The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: helpmeee on November 06, 2014, 03:32:45 PM
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hey MM community- you guys are keen on detecting when something is off. help me out?
we're looking at buying a beautiful condo in a city with a fast moving real estate market. we put in an offer, it was countered, and we accepted the counter. moving through the inspections/lawyers/paperwork now, and the seller's agent has informed us that 1) there's another buyer (no surprise), 2) they have the same offer as us, down to the dollar and 3) THEY'RE SIGNING TOMORROW BETTER MOVE FAST!!
the seller's agent has been warning us about the other buyer as we've been moving through the process. i don't doubt there's another buyer, but i'm curious if the seller agent is even allowed to tell me this other offer, and the likelihood that this signing tomorrow is real.
there are a few other things that seem fishy- lost condo meeting minutes, possible HOA litigation that we can't seem to pin down, delinquent HOA fees from the condo members.
anyway my SO is nervous because of all the red flags. we really want the place but don't want to be one of those horror stories you see on HGTV- "we saw some red flags and ignored them and now our home is destroyed and our lives are ruined" kind of a thing.
would tremendously appreciate any thoughts.
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Not sure where you are located but here (CA) if you have accepted the counter and are in the inspection phase you are in contract and the seller cannot accept another offer unless your deal falls through. Also the HOA issues would be part of the disclosures and they would have to provide those documents. THAT is a true red flag to me.
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There is one sure fire way to make me NOT buy something... and that is to try to pressure me into buying it.
If it were me, I'd say "okay, well then let them have it." I do think (as was already mentioned) that you have a contract and they just can't sell it to someone else.
The main thing is to try really hard not to get emotionally wrapped up in it. I know that is hard. You set yourself up that THIS IS IT. But you have to make it a business deal -- at least up to the point that it is yours.
If it smells wrong, walk. Nine times out of ten, they'll come chasing after you and you'll be in control.
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When I was buying my last house, a foreclosure, I was told that I needed to give my 'best offer' as they had 2 other offers at the same time. I told my agent that they had my best offer. I was on vacation and blew it off. When I got home I started looking again as I figured that house was lost. I saw the same house relisted for less than my offer. So, I lowered my offer and got the house. Don't know where those 'other offers' went.
I wish I had looked further at the other red flags. It was not a good experience with that house all in all. If there are other red flags, and they are pressuring you, slow down. There will be other chances if this one falls through. Just my $.02.
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One thing I learned in my life, is that if there is a deadline to purchase something, like "buy now before it is gone", or "we are only offering this today" then DON'T BUY IT. These are always in the best interest of the seller and at the loss of the buyer because the buyer doesn't get to do his/her 'due diligence' and that is what they are trying to prevent you from doing.
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It sounds crazy. If this seller knew they had 2 buyers with the exact same offer, why are they pushing for time and not for more money?
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you guys are wise, wise, wise.
my SO is leaning towards saying this is too sketchy for us to deal with, he's open to arguments but i'm having a hard time coming up with any since the details are a little red flaggy. it's in nyc so i was expecting a huge amount of pressure to begin with, and i got it ;P
we both love the place- it's unique to the neighborhood and really a stunner. but we're maxing out our house budget, and with the details unclear and the high pressure from the seller's agent...
we're both tempted to let it ride until monday and just see what happens.
we're technically prepared to let it go, but it hurts. it's already a stretch for us, so it's a bit of a relief if it gets taken off the list, but we'd both still be disappointed.
but there's always another place, right?
...right?
PS: FarmFam: i hadn't even thought about it that way, pushing us to move too quickly to do the due diligence. i am very very gullible and fall for that stuff all the time :/
shadowmoss: it's been on the market for a while, much longer than it ought to for the place that it is. it's got some condition issues, but it's length of time on the market is a little suspicious. there were also originally 2 buyers, not 1, so idk what's made up and what's not.
thanks for your advice. we both want a nice place to live for the next couple decades, not a headache with a pretty view.
spork: we are not in contract yet, we are racing this mystery person neck and neck to possibly sign. our realtor notified us the other person is signing tomorrow, but our lawyer says there's no way to verify if that's real or not. if they sign first, it's in contract and we're out. if we sign first, we get it and they're out.
i hate to admit my competitive spirit is influencing me. this is ebay all over again.
oddone: we're dragging out what little info we can from the owner, we've gotten vague answers. and.... the board meeting minutes were all lost in a computer crash
._.
that's where my SO was like "well that's it for me" haha and i find it hard to argue. im just trying to find any sliver of hope of getting this place before turning it down for good.
also worth noting, they need the earnest money before tomorrow which we cannot get to them by then (banks, transfers, illiquid funds). so if the other buyer exists and forks over the cash, i believe it's game over. i'm really just working through the heartbreak.
