Monday, August 24, 2009

House Hunting Update

A week has passed since my previous house hunting update, and much has happened. For one thing, we have put down an offer on a house. Well, it was technically an offer but we bid about 10% below the asking price - that's all we could afford. True, the house was languishing on the market for 4 months before we put in our offer, and it's true that the sellers had already reduced their asking price by about 15%, but still I was expecting a flat out rejection.

The house was about 10% above our budget, so we had not choice but to low-ball the offer. It's a really great house and Alpaca and I loved it immediately. It's located on a nice side-street, in a good neighborhood, with good schools. It is impressively renovated, and it's clear to me that the owners bought it as an investment (they bought it a couple of years ago) and threw a lot of money at repairing and renovating the property.

Anyway, on Wednesday evening our realtor came over and together we assembled the offer. That was an interesting experience. Our realtor is a very energetic person and is very useful and knowledgeable when it comes to finding and researching houses, but it very quickly became apparent to me that she knows little about the contractual part of the process. I am a lawyer by training (although I haven't practiced in 10 years), and I understand the implications of a contract, so I was taking none of her bad advice. For example, she wanted us to have a financing contingency with a maximum interest rate of 6.5%. I explained to her that I needed a tighter contingency of 6% on the mortgage, since a 6.5% mortgage would break our budget. Under her proposed terms we would have to remove the financing contingency even if the lowest rate we could obtain was 6.5%.

Yet another example came a bit further in the contract, we she specified the appliances included in the sale as "per MLS", and was really surprised when I insisted on checking MLS to verify which appliance were included in the listing. None were included. I insisted that she spell out the appliances and she protested saying that this is something that she could always negotiate later. I had to explain to her that this is a binding contract, and while she may be able to negotiate after the fact, the seller would be under no obligation to agree to the change. When she finally agreed she insisted on making the correction on the contract using "White Out". I explained to her that this would not be valid, but she insisted on proceeding, explaining that she would ask around and if this was a problem she would have us re-sign by fax the next day. It was a problem, and we re-signed by fax the next day.

Anyway, Perry Mason she's not, but I am still happy with her service and dedication. I wouldn't recommend her to someone without legal training, but given that I feel my background in contract law is sufficient to at least spot any traps in our way, I am happy to keep working with her.

From here on out, there is only anti-climax. The sellers did not respond within the 24 hour response period that was specified in our offer, but they sent us a counter offer the next day. In their counter offer they reduced their asking price by about 1% and insisted that we take the house as-is and without a contingency for property appraisal value. A non-starter if there ever was one.

Saying I am disappointed would be over-selling the point. I sort of expected this result given our budget and resulting low-ball offer. Still, I am a little disappointed. It's a really nice house and it was almost (but not quite) within reach. I guess it's back to that old axiom: the house you want is the one just slightly beyond your budget...

The search continues.

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DoneToZen said...

Anytime I see the seller demanding an "AS IS" sale, I immediately begin to wonder if there's something nastily wrong with the property. Seems to me that if there's nothing wrong, then they wouldn't need to add the clause...

Shadox said...

Yes - buying a house "as-is" is not even an option. That is too big a purchase to take any gambles on.

Anonymous said...

Try not to get too discouraged. That same advice you got as a teenager when someone broke your heart for the first time applies equally to the house hunt; "There's more than one fish in the sea!"

The real estate bubble was spectacular. I think it'll be quite some time before house prices go up appreciably in most areas so your wise to know your limits. I'm sure you'll find just the house for you in due time.