Rosa Mystica Posted March 28, 2006 Share Posted March 28, 2006 I am currently looking for my first home. I only recently starting the hunting process. Tonight, I put in my very first offer on a home. I'm in a seller's market, so I offered $10 000 above the asking price, and put down a *very* hefty deposit. I also decided to put in two conditions: 1) Mortgage Approval, and 2) Home inspection. I've done a fair bit of reading about the inclusion of contingencies, and every bit of expert advice I've come across states that it is highly risky to place such offers, and that it is *not* in the buyer's best interest to do such a thing. I was told, however, that contingency free offers are almost always the ones that get chosen. Now, my agent decided to come up with an additional strategy to help me get the place: he wrote the owner a letter stating the fact that when she first bought the place (three years ago, also in a seller's market), she had a home inspection done. He said that my offer should be considered b/c I want to take the same precautions she did (kudos to him for using an emotional appeal!). Well, here's how it panned out. The home had six other offers besides mine. None of theirs had any contingencies. Then I got a call saying that the owner *might* take my offer *if* I got the home inspection done tomorrow. I said, "No problem". After 10-15 agonizing minutes, he called back to say that she was taking an offer which was $3 000 higher (changed on the spot by another prospective buyer, who may have felt threatened by me). And of course, the offer was contingency-free. That being said, I was a very close second choice. A very, very huge letdown for me, b/c I almost got it. Now, what frustrates me more than not getting the place is the feeling that I must do it without placing *any* conditions on it. My gut is begging me not to do such a thing, even though everyone else is doing it. When I go against a strong gut feeling, I always regret it. When I think of the current phenomenon of contingency-free offers, the following expression comes to mind, "If everyone else were to jump off a cliff, would you do it too?" My answer is "No, never". For some mind-baffling reason, many peoples' answer in this instance is "Yes!!!!!! Who cares if I fall?" Although interestingly enough, these same people would never buy a car or choose a spouse without having a *very good idea* of what they were getting into. Why do it with home-buying???? If there's severe structural damage to the place that you didn't know about, or if your lending institution won't do a final mortgage approval, you are *seriously* screwed. Guess some people think they're immune, though- even when they're not. To those here who recently bought a home in a seller's market: did you make an offer with or without contingencies? If you included conditions, which ones did you include? If you didn't include any, what was the reason for this? My agent believes that I *will* get a place despite my wanting to make offers with certain contingencies in them. He then told me the inspirational story of a recent client of his who was like me (in that he refused to make an unconditional offer). He lost out on five homes, but got the sixth (yay for him)! He stuck to his guns, and it paid off eventually. I hope I can do the same thing: I don't want to go against my intuition, but I don't want to lose 10-15 homes b/c I refuse to take foolish risks. I also don't want to rent after my lease expires in Sept. (apartments REALLY suck!). So, I think I've finished ranting for now. I just really hate to see risk-taking behaviour rewarded, and for my efforts to be shot down. Btw, the seller of that home is a fucking hypocrite for not wanting me to get a home inspection. You get it, but don't want me to protect myself in the same way? You pathetic, stupid bitch!!!! Okay- now I'm *really* done. Thanks for listening. Rosa Link to comment Share on other sites More sharing options...
Vigile Posted March 28, 2006 Share Posted March 28, 2006 Rosa, I know very little about RE, but do know something about stocks, supply and demand, and how the markets (including RE) work. It's my business to know about such things. In the stock market when a stock or the market is at a fever pitch and people are scrambling to get in for fear they are going to miss out, it is smart money that is selling to dumb money using the blow off strength to sell into. Those who end up throwing caution to the wind and those who replace reason with desire for gain and fear of getting left behind in the end, end up holding the bag as prices come back to earth. From what you have described here this is what is happening in your RE market. People are so afraid of missing out that they are throwing caution to the wind and not protecting themselves with reasonable contigency clauses. In addition they are chasing the prices higher creating this seller's market. Keep in mind that the Fed continues to raise interest rates with the idea that they are going to cap off RE inflation, which they fear is getting out of hand. Also keep in mind that the Fed ALWAYS overshoots their targets and that this is not normally felt by the economy for at least a year past when their mistakes are made. Your description of a "Hot" market is indicative of a market that is experiencing a blow off top. With a probable recession on its way due to the Fed overshooting their inflation targets my advice would be to be patient and be willing to have your offers rejected. Don't let yourself be a bag holder (the last buyer who paid the highest price before the market pulls back down). Follow your original instinct here. It may not feel good to do so now, but it will save you a lot of heartache in the long run. Link to comment Share on other sites More sharing options...
