Hello Lanna, FYI check out ch6668079

Sun Mar 23 2008, 15:35

Yes there are companies and certainly many loan officers in many companies who have participated in the mortgage meltdown over the past year. And yes you are correct in that folks borrowing the money don't have a gun held over their head. The problem could be as simple as that. "Hey, you signed the dotted line deal with it." What do you say the person should do who has already made the mistake and gotten themselves into a loan that is an adjustable with a very stiff prepayment penalty with no money in the bank to make up the difference in a declining market where they can't afford their payment any longer and they can't refinance?

Perhaps we should start another thread on this. Also, we have a discussion forum at GetPreQualified.com where there are some other folks who might want to talk about it if we're imposing on Lanna's question.

We do discuss in many of our articles responsible lending as well as responsible borrowing. Our focus on GetPreQualified.com is to present to consumers information that empowers them to make better choices, informed choices etc.

Tue Mar 4 2008, 09:36

Lanna, How to write a $250K Offer for $300K price? Rule #1, everything is negotiable! Rule #2, Buyers determines the price they are willing to pay for a property. (in respect to the Market Value and comparisons to other properties they have seen), Rule #3, if you don’t ask, you will never known. If you do not want to waste time to see if the seller accept or reject, write a Letter of Intent vs. of full 40 to 60 pages of Sales Contract! That specifies your price and all terms of the contract! Now, does this really work? It requires some analysis prior to that! Find out when the seller purchased the house (gusstimate the balance and equity), why they are selling, (motivation), where are they moving (net proceed), Repairs/Updates (deductions), market value (past 30 days SOLD properties), location (zip code, subdivisions make difference in price). So, what we learned? Do your homework, and base on the result you know how to write an strong offer to be accepted by the seller! If you are asking for $50K below asking price, than you should minimize other wants through the contract (contingencies, closing cost help, etc.). This will minimize the risks for the seller!

Remember, you either buy a DEAL or DREAM!

Cheers,

Tue Mar 4 2008, 09:13

"Many folks as we know don't have the resources to make the correction." And that was a point I tried to make earlier. Whatever happened to moral obligations? While some companies are certainly participating in predatory lending, they still don't hold a gun to the heads of buyers to sign contracts they have no plans to honor ("we'll fix it later...").

If you give your word, you need to back it up. I sorta doubt I'd have my 839 Fica score had I taken the easy way out back then. Make iformed decisions and then stand by them!

Tue Mar 4 2008, 08:44

Brad, thanks for the clarification on how you worked through what happened. It wasn't clear that I could tell from the earlier posts. Fortunately you had the means to recover. Many folks as we know don't have the resources to make the correction.

Tue Mar 4 2008, 08:23

By the way, I didn't lose my *shirt* in LA...I sold an *airplane* to pay my $17000 to contribute to getting escrow to close. At least I did the honorable thing and didn't walk away leaving the bank holding the property...to drag down my neighbors property values...as they had done to me.

Tue Mar 4 2008, 07:35

Got a little tense in there, but not as bad as some threads. Your reasons for changing realtors sound very valid to me. The one we have now has "held us back" from making offers on 2 houses because she knew we really wouldn't be happy. We were settling and she could see it better than we could. The result is that we are buying a much better house for approximately $25,000 less than what we were gonna spend on the lesser houses...so even her commission is lower, thanks to her honesty.

Just take the good advice along with the not-so-good. Also note that most of your answers are coming from "Real Estate Professionals." Double-edged sword, that is... On one side, they make money off of folks like you and I and thus have vested interests...and on the other side, they likely have been thru hundreds of buys and do have a lot of good knowledge they can provide about things you should think about.

I don't have anything vested here (retired from state government) and this will be our 19th house...so we've been around the horn a few times.

There is another loan we took out in 1992 and another in 2003. I've not seen it lately, but may be offered somewhere. It is a 5/25, sometimes called a "2-step." The first 5 years are at one rate and it can adjust once and only once at the 5 yr mark. It will remain at that rate for the last 25 years. When we got it, it was 4.0% for the 5 yrs and could only go to 9.0% as worst case (which we planned for). As usual, we sold it in less than 5 yrs. I am only a fan of variables when there is rock solid certainty that we can either retire the mortgage or handle the increase... I'm old enough to remember the Jimmy Carter 1970s where houses were 18% and CDs paid 15%. I still consider anything under 10% to be good...and am headed to a 4.625% 7/1 loan on this house...can't exceed 9.625% in 7 years...

Sounds like you are well on your way. Do listen to all the stuff these folks are telling you, even the gruff ones. You are getting a lot more education than many first-time buyers get!!!

Tue Mar 4 2008, 07:32

Just to add another thing....we are also looking at foreclosures. We aren't blind. We realize that to get a half-way decent property for a good price that is what we are going to be dealing with. We are fine with that fact. I also realize that means more money will have to go into it. We have family members (father and uncle) that are plumbers and home builders so we have that covered in terms of not having to pay a contractor to help us fix something up.

