Home Buying in Ben Ali>Question Details

Stella, Home Buyer in Sacramento, CA

I am a buyer with a pre-approval from a lender (we did all the paperwork up front and underwriting approved).

Asked by Stella, Sacramento, CA Mon Jul 28, 2008

I am buying using a Nehemiah type loan and no house to sell. Where I live it's a huge buyer's market. I have an offer on a short sale that was made 1 month ago. We now found another house we like better (not a short sale). Aged seller, no loan on the house, horribly outdated but in great location, with pool (which is what we want). House needs total recarpeting and seller's agent offered credit towards 100% recarpeting though he has no idea our offer will be a Nehemiah type & he even said something rude about a previous offer being "one of those Nehemiah loans" (seller's agent is about 75 and a friend of seller. House on market for $370k after a drop from $409k (listed about 70 days ago), valued at $350k. If we ask for down payment help from him and the carpet, it brings the final amount to $342k. Does my offer sound fair? What is the typical expiration time for my offer? I say 48 hours as interest in house increasing with price change. Advice?

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Stella - you mentioned earlier that you need Nehemiah for your downpayment and that you have no other options? Let me reiterate what someone else has already mentioned, Nehemiah is expiring soon, Oct 1 is the deadline for having your sellers gift approved through this program. Since this is done typically towards the end of your escrow, you'll need to be in contract mid August to allow for sufficient time for your loan to close. If you truly can't get ahold of a 3% down payment, then all your other concerns won't mean a thing....If you care to investigage, go onto http://www.getdownpayment.com, this is Nehemiah's site, they even have a time clock on the site for how long their program will last...

get moving on your home purchase now before time runs out on you!

Let me know if I can provide any more details for you,

Jeff Marr, Stanford Mortgage
916-947-1312
0 votes Thank Flag Link Thu Jul 31, 2008
Stella,

Thank you for coming back and telling us ( switching to Paul Harvey's deep radio voice ) "the rest of the story"

It sounds like you and your agents are smart and savvy. I expect you will eventually get a good deal on this or another house.
0 votes Thank Flag Link Mon Jul 28, 2008
Then I think you've got a great team to represent you. Sounds like they've got their work cut out for them with the seller's agent!

Your first offer does not have to be your final offer so just get started, if you really want the house.

I think you said that your realtors have asked to present the offer directly to the seller. That is allowed, but then your realtor is supposed to excuse themselves so that the seller can talk directly to their agent confidentially. That might be the best approach, if your realtor can make it happen, like you said.

Good luck! The house sounds wonderful.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Mon Jul 28, 2008
Wow, thanks to all! Here are some points in reply since you mentioned things I had not thought about or didn't think to mention:

The house has solid comps of $350k per my realtor (very knowledgeable in my opinion). I have looked at gobs of houses and I think he's spot on.

It is not literally a Nehemiah loan, per my lender (Vitek) but a similar one. There is no other option for us.

We will only be recarpeting. No ugly wallpaper (shockingly). Just neutral/boring paint. Yes, dated kitchen and dated/original bathrooms but, interestingly, all are in pristine condition and kitchen has all new appliances (they put a new KitchenAid stovetop on top of bumpy brown and white tile!). We would not have to replace any appliances til we're ready to remodel. Aged widower/owner has housekeeper and I have never seen a house this dated so squeaky clean with dated peach tile in bathroom with sparkling white grout that has no cracks or anything. Matching peach tub looks like new. Master bath walls are tiled with pale blue tiles with white doves/birds flying on them (sort of 3-D). I cringe but, again, it was amazingly spotless and well kept up. We will do nothing to it initially beyond paint and carpet or flooring. Every room has a different bright colored carpeting (lime in master!) and all 3 bedrooms, hall and living room have original hardwood beneath. Sigh.....

It's 2072 sq. ft on a 9700 sq. ft lot with pool. Built in 1960. Yes outside front and back totally fine for now. Pool was resurfaced 2 years ago.

