Making an offer for a house help

[b-boy]

zillow.com for comps.

I was the lowest of 3 bidders when I bought the house I'm in now. Why did they sell to me? They liked me. They liked my wife, and we brought my adorable daughter, and they liked her. You probably think this is crazy, but it was a corporate move and I don't think they were sweating the money, and the seller's realtor lives next door (which is how I know all this).

Anyway, it can't hurt to just be really nice. It's a house to you, it's a home to them. They probably want somebody to continue taking care of it after they are gone. They might also feel some responsibility to the neighbors.

I sold my house to the second highest bidder. The main reason was that they were older, had more money to put down, and seemed like a less risky choice.

The high bidders were going non-conventional via a government program, which would have most likely become a morass of paperwork and red tape by the time we closed. It would have bumped my closing out an additional month. They were also borrowing the down payment from family. I didn't want the hassle. It was worth a few thousand less to go with a more stable buyer.

 

[fuzzy2133]

Sorry all Zillow is for marketing, they keep old listings up until people stop clicking on the picture. Only good info is the historic data that is pulled from the county.
OP if you have not gotten a Realtor yet, read reviews and find a good person you like. When we sold our house last year we got 4 offers and only 1 had all the proper documents!
A cover sheet created by your Realtor that describes you and your family as buyers really does go a long way. I had a similar situation like Passed Pawn sellers liked we had a common hobby.

Edit: Beware using the listing Realtor they will know too much on both sides of the deal.

 

[Bobby_M]

Are you suggest zillow isn't a good research tool? Hell yes it is. The county data doesn't have up to date pictures of the whole house. It's ALMOST as good as the data realtor's have for pulling comps.

 

[b-boy]

I think Zillow is an excellent research tool, but I don't trust all their comps. Most are simply square footage multiplied by the average cost per square foot of the neighborhood. They don't take into account condition or amenities. If the house hasn't sold recently, the numbers are just a guess.

The house I just sold was listed on Zillow for 122k. The house sold for ~190k. After 2 months, the Zillow value has gone up to almost the selling price.

Still, it's a great tool for researching homes and neighborhoods. Just make sure to use recently sold property to do your research.

 

[fuzzy2133]

b-boy nailed what I was going to say.

 

[Magnus314]

Zillow is fine for comps. Just don't trust their "Zestimate". Scroll down the right side of the page and see the actual sales for yourself.

To look up the mortgage balance, you can look it up in the public record. If they paid it off sooner, it won't shoe there, just the original mortgage balance and how long it's been. You can use a mortgage amortization calculator to figure out how much they "probably" owe.

If it's in foreclosure, that payoff amount will be increased by the amount of back payments, attorneys fees, etc., and will ALSO be public record... but in the Notice of Default or Lis Pendens instead of the original mortgage.

 

[cannman]

Sorry all Zillow is for marketing, they keep old listings up until people stop clicking on the picture. Only good info is the historic data that is pulled from the county.
OP if you have not gotten a Realtor yet, read reviews and find a good person you like. When we sold our house last year we got 4 offers and only 1 had all the proper documents!
A cover sheet created by your Realtor that describes you and your family as buyers really does go a long way. I had a similar situation like Passed Pawn sellers liked we had a common hobby.

Edit: Beware using the listing Realtor they will know too much on both sides of the deal.

Well, the *funny* thing is that when looking at available homes in our area, the listing agent for the home was the same agent who sold us our first home in 2008.

She knows our situation, she knows the house for sale situation, we're kinda screwed in terms of a neutral party HOWEVER, we were extremely pleased with the transaction 7 years ago so we really don't have any issues with using her again. I feel there is enough resources online now that we can be an educated buyer.

BTW we were preapproved for the asking price so its all negotiation from here. We took a look at two other more expensive properties and this is just the right bang for the buck given for our current life situation.

 

[MattyIce]

Good luck man! We are still in a seller's market down here.

