Brad

Typo below. Website is http://www.ofheo.gov - Thu Jul 10 2008, 10:13

"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

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 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

Couple more comments: Only in a Seller's market would we buy from the listing agent. We've done that successfully once and the Realtor convinced the seller to take our offer over another: He makes the commission on both sides, and we developed a friendly relationship with him so he wanted us to "win". Our "clean" offer (and he helped us to make it clean, knowing what would appeal to the seller) was not the highest offer...but it was the one they accepted based on his recommendation. On our current buy, I can talk very openly and honestly with my trusted agent, as she knows how high we would go on the property we are now buying, but she won't share that with the selling agent. She knows how much we want the house, which is another thing I don't want the selling agent to know. If they did, they'd have a responsibility to the seller to raise us as high as they could. "Dual representation" of both buyer and seller is not a comfortable situation for a buyer...altho most Realtors like to show you their listings first. As someone said, the dual agent still has a bigger responsibility to the seller.

Re: the "small requests." Well this is essentially a pre-foreclosure property. Banks here do tend to agree to pay for 1 yr home warranties requested (about $350), and that still is in our contract. The only thing the builder wanted to take out was the list of additional items. He didn't balk at all on the price (which the bank will have to approve). Asking for things doesn't cost anything. On the house we sold in the summer, we'd have given a lot just to make it go away.

Re: your nothing to put down, are you sure now is the time for you personally to buy? What will happen if the market goes down another 10%? Will you be able to endure it? Nothing is a loss until you sell, just like in the stock market, so if you can ride out a 10% loss in value and definitely not try to resell the house within 3 years, then I encourage you to buy. If that is not the case, I think you should rent. As someone else said, get a prequalification letter to be able to include with your offer so they know you really can purchase their house. It costs so much more for a 100% loan than an 80% loan that in a level or falling market, I'd not buy if I had to borrow over 80% of the value... Just my 2 cents more... Save up the 20%. - Sat Mar 1 2008, 07:10

I've been on both sides in the past 6 months.

We're currently buying in AZ. Listing price on this builder's model was $339k after the most recent wave of reductions. It was built in 2006 and likely they were looking for $459k at the time. Well, they have reduced it again to $315k and said bring all offers...owner motivated. Turns out the builder is on the verge of letting the bank foreclose on this second property of his. Bank is highly motivated NOT to foreclose and our offer of $285k is reportedly gonna be close to what they need. Heckova discount. We trust our realtor, who suggested that figure. If you don't have a good and trusting relationship with your realtor, always remember that the more you pay, the more money goes into the Realtor's pocket. Don't be afraid to offer $250k for a $300 listed property. It all depends on the situation of the seller and whether they really want out...for whatever reason.
I'd never make 3-4 offers... We offered this price and asked them to install a water softener, garage door openers, etc ($2000 or less). We did that so they'd have something to decline besides just wanting the dollars raised.

Now the other side: We had a house here that was worth $550k when all the decline started. We chased the market down (poor realtor advice) to $524K....$489K...$469K and then changed realtors. She told us to list it at $425-$435k if we really wanted to sell it. We went to $425k and soon got an offer of $400k which we took. Today the house is likely worth $350k or less. We wanted out as we were away 7 months out of the year and it had a pool...that needed constant attention. It was such a pain, we just wanted out of the house and were considering draining the pool (causing plaster damage).

Your offer will be accepted or rejected based on the seller's need. Make your $250k offer and let them tell you what they need. The deal discussed earlier where the person made 4 offer, from low-ball to full price and then the seller rejected it, was a meeting of two stubborn folks who did not want to complete a transaction in my opinion! - Thu Feb 28 2008, 14:35

Egads. Might I suggest you look a little further South to Lake Havasu. I looked all over Bullhead City about 3 months ago. Man, what a depressed, poor and ugly area (except for the stuff right on the river). If you don't need to be that close to gambling all the time, and can stand the 60 mile trip from Havasu....you can buy a lot more house, community, etc. there than in Bulhead. The developments way up on the ridge seemed to have really dropped in price, but still weren't inviting.

