk of money, then their asked-for balance plus interest, and you get the house you want.

A couple of points about this approach, though...

1. First, you really need to want the house AND be planning on staying for a long while.
2. Keep in mind that closing costs will be several hundred dollars more to record the second mortgage.
3. While traditionally second mortgages carry higher interest rates to account for the higher risk of default, in this case I would negotiate it to be the same rate as your primary mortgage so that it doesn't mess up your payment schedule too much*. Current owner would still be getting a much higher interest rate than they would get through a bank acct.

* altho the owners almost certainly wouldn't want to carry a 30 yr note, so maybe you could make it a 5yr balloon: payments on a 30yr amortization schedule, which would keep you in track of what you had planned, plus a balloon payment of the balance at 5 yrs... so you would have five years to save the 19-20k.

Not necessarily recommending this approach - you have to do what's best for you - just offering another way to attain your goal...

Good luck!

[jkapp]

Would it work if you put $22k down on the house and mortgaged the $98k?

(This assumes, though, that you have $22k to put down)

[brdsl]

3 and your complaining?

I have made looked at and made offers on almost 100 properties.

Keep looking.

I would never recommend starting with a short or foreclosure....so in my book, you only have one offer. The first two are almost impossible to get, you might get one out of 10.

[brdsl]

May 13, 2011 9:10:31 GMT -5 @wrongsideof30 said:

Oh my gosh Havoc, I think I am in love with you right now! I would absolutely consider paying more via a second mortgage with the home sellers. My realtor never mentioned this option to me.

Craziness. Move on. If it isn't worth what the bank says, you are overpaying.

[swamp]

May 13, 2011 9:23:50 GMT -5 @wrongsideof30 said:

Brdsl, you are looking at investment properties and I am looking for a place to live. It's not that easy to move on.

But it's still just property. Don't get emotionally attached to a house and land, that's where bad financial decisions come from.

[bean29]

I to think you should move on. I agree that the house is worth what the bank says it is worth, with the warning that some "extras" are costly to replace and might be worth paying for. I might split the difference if there was a lot of electrical upgrades or built in cabinetry or lower level finishes that I felt were still current/usable. The way they are currently doing appraisals (I think) does not measure extras and upgrades real well.

You can tell me that the house with flat panel cabinetry, no pull outs, no celing lights in the bedrooms, no extra electrical outlets and no garage door opener is worth the same as the house with Raised panel cabinets, pull outs, crown molding, tile flooring, upgraded electrical, undercabinet lighting, cathederal ceilings but I lived through buying the cheap forclosure and fixing everything that was wrong. It cost us more than we expected.

I will say I was very happy with the result of our fixed up forclosure but not the cost. We built our 3rd house, and I will say that if I move again I want to buy the house that is almost every thing I want and only needs minor repairs. So if the house had lots of upgrades and I did not want to change anything, I might throw some cash at the deal.

Lots of houses for sale in my neighborhood and the prices look very attractive.

[luckyme]

Do "you" think the house is worth $120K?

Maybe the bank appraisal is a way to limit the amount of loans, and really doesn't reflect the value of the property.

There were one or two suggestions here that would enable you to buy it, and if you really love it and it's worth it to you, why not?

[brdsl]

May 13, 2011 9:23:50 GMT -5 @wrongsideof30 said:

Brdsl, you are looking at investment properties and I am looking for a place to live. It's not that easy to move on.

I actually looked at both, at the same time. We looked at houses for 2 years, before purchasing one. We made a whole lot of offers, and missed 6 houses we would have liked. The problem....people still think the home is worth more than the market says. They simply aren't. 4 of the 6 are still listed, and the people won't budge on price.

[Deleted]

May 13, 2011 9:38:27 GMT -5 swamp said:

May 13, 2011 9:23:50 GMT -5 @wrongsideof30 said:

Brdsl, you are looking at investment properties and I am looking for a place to live. It's not that easy to move on.

But it's still just property. Don't get emotionally attached to a house and land, that's where bad financial decisions come from.

What swamp said. Either keep on looking or take a brake; but don't pay more just because you fell in love with the house.

If the bank says it's worth 98K, sadly it is worth just that 98K.

[Wisconsin Beth]

And is the Metro Detroit housing market done tanking? I'm not sure they've hit bottom yet. Doesn't the mayor have a proposal to do something like "un-annex" big chunks of the city so they can reduce the area that must have street repairs, sewages, snow plowing, etc, bringing down the cost of City services?

[midjd]

I think that's a great letter... good luck to you!