 

[Punity]

Thanks for this thread! its all good info for me haha, i bought a home a few years ago but that was by chance. MIL was on a walk and saw a for sale sign tacked to a garage. She just happen to know the owners and he was recently let go of his job and needed to move to Colorado for another job and soon. My wife worked at a title company so we were able to get all the info we needed. Had already been approved for a mortgage as we were in the market for a house. I sat in his living room drew up the paperwork myself got him to agree to pay all closing costs and away we went able to move in rather quickly. Which was lucky as we moved in the day the house we were renting was sold and supposed to transfer ownership ( another story in itself)

But i know my case is an anomaly so its nice to see how its done like normal people haha so down the road if we decide to find another home we have some insight.

 

[cannman]

NEW question: If I present a prequalification letter when making the offer from lending company A, am I in anyway restricted from using lending company B if they come back with a better rate by the time we close everything?

 

[Onkel_Udo]

NEW question: If I present a prequalification letter when making the offer from lending company A, am I in anyway restricted from using lending company B if they come back with a better rate by the time we close everything?

You should not be held to anything but your offer price unless the offer you make specifies the lender.

You are writing the offer. Outside of basic boilerplate language for your state (which can be extensive) all terms you list are those that you choose. If you are concerned, in the "other" section specifically note that the prequal letter is for information only and the lender used at closing may differ. Keep in mind also, if your mortgage broker is one the seller's realtor prefers from past experience and the seller has competing offers, the realtor will mention it to the seller.

Most likely your offer will be on a form provided by your realtor. If so, take the time to read it. As most states have tried to standardize a lot of the home buying process, the form may actually be state supplied binding contract agreement that you may add non-binding addendum to. That was how Oklahoma had gone when I sold my house there...anything not part of the state form could have a minor cash penalty but if it was not part of the form, it could not nullify the contract.

 

[MattyIce]

These are great questions for a Realtor! ;-)

In Texas, you are not bound by a lender unless specified otherwise. The thing is that much of the 30+ day closing process involves getting everything squared away with the lender. I recommend finding a lender you like and also know will not be jerking you around up to and possibly through the hour of closing.

 

[IslandLizard]

Definitely shop around NOW for the best rate. Odds are your current lender who "pre-approved" you is a big outfit and does NOT have the lowest rate around. We learned a valuable lesson there. Within 1-1/2 year we re-financed... now the rates had dropped considerably too, but even without that we could have done a lot better from the get-go:

There's a good Zillow tool to find lenders/brokers (they pay a subscription for that listing service) for the loans terms you're considering. Sort by lowest rate, check for lowest fees and points and you've got at least a handful right there. Check their feedback.

I made 20-some phone calls to various lenders and boy, there was a lot of difference! Through the Zillow tool I found a small brokerage firm across the bay, but we never met in person. All transactions and communications went over the phone and through emails, and the closing was done by the title company's agent who stopped by the home to get all the papers signed.

Having 20% down in equity really helps to defray Private Mortgage Insurance (PMI) for which you get NOTHING in return. Without PMI you're saving $100-200 or more a month easily, which could be applied to your principal (or other debt) instead. PMI is an other way of fleecing the American people.

 

[Onkel_Udo]

All transactions and communications went over the phone and through emails, and the closing was done by the title company's agent who stopped by the home to get all the papers signed.

Without PMI you're saving $100-200 or more a month easily, which could be applied to your principal (or other debt) instead. PMI is an other way of fleecing the American people.

My re-fi was done by email, fax (get ready to need a fax again for real estate) and a notary showing up to my house.

PMI is not about fleecing per se. It is about protecting the mortgage company's interests because the buyer cannot or will not "share the risk" by putting enough down. I paid PMI on purpose for 2 years as I built equity enough to drop it (most came from a 14% additional principal payment on month two). The mortgage offer for the "preferred" 6% down for their best mortgage was actually worth losing that much for 24 months.

EVERY offer is different. If you cannot or will not wade through the fine print and minutiae, stick with one of the big boys. I manage the money on mega projects daily for almost 15 years and still find the ins and outs of mortgages truly mind boggling. The number of variables is just silly.

 

[Hello]

NEW question: If I present a prequalification letter when making the offer from lending company A, am I in anyway restricted from using lending company B if they come back with a better rate by the time we close everything?

Why would you be restricted from using the lending company that presented you with a pre qual? B, your rate isn't locked, it will be locked eventually. You would want to lock it if it's good. It could go up, it's not worth the gamble. You won't get a better rate at time of close because they will lock the rate. Unless you back out of the loan, which you can before you sign, you'll be stuck there. However, if you back out, the seller may have a chance to tell you to kick rocks because you'd be delaying closing and all that jazz. The loan process now is more in depth and it takes a little more time. Especially with the new rules that come into effect 10/3.

