And so it begins... or not?
Last weekend, we rented a storage space near the house. This weekend, we're moving the first load in. And the irony is that we may not even end up buying this particular house.
We had the inspection last week and found out that we're facing a bunch of substantial repairs in the near future. Re-grading the backyard to move the "moat" so that water doesn't get into the basement; reinforcing the deck, which is over-extended; replacing the furnace, hot water heater and air conditioning; and the list goes on. Not too many things that aren't anything but the usual wear and tear of the house, but definitely not what we wanted to hear. The impending repairs had us concerned, but it's not like the house was about to fall in or anything. If anything, everyone has said that the house is in very good condition.
But this weekend, we found out that the appraisal came in lower than the sale price. Not substantially lower, but enough lower that it affects our finances. The mortgage company will only cover up to 95% of the appraised value, which means that we'd have to lay down the cash for the difference between the sale price and 95% of the appraisal value. Which, in this case, is enough of a chunk of change that -- combined with the upcoming costly repairs -- it made us think that this house isn't as good an investment as we had thought. Plus, the increase in the cash up front would kill our liquidity, leaving us with little money to pay for the move, fix the (many) problems and buy furniture.
So, we've gone back with an addendum based on the appraisal contingency to lower the sale price. We don't think they'll take it because this new provision basically brings us back to the original offer we made (in terms of the sale price). They refused that, so we don't think they'll bite this time. But then again, it's a month later, and they have to move because they've been relocated. They're under the gun to get the house sold.
That being said, the sellers' agent keeps telling us that they have back-up offers. But I think it's a bluff. Here's why. They keep repeating over and over that they have back-up offers. I think they are trying to scare us into a higher number. They may or may not have back-up contracts, but if they do, I think the offers are lower. They didn't get an acceptable offer in the first month that the house was on the market and then suddenly within a week of our making the offer, they have two? (The sellers agent told our agent that they have two back-up contracts.) If that's true and if one of those offers is substantially better than ours, wouldn't they keep it a secret and play hardball with us? I would. I would clam up about the offers and not give anything in the negotiations, hoping that we scram. That way, they can take the better offer.
But that's not how it's played out. Instead, they keep reminding us at every turn that they have back-up offers, and they have given us a little -- a bone, as it were -- at each point of negotiation when we ask for credits or concessions. That tells me that their back-up offers are the same, if not worse than our offer. If they were better, they wouldn't care about negotiating with us. If they were the same, then they are taking a huge risk in letting us walk because they may end up in the same or even a worse position than they are now. Also, the sellers are now facing down whether they'll have to pay another month or partial month of mortgage. It might be tough for them to start the process again with a second contract at this late date, go through the inspection, appraisal, get loan approval, etc. and still make an end of April closing. That means they'll have to pay the mortgage for May, too, and get any refund at closing. Pressure on them. So time is on our side. The more time we eat up in the negotiations, the harder their position -- and they also risk losing whatever contracts they have.
That was my analysis about their position. I could be completely wrong. Either way, SM and I decided that we'll eat the money we paid for the inspection and appraisal if the deal doesn't go through on our terms. That may sound awfully mercenary, but we don't need to buy this particular house. I have no emotional attachment to it (learned my lesson with the first place!!!). We figure that there will be plenty more houses on the market soon, and while there will also be lots more buyers, that doesn't worry us. We're in no hurry to move. No push factors.
The thing is, all of the cute houses -- the really good ones -- get snapped up right away. So, if we do find one that's really great, we may have to get into a bidding war for it. And we don't want to do that in this market.
So, for the time being, we're cleaning up my place to rent it and moving stuff into a storage unit convenient to house #2 (and less so to SM's place... oops!).
We had the inspection last week and found out that we're facing a bunch of substantial repairs in the near future. Re-grading the backyard to move the "moat" so that water doesn't get into the basement; reinforcing the deck, which is over-extended; replacing the furnace, hot water heater and air conditioning; and the list goes on. Not too many things that aren't anything but the usual wear and tear of the house, but definitely not what we wanted to hear. The impending repairs had us concerned, but it's not like the house was about to fall in or anything. If anything, everyone has said that the house is in very good condition.
But this weekend, we found out that the appraisal came in lower than the sale price. Not substantially lower, but enough lower that it affects our finances. The mortgage company will only cover up to 95% of the appraised value, which means that we'd have to lay down the cash for the difference between the sale price and 95% of the appraisal value. Which, in this case, is enough of a chunk of change that -- combined with the upcoming costly repairs -- it made us think that this house isn't as good an investment as we had thought. Plus, the increase in the cash up front would kill our liquidity, leaving us with little money to pay for the move, fix the (many) problems and buy furniture.
So, we've gone back with an addendum based on the appraisal contingency to lower the sale price. We don't think they'll take it because this new provision basically brings us back to the original offer we made (in terms of the sale price). They refused that, so we don't think they'll bite this time. But then again, it's a month later, and they have to move because they've been relocated. They're under the gun to get the house sold.
That being said, the sellers' agent keeps telling us that they have back-up offers. But I think it's a bluff. Here's why. They keep repeating over and over that they have back-up offers. I think they are trying to scare us into a higher number. They may or may not have back-up contracts, but if they do, I think the offers are lower. They didn't get an acceptable offer in the first month that the house was on the market and then suddenly within a week of our making the offer, they have two? (The sellers agent told our agent that they have two back-up contracts.) If that's true and if one of those offers is substantially better than ours, wouldn't they keep it a secret and play hardball with us? I would. I would clam up about the offers and not give anything in the negotiations, hoping that we scram. That way, they can take the better offer.
But that's not how it's played out. Instead, they keep reminding us at every turn that they have back-up offers, and they have given us a little -- a bone, as it were -- at each point of negotiation when we ask for credits or concessions. That tells me that their back-up offers are the same, if not worse than our offer. If they were better, they wouldn't care about negotiating with us. If they were the same, then they are taking a huge risk in letting us walk because they may end up in the same or even a worse position than they are now. Also, the sellers are now facing down whether they'll have to pay another month or partial month of mortgage. It might be tough for them to start the process again with a second contract at this late date, go through the inspection, appraisal, get loan approval, etc. and still make an end of April closing. That means they'll have to pay the mortgage for May, too, and get any refund at closing. Pressure on them. So time is on our side. The more time we eat up in the negotiations, the harder their position -- and they also risk losing whatever contracts they have.
That was my analysis about their position. I could be completely wrong. Either way, SM and I decided that we'll eat the money we paid for the inspection and appraisal if the deal doesn't go through on our terms. That may sound awfully mercenary, but we don't need to buy this particular house. I have no emotional attachment to it (learned my lesson with the first place!!!). We figure that there will be plenty more houses on the market soon, and while there will also be lots more buyers, that doesn't worry us. We're in no hurry to move. No push factors.
The thing is, all of the cute houses -- the really good ones -- get snapped up right away. So, if we do find one that's really great, we may have to get into a bidding war for it. And we don't want to do that in this market.
So, for the time being, we're cleaning up my place to rent it and moving stuff into a storage unit convenient to house #2 (and less so to SM's place... oops!).
Labels: home stuff, random observation
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