Strategies for buying house in a seller's market..

[academica]

Originally Posted by gf2020

If I was encountering these challenges, I would just take a break. Your 10% down payment is not attractive to today's sellers in those competitive communities. Rent a place for a while longer, save a larger down payment and buy when the market inevitably cools down. Life is too short to get so wound up about buying a house.

well, of course that is an option too. I am not really desperate to buy, maybe it sounds so here because I come here for advice and maybe I put a very desperate picture while trying to understand the nuances of the market. I know that it is the market conditions, not me. but having already invested 3 months into this, I gave myself a deadline as the end of this Fall, if it doesn't happen by then I will give up. And of course there will be vacation, travels, this and that, I am not always 100% on the ground looking like these days.

[MikePRU]

Originally Posted by academica

that's totally reasonable, I would probably do the same! but you said the multiple offers were at asking price. I already accepted the fact that I will pay more than people putting down more cash on the table. if someone offered 10% down but 5% more on the final offer price, I can see some people choosing it over convenience. how often that a house doesn't actually appraise to the value offered? I am told that is very unlikely in the hot towns.

As I was reading your post, the first thought I had was "I would advise my client not to accept this offer if I were the listing agent." Sometimes, the offer is just so high it seems unlikely that an appraiser will agree with that the value matches the buyer's offered amount. Especially given that you're putting down less than 20% there's absolutely no wiggle room when it comes to the LTV ratio. As others have already stated, it's all about calculated risk when accepting an offer. An offer not likely to go all the way to closing is a worthless offer.

Originally Posted by academica

going with listing agent tactic would probably help more if a seller is actually looking up to the recommendation of their agent strongly. couple that with a higher final offer, and the agent may have incentive in talking the sellers into choosing that offer, no? not in your case, I see, but I was also told in this thread how some agents can look the other way when they see an offer from Redfin for example..

Honestly, I don't think that's going to get your offer accepted over another one. You may be able to convince the agent to rebate you some of the commission in exchange for representing you but chances are you'd get a bigger rebate from Redfin.

Originally Posted by sal1181

Trust me when I say to use your own buyers agent. There is no incentive in not having one. The seller and listing agent already have a signed listing contract saying what the commission amount will be. The listing agent then gives a percentage to the buyer's agent. No buyer's agent than the listing agent keeps it all. In some states dual agency is against the law. It's very risky to represent both parties in the transaction as someone might feel that they did not get represent properly all the way.

According to our E&O Insurance agent, there are by far more lawsuits in dual agency transactions than in designated agency transactions. It's not even close.

Originally Posted by sal1181

Also regarding the Redfin agent. I don't see why a listing agent would refuse an offer because the buyer's agent is with RedFin. What difference does it make to the listing agent. The agent already has a signed agreement with the seller regarding commission.

A listing agent certainly can't refuse an offer. They're required to present offers to their clients in a timely manner. That's the theory at least. I've certainly had listing agents delay my offer or delay having my offer signed while they try and drum up another, higher offer.

Some agents just don't like Redfin and they bad mouth not only their agents but the clients who are represented by them. I've seen it. It's not right, but it happens.

Originally Posted by sal1181

He or she will then decide how much to offer the buyers agent. It will be the same if he was dealing with an agent from another company. All the listing agent should care about is if the buyer is a qualified buyer and the offer is solid

Actually, the seller and the listing agent agree to what is offered to buyer's agents. It's written right in the listing contract if you're using the standard forms and it's displayed clearly when agents view a listing on MLS. Once you put the number in MLS, you're responsible for paying it.

As in all things in life, there's what should happen and what does happen. While it shouldn't make a difference what brokerage a person is represented by, there are plenty of "traditional" agents out there who don't like Redfin because of their commission rebate. I've heard stories from some of these agents about how they've said things like "are you sure you want to accept an offer from this guy? If he's working with Redfin he's probably really cheap and will nickel and dime you to death after the inspection."

[sawyer2]

There is no magical x% over ask formula .... every listing has to be viewed in its own merit.

For what it's worth we spent the best part of a year looking on and off but we had very specific wants/wish list and were in no real rush. Also, rent is not dead money .... completely overpaying for a property is.

I really think you need to use a good buyer's agent in the towns that you are interested in. You are doing this on your own without any insider/local knowledge insight ..... and you will end up overpaying just to buy a property .....or driving yourself crazy in the meantime.