Tue Mar 4 2008, 07:07

Seriously Don, I am not here to argue with anyone. We fired our first agent for many reasons. One being that she wanted us to put offers down on houses that was more than we could afford. The house we ended up putting an offer on (we put in an offer lower than what she suggested...she told us "no way they will deal with you"....but they ended up dealing with us....everytime they countered she told us to take the offer instead of recountering.....if we had taken her advice we would have paid 50k higher. She definitely wasn't looking out for our best interest.....it seemed that she just wanted a quick sale and her comission)There were others reasons too but I'm not going to get into that right now.

Another reason we decided to move on with another realtor is because we like Ashburn better than the houses we were looking at in Germantown/Gaithersburg. We have made up our minds...we are going to live in Ashburn and we are looking for a townhouse. I understand that we aren't going to find our dream house and we aren't trying to do that. We aren't being unrealistic in our search. We aren't looking for houses that are 350k and expecting to pay 200 or 250k. The ones we have been looking at are 260k and under. We actually looked at 12 houses on Sunday that fit our criteria and that we could afford. And, yes I do find it offensive for someone to say I can't afford to live somewhere. Sorry if that irritates you....that's just the way it is. Bottom line here is: We want to live in ashburn, in a townhouse, for around 230-250k and it seems to me that we found that on sunday. The realtor we are dealing with now is much better than the first one we had....he is much more honest with us and actually is telling us every detail of home buying...which our first realtor did not. She knew we were first time home buyers but failed to tell us ALOT of things.

Anyway, I am done arguing with you or anyone else ....it is just making this whole process of home buying worse.

Tue Mar 4 2008, 06:59

Wow, Lanna you have yourself quite an exchange of answers going. Go back to your loan officer to see what you might be able to do to qualify for a bigger house. Payoff a credit card to boost your score or increase your debt to income ratio. Perhaps you have already thought of this. More important however is does the payment with a larger home align with what you and your husband want to pay to live somewhere? If not, get your payment to align with what you offer and get on with it. Sometimes the hard choice or reality is picking where you want to live versus what is there to live in. It is rare that any first time home buyer buys ever buys their dream home right off the bat. Maybe you'll have to live in a place for 5 years until you can really get what you want, or ride out the current market so you don't lose your shirt.

Someone who answered your question talked about losing his shirt in a home he bought in LA and had to sell lower than what he bought it for. What needs to be asked of you is how long are you going to stay in the home? Can you see that far out into the future? Or do you have the financial means to carrry the extra mortgage payment if you move out and have to get a new place to live in another area? Maybe you can with a renter, but what happens when you can't rent? Mortgage qualifications will only count 75% of your rental income, so at the very least you'll have to cover 25% of the rental income with your own income in to qualify for another home. Maybe that's too much information for your question. Back to what there is to consider here, are you going to be able to stay in the home long term. If yes, then who really cares that the property value goes down, if you get a fixed rate 30 year mortgage that you won't have to refinance? I encourage you to read the following article that I put into the web reference. It is about buying a home in a declining market.

Mon Mar 3 2008, 22:17

Lanna:

Too bad if you "find it offensive that you feel Ashburn 'might be priced a bit too high for you.'" Let's see. You've been pre-approved up to $250,000. You're looking for 100% financing. You have no down payment. You "fired" your first Realtor because she urged you to make offers on properties you liked. Someone (not me) suggests you consider renting until you're able to save up some downpayment, so that your financing will be more affordable, and you dismiss it as "the worst suggestion I have read so far." You think that because prices have come down significantly, that "we will definitely be making some kind of profit in 5+ years." You say: "The bottom line is that we don't want to rent anymore...no matter what our rent payment is."

Lanna: Wake up and smell the coffee. Where do you think all these foreclosures came from? Maybe from people who couldn't afford to buy, yet went out and got 100% mortgages? Why should they rent when buying was cheaper? Then prices slipped a bit. Their 100% mortgages reset, or they ran into some sort of difficulty, and they were upside down. They, too, figured they'd "definitely" be making a profit. Lanna, luckily for you, you're about 2 years too late to jump on that train to nowhere.

As for finding it offensive that I suggested that it might be difficult to find a property for $250,000 in Ashburn (which, I agree, most people would prefer over Prince William County), well, that's the way it is. Today on the MRIS, searching in "Ashburn" for non-condos, 3 bed/2 bath or greater, there are 28 listings under $300,000. There are 8 under $275,000. Most/all appear to be REOs or short sales. And they're townhouses, not "houses."

Lanna: You've gotten good, supportive advice here from me and from others. We've said: Make the offers. Go for it. Give it a shot. But for some reason you don't want to do it. You "fired" your agent, as you put it, because, as you said, she "basically wanted us to put an offer down on any house we 'liked.'" Well, duh! You dismiss solid advice that you don't want to hear as "offensive" and "the worst suggestion" you've read. You're convinced that you'll "definitely" make a profit with zero down, buying into a declining market.

You may want to rethink your strategy.