Initial price of $409k was totally unrealistic and unsubstantiated. I think seller's agent advised seller very poorly. Part of our offer is the condition that our pair of agents present the offer. We do not think the seller's agent could present it objectively. Seller's agent was bloviating about all the houses he had sold in the neighborhood and how much he got for this one or that one. When I asked "how long ago did you sell them for that price?" he replied stating a time that was at the height of our local market 3 or 4 years ago with the last sale being last November across the street (literally) for $364k. That is not the benchmark for setting a price now. Selling agent is stuck in a time warp and as my male realtor said "he is probably doing realty 4 hours a week as a retirement hobby" though he had been in the business a long time. He was rude when we first walked in and told our agent, in my earshot, that those Nehemiah loans were a "dead horse". He said it in a scoffing tone. I kept my mouth shut as did my agent but I thought he was ignorant to make any statement not knowing one thing about the prospective buyer who just walked into that house.

My agents are a man/woman team who are professional, kind, savvy and very nice friendly people. It took me 2 months and by talking to 8 other agents before I committed to them. They are fantastic! They are a couple and the guy has a very gentle demeanor. I know he'll be great when it comes time to present the offer. When we looked at the house a 2nd time, he stayed outside with the elderly owner and had a really nice chat with him while we looked around. When I saw it with seller's agent present, he followed us room by room and would not stop talking. It was irritating and very distracting. He seemed to think everything in this dated house was way above par and it might have been.... 20 or 30 years ago.

I am glad to know that it's typical to expect a 3-day reply. I can live with that.

To all, again, loved what I read so far and look forward to more dialogue!
0 votes Thank Flag Link Mon Jul 28, 2008
50% of a realtor's job right now is in negotiating the deal, and providing you all of the information you need in order to determine your negotiating position. (The final say is always yours).

First, get your analysis of property values, including structural/cosmetic upgrades to bring it in line with your comparative properties. If you can (but it sounds like the house is occupied) see if you could have a contractor/knowledgable person go with you to assess costs of the items. (an experienced realtor might have some ideas of cost but they're normally not extremely technical on items such as electrical or plumbing- costs on painting, carpet, counters are easy...) Other considerations are how long it's been on the market, etc. That should give you some idea of price/value.

The second item is terms. Sometimes people balk at the Nehemiah program (this is not a specific loan but a home assistance program run by a non-profit agency) because they don't understand it. If you provide a little education, along with your offer, you might be able to relieve his fear. The key to a seller's decision is normally highest net sales price, and 'easiest offer' to guarantee a close of the transaction. So if your terms are more difficult, consider that they won't be as flexible on the price.

But the bottom line is- do they have a better offer, and how motivated are they to sell?

Forget the 48 hour question....it really has turned out to be a non-issue (since banks haven't respected our timeframes in our contracts at all and they've got the majority of sales in the market right now). After three days, if you've left it standard, your offer is expired but I'd still send a cancellation of the offer notice on your short sale offer.

Good luck to you!
0 votes Thank Flag Link Mon Jul 28, 2008
Stella, I'm a Realtor in Redding and again, even though we're pretty close, I am not truly familiar with Sacramento's market. But I do think your Realtor is right in thinking the Seller will not want to offer a full credit for the carpet if you're considering a low-ball offer.

On the other hand, it is a buyer's market and anything is worth a shot. If the Seller is serious about selling, he may consider it. In my area, an offer that's 10% off the asking price is not considered unreasonable. Regarding your loan, the Nehemiah program is expected to end on October 1st so if you don't think you will close escrow by that point, you will want to look at other options, like perhaps Cal FHA - your lender should be able to give you some direction. And in California, the typical time allowed for a Seller to respond is 3 days, unless you specify otherwise in the contract. I'm not sure shortening that by 24 hours is a big deal, unless you think other offers may be coming in.

So, that's my advice. I would ask your Agent for new comps (no more than 3-4 months old) to get a true picture of the neighborhood & how homes are selling. With all the short-sale & REO competition out there, traditional sellers are having to deal more than ever to get their homes sold. So, I hope this helps and good luck!
0 votes Thank Flag Link Mon Jul 28, 2008
Don Tepper is very knowledgeable, is a good writer, and I usually agree with him.
This time I don't.

Most of what Don describes is cosmetic in nature. - The lender cares that the house is structurally intact, its systems are in good operating ondition, ,and that there are no health or safety problems.