[BostonMike7]

Originally Posted by academica

But then you mentioned the appraisal stuff, which got me thinking- would too much over bidding scare the seller because of the appraisal concern? Should I be worried about that?

Yes. Because if you offer too high an offer, the appraisal may not come back and then you are in a pickle, especially if you waived your mortgage contingency. In that situation, you need to pony up the difference, or you lose your earnest money.


If you kept the mortgage contingency, then you can either renegotiate, or you have your out. A seller may not like this because 1.) they had an all cash, or offer with no contingencies that was slightly lower than your offer, but higher than the appraisal, or 2.) they just lost 3-4 weeks of time that the house was not on the market, and now need to put it back onto the market. They've paid another month worth of mortgage and expenses.




Really, the whole thing is a game of calculated risk. While sellers tend to want the most $$, they have to weigh the risk and odds of the deal actually closing as well. Nobody wants to waste time...especially now when families want to get an offer in and close during the summer before school starts up again.


Honestly, it's a very stressful "game" and I did feel as my search went on, I got much better experience at it. In the beginning I had no idea what I was doing. Towards the end, we had our strategy. With that said, I certainly do not want to repeat it anytime soon.




BTW, are you following the houses you are making offers on to see what they actually closed at?

[academica]

Originally Posted by BostonMike7

Yes. Because if you offer too high an offer, the appraisal may not come back and then you are in a pickle, especially if you waived your mortgage contingency. In that situation, you need to pony up the difference, or you lose your earnest money.


If you kept the mortgage contingency, then you can either renegotiate, or you have your out. A seller may not like this because 1.) they had an all cash, or offer with no contingencies that was slightly lower than your offer, but higher than the appraisal, or 2.) they just lost 3-4 weeks of time that the house was not on the market, and now need to put it back onto the market. They've paid another month worth of mortgage and expenses.




Really, the whole thing is a game of calculated risk. While sellers tend to want the most $$, they have to weigh the risk and odds of the deal actually closing as well. Nobody wants to waste time...especially now when families want to get an offer in and close during the summer before school starts up again.


Honestly, it's a very stressful "game" and I did feel as my search went on, I got much better experience at it. In the beginning I had no idea what I was doing. Towards the end, we had our strategy. With that said, I certainly do not want to repeat it anytime soon.




BTW, are you following the houses you are making offers on to see what they actually closed at?

yes, it seems like my offers were 5k-15k below the winning offers so far. So even if I sound crazy when I say I will offer 12-15% over asking, it seems like those were the numbers that won in these properties. some sellers underprice to attract bidding wars, so as long as I offer around current market analysis suggest, I don't think that will scare the sellers.
I plan to keep mortgage contingency, so that can be my way out.

how do they appraise a house? does listing price matter at all? my common sense tells me it shouldn't, since some people underprice on purpose as I mentioned above.

[KatieZ]

Question - we bought w 5% down w no problem. How difficult is it to get a mortgage these days? Do sellers know what buyers make or their credit score in any way in their pre approval letter? I heard a neighbor went w an asking price offer instead of an offer 10k over asking bc it was 20% down v 5%. I thought that was crazy. I can see if they are nearly the same but 10k is a lot. My neighborhood we are talking about houses in the high 3s so someone w good credit and 100k combined income should easily get that.

If you waive the mortgage contingency and don't get a mortgage what's the remedy? You're technically obligated to buy at the agreed price and the buyer can sue for breach? In reality wouldn't they likely take your deposit (assuming it was good) and move on? I've mentioned before we are listing soon and I truly feel awful for first time buyers who only have 5%. I would never have had 20% for my first home unless family helped me or I saved for a long long time. Thankfully we will have 20% this go round but that's only thanks to the market we are selling in.

[BostonMike7]

Originally Posted by academica

how do they appraise a house? does listing price matter at all? my common sense tells me it shouldn't, since some people underprice on purpose as I mentioned above.

I spent an hour or so reading through my appraisal report trying to understand how they go about assigning value. There was a page that had stated values, and also ratings as to quality of materials/appliances/etc used. They took 4 comps from the area (roughly same sq footage, bedsrooms, baths) and put them side by side, took the closing prices on the other 4 and then added or subtracted value from my property based on additional things it had, or things it was missing.


