Home Buying in New York>Question Details

Mark, Home Buyer in 10128

If a coop requires only 20% down, why would seller insist on a minimum of 25%?

Asked by Mark, 10128 Wed Dec 18, 2013

If the property might be a little overpriced, does the 25% down rather than 20% make it more likely the deal will go through anyway if the property doesn't appraise?

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BEST ANSWER
John, Janet - to your corners! NOW!

Mark - we don't know what the seller is thinking, we can only imagine. Rather than rely on our imaginations, ask the listing agent what the seller's rationale is. Go to the source.

All the best,
0 votes Thank Flag Link Thu Dec 19, 2013
Seller's agent let me know that seller wants a cushion should appraisal fall short. They've even got back to me today to do 30% down rather than 25%. They told me there was already an accepted offer and contracts were out when I made my offer, but that until contract is signed all offers will be presented to seller. They've been telling me for a few days now that the other buyer signed the contract, so I guess they want me to go to some lengths to persuade the seller to not countersign and to drop the other buyer in favor of me. Seems like it might be a bridge too far to me, though...I could be locked into potentially paying that much more than what the property might be worth?
Flag Thu Dec 19, 2013
Merry Christmas Mack!
Flag Thu Dec 19, 2013
Sellers can establish any criteria they want in selling their unit. Normally a higher down payment brings a buyer that is more financially qualified with less headaches from their bank when they go to purchase a property.
2 votes Thank Flag Link Wed Dec 18, 2013
- Seller's agent let me know that seller wants a cushion should appraisal fall short. They've even got back to me today to do 30% down rather than 25%. They told me there was already an accepted offer and contracts were out when I made my offer, but that until contract is signed all offers will be presented to seller. They've been telling me for a few days now that the other buyer signed the contract, so I guess they want me to go to some lengths to persuade the seller to not countersign and to drop the other buyer in favor of me. Seems like it might be a bridge too far to me, though...I could be locked into potentially paying that much more than what the property might be worth?

Appraisers do not like this, but they don't know value. Buyers determine value. Appraisers give lenders an opinion of the value of the collateral backing the loan. It is an opinion, an educated opinion, appraisers are smart people, but I wouldn't let an appraiser change my opinion of value. If I was willing to pay, say, $750,000 for something - I wouldn't care what an appraiser thought, although in order to get a loan, I have to submit to the process of having an appraiser tell the lender what they think the property is worth.

Ultimately, a property is worth what a buyer is willing to pay for it, and if you lose out to another offer, that will tell you what the value of the property is.

Thank you for the "best answer," and all the best!

Merry Christmas and Happy New Year to all.
1 vote Thank Flag Link Thu Dec 19, 2013
When trying to sell, the seller can impose his/her own rules. If purchasing with a mortgage a higher downpayment betters the odds that the loan will close. If you feel the property is overpriced and it may not appraise, consider searching for other units....
1 vote Thank Flag Link Wed Dec 18, 2013
Mark,

That's one way to handle an overpriced property. But why would you want to overpay for a property?

A larger down payment on any property gives more assurance of the mortgage commitment going through.
1 vote Thank Flag Link Wed Dec 18, 2013
Mark: You mentioned that the seller's broker told you that the other buyer already signed the contract, and yet they are still after you (to up the cash down). If is obvious they are still shopping this listing around (not a nice thing to be doing!). So forget about the question of how much you should put down. Just ask yourself: if they were to accept your offer, and you signed the contract, are they going to keep on shopping for another buyer? Are you going to lose out too just like the other buyer who has already signed the contract? Do you want to subject yourself to disappointment and waste your time?
0 votes Thank Flag Link Thu Dec 19, 2013
Mark, are you working with a Broker? Based on your question, I'm thinking you're not or you would have asked your Broker. Your point may have some merit but why then not ask for 30% down? That would certainly cover a shortfall on an appraisal. Why not even more? Manhattan is full of highly qualified buyers. Perhaps the seller was burnt before or actually does want to see someone with a bit more skin in the game. Good luck.
0 votes Thank Flag Link Thu Dec 19, 2013
Mark, from my experience, the seller can ask for whatever down payment they want. My guess is it makes them feel like a buyer has more skin in the game and are serious. In the end they still get the same amount for the property so it tends to be psychological.