You can find the full range from $99k mobiles to $200k nice houses up to $2M plus in Havasu, and there is only a small area that is a real crime/drug area. I spoke with Mohave County Sheriff's Office to learn where it was. Driving thru that particular crime-ridden area is obvious. - Sat Jun 21 2008, 15:52

Run from pre-foreclosure homes unless you have tons of time to wait! Here's another little "trick" I fell into. The house we wanted was listed high, at EXACTLY what it would have taken to satisfy the bank with $0 to the seller and even a reduced commission to the seller's agent. So, there was nothing about it being a pre-foreclosure (short) sale in the listing. We offered $30,000 below the asking price of $315k and it was accepted...but that put it into the Short Sale category and, after waiting for Saxon Bank to respond to our offer for 5 weeks after they received all required documentation from the seller/builder, they finally told the escrow company that it would be at least another 5 weeks before they would make a decision (whether or not to forgive $25,500 needed). We walked away at that point and found a better deal.

I say all that to note that they have now returned the house to the market with the very same tactic: listed at a too-high price that prevents them from having to disclose up front that it is a short sale, hoping to get someone else to love the house and then wait. We passed up looking at ALL (identified) short sale listings as the banks just do not seem to be in a hurry to deal with a live buyer...Saxon, it appears, would rather just go thru the foreclosure process. The escrow company reported they were just plain rude to them when they were trying to get an idea as to when escrow could proceed. - Tue May 13 2008, 08:06

A little over a month later and I'll have to also be more optimistic... We gave up on the short sale referred to below as Saxon Mortgage is taking a minimum of 10 weeks to look at the offer. So we told them to go fly a kite.

Then we resumed looking and we are about to close our new house. It was priced right and on the market less than 2 weeks when we grabbed it. Both the House inspector and bank are now starting to get really busy. Sounds like we are at or near the bottom of the market here in Havasu, as even investers are starting to buy right and flip houses again....

However, you still must really work hard to check and learn values. The type of house we are buying has many similar to it, all in decent locations, for a price range between $229k to $350k...for essentially the same thing. It is all about the financial situation of the seller, as so many are so far upside down. This is a less than 15 yr old 3 bedroom, 3 bath, 1600+ sq ft, tile-roofed house with a boat deep garage (both bays) and plenty of room to add RV garages. Lots of other positives. The buys are out there amidst the upside-down houses that are still headed to foreclosure. - Sun Apr 20 2008, 16:54

Nice optimism. Realtors are quickly putting up sold signs to encourage folks that things are selling here. 101 closed sales in a month means that if no more houses come on the market, in only 18 months or so, the existing inventory will be sold.

Many sellers here haven't yet gotten the message to drop their prices if they really want to sell. We are looking to buy another house here, but aren't even bothering to look at occupied houses as there are something like 400 foreclosures on the market and I don't know how many Bank-owned properties.

We are currently trying to buy a short sale now and everyone is dragging their feet (seller, bank, and even escrow company) so we are doubtful the sale will even occur...but that didn't stop the selling agent from putting up a sold sign the moment we made an offer (well under asking price).

Once the glut of "weekend homes" owned by folks from the next-door state (who currently can't afford them), then Havasu can resume its climb. This is a great area to live, but I don't think we are at the bottom yet... We're willing to buy now because we think the bottom is close...but we certainly put in a much lower offer than the asking price. If it doesn't work, we'll find another...there are plenty here! - Wed Mar 12 2008, 20:05

So, Jessica, if you are selling them in FL, what kind of shortages are banks agreeing to? $10k, $20k, 50k? or 5%, 10%, etc? - Fri Apr 4 2008, 12:05

One more piece of info:
The mortgage is held by Saxon Mortgage if that means anything (good or bad). I found a web form on their website and asked them directly, since both my escrow officer and the selling agent are too lazy to do so.

REO properties are selling here, but I have no idea if the short sales are happening. Banks seem to be as bad as sellers who refuse to understand where the prices need to be here to sell. They just seem to end up owning them and then selling them for even more of a loss. Hopefully, Saxon will be a bit more prudent than to wait til this house drops another $30k in value to buyers. I did nicely tell them we were considering just canceling the contract and resuming our search in the fall. - Fri Apr 4 2008, 12:04

Thanks Barbara for your candor. We are in a somewhat unique position, in that this is a winter house we are looking to buy (we have been living in the area in a comfortable motorhome this winter). We are heading to our summer house in 2 weeks, and I'd just as soon it take until October (I earn but not pay interest while we wait, and I wasn't gonna live in it in summer anyway)...but I want some progress report. We plan to sell the "summer house," but there isn't a contingency issue. If it doesn't sell for 2-3 years, it wouldn't kill us...but it is a nice small acreage in the $450-$600k range in Salem, OR.