 

[cannman]

Definitely shop around NOW for the best rate.

How many lenders is too much? We've been talking to two lenders and each one has made a hard hit on the credit report...

 

[Onkel_Udo]

How many lenders is too much? We've been talking to two lenders and each one has made a hard hit on the credit report...

Wait, what? Are you sure it was not a soft inquiry? If not, go immediately to one the of the big boys and stop screwing around because either the rules have changes in the last 4 years or you are making some very bad choices on who to entrust with you future.

Truth is, in the end the mortgage will end up with with about one of 4 companies after it gets sold anyway.

 

[cannman]

Wait, what? Are you sure it was not a soft inquiry? If not, go immediately to one the of the big boys and stop screwing around because either the rules have changes in the last 4 years or you are making some very bad choices on who to entrust with you future.



Truth is, in the end the mortgage will end up with with about one of 4 companies after it gets sold anyway.

I check my credit periodically with Credit Karma and part of their service is credit monitoring. Sure enough, they sent me an email within 24 hours letting me know about the inquiry... If this shouldn't be a hard hit, I don't know what is...

View attachment ImageUploadedByHome Brew1441962608.386582.jpg

 

[IslandLizard]

Wait, what? Are you sure it was not a soft inquiry? If not, go immediately to one the of the big boys and stop screwing around because either the rules have changes in the last 4 years or you are making some very bad choices on who to entrust with you future.

Truth is, in the end the mortgage will end up with with about one of 4 companies after it gets sold anyway.

Hmm, when I did my inquiries they all pulled a credit report. Perhaps they were "soft" ones, how would anyone know?

True that mortgages get sold, but I got a much better rate going through my broker, who secured the mortgage with CitiBank, than I could get from CitiBank directly. Or any other bank for that matter.

He did mention having bad experiences with Providence Bank (sp?) at the time.

Ages ago, on a former house in a hick town, we had a really bad experience with a local bank. We had accounts there too. They offered a stellar rate on a 7 year mortgage but were fastidious and dishonest. Although we had a huge down payment, giving us more than 60% equity in the place, they wanted us to take out a much higher loan (more than double) to replace the roof, plumbing, heating, electrical and what not, only to be contracted out to those on their "approved list." Guess who were on the board at that bank? Yup!

Of course we declined, but were out all expenses incurred, including the application and appraisal fees. Luckily we found a different way to finance the gap and bought the house. I did a lot of the work myself, and hired contractors from MY short list. We withdrew all our accounts from that bank instantly, and again after they merged with our new bank a couple years later.

 

[Onkel_Udo]

Hmm, when I did my inquiries they all pulled a credit report. Perhaps they were "soft" ones, how would anyone know?

True that mortgages get sold, but I got a much better rate going through my broker, who secured the mortgage with CitiBank, than I could get from CitiBank directly. Or any other bank for that matter.

Soft inquiries do not show up on your credit report (oversimplification) for other potential lenders to see. In short, the prequal lender gets nothing more that you do on free credit report; score and debt to equity. That combined with the one or two tax returns most require is enough for them to give the provisional thumbs up or down.

The hard inquiry, if more than say two in a 6 month period, do start to effect your credit rating and are visible to all that pull a hard inquiry...they know you are shopping. Almost no lender did this on my last four large purchases (House, refi, new car, trailer) and in fact the only hard inquiry was the one 3-days before closing on this house when they locked in the final rate and terms...even my refi never bothered.

It really may be much different now and it may be different when you start getting into sums over the "standard mortgage" (old cut-off was like $390K, think it is over $400K now). It may also be different when you do not have a good-to-excellent debt to equity or credit score.

 

[IslandLizard]

@Onkel_Udo ^ Thank you, very good explanation!

 

[Hello]

FWIW, I went to a bank originally and the rate they offered me was .75 over the standard rate for that time. I went to a broker that same day and he got me the rate I wanted without me having to pay points to buy my rate down. The loan was then sold to that exact bank I went to where I couldn't get the rate I really wanted. I have always been opposed to brokers based on what I do for a living. This time, I was careful, I kept an eye on things and I found a broker who was just as happy to get me what I wanted while he got what he wanted.