Rosa Mystica Posted March 28, 2006 Author Share Posted March 28, 2006 Vigile, You described the situation perfectly. That is exactly what my real estate market is like. And it is ridiculous what lengths buyers will go to in order to find a place. I've heard several people imply that it's almost stupid to include contingency clauses. Uh...no! What's stupid is when you become so desperate that you will take a risk that may cause you much heartache in the long run. If I may ask, what's a "fed"? Is it an acronym for something? Thanks for affirming the sensibility of taking precautionary measures. I very nearly caved in to the temptation to do what other buyers do. But in the end, I stuck with my gut instincts (which almost never fail me). I just hope I don't get so desperate that I throw caution to the wind (don't think I will, but I'm severely stressed out by this all). My boyfriend, counsellor and agent all think that I *will* find a home before September- even if I *do* include the contingencies. And of course, I need to remember the story my agent told me about his former client who stuck to his guns, and managed to land a house in this market despite the inclusion of conditions. I just wish I had the same confidence in myself. I'm a smart woman who doesn't take outlandish risks. I hope my sensibility pays off in the end. In the meanwhile, methinks the time has arrived to expand into slightly less desirable areas of the city. Hmmm....not sure how that will work out for me... Link to comment Share on other sites More sharing options...
Vigile Posted March 28, 2006 Share Posted March 28, 2006 If I may ask, what's a "fed"? Is it an acronym for something? The Federal Reserve Board (Fed), which has a new chief that just replaced Greenspan. Interest rates just over a year ago were at historic lows after a long round of cuts. These cuts spurred a massive real estate market by making money cheap. As people refinanced and traded up the market self perpetuated as demand was subsidized by fed policies. Now however the fed has been trying to let some air out of the bubble they created and has raised rates for the past 13 or so odd sessions. They will likely raise the money rate to 4.75% today even though as I stated before they won't really know the final impact of the hikes for another year. Likewise, this is very likely not going to be the last hike. In short this means that the fuel that they added to the fire a few years ago is now being withdrawn. Interest rates will continue to grow for some time and what caused real estate prices to explode will now have the opposite effect and there is a good chance that real estate prices will go through a deflationary period. I would expect the consumer to start feeling the effects of these policies next year some time. Right now consumers are justifying the high prices the same way Nasdaq traders justified $400 EBay shares in 1999. Link to comment Share on other sites More sharing options...
garrisonjj Posted March 28, 2006 Share Posted March 28, 2006 Don't be discouraged. With each experience you gain knowledge.Be very selective with your home pleasing YOUR needs first. Yes, it is tough in a seller's market, however always insist on a home inspection as it will ultimately benefit you. I purchased my home 6 years ago for $109,000 and made a real buy! Today, with about 50 thousand in improvements, my home was appraised at $299,000!! Its a 4100 sq ft 4 bed room 4 bath on a half acre lot in NE pa. Hope this helps somewhat,,,,,,,be patient and don't let anger rule your decision, Sincerely, gary Link to comment Share on other sites More sharing options...
Bodhi-in-Training Posted March 28, 2006 Share Posted March 28, 2006 We went through the process of buying our first home 2 years ago. We put in offers and lost out on 2 houses before we finally found the house we live in and love now. Do not compromise on doing the right thing. I think home inspections are absolutely necessary as although a house may be esthetically pleasing, you never know whats lurking unseen that could cost you thousands in repairs. Be patient and listen to your gut. You will find the perfect place. Link to comment Share on other sites More sharing options...
