Question about "Short-Sale" home!?
My wife and I are looking to purchase our first home using the FHA 3.5% down payment option possibly utilizing her CalPERS retirement savings money to assist us with the needed funds for the down payment. Our realtor has been telling us over and over again that the owning banks do not like buyers using CalPERS because it makes everything take longer and apparently banks woulde prefer to close the deal in 30 days rather than 60-90 days. Why would they think CalPERS will take 90 days? The home we want to buy has an asking price of $330,00 in a great neigborhood and he says that we need to be prepared to pay not only the 3.5% down payment but we also should have all of the closing costs in our bank account. My wife and I have the 3.5% down but not the extra $10,000+ needed for closing costs. Would it increase our chances if we were to offer $350,000 ($20k more than they are asking) and ask them to pay all the closing cost? Is this unheard of or is it possibly that it might get us the home we really want? I've noticed that the popular belief is that perhaps we are not "ready" or "responsible" for our first home at this point. However, with the $8,000 tax credit (which does not have to be paid back) and the $13,000+ we have saved up for our 3.5% downpayment...how could anyone tell us that we are not "ready" to be homeowners? There are TONS of lucky people who never had to pay closing costs when they purchased their home! At least we are not being stupid like all those people three years ago and getting an "interest only" loan to buy a home we shouldn't be living in. We are responsible people living within our means and just trying to get a decent home without having to pay the closing costs!
Public Comments
- As Suze Orman would say, "if you don't have at least 6 months or more in reserve funds, then you shouldn't be buying anything." If the storm of the century blows your house away the day after closing, will you have enough money to sustain yourselves until it is rebuilt? What if you lose your jobs after closing on the house, will you have enough in reserves to pay the mortgage until you find new jobs? This is practical - common sense things you need to consider. If you don't have the closing costs, maybe you aren't quite ready to take on the responsibility of owning a home.
- Why would you offer to pay $20K extra to have them cover $10K in closing costs? If anything, offer $10K more. In a short sale, a bank will have approved a minimum sales price that they will not budge on. So, they generally won't cover closing costs for a purchase at that minimum. But, I think you would have a good chance at getting them to cover closing costs with a higher offer. Keep in mind, though, that you're now increasing the purchase price and a lender has to be satisfied that the price you're paying is at or below market rates to approve the loan. That is, they're not going to approve a loan for the purchase of a property that is priced higher than it's worth. It doesn't make good business sense, especially in this economy. Regarding the CalPERS restriction, this could be a real stickler. Bank acceptance of offers on short sales and foreclosures can be very restrictive. Banks want to unload the property (foreclosure) or get the mortgage off their books (short sale) as soon as possible. And, anything that may delay the escrow can be a deal-breaker. Especially with a foreclosure, they'll even accept a lower offer from someone offering cash than someone who's going to finance the purchase, because there's no way the purchase will fall out of escrow for lack of financing.
- Paul makes some good points, but a major issue is that the Short Sale may not allow you to get ANY help with closing costs from the seller. This is one of the big issues in my area. Your agent should find out if the seller's lender will entertain this offer. I would suggest that you may end up paying more than the house is worth by $20,000 with your plan. $20,000 more of a sales price may up your monthly payment as much as $200. That could hit you in the pocket book in a way that you don't like at all. As Alterfem suggested, maybe now is not the right time for you to buy a house in this price range.