Chris
0 votes Thank Flag Link Thu Dec 19, 2013
John Sacktig, don't start with me again you total jack ass. And don't write to me via email either, you're not worth my time. Of course what I wrote doesn't make sense TO YOU, because you are a DUMMY. Go cry to mommy and daddy now to remove my comment but maybe in the future you can just answer an question and give your sorry advice and stop criticizing other agents comments which is often what you seem to do. Why do you think you are so better than everyone else. Go away........
0 votes Thank Flag Link Wed Dec 18, 2013
Would you like me to post me the emails right here...i don't think so but push me and i will and then you'll look like the liar that you are...lol
Flag Thu Dec 19, 2013
I have no reason to email you and never have. Your posts often prove that *anyone* can get a real estate license. Sad, but true.
Flag Wed Dec 18, 2013
Aside from this….“ I may not be explaining this well in writing”

We get this: “If you are not currently working with a buyer's agent, consider working with one (like myself) as they can explain scenarios like this to you. A buyer's agent's commission comes out of the sale so it can only benefit you to work with one and have an agent on your side.”

Well, the contradictions are pretty funny. But how on earth do you think that you can provide any clarity as the buyer’s agent. And what, pray tell, would be the benefit that you –or- any other buyers agent could provide? I see the stellar advice is flowing. I am most positive that phone call is going to be a cluster freak of sales gibberish.

It burns my butt to see such responses that reflect so poorly on the real estate profession.
0 votes Thank Flag Link Wed Dec 18, 2013
Ok, but then what would be your answer to the original question? Thanks.
Flag Wed Dec 18, 2013
Hi Mark,

The seller can set his own rules. He likely knows something that he is not disclosing with you.

My guess would be that he may be asking for the buyer to have 25% or more in cash, not necessarily downpayment. One possible reason for this is that your assumption may be right that the unit is not worth as much as listed. If you turn in an offer at list price and it gets accepted for instance, and you go through the mortgage lender and they send their appraiser... the appraiser may say, this unit is worth $10,000 less than the offer price. The mortgage lender will not lend you the $10,000.

In this case, the buyer can choose to continue (your lawyer should explain this to you and have this as a contingency on a sale) but this would mean the buyer pays the extra $10,000 in cash on top of the 20% downpayment to make the accepted offer work.

I may not be explaining this well in writing. If you need to chat over the phone regarding this, please feel free to give me a call. If you are not currently working with a buyer's agent, consider working with one (like myself) as they can explain scenarios like this to you. A buyer's agent's commission comes out of the sale so it can only benefit you to work with one and have an agent on your side.

Karen Cheung | 917.334.9544 | kcheung@citihabitats.com
0 votes Thank Flag Link Wed Dec 18, 2013
"I may not be explaining this well in writing." & "consider working with one (like myself) as they can explain scenarios like this to you." A bit of a contradiction.. no?
Flag Wed Dec 18, 2013
Sellers typically can ask whatever they want to ask, which is part of negotiating the deal. The 25% down requirement sometimes comes into play if it were an investment property and you were planning on living in your current residence (which some co-op boards don't allow). If the property is going to be owner occupied, which many of them are asked to be so - you could consider an FHA mortgage (depending on what the regulations are with the board) - which would give you the ability to put 3.5% down. However, any down payment less than the usual 20% often asks you to carry a Mortgage Insurance or some sort.

Eric Rohe
CITI HABITATS
erohe@citihabitats.com
201-328-2758
0 votes Thank Flag Link Wed Dec 18, 2013
The down payment has absolutely no bearings on the appraisal value of the unit. Your down payment could be 50% and it will not change the appraisal value. If that's what you were told, someone is dead wrong. The purchase price of the unit is what appraisers look at, NOT the down payment. Asking for the extra 5% is odd, believe me it's not typically done, although it's the sellers prerogative to make that decision probably guided by the agent or vice versa.

How do you know the unit is overpriced, is that your personal opinion? Who are you working with, the listing agent? if your offer does become accepted under the sellers terms, you don't have to worry because the lender won't finance it although you would have wasted some money and time along the way. So if in doubt, find another unit.
0 votes Thank Flag Link Wed Dec 18, 2013
Another brilliant nonsensical reponse. You never cease to amaze!
Flag Wed Dec 18, 2013
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