Mon Mar 3 2008, 21:07

No Lanna, it is not unrealistic to offer $250 K on a $300 K listing, especially if the listing has been on the market for over 6 months. You might be pleasantly surprised that the sellers at least make a reasonable counter that each of you can work on to complete a transaction and you are able to purchase a nicer home at a discounted price. Ask your agent straight up to research homes from $275 - $325 K and find any that fit your criteria and have been on the market for at least 6 months and then preview any in your desired locale. Happy hunting and hope you find a great deal!

Mon Mar 3 2008, 17:21

Although it wasn't in the area you are looking, I contacted the agent of a beach condo and offered them $69,000 less than what they were asking. I told them that was all I could afford and if they were interested, they could let me know. They jumped on it. Just goes to show, you never know until you try. I say go for it!!!

Sat Mar 1 2008, 18:34

Brad,

I totally understand what you are saying, but you have no idea what the cost of living is around the DC area. The amount of money we are spending in rent right now will be the same exact amount as our mortgage. Our lease is going to be up in 2 months and are rent will jump up $300 a month (which is more than what a mortgage payment will be.) The bottom line is that we don't want to rent anymore...no matter what our rent payment is. All of the houses we have been looking at have come down in price significantly (50k to over 100k) so we will definitely be making some kind of profit in 5+ years.

Sat Mar 1 2008, 11:27

Just a little more follow up. I agree renting is generally ugly. But if you bought a house for $250,000 and it went down 10% in a year (some areas have declined over 20% in 1 year...like in CA), then you will have "thrown away" $25000 by buying now...plus probably $4,000 in loan costs...or about the same as having paid $1800+ a month rent (after you subtract the mortgage tax benefit at 28%). Of course, if the house goes up in the year, the equivalent wasted rent would be lower. So renting isn't as disgusting as it used to be...in a flat or falling market like we are in.

Real life example: I purchased a house in North LA County in 1993. I "stole" it for $172,900. 9 months later, when I transferred, the best offer (only one) I could get was $154,500. So the cost of the original loan, plus 9 months of interest payments, plus the real estate commission to sell it, and that house cost me $42,000 real dollars to live in it for 9 months.... Had I spent $4000 a month for wasted rent money, I'd have been ahead. Hindsight is 20/20. I had planned to be there a long time, but circumstances changed and it really bit me.

So please, really weigh rent vs. owning for your particular case. It isn't as cut and dried as:
rent = wasted money -and- ownership = equity.

Sat Mar 1 2008, 10:52

Just to respond to a few of the comments. We definitely do not want to rent anymore! We are throwing our money away and not being able to save very much at all because rent is unbelievably high. I feel like that is the worst suggestion I have read so far.

Also, we do not want to live in Prince William County....that is just getting further and further away. We like Ashburn and we have found some houses there that we can afford. I find it offensive that you feel Ashburn "might be priced a bit too high for you."

Sat Mar 1 2008, 08:50

A few additional comments to what's already been provided. And some is very, very good. I especially liked Brad's advice: Your offer will be accepted or rejected based on the seller's needs.

Your offer will either be accepted, rejected, or countered. That's it.

Let's talk a moment about negotiating. Stacey gave you a great negotiating tip. It's called "nibbling." Ask for more than you expect to get, and throw a few small items in that the other side can reject without it ruining the deal for you. So they counter, eliminating some of those small items (that you never expected to get, anyway), and leave the rest of your offer intact.

I mentioned, above, that the seller can only do one of three things: Accept, counter, or reject. Let's turn that around for negotiation purposes. The seller has a list price. The buyer--you--have three options. You can accept (by making a full price offer). You can counter. Or you can reject, by not making an offer at all. Let's accept that the worst option for the seller is for you to reject--make no offer. But here's an interesting question: What's the best option for the seller? You say "accept"? You come in with a full-price offer. Well, maybe. But the seller will immediately worry, "Did I price this too low? If I'd listed for a few thousand more, would they have paid it? Did I leave some money on the table?" So, from a negotiation standpoint, counter. It doesn't have to be by too much. But when you're done, the seller will feel satisfied that he/she got the best price for the house. And you'll have saved a few thousand dollars (or more).

In a short sale, though, it doesn't matter what the seller is willing to accept. That's just a game. He/she will not end up with a penny, in any case. The question is what the lender will approve. And in a bank-owned property, yes, you can negotiate.

Regarding "comfort zone," I can't speak for Stacey, but if you were approved up to $250,000, I wouldn't have a problem showing you properties priced at $300,000. As Stacey said, you just make a "best and final" offer. Keep in mind, too, that while price is one variable in negotiations, there are many others. Your Realtor can help you with that strategy.

As for geographic area, Ashburn is fine, but might be priced a bit too high for you. There are a huge number of bargains in Prince William County. But if you buy there (or anywhere, really), plan on staying there for 5-7 years; it'll take awhile for the market to steady, then to recover.

Hope that helps.

Sat Mar 1 2008, 07:14