They assigned set values to things like bedrooms, bathrooms (1/2, 3/4 or full) if the basement was finished, each garage bay, things like that. Pool only counted if built-in. My nice Reeds Ferry garage was not assigned a value and considered personal property...even though in my mind personally, it had value.

Originally Posted by KatieZ

Do sellers know what buyers make or their credit score in any way in their pre approval letter?

When I got offers, all I knew was the type of mortgage they were trying to get, timeframe of closing, % down, and preapproved. I never got a peep about credit scores, their income, and very little personal info.

Originally Posted by KatieZ

If you waive the mortgage contingency and don't get a mortgage what's the remedy? You're technically obligated to buy at the agreed price and the buyer can sue for breach?

You either pay full in cash, or you lose your earnest money. I think this amount varies depending on the type of loan. IIRC, when I sold/bought, it was $1K with the offer, and 5% down with a signed P&S. This was with a conventional loan, so I do not know how much is required with other loan types. Buy, on the buying end of things, with 5% down on a typical MA house, it was a significant amount of money to lose. So I made sure I got whatever the mortgage company needed to get that commitment letter by the contracted date.

[academica]

Originally Posted by BostonMike7

I spent an hour or so reading through my appraisal report trying to understand how they go about assigning value. There was a page that had stated values, and also ratings as to quality of materials/appliances/etc used. They took 4 comps from the area (roughly same sq footage, bedsrooms, baths) and put them side by side, took the closing prices on the other 4 and then added or subtracted value from my property based on additional things it had, or things it was missing.


They assigned set values to things like bedrooms, bathrooms (1/2, 3/4 or full) if the basement was finished, each garage bay, things like that. Pool only counted if built-in. My nice Reeds Ferry garage was not assigned a value and considered personal property...even though in my mind personally, it had value.

When I got offers, all I knew was the type of mortgage they were trying to get, timeframe of closing, % down, and preapproved. I never got a peep about credit scores, their income, and very little personal info.

OK, that is what Redfin did exactly when they gave me CMAs.

My pre-approval letter does not state the timeframe of closing. And I got letters from three different lenders, none of them had that. I sometimes mention in my cover letter about my flexibility though, (if I read that note: "subject to seller finding suitable housing"). My landlord is friendly, I can close ASAP, or I can close in 3 months, I am flexible with that. Maybe I can stress that more in the letters, to score another point there..

Originally Posted by KatieZ

Question - we bought w 5% down w no problem. How difficult is it to get a mortgage these days? Do sellers know what buyers make or their credit score in any way in their pre approval letter? I heard a neighbor went w an asking price offer instead of an offer 10k over asking bc it was 20% down v 5%. I thought that was crazy. I can see if they are nearly the same but 10k is a lot. My neighborhood we are talking about houses in the high 3s so someone w good credit and 100k combined income should easily get that.

finally someone who was on the same boat.. thank you! it is too easy to say: wait & save, but guess what, home prices rising too, so it makes sense to buy with whatever you can come up with now, rather than waiting to see prices AND the rent (!) keep rising on you!

yes, I don't see why someone would leave more than 10k on the table either. But then, I have yet to put 10k more than the next best offer, so we'll see if that happens.

Originally Posted by KatieZ

If you waive the mortgage contingency and don't get a mortgage what's the remedy? You're technically obligated to buy at the agreed price and the buyer can sue for breach? In reality wouldn't they likely take your deposit (assuming it was good) and move on? I've mentioned before we are listing soon and I truly feel awful for first time buyers who only have 5%. I would never have had 20% for my first home unless family helped me or I saved for a long long time. Thankfully we will have 20% this go round but that's only thanks to the market we are selling in.

Originally Posted by BostonMike7

You either pay full in cash, or you lose your earnest money. I think this amount varies depending on the type of loan. IIRC, when I sold/bought, it was $1K with the offer, and 5% down with a signed P&S. This was with a conventional loan, so I do not know how much is required with other loan types. Buy, on the buying end of things, with 5% down on a typical MA house, it was a significant amount of money to lose. So I made sure I got whatever the mortgage company needed to get that commitment letter by the contracted date.

oh! I wouldn't risk playing with financing contingency, that is too scary. that deposit is more than $20k.

[OrganicSmallHome]

With that budget, I think you should be able to get a very nice condo in either Melrose or Medford, and possibly even Somerville or Arlington, which would be even better.