The fact that the house needs updating will not stop the lender from making a loan. It may result in the property having a lower appraisal, but it is still lendable if the problems are only stylistic and decorative.

Paula brings forth an important new issue. The Nehemiah progam is either in limbo or about to be shut down or is on temporary life support,(depending on who you talk to). Even if the loan officer can show that this loan is approved prior to the cut off date, the sellers agent will probably continue to be skeptical about the Nehemiah program.

If you were my client, I would advise you to make the offer that you feel comfortable at without regard to whether you felt it was fair to the seller, or had a strong or weak chance of being accepted. I would tell you that the higher your offer, usually the better chance you have to be accepted and the lower your offer, the more chance your offer will be rejected. You probably would already know that, but buyers ( in their own interest) sometimes forget that sellers prefer good offers to low ones.

Buyers tend to put a lot of stock into the psychology of how long until the offer expires. That stock is overvalued. The seller is not going to rush into a deal they don't like because of a short expiration period.
The standard time on the CAR purchase form is the third day after the offer. You can make it anything you want.
0 votes Thank Flag Link Mon Jul 28, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Hi Stella: While I would love to help you, the fact is you already are working with an agent, and our REALTOR code of ethics prevents us from interfering in another agent's transaction. Plus, none of us know where the property is located, what the comparable sales show for the area nor the seller's motivation for selling or even who the listing agent is, all of which will affect your offer.

I can say that standard offer acceptance, by contract default, is 3 days. When I write offers, I generally give the seller about 24 hours to respond, depending on the circumstances.

I can also say that Nehemiah will fund until about October, and after that, it goes away.

For comparison purposes, I closed a Nehemiah sale last month. The home was listed at $260,000. My buyers paid $235,000. The seller paid their down payment and closing costs. The seller also put on a new roof prior to close of escrow, paid for all the termite work, paid escrow, title and transfer tax fees, and gave the buyers a home protection plan. You can do the math and figure out how much the seller gave away. :)
0 votes Thank Flag Link Mon Jul 28, 2008
A Realtor familiar with local conditions and customs--as well as one who knows local values--can help you the most. That applies to such things as expiration of your offer, too.

You really need to know what the comps are. You think it's $350,000, but you really want to make sure.

If that's the case--and I don't know Sacramento at all, and I only know the house from your description of it--you still may be going in too high. (Even though the seller probably wouldn't welcome an offer of $342,000 on a house priced two months ago at $409,000.)

Consider: The carpeting will be a minimum of several thousand dollars. You note that the house is "horribly outdated." The bathrooms probably have the lime green tiles, right? The kitchen is from the 1960s or 1970s: Yellow double-oven. Painted wood cabinets? (Or, from the 1980s, those Euro-style cream with the brown trim.) Formica patterned counter top? (Or, 1980s, butcher-block Formica.) There's some wallpaper, probably in the baths, maybe the living room, maybe even a bedroom. That'll have to come down.

Outside, there's nice landscaping, but seriously overgrown. Same in the back yard. In fact, the trees are so big that there isn't much lawn anymore.

How am I doing?

Depending on the size of the house, and assuming no major problems (roof is OK, HVAC is OK), you'd still be looking at $20,000-$30,000 to really bring it up to today's standards.

So: Consult with your Realtor. If you don't have one, get one. Get the comps. Find out from the Realtor what some of the major drawbacks are. And while Realtors aren't contractors, some can give you decent ballpark estimates on the cost of rehabbing.

Good luck.
0 votes Thank Flag Link Mon Jul 28, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
You already have an issue that you need to call your lender about. Nehemia is no longer a viable lender - the federal government is basically shutting them down. You will need to contact you lender for a new type of loan. Regarding the rest of your question, you should be asking your Realtor these questions. If you don't have a Realtor, let us know and then we can answer your question.
0 votes Thank Flag Link Mon Jul 28, 2008
I forgot to add that our realtor said that he didn't think asking for new carpet would fly given the seller's concession on the down payment. I say it's a buyer's market, older gentleman said he wants to move to live with daughter, daughter is pressuring him, the final price is only $8000 less than the solid comps. Why is this asking too much?
0 votes Thank Flag Link Mon Jul 28, 2008
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