Rosa Mystica Posted March 28, 2006 Author Share Posted March 28, 2006 Be patient and listen to your gut. You will find the perfect place. Thanks. I sure hope I will. One of the downsides is that everything must be done within two days of submitting the offer (getting the mortgage approved, having the inspector come by, etc). The deadlines my agent insists on setting are insane. And of course, if these things are not done by the short deadline, the deal falls through. This is fucking ridiculous already. I can't believe six other people besides me wanted such a simple, basic home! Why the fuck can't *they* continue renting?! Brainless idiots... Link to comment Share on other sites More sharing options...
pandora Posted March 28, 2006 Share Posted March 28, 2006 Now I feel ripped off... our buyer had the same contingencies as yours, plus repairing a few things that cost us thousands. AND a downpayment. AND they offered lower than the listing price. But maybe that's just cuz we're in a low income area.... looking back, we shouldn't have agreed to all those contingencies (like the thousands in repairs... one hole in wall, one hole in ceiling in utility room, buy a new window, and termite treatment). Fuck. We've been screwed. Because of all this, we lost money... when we would have made 12K if someone didn't do all that to us. It looks like you'll get a home though... but it is news to me it is a seller's market... older homes in Indianapolis are not in demand and the market is very underpriced compared to other modestly large cities. Link to comment Share on other sites More sharing options...
Open_Minded Posted March 29, 2006 Share Posted March 29, 2006 Be patient and listen to your gut. You will find the perfect place. My thoughts exactly Bodhi. Life has taught me to place a very high priority on what my gut is telling me. Rosa, you're smart, you work hard. Time is on your side... stay the course. You will be happy you did. Link to comment Share on other sites More sharing options...
☆ TexasFreethinker ☆ Posted March 29, 2006 Share Posted March 29, 2006 RM, I've always added the contingencies of a professional inspection, mortgage approval and (except for my first house) sale of my existing home. You miss out on some deals that way, but unless you're very wealthy it seems too risky to make an offer without these conditions. Good luck finding your dream house - I wish you the best. From what I've been reading the housing market is cooling across the country. Hopefully you'll find better conditions soon. It's worth waiting for a reasonable seller if you can. Link to comment Share on other sites More sharing options...
Rosa Mystica Posted March 29, 2006 Author Share Posted March 29, 2006 Thanks, everyone. The reaffirmation that I'm doing the right thing by avoiding stupid risks is a good one. My agent's really cool, too (will likely keep on trying to make the seller "crack", so to speak). Unfortunately, he *insists* on setting ridiculous deadlines for the mortgage approval and home inspection (he says they must be done the next day, or the deal will fall through in a multiple offer situation). I don't know how to meet this outlandish deadline (*prepares to say goodbye to every home she likes*). I wish sellers would read this article: http://www.doityourself.com/abc7news/homes...cyfreeoffer.htm If I ever sell a home (assuming I'll actually manage to own one), I will *not* outright reject an offer with conditions. I will very likely remember the position I'm in now. I don't think I could say no to such an offer from the start- not without my conscience killing me. Link to comment Share on other sites More sharing options...
Rosa Mystica Posted March 29, 2006 Author Share Posted March 29, 2006 Now I feel ripped off... our buyer had the same contingencies as yours, plus repairing a few things that cost us thousands. AND a downpayment. AND they offered lower than the listing price. But maybe that's just cuz we're in a low income area.... looking back, we shouldn't have agreed to all those contingencies (like the thousands in repairs... one hole in wall, one hole in ceiling in utility room, buy a new window, and termite treatment). Fuck. We've been screwed. Because of all this, we lost money... when we would have made 12K if someone didn't do all that to us. It looks like you'll get a home though... but it is news to me it is a seller's market... older homes in Indianapolis are not in demand and the market is very underpriced compared to other modestly large cities. Heh, I wouldn't dream of asking a seller to do *any* repairs on the home before I move in. You do that here (i.e. in most of Canada), and you will *never* find a home in this market. Guaranteed. If an inspection were to uncover more things to fix than I could afford, I simply wouldn't buy the place. Thanks for the well wishes, though. I'm starting to wish I lived where you lived! Link to comment Share on other sites More sharing options...
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