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It sounds crazy. If this seller knew they had 2 buyers with the exact same offer, why are they pushing for time and not for more money?
....
that's a stunningly good point
omg what other giant obvious points am i missing ._.
supposedly they are just trying to offload the unit asap. it's been on the market for a while.
but...
if i were a development owner and i had 2 offers YOU BET i'd be playing them off each other trying to get a bidding war. that seems like real estate 101.
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I'd be very careful. do check what they owe the HOA and if that becomes your liability plus if there any major purchases/improvement coming up in the building soon and if that will require a payment from the owner of the condo.
they may want to move fast to avoid being the owner by a certain date...
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Too many flags and not enough info. I'd let it ride through the weekend and spend some free time over the weekend looking at additional properties. I would certainly NOT sign anything nor hand over earnest money until you get all the due diligence completed. Condo's are notoriously famous for all kinds of issues....don't take on any issues you are not thoroughly prepared to handle time wise, money wise, and emotionally! There really in NO one "perfect" home for you. Another will come along if this one does not work out.
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Former realtor in Illinois here:
1. Unethical, if not illegal for the selling agent to disclose the amount of another offer. This is very sloppy, to put it mildly.
2. When I was dealing, a seller can accept another offer during the "contingency period" (inspection, attorney's approval, etc.).
Guess what, I believe (check with your attorney), that you can bail as well during the contingency period. Just call your attorney and he/she just needs to make up some legal reason and you're out.
As far as minutes and litigation: Most large condo associations are always in some litigation (people arguing about 2 inches of their parking space, for example).
Don't be bullied or be uncomfortable. There's other properties.
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Are there also any upcoming big purchases being forced on condo owners? I bought my condo this year and the condo was in the middle of making everyone replace the old windows. My prior owner already had done the replacement luckily, but other people had to shell out $9k for windows (massive windows and we're located near a major highway, so quality matters).
If it's been on the market that long and all of a sudden you have to jump because two people have the exact same offer? While it's possible and you might lose the condo because you didn't react fast enough, but it's also very possible that something else is up.
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This thread confused me from the beginning, because when I saw the words "accepted the offer" I thought that meant that the property was under a purchase contract at that point. Is this all verbal? Does New York not allow contingency clauses in the written contracts?
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This thread confused me from the beginning, because when I saw the words "accepted the offer" I thought that meant that the property was under a purchase contract at that point. Is this all verbal? Does New York not allow contingency clauses in the written contracts?
Yea I was confused by that too. What does "accepted the offer" mean? Sounds fishy to me.
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hey guys!
i wrote our your answers so far and brought them to my SO- we were both happy that the decision seemed unanimous to wait.
a few more details:
(sorry if I am sketch on them. this is my first time buying a place and there are so many details it's hard to keep them straight)
unleashhell: good point about taking ownership by a certain date- there are probably more forces at work than we're aware of.
you know, if the seller's agent gets the commission either way, then why is the seller's agent pushing us so very hard? wouldn't they get the same commission from the other deal? my sunny smile and winning personality could be a factor in the agent wanting us to get it, haha, but i am still suspicious.
lakemom: yeah, we decided to take the weekend- to cool off and relax, to make the sellers wiggle a little if there is no actual signing today. we also decided we'll have to wait a bit till looking at the next one, house hunting is very disruptive to our jobs and we've gotten like nothing outside of condo stuff done.
we go back and forth constantly on house type- condo seems like the mostly likely (most of of the housing inventory is condos, our bank wont finance co-ops and detached houses are rare).
also they want like the entire down payment as an earnest payment, which seems sketch to me.
also, we just don't have the entire down payment on hand, liquid cash ready to sign over right now.
