Now after all of my experiences, and I know I am buzzing here on posting about this but will stop at this point once I finish as we are just at the end of this stage of it.
Ok so the bid. What do you bid? How much or little? I feel this is a bit backwards of a system and I'll explain why.
First however, what you should really do when wanting to buy a home, is to go to your bank and get what is called a "Pre-Qualification Letter". This is where your bank will pull your credit and see what amount they can approve to lend you. It takes about 30-40 mins on the phone and you will know and the document is online at your bank's site and they can also fax it to you. This allows you to take that in hand and go shopping for your new home. It also tells the sellers that you are serious and ready.
I went to look at this property first however before the letter because I was planning on going up there to Maine at the end of April and not so fast. So I did not want to have my credit pulled too soon and for just one property and if I ended up not liking it, I will have wasted a month to where I could have paid down my debt more to raise my credit scores and then have a better interest rate in the long run for the mortgage. See? A lot of factors go into this.
But after returning from seeing this one, I didn't need to wait any longer and so called my bank and got the Pre-Qualification Letter and sent a copy to my realtor to put with my bid on the property. He whites out the numbers as its best the seller does not know what the buyer has qualified for, the maximum, else they will hold out thinking the buyer can afford more. Then he writes up a tentative contract with my bid.
So how much do you offer?
The seller puts a price they want for the property. More often than not, they ask for more than what they really want. So it is accepted and expected for you to offer a lower price. They can counter or say no and then you go from there.
Looking at this particular property I am wanting to buy, they originally had a price on it for $249,000 in the fall. They eventually lowered it to 235k which is when I looked at the listing more closely. Of course, I would offer them a lower amount. So I did at 220 and then offered for us to split closing costs.
Closing costs are what pays for the appraisal and other various fees that are involved in transferring the deed over from the sellers to the buyers. This is usually about 3% of your purchase price. So yea, ewe, it can be several thousands dollars, in this case over 6,000.
Now something to take into consideration before placing the bid, is the appraisal, This won't happen (set up by the buyer's lender/bank) until after the contract is signed between the buyer and seller having agreed upon the terms of the sale.
This is where it's backwards a bit.
The bank will send an appraiser out to look over the property to determine its true worth before they will lend me the money to purchase it. The sellers will sign a document saying that they acknowledge this is a contingency on me buying the property (as this is a VA loan and it's one of their stipulations), that it has to appraise or be valued at the price we agreed upon or higher.
If it does not, then I have a few choices. Either walk away from the property, ask the sellers to come down further with their asking price or I pay the difference out of my pocket.
This seems backwards as I would think the sellers would get an appraisal ahead of time so they would know what the highest price they could ask for their property before listing it. That way, they wouldn't lose a prospective buyer because a bank won't loan anyone more money than what they deem the property is worth, VA or otherwise.
So I put in the bid and the sellers took a day and night to think about it and countered with 230k, split closing and then I pay for the leftover oil and cords of wood they have on the land and they pushed closing to June versus May. I agreed. So then came the contract which was signed via DocuSign online and sent off to them and they signed it. That whole process is quite easy. HOORAY!!
Afterwards, I found out what the sellers had paid for the property when they bought it, 235k and they put in 75k of their own into the place!? Oh noooo I felt bad in some ways about the lower offer I had made. But no, some of the things they had put into it was needed and would depreciate anyway over time. They don't stay new and the place is in boonieland and no town nearby, why the low taxes. Still, I felt they should have asked for more like 300k! Just to try to get back what they had put into it. Again however, depreciation on a lot of things and on top of that, they had started out higher but were not getting any real bites at least because of the remoteness of the place no doubt along with other issues like the Road Association would/might deter some people, it nearly had me. Although the place has more pluses in my mind, it could have minuses for others. It all comes down to taste and preferences.
Now, that signed contract will go to my bank in the morning who will move the loan forward with the VA. Plus the bank sends me a disclosure statement and goes over a few things with me and then sends for the appraiser.
In the meantime, my realtor is setting up an inspector to inspect the property. You don't have to do this part but it's a good idea nonetheless to not only have water tested but the structure itself and radon and a few other items. This will at least let you know what you are getting into before you buy it.
My only worry is how much the VA will appraise the property at?
This will take a couple weeks to happen if not longer.
This post brings you up to date if you'd like to follow along as I go over the steps and all that I am going thru in buying this property.
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