Need Quick Advise - Home purchase
 

About to make my best and final offer on a house in multiple..
The other potential buyer pulled his loan contingency and is going to close in 30 days.

My broker says that I have to pull my loan contingency to be in the game..

I have great credit, income.. Spoke to my guy at Bank of America who looked at my numbers and said 90% no problem..

Should I pull the loan contingency.. If I don't, I have to pass on the house..

Any thoughts or advice here?
I have about 2 hours to make a decision...

Just want to be sure I am on the same page as you. When you say pull your contingency, you mean taking the loan contingency out of your offer, correct? Which means you are confident that your financing will go through.

Yes..

No one seems to think I will have any issues getting a loan..
Though we may need to ask for extensions once the deal is in place.

If you feel confident in your finances and you really want the house, then you may want to go for it.

What about offering a higher earnest money payment and still keeping the financing contingency?

The current owner is bleeding...
He wants the deal done..

He is losing lots of money... Doesn't want to hold it anymore..

His price has reduced almost 50% since it was put on the market.

I got ya.

You seem pretty sure your financing will go through and from what I know of you, you seem like one who does his homework on this sort of thing, so I say if you are sure that you really want the house, then go for it. It sounds like you will probably be OK. In a perfect world, I would suggest a contract with more proctection for yourself though.

I am not sure about the legal aspect of this. If for some reason it didn't work out, what is the worst that can happen? You will be out your earnest money? Is that all or are there more serious consequences? Are you willing to take that risk? I guess that is what it comes down to.

I think I saw x5GuyInLA online. He may be able to help you more. He is a realtor in your neck of the woods.

Nope, I wouldn't do it in a million years. If you don't get the loan then you lose the down payment. Just because a banker says there is no problem that you'll qualify for the loan isn't good enough (btw you need to get that statement in writing). What a lot of people forget is that getting a mortgage is different from getting a loan. Not only does the buyer need to be approved, but the PROPERTY needs to be approved as well. For example, if the asking price of the property is $1,000,000 but the bank's appraisal of the property is $750,000 then either the bank will not approve the loan with standard financing or they will only do so with considerable change in terms (such as significantly higher downpayment, etc.) So even if YOU qualify for the $1,000,000 loan (or 900,000 if financing 90%) the PROPERTY might not. (Keep in mind that doesn't mean the property isn't worth $1,000,000, it means that the bank is not willing to take a risk on the property unless the deal is sweetened for them... think about the extreme case.... you want a $10 million loan (very low interest) for a $500,000 house ... obviously the $9.5 million is going to go somewhere else entirely and the bank realizes that fact and isn't stupid) If you've dropped your loan contingency, then your downpayment is going bye bye.

Sounds crazy right? I've seen it happen way back when. Granted, this was a much rarer scenario the past 10 years since banks would give out mortages to anyone with a social security number, but now the situation is totally different. People are finding it harder to get 90% financing anymore for large loans, banks are getting much more strict with their appraisals, etc.

Hope this helps.

I agree with you Meister, but B-LIne seems to know his stuff. He said the seller was "bleeding" and seeing as he dropped the price to 50% of the original list price, I would imagine that the market value of the home is most likely well over the current listing price and what B-Line would offer. It sounds like a distressed/motivated sale, which are typically below market value. I know that is not guaranteed though. I was assuming he knew the actual value of the home. It can be sketchy if you don't have all the facts though. This is probably a moot point by now.

Two months ago, a house that is a stones throw sold for $850,000 more.
Same square footage under roof.

Exterior square footage, mine is 14,000 and the comp that sold is 18,000 sqft. So there not exact, but there pretty close.

So I don't think we'll have any problem with comp appraisals..

It's just a protection for yourself. Whether you want it is up to you. Note that comp appraisals are only one thing a bank uses in determining mortgage eligibility, not the only thing. It's not a trivial process like buying an ipod or even a car, that's why home purchase escrows are 30 days, 45 days, etc. Escrow may fall through because the bank finds out there are 5 liens on the property or there has been reported structural damage to the site or there is a lawsuit pending on it because a divorce went bad and the kids of one party have put forth a legal challenge to 10% ownership. IOW, due diligence takes time. You can buy a Ferrari in one afternoon.

BTW, getting someone to pull a loan contingency ASAP is one of the classic broker moves as is 'there's someone else interested...you have 2 hours to decide.' You have to understand, a mortgage contingency is NOT a valid reason why a seller should refuse, what it is, is a reason for a seller to FORCE you into making a quick decision on something. Case in point, I went with someone to look at a $1.5 mill property that was on and off the market for over 8 months and had it's price dropped a half dozen times. The broker just happened to also be the owner. He was losing money every day on his loan, taxes, maintenance, etc. as it was vacant. After seeing it and expressing interest, my friend got a call the NEXT day that if he wanted the property he would have to make a decision within 24 hours because there is 'suddenly' an interested buyer who offered full price with no loan contingency. Yeah right. It's still for sale.