[Deleted]

I wouldn't be as quick as some other posters to just say walk away, it is only worth 98k. Is there something about this property to makes the value to YOU over the appraised value? Such as, location near places of work. Location near family members that baby sit for you. Quality of schools.. etc.. House has a unique attribute that fits a requirements (can park a boat or RV on side, etc) There is a middle ground between a completely emotional based decision and a completely financial based decision.

[swamp]

May 13, 2011 10:58:16 GMT -5 @mmc said:

I wouldn't be as quick as some other posters to just say walk away, it is only worth 98k. Is there something about this property to makes the value to YOU over the appraised value? Such as, location near places of work. Location near family members that baby sit for you. Quality of schools.. etc.. House has a unique attribute that fits a requirements (can park a boat or RV on side, etc) There is a middle ground between a completely emotional based decision and a completely financial based decision.

But if it appraises for $98k, the bank will only be willing make a loan based on the $98k, not the purchaser price. Unless OP has cash to bring to the table, it's not gonna work.

[Havoc]

There are a lot of different ways to look at this, which is why I said it had to be something that was right for Wrongside... the letter is certainly a good idea.

I agree that it pays to be very cautious about falling in love with a property and then doing outlandish things to get it.... a benchmark that I would use is how often you fall in love with property. If you are dying to own every fifth house you tour, you have a problem. If you covet a house that you see, whether a neighbor's or just a house that you drive by, and then three months later you see another house you drool over and forget all about the previous "wish-I-had" house, you have a problem. But if you have looked at dozens of houses, spent time scouring neighborhoods and finally find a house that fits all of your needs, then I think it is OK to go a little above and beyond to get what will make you happy.

I also fall in the camp that believes that buying a "home" is a little different than buying an investment property. I have done both, and my checklist for an investment property is much different than what I would use/have used for my home. Not all homes are created equal, the amenities and demeanors of neighborhoods can vary wildly, public transport and commute times need to be weighed in, one school district can be much better (or worse) than the one next door.... If you are focused only on a dollar amount, then it would be a mistake to pursue a house beyond its appraisal value. But if you are looking for a home that you can actually live in and be comfortable & happy in, AND you have the financial means to comfortably afford it - and to realize you might not get all of your $$$ back if you have to sell - then I think that quality of life is an important consideration to factor in.

There are some things worth spending the money on if you have the money to spend.... (cuz otherwise, ihearyou is gonna show up on your doorstep calling you a "cheap ass" )

[Tiny]

May 13, 2011 9:08:40 GMT -5 jkapp said:

Would it work if you put $22k down on the house and mortgaged the $98k?

(This assumes, though, that you have $22k to put down)

I doubt the bank would do this... to the bank financing 98K would be 100% financing. Banks aren't doing that so much these days. the Bank would probably finance 78K on what they feel is a 98K valued house. Just saying.
That said, I'd definitely ask about doing something like this. It never hurts to ask.
I'd probably keep looking for houses, though. Paying more than market value for a house is rarely a good idea. Unless there's some reason why it's undervalued (as has already been given).

[Deleted]

May 13, 2011 10:59:33 GMT -5 swamp said:

May 13, 2011 10:58:16 GMT -5 @mmc said:

I wouldn't be as quick as some other posters to just say walk away, it is only worth 98k. Is there something about this property to makes the value to YOU over the appraised value? Such as, location near places of work. Location near family members that baby sit for you. Quality of schools.. etc.. House has a unique attribute that fits a requirements (can park a boat or RV on side, etc) There is a middle ground between a completely emotional based decision and a completely financial based decision.

But if it appraises for $98k, the bank will only be willing make a loan based on the $98k, not the purchaser price. Unless OP has cash to bring to the table, it's not gonna work.

Obvious is obvious

[giramomma]

I agree with others. Take a break or move on. Our market is still falling. Our city assessment went down 5% over the last year. I don't think housing prices have bottomed out yet.

We looked on and off for over 2 years before we found a house we liked that was in our price range. A year and a half later, I'm still thrilled at our decision.

[bean29]

Is that forclosure you bid on one of the comprable properties? If so could you get them to raise the subject appraisal price by naming the deficiencies in the other propety and attaching solid estimates for the cost to repair?

[jarhead1976]

My neighbor just came over and told me he was moving . Wife and 2 kids. Mortgaged out at 230,000 . Homes worth $140,000 today. Also told me has not paid the mortgage for over a year. One in every 4th house in the development less than 8 years old are empty.

[debtheaven]

We have decided not to pursue looking for another house. If at any point you lower your price to the appraised value, please please contact us first –even if it’s a year from now.

