Today the real estate news came hot and heavy. One bank accepted my offer for the bungalow I looked at on Saturday, albeit for more than my initial offer. And today I finally heard about the other house I offered on back on February 4. The news there was less good, both for me and for the current owner.
That house was a 1,600 square foot ranch with a killer, unfinished basement with a workshop, storage area and a cedar closet. It was also ready to move in, and important virtue. And it was a short sale, meaning I was offering less than the purchase price of the house back in 2005. A fair amount less. Short sales are always a bit problematic. After all, they require the bank to take a loss. Banks quite understandably don't like that. On the other hand you may have a property owner who is in over his or her head, and may decide to dump the place and maybe even trash it on the way out. I've seen that one before. And if a property owner can't afford to properly maintain the home, it will get trashed by degrees as he exists there while deferring needed maintenance.
My offer was $2K under the last appraisal on the house. Understand, an offer has to come it no higher than the appraisal for there to be any hope at all of getting the financing approved. No bank will finance a home for more than the appraisal. So I offered close to the appraisal because really, anything higher would be foolish though it still implied a big loss for the bank. And I know short sales take a while, but four months is a long time to wait. I heard things were happening, they'd ordered a new appraisal, it had come in and I was supposed to get an answer two weeks ago.
Today I got my answer. The new appraisal came back more than 25% over the last appraisal. Then they demanded even more money on top of that appraisal. Assuming I had said additional money, I would have to pay out of pocket the difference between the appraisal and their price before my down payment began. For me it was a huge difference, and made going with the bungalow an easy decision. For the existing owners, their bank has just said we will not do a short sale for you. Period. Yes, you're underwater $30K but that's too bad. You made the offer, we gave you the loan. Grin and bear it. From the bank's point of view that's quite understandable, they're protecting their investment. But I can see some ways that thing would go bad for them. I've heard of divorcing people who stayed in the same house because they couldn't afford to move. Or maybe one wants to move to pursue a job in another town. They're well and truly hosed now. The person the bank is depending on to keep up what is still bank property (and these people did that well) now has a fresh reason to hate their home. They're angry, ticked and realizing there is no way out right now. For me it's no skin. I'm a buyer, I have alternatives. But the current owners have no choices at all. That has to hurt.
Today their bank called back and said, "That request that was greater than appraised value was just a counteroffer. They'd like it if I offered back. So you ask for 28% more money at a price no one can possibly finance and call that an 'offer'? Or maybe their realtor broke the news to the current owners and they had a fit! Now they need to appear to be flexible to mollify the folks still paying the mortgage. I certainly don't believe they want to negotiate on the house after that 'offer'. Even if I didn't have the other place, I'm done with that bank.