Typical sales tricks. ;)

These days the banks are doing a very detail check of income history, future etc. before they approve any loan. The local bank branch's words mean nothing as its the underwriters who have the initial and final word.

The title issues would most likely be picked up by the closing attorney and if they aren't, title insurance should cover any undiscovered issues.

The structural issues would be observed during a property inspection. As long as B-Line doesn't purchase "as-is" he would most likely be able to back out of the purchase if there were any structural issues with the property.

If the other "buyer" is willing to purchase "as is", with no financing or appraisal contingencies, then walk away and let them take that risk or call the sellers bluff. Otherwise, if you are confident about your credit score, income, debt ratios and market value of the home, you are somewhat limiting your risk. If this is a must have house, then you may be willing to take the chance that you will lose your ernest money. Once again, it depends on how confident you are on those items and how bad you want the house. Is it the most safe way to buy a house, absolutely not. Is it worth the risk, that is a personal decision you have to make.

Yes title insurance and property inspection and all that, but that is down the road and takes place during escrow and then covered at closing. The point is that if he puts a downpayment down now with no loan contingency and those things end up causing the financing to fall through during escrow...it happens plenty of times ... then the deal is off and he's out his downpayment unless he wants to finance it himself. If a seller insisted on no loan contingency then the only way I'd ever agree to the deal is to have the seller agree to private financing (having the seller give me the loan) should the bank not come through.

Not necessarily. Say he signs a contract tonight with a due dilligence period. The financing will take weeks to be finalized, so he can set up an inspection in the next few days. If there are any major issues, he can back out before the financing is ever an issue. As long as the sale is not "as is".

I am not 100% positive on the this but, I am pretty sure that B-Line can put a simple stip in the contract stating that the title must be clean or it is a deal breaker. If the owner wont do that, then don't sign. :dunno:

Actually, I am looking at a typical F-20 purchase and sales agreement contract for an appraisal I am doing right now and there is paragraph in there regarding the title that states; if the seller fails or is unable to satisfy valid title objections at or before closing, or any extension thereof, which would prevent the seller from providing good and marketable title to the property, then buyer, amoung other remedies, may terminate the agreement upon written notice to the seller.

So basically, title or structural issues are considered seperate from financing, so he should be able to back out due to those issues without sacraficing his earnest money.

The due diligence period IS the escrow period. All sales are 'as is'. You can't just put 'clean title or deal is off' since he may have no idea... a title search is a complicated thing... that's why title insurance exists, because it is so complicated. Besides, if he could put 'clean title or deal is off' then why stop there? Just put 'no problems of any kind or deal is off.' Home inspection will be set up by bank or someone else who is independent.

You are missing the point. Yes title or structural are separate from financing, but those are just two potential problems that could result in a bank NOT granting the loan. If he signed an agreement putting down money and saying that he is buying without a mortgage contingency, then he is screwed unless he can get another source of financing fast or finance it himself. (Escrow not closing is plenty frequent) If he does neither, he broke the contract and loses his downpayment. That's how it works.

Hey Guys..

So the deals are in and the owner is making a decision on which one to take. Evidently both me and the other buyer came in very close.

It's not an "As Is" deal. I've got a 10 day inspection period.. If they tried to force the "as is" I would have walked, no question.

There was some other strange detail that the builder only wanted to be liable for up to $1000 of termite repair.. So I'm going to have my termite guys go through with fine tooth combs.. But all houses in Hollywood have some termites.

I've been assured by just about everyone that 30 days is enough time to secure a mortgage.. But I'll keep pumping away and make sure that it happens.

I've also learned that if it doesn't fulfill in 30 days that the current owner has to reasonably allow me to secure the financing if they take the down payment. If they don't take the down payment then they can walk away from the deal..

But if they take my money, any judge or arbitrator will insist they give me a few more days to close up the deal. We may just have to release more funds..

So lets cross our fingers, I find out tomorrow...

Thanks everyone.. You've been really helpful.

And I did do a lot of research and dotted my I's and crossed my T's before jumping into this risk.. I think the upside FAR outweighs any downside..

http://i19.photobucket.com/albums/b1...neC2S/bid2.jpg

Meister, not trying argue, but you are the one not getting it. A property can be sold A) subject to a due dilligence period or B) "As-Is".

Buying a property with a due dilligence period allows a buyer to back out of the sale for any reason within a 10 day period from the binding agreement date. This is called the Due Dilligence period. The buyer can perform home inspections and so on in this period.

Purchasing "as-is" is exactly that. You are signing the contract and have to take the house with all of it's faults. You do not have the option of a due dilligence period to back out. They are two very different ways to purchase a house.

Also, I just provided word for word the fact that if the seller can't provide clean title on or before the closing date, the buyer can back out.

Home inspections are not set up by the bank. They are not even required in my state (not positive about California). I purchased a home 3 years ago and set up my own inspection with the inspector of my choice on the date I chose. Not sure what you are talking about.