I liked your letter very much, apart from this. I don't think it is in either of your interests to tell these people that you're willing to hang on for a year to get that house.

It's not in your interest to pay that much more than the bank appraises the house for (although I do understand the issue of the woods behind the house), and it's not in their interest to hold out false hope for something that may never happen.

They will NEVER lower their price if they know you would be willing to wait for a year or more for it. You have to put the time risk on it, if you really want it. By telling them this, you are exempting them from feeling ANY pressure to bring their price down. In other words, you are cutting off your nose to spite your face.

If you haven't yet sent that letter, by taking out those couple of sentences, they may decide to lower their offer. And even if it takes a while, that could give you the time to save more to bring to the table.

I really do hope you get this house you want so much. But, I wouldn't give up the chase, I'd keep looking.

And although I think I would be willing to "overpay" somewhat for something I REALLY wanted, I'm not sure I'd be willing to "overpay" quite that much. If you take the time element out of your letter, you open the door for them to make you a better offer, rather than just close all negotiations down for a year.

Best of luck to you!

[Deleted]

You can also "challenge" an appraisal if you think that it was low-balled. The lot size and it backing up to a park are material. You might be able to justify as much as 10% over the comps for a premium lot.

Ask the listing agent to provide support for the listing price. If s/he can't, then you know you have a problem and that you are indeed paying too much. Also you might try what I do. Zillow (www.zillow.com) the address and hover over the houses surrounding the parklands. In the lower part you should be able to see when the other houses have sold for (you might have to look under "other facts"). If you find other sales within 6 months of your appraisal you can use them as support to challenge the appraisal. Also you should be able to see the actual premium folks are paying over time by zillowing a non parkland propertyl

As far as financing the sale, you also might consider going FHA with the 3.5% down route. Presumably you have 24k (20% down for your $120k price)? FHA requires impounds and mortgage insurance (MMP) but you could structure 30 year fixed rate financing for a sales price of around $110k-$115k. Have your mortgage broker calculate those closing costs conservatively because they are substantial.

I wish you good luck. The best real estate investment we made was for a house I felt we over paid for. It wasn't substantial; about 2% over what I thought was fair. That house was worth triple what we paid at the peak. Now it's "only" double. We still own it 15 years and two moves later. I know we would still be kicking ourselves if we didn't buy it.

[mtshastawriter]

Just a quick warning about 2nd mortgages funded by sellers...

We did this on our first house. The sellers held a second mortgage and then filed bankruptcy. If they had been smart and recorded their second, the bankruptcy court would have come looking at us for this "asset" they were holding. Thankfully, our seller was dumb and didn't ever record it. We filed BK too and got this second removed...

[Deleted]

Mt Shasta,

The lien holder filing for BK wouldn't have had any affect with respect to the terms of your note e.g. the bankruptcy court couldn't have made you pay off the loan faster than what you agreed to, or changed the interest rate. The most probable scenario is that the former sellers would have to sell the note to another party (at a discount) to generate cash to pay off the former seller's debts. Smart borrowers will often include a first right of refusal on seller carry backs so they can take advantage of any discount a desparate note holder might make to generate fast cash.

I assume in your bk you were upside down on your house?

[RoadToRiches]

Why would you want to pay more for a house that it was appraised for ?? I don't get it.

[zibazinski]

Sorry but Detroit is an awful place to live and the market is not done tanking. Those sellers should be grateful they even got an offer. Rent, there's plenty out there.

[AgeOfEnlightenmentSCP]

May 13, 2011 8:32:08 GMT -5 @wrongsideof30 said:

Thanks Cawiau. I'm not in a rush. I'm in the metro Detroit area.

Chalk up your experience to Divine intervention and thank God.

Bluntly- you should not be buying-- especially in metro Detroit until you're better educated and equipped to buy.

OK, first of all YOU ARE BIDDING TOO MUCH for the houses you're looking at. (That $98K appraisal was high).

If you're in metro Detroit, you take asking price - 20% to 40% and you take a lot of "HELL NO!!!" in stride until you land yourself a deal.

I recommend you get over the the REIA of Macomb and see Dylan Tanaka. Learn how to buy right. You are going to get killed if you continue to make these suicidal offers and by chance one of them goes through.

Now, I don't know how I come across-- some people don't like me, some think I'm a bit of a pompus ass-- but here's what I really am: I'm a guy standing in front of you with $50,000 to $100,000. Do as I say. You don't have to thank me.

[zibazinski]

Do as Paul says. Houses are a dime a dozen, especially in Detroit or its Metro area.