 

[IslandLizard]

@Hello ^ That was experience too.

The worst mortgage companies I talked to during my search were the ones who had long stories to tell on how they do things differently, why they are the best in the market, blah, blah, without me asking for those details. If they couldn't cough up a rate within 5-10 minutes I mentally wrote them off, and made note of that. Even hung up on them occasionally. Lots of bait and switch methods too, where the published (advertised) rates are not available, "but we have..."

When dealing with my broker, all the paperwork was handled through PDFs emailed back and forth. No fax involved. Fax is dead IMO, and I will refuse to resurrect her.

 

[b-boy]

Be careful of high fees with brokers. In a lot of cases you can end up paying up front. Interest rate isn't the only thing to look at. Read the terms of your loan too. Make sure you understand how variable loans will behave when rates start going back up (which they will eventually).

Some of these brokers can be a bit predatory. The more loans they push through the process, the more they make. It's harder for them to do after the mortgage crisis, but people have short memories. A lot of the bad lending habits from 2005-2008 are starting to come back.

Unfortunately you don't get your Truth in Lending docs until you've pretty much committed to the mortgage, so it can be tough to compare costs.

 

[IslandLizard]

@b-boy ^ Excellent point on fees. You should clearly know what you're in for at you first inquiry, before proceeding and definitely before committing.

Lots of jargon too, so ask what it means, and check against web resources. I guess there are better brokers as well as greedy sharks. And it may be difficult to tell them apart.

Always check the quote for (hidden) charges and fees, and ask for explanation of the various entries if they're not clear. That quote should be on a HUD form, so you can compare.

 

[Onkel_Udo]

@b-boy ^ Excellent point on fees. You should clearly know what you're in for at you first inquiry, before proceeding and definitely before committing.

Lots of jargon too, so ask what it means, and check against web resources. I guess there are better brokers as well as greedy sharks. And it may be difficult to tell them apart.

Always check the quote for (hidden) charges and fees, and ask for explanation of the various entries if they're not clear. That quote should be on a HUD form, so you can compare.

Again, I sacrificed fees for a rate but the fine print, your knowledge of the mortgage process and your willingness to comb through the fine print is KEY.

The Big guys like Wells Fargo and Citibank Mortgage (my mortal enemy) make their money by being transparent, easy and consistent.

 

[cannman]

Lets talk about concessions.
From what I understand, this is the realtor, lender, or seller taking some of the closing costs and misc. fees. Can someone clarify? Why would I want this (ie, why doesn't' everyone ask for them)? When do I ask for them? Can I ask for them AFTER the contract to buy/sell?

Also, what is a good realtor commission rate?

Anything I should ask for when drafting the offer letter with the realtor? thank you!

 

[b-boy]

Are you selling or buying. If you're buying, you don't need to worry about the agent commission. If you're selling, I'd say 5-6% is about right. Sometimes you can get it reduced if you push. I got 1% knocked off when I sold. I knew the agent, so that helped.

Concessions are generally good for the buyer. I can't think of a single reason I would do this as a seller. If you have a buyer who is having trouble getting funding, it may be helpful for the seller to give some concessions. He may not have enough money to close otherwise. In many cases, the selling price is jacked up to make up the difference. I think ethically, this is a grey area. It's common in a lot of government funded mortgages where buyers are coming in with very low down payments. I don't think you see it in conventional mortgages.

Ask for appliances, repairs, or whatever else you think you want from the seller. They can always say no. It's easier to put it in now, than amend the agreement later. I screwed up in my latest purchase. I didn't ask for the appliances, because I didn't think I needed them. When I realized that I had an electric stove, and the new house was gas, it was too late. I had to pay $300 to buy the appliances. I probably could have got them for free if I had asked during the negotiations.

 

[Hello]

I asked and received a new roof and a home warranty. The warranty ended up being useless at the time I tried to use it, but the roof is holding up.

Don't you have a realtor? It worries me that someone isn't there helping you. I whole heartedly disagree if you're still trying to use the seller's realtor. It's just a bad idea and that realtor should have declined if you had asked.

 

[Gavin C]

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