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I am single man; no children; mid-career. I currently outright own a starter condo in a large building for the last several years. It's a modest building in a great neighborhood. Upgrading to a newer unit has been on my mind. Each day I see a distinctive condo building on my commute - it's built after 2000 and is the best looking building with a dominant presence in an awesome area. Much closer to work, closer to a friend, and right in the location where I would enjoy living.
I've kept my eye on MLS for the past year. Only a few units in that building have been for sale, even though there are almost a hundred units in that building. Two units on sale are way too big for me and would be a waste to pay higher sales price plus an additional $1000 HOA per year for space I don't need. However, there is one particular unit for sale that exactly fits my needs/wants and my budget. This unit has been on the market for over 60 days. The price is high - definitely way above comps. The price recently dropped a few thousand US dollars but still is "active." I'd be willing to offer & pay asking price or even over pay. I would keep this unit for the long haul, so I feel the higher price is worth it. It's the right size for a spouse and one child, should that play out.
I have untarnished credit and a 815 FICO score. But the asking price of that available condo unit exceeds my ability to qualify for a mortgage on the full price by myself. First I would have to sell my current condo unit so I could take out a smaller mortgage ($50,000).
In order to make an offer that gets accepted, would need to follow these steps:
1. Prequalify for a mortgage.
2. Contract with my former real estate agent to be buyer's agent again. (We could do that and put together my offer all in the same day).
3. Make an offer. Place a contingency in the offer that I would need to sell my condo first. Also, my offer will undoubtedly have a contingency on lender approval.
4. List my condo for sale at a motivated seller price. (In my building, similar units to mine have been selling within a month at favorable prices).
To entice the seller to accept my contingencies, I would probably have to over pay. However, since the current list price is still above comps, I am not sure if the lender will let me pay asking price - even though it's just a $50,000 mortgage?
I have untarnished credit and a 815 FICO score. But the asking price of that available condo unit exceeds my ability to qualify for a mortgage on the full price by myself. First I would have to sell my current condo unit so I could take out a smaller mortgage
Unless....
Are there some lenders that make full-priced mortgages to buyers who are not fully qualified, like it is still 2006?
All you can do is make the offer and see. In a hot market, sellers will often not accept a contingency that the buyer has to sell their existing home. But if this unit has been listed for over 60 days, it may not be that unusual. Call your old agent and get the process started and see what happens. Maybe a bigger deposit will go further or maybe you can be flexible on closing date or something - you don't know what will motivate the seller, and it's not always a higher price.
OK here is my opinion. It seems like you are already primed to pay over asking for a unit that has been on the market 60+ days. Why?
First have your agent run comps and make sure the asking price is correct. Don't over pay. Also have your agent run comps on the unit you are selling. In fact ask your agent to do a "coming soon" with other local agents on your unit to see if there is any interest.
Secondly, definitely get pre-approved with a lender. I think you will find getting $50K mortgage won't be that easy and it may be more costly than a larger mortgage. That may change your plans.
Finally, be prepared that if you put a contingent offer that the seller will ask for kick out clause for the contingency. If another non-contingent offer comes in you will have to drop the contingency (if I was the seller I would require it).
So bottom line, get your ducks in a row, then make your offer. I think you have a good chance of succeeding if you have your facts documented.
If it's overpriced as you say, you'll have the additional concern of it appraising for the sales price. Then what will you do? Especially, if your current condo is under contract?
If it's overpriced as you say, you'll have the additional concern of it appraising for the sales price. Then what will you do? Especially, if your current condo is under contract?
I'd probably get a month-to-month rental apartment. Then I'd have to wait until another similar unit in that ideal building comes on the market. Could be a year or more. I'd rather not be in limbo that long and would pay more now to settle sooner.
Back to me wishing it was 2006, and I could get full financing no questions asked
Finally, be prepared that if you put a contingent offer that the seller will ask for kick out clause for the contingency. If another non-contingent offer comes in you will have to drop the contingency (if I was the seller I would require it).
Thank you for sharing this. It makes a lot of sense for the seller to do this. I definitely have to think this through before making an offer or even contacting my former real estate agent.
Will some lenders let the buyer purchase well-over the appraisal if the amount lent is below a certain threshhold? For example, I'd only borrow $50,000 (16% of the purchase price). The condo for sale is listed at $315,000.
I will make just one more comment, then I will stop (promise). You seem hellbent on doing all this without the help of an agent or lender. Without their help you are speculating on how this should all come together. Knowing what your loan costs will be and having a second set of eyes and ears helping you with pricing of the two units will give you a much clearer picture of reality. If you want to move up, get some help, get the data, then decide. There is no cost to speak with an agent or lender.
I will make just one more comment, then I will stop (promise). You seem hellbent on doing all this without the help of an agent or lender. Without their help you are speculating on how this should all come together. Knowing what your loan costs will be and having a second set of eyes and ears helping you with pricing of the two units will give you a much clearer picture of reality. If you want to move up, get some help, get the data, then decide. There is no cost to speak with an agent or lender.
Exactly. Why ask a forum, when you can contact someone who does this for a living? Why speculate when there is hard data, and precise answers available?
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