Rent vs Buy in 94536>Question Details

Joe Patel, Real Estate Pro in fremont, CA

Is price of home relevant factor if you finance home?My take is price is not relevant if you finance.It's only relevant if you pay cash.

Asked by Joe Patel, fremont, CA Sat Sep 14, 2013

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Of course price is relevant; if by relevant you mean not over paying for a property? Would you choose to pay above market rate for anything? And it certainly matters if your financing as the final price will determine what your monthly payment is. I'm truly puzzled why you might believe acquisition cost isn't a significant factor when making an offer on a property. I'd be curious to read your explanation of what I consider a very unusual perspective.
1 vote Thank Flag Link Sat Sep 14, 2013
Hello Joe,

Price is the most sensitive issue regardless of the property being financed or bought with all cash. In my experience of over 20 years in Real Estate, I have observed and witnessed several real estate transactions, people negotiating even $2,000 to $5,000 on a price range of over a million.

Like Elva Wormley, the first one who answered your question and mentioned about “good deal”. Good deal is a deal that makes sense in investing; it could be for prime residence or for rental property.

Please don’t forget that loan/lien that’s secured against the property is to be paid in cash each and every month/periodically until that loan amount is paid off in full. That sum of the interest and principal will be much greater than what’s paid in cash up front.

Hope this clarifies your question.

Charo Bhatt
Web Reference: http://www.HomesByCharo.com
1 vote Thank Flag Link Sat Sep 14, 2013
Joe,

Have you seen the price of HomePath REO properties when they are first listed for sale? Since there is HomePath financing available with no appraisal required, I you might say price is not an issue if you are financing.

You would be way wrong to make that statement! If you are willing to buy a HomePath property at their inflated list price with their no appraisal financing you will be paying too much for the property and you will be underwater from the time you close escrow.
1 vote Thank Flag Link Sat Sep 14, 2013
The price of a home is always relevant. No one wants to pay more for a home than it's wroth - and that includes institutions that offer mortgages. If the home does not appraise, you won't get the mortgage!
0 votes Thank Flag Link Sat Sep 14, 2013
Joe,

If home is priced more than the appraisal you will not be able to purchase the home unless you pay from out of pocket for the difference between the price and the appraised value. In this regard, price is relevant when financing a home.

Even when you pay cash, price is still relevant. If your price offer is less than the price offer of another cash buyer you will not be able to purchase the home. Many who pay cash think they are king and come in with low offers over asking. Many also think they can lord it over financed offers because they pay cash. They are in for disappointment because sellers do accept financed offers, that are substantially above a cash offer.

Price of home is relevant whether you finance or offer in cash. I have never known valuation of any property not to be relevant.

Hope this helps.
0 votes Thank Flag Link Sat Sep 14, 2013
Why do you think that, Joe?
0 votes Thank Flag Link Sat Sep 14, 2013
Joe, your question is a bit confusing to me (maybe clear to others, however!). If you are asking whether or not the price you offer for a home is relevant if you are obtaining financing, then the answer is "absolutely." As Dawn pointed out, the ensuing appraisal makes the price VERY relevant. If you pay cash, then price is a moot point. Maybe you asked the question backwards?
0 votes Thank Flag Link Sat Sep 14, 2013
Put simply, if you are paying it, it is part of the equation and relevant. For valuation, financing, property tax and income tax purposes, price is the central factor. If you finance, there are *additional* factors like prevailing interest rates and borrower qualifications.
0 votes Thank Flag Link Sat Sep 14, 2013
Hi Joe,

If you remember Dave Stark at the Marketing Meeting back in July had a nice presentation showing that there are not that many cash offers;
$417K and below: 35%
$417K - 625K: 15%
$625K - 729K: 8% cash offers

Furthermore, the agents also felt that some owners will pass up on a cash offer if that buyer is an investor and not a family, and others mentioned that if the financing offer was a lot more than the cash offer, they take the higher, financed, offer.

Brian
0 votes Thank Flag Link Sat Sep 14, 2013
Hi Joe, the price is absolutely relevant. Even more so if you are trying to get a loan as the home will need to appraise for a particular price. With a cash offer you can pay whatever you want. Dawn
0 votes Thank Flag Link Sat Sep 14, 2013
Hi Joe,

I believe price is a factor regardless of whether you pay cash or finance the purchase. Everyone wants to feel like they "got a good deal".

Also, in the qualification process, price is a critical factor.

Best regards,

Elva A. Wormley
Mortgage Consultant
(408) 615-8500
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981 / DRE #01274093
0 votes Thank Flag Link Sat Sep 14, 2013
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