I just started escrow. First time buyer, used a buyer’s agent. I think a year ago was the absolute best time to low ball on the REO price. Had I been making offers last year I would have been offering 10% under list at a minimum.
Maybe I got frustrated and impatient. I have been looking since 2004, waiting my time. I’m a little bit afraid I overpaid because I can see some possible downside in the future.
All of the offers I made were on REOs or short sales. I can say that in general today the list price is the lowest price the bank will entertain. Lower prices are rejected. If no full price offers are made the price is reduced by a little.
I think there is a shortage of 20% down buyers out there. Or, if they have the money no one wants to put it down. I am in that group. Unfortunately, the bank said no to FHA and VA. It is a multi-family and no one is lending on them with less than 20% down.
I first made a full price conventional offer at list price (20% down). The bank countered immediately with a change to inspection days and escrow time. The sudden response scared me because I had never heard anything from any of the other offers I made. Total silence. I didn’t like the reduced time so I countered for a discount and FHA. It was outright declined with no counter. I offered full price VA. The bank decided they didn’t want to do VA. I offered full price FHA. The bank decided against FHA, though originally they were accepting FHA offers.
Unbelievably to me, mine was the only offer after over 3.5 weeks on the market. Make that my 4 offers were the only ones. Immediately after they denied my full price FHA offer the bank reduced 25K. I made a full price 20% down offer and it was accepted. I can’t believe the bank didn’t want to sell to me for 25K more, but that actually just happened.
I am puzzled why I’m the only offer but 275K for over half an acre with 2 units (small 3/1, plus detached granny flat, plus possible extra 1 bed/ 1 ba apartment above garage set up to be a separate 3rd unit) seems like a bargain in the current market. Just proves that the government money is the entire market. Part of me thinks I should have offered 260K, but after a month of playing games, and still really wanting the house I decided to just pay full reduced price. I will pay for all repairs except termite.
Weird though. I am still puzzled. Seemed like a more than fair deal and no other takers but me for a month. Makes me feel like I must be a sucker. After all these years of analyzing, thinking about real estate, and actively looking…did I make a bad decision?
The way I justify it is that I can easily see 2400 a month as a rental. With my 20% down, PITI is around 1500. Throw in a boatload of maintenance and even 20% rental reduction and I believe I still cash flow. Property inspection yesterday had no deal breakers so I’m going to proceed.