I fully understand that a bank may not loan money because of title issues, but here is the thing. There is a clause in the contract that states if the seller can't provide clean title, the deal is off, period, end of story. If the seller can't provide clean title, then the financing is a moot point and the buyer gets their money back. Get it, the financing would be denied because the seller broke the contract.

Also, If B-Line buys the house subject to due dilligence period, then he can set up an inspection when he wants (within the 10 day d.d period) and have the home looked at. If there are major issues, then he can back out and once again keep his earnest money.

Good luck! I hope they take your offer. It sounds like you know what you are doing and really want this particular house.

It is much harder for a seller to keep earnest money than most people realize.

Don't do it.. Interest rates going to go higher due to the failed treasury auctions. IF the 30 year treasury auction is bad tomorrow, I can guarantee you there will be jump in rates and the other the other "potential" buyer who released the contingency will be SOL. Keep your loan and inspection contingencies in place. If the other "buyer" pulled their contingency, its pretty surprising why they would would have done it while still letting the seller take other offers.

Treasury rates are up big time, read this story

http://www.businessweek.com/investor...ge_top+stories

According to Bankrate.com Mortgage rates rose to 5.56% for a 30-year fixed. That is up from last weeks 5.36%. These rates are still crazy low. Before this recession, people would kill for rates like this. What are you gonna do? Sit around and wait for them to drop back into the 4's? Who knows if that will even happen and even if it does, by then the house you really wanted to buy may be gone??? It is a tax deduction anyway. If you can get a crazy deal on a house right now, it may more than make up for the rate increase from last week in the long run. Plus, you now have the house you wanted.

I WON...... I GOT THE HOUSE......

:)

Congrats!

Hopefully everything will go smoothly as far as inspections and finacing are concerned.

!!WOOOOT!! :beerchug:

Congrats!

Best of luck on the financing.

Congrats!! Are you going to move your P car storage arrangement or does the new pad have a bigger garage? Any pics of the house? I'm sure its bad ass!

I think he has enough space in new crib but does not hurt to take the setup.;)

Congrats.... sounds like it's big enough for
a X5/3/6 member ho-down.......:thumbup:

Great news, get that loan application in ASAP and look into locking the rate.

Of course you won, you were the only bidder.

There are no deals for anything in a good area, at least for homes over half a mil, you also have a huge amount of homes that were say listing for under 425k back in dec, now listing for half a mil or more. Although the lower range of homes are somewhat stablizing, a vast majority are still priced too high.

For homes 500k and up its the same deal. btw... Anything decent is listing at a 10% premium at minimum. btw what tax deduction aside from what you can usually deduct? You get $8,000 credit from federal if you're buying your first home, and/or $10,000 from state if you buy a NEW construction home. If you make over 75k a year, you are automatically disqualified for the federal credit.

These "incentives" does nothing beside keep house prices high enough to lure a new batch of suckers to buy up the forclosure/REO inventory.

In a few months, the jumbo/ alt-a loans will start defaulting in large numbers. By then you'll see the 500k+ properties start to come back down to reality hopefully.

I'm really tempted to buy right now too but its not really a buyers market right now.

California gave another 120 day free pass to deadbeats, Banks aren't budging on the price for any short sale/forclosure homes that are decent.
I think the only way to possibly get a deal right now in this market is to pay cash.

There are plenty of good deals in the best of areas here and even in these areas, the $500,000 and up homes have taken hits just like any other price point. $1 million+ homes have taken a big hit. It is hard to get values from a few years ago when appraising $1 million properties. I have come in less in the majority of these appraisals. From my experience here, listing prices have not started creeping up. If a house was listed for $425k in December, it not going to be listed for more now. More than likely reduced.

All I was saying about the deduction is that mortgage interest is tax deductible in general and if you are buying an 18,000 square foot home, you could probably use the deduction of the extra interest to get the house you want.

Like I said, someone else may know the Cali market better than I, but rates are still historically low. Not low for the last year or so, but still pretty good. B-Line really wanted this house and it appears that he found a pretty good deal from what he has mentioned. If he were to wait, there is no guarantee the house he really wanted would still be there. So with decent rates and the house of his desire available, he felt it was worth it to pull the trigger.

I understand what you are saying, things are a little different over here than in GA. Over here in Southern California, prices have gone up so much to the point where homes in less desireable areas like South Central LA or something went for $300,000.

Prices for homes that were/sold worth $1 million back in 2007 have fallen nearly 30% since. If looking at prices in that sense, then yes there are plenty of good deals. True that rates are historically low, but the what the government is doing trying to keeping home values artificially high, rather than let the market decide for itself what a home is worth. Listing prices might not have increased but most sellers will not sell for less than list. That being said, if you have no problem sitting on a home for a few years then now might be a good time to buy due to the amount of inventory available. People would rather let their home get foreclosed on rather than take a loss, all that has to stop.

btw b-line, if you're looking for more data on that home you are interested in, you can take a look at redfin.com or trulia.com for stuff that you won't see on mls.