It isn't like the market is climbing and leaving us behind...LOL. The only financial downside I see at the moment is the lack of interest on our $5000 earnest money. But it has been frustrating as hell, especially the lies that started it....and I don't want to be in this same place in October. - Fri Apr 4 2008, 10:49

One more thing: My realtor had been steering us completely away from short sales. This was not listed in MLS as a short sale, as if he'd have gotten the full price, it wouldn't have been. It became a short sale when the builder accepted the price we offered.

At that point, the Selling agent assured our agent that this was the 2nd of two houses to finish the builder's business and the first sale had already gone thru, so the bank was well aware of the builder's status and this second and final property would be quick and easy.

Escrow learned the first sale had the buyers making up ALL the loan, thus it wasn't a short sale...and this second one was with a completely different bank and he had NOT submitted anything to them when we started escrow on 2/28.

I have no clue what a "BPO" is. Banks here don't do anything on a "what if" basis. You bring them a signed offer and then they start their process. This bank said 3-10 business days for review, but today is business day 15 since escrow and the seller finally got the documentation submitted... - Fri Apr 4 2008, 08:05

A few clarifications after reading the first 4 responses:

The value of the house (to us) isn't in question. This is a 1540 sq ft house with an RV garage and they are generally listed here at $265k to $350k for what we are looking for. This particular house has a combination of amenity, location and lot attributes that make it highly desirable to us at the $285k we offered (and the seller accepted). We want it at that price and have done our homework before we made our offer. This is our 18th or 19th house purchase (always to live in, never as an investment property) so we aren't neophytes...except at the concept of a short sale. The one time I was $17k upside down in a house, I sold an asset to come up with my part. It never dawned on me to crawl out from under the loan in this manner. Yes, I know about how taxes are assessed here. They wildly differ from house to house and I know to expect approximately $1300 here.

This area has approximately 1800 houses on the market and 400 houses in some stage of foreclosure, but short sales are still rare and I (the buyer) cannot choose a knowledgeable selling agent as someone suggested. The selling agent is who he is (at least he is the owner/broker). The selling agent, who apparently has been selling for this builder for a few years, has reduced his commission to 2% and is doing nothing else...not even returning phone calls from my good agent.

The escrow company wasted a week or so in getting the builder/seller's package to the bank, but they did fax it on 3/17 and the bank provided receipt. Despite the addendum that allows the bank to give me status updates on their process, the escrow officer says she can't get any information. This was the escrow company selected by the seller's agent...but one we'll not be using again. I point out again their ineptitude, as they sent me a copy of the seller's proposed HUD-1. Nice to know, but it should have been kept private.

We are leaving AZ for the hot summer and altho we are ready to close quickly if needed, we would just as soon drag this out...if we had a good idea it was gonna be successful. The contract says we'll have 30 days once the bank's agreement with the seller is received by escrow. The only issue is that at some point in time, we might want to reduce the offer if RE keeps falling. The Zillow "Zestimate has floated from $308k to $300k, and is currently at $302k.

A puzzling piece was that the selling agent immediately put a Sold sign on the property and took it out of MLS the moment we accepted the builder's counter-offer (to not add some goodies, but left the price alone). I'd have thought they'd list it as sale pending or something...but this leaves us the only game in town for the bank. I'd also have thought that the seller would have come back with a higher price, to attempt to make it more palatable to the bank. Were I in the bank's position, I'd be miffed that he didn't even try to get more of his balance covered. Our offer was $30,000 less than the asking price.

Only one response addressed my question: How likely are they to forgive $25,500 on his $292,000 loan to make the deal work? I'm encouraged by the reply, but I'd like experienced others to address what they think about that amount being forgiven.

Thanks! - Fri Apr 4 2008, 07:53