plus, the entire down payment as earnest money??? that seems odd?? again, no experience, no way to tell...
frugaliknowit:
THANK YOU! I KNEW IT WAS SO WEIRD that she gave us the offer down to the dollar. we appreciated the data but got really really suspicious. it's like with a cheating dating partner- if they cheat on their current partners they're likely to turn and cheat on you too. a lot of dating analogies in real estate so far.
i believe we are in the contingency period. buyer #1 made an offer, they wanted work done to the condo, seller didn't want to, they were going back and forth, and the condo eventually accepted their offer. in the meantime we appeared, put in an offer, got the counter to match buyer #1, matched it, then started our inspections and lawyer stuff. while we've been doing the inspection/lawyer stuff, the agent has been bugging us that the other buyer is so close, they might have it soon, great news, their agent is away for a few days so you have extra time, uh oh, they're back, signing tomorrow, freak out!!
so far our offer is contingent on our financing, which is a little dodgy since we had to match their counteroffer. my SO is working out the details and says theres a shot we can get it, and a shot the bank will look at everything and turn us down.
good to know about the litigation. i can't figure out of they're spacey or what, they said there was, then there wasn't, and they won't provide details. hard to know what's legit not available and what the dog ate.
more replies on the way...
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also they want like the entire down payment as an earnest payment, which seems sketch to me.
also, we just don't have the entire down payment on hand, liquid cash ready to sign over right now.
plus, the entire down payment as earnest money??? that seems odd?? again, no experience, no way to tell...
The entire down payment as earnest money? Only if you have a really tiny down payment...
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Are there also any upcoming big purchases being forced on condo owners? I bought my condo this year and the condo was in the middle of making everyone replace the old windows. My prior owner already had done the replacement luckily, but other people had to shell out $9k for windows (massive windows and we're located near a major highway, so quality matters).
If it's been on the market that long and all of a sudden you have to jump because two people have the exact same offer? While it's possible and you might lose the condo because you didn't react fast enough, but it's also very possible that something else is up.
there aren't upcoming purchases, but there was a huge loan taken out for a repair (the area was hit by a nasty storm 2 years ago and they're still repairing the area). it's big loan, but when you split it up into the units it's only $150/per unit/per month/for 30 years.
oh em gee i can't believe i'm sitting here explaining this and we are trying to buy this hot mess.
anyway it's got this huge loan on it, and like a fifth of the residents are behind on their HOA/loan fees, the condo was just like "yep we're on it, THEY'LL PAY" which is not terribly comforting.
yeah... we're like 50/50 that this other person is real. it's a gorgeous condo so i wouldn't be surprised if there was other interest. just everything about it has been fishy. the offer match with disclosure we were matching the other buyers, the pushiness...
it's also a big city/hot market so it's not unlikely someone will move faster and snatch it out from under us.
but, we're been watching SO MUCH holmes inspection and everyone is like "oh we skipped the inspection and this that and the other and NOW OUR LIVES ARE RUINED"... i know real life isn't tv but it seems prudent to cross all the t's and dot all the i's on such a large purchase.
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This thread confused me from the beginning, because when I saw the words "accepted the offer" I thought that meant that the property was under a purchase contract at that point. Is this all verbal? Does New York not allow contingency clauses in the written contracts?
Yea I was confused by that too. What does "accepted the offer" mean? Sounds fishy to me.
sorry for the confusion! my head has been spinning the past couple weeks trying to learn all this stuff so fast.
the property is not "in contract" until the purchase order papers are signed. as far as i can tell, this is the order:
1. look at place, make offer
2. have offer accepted/rejected/countered (verbally, no signatures at this point)
if accepted:
3. condo is inspected
4. condo documentation & financial statements & rules and purchase contract are presented to buyer's lawyers. this is called "the deal sheet"- our agent said there were 2 "deal sheets" out and this is what it means :P
5. based on inspection report and documentation, lawyer recommendation and bank financing, buyers can decide to sign the purchase contract
6. if the purchase contract is signed, the property is formally "In Contract" and the seller can't accept any other offers.
The seller can accept other offers up and set up deal sheets all day until the purchase contract is signed by someone, then they have to stop and go with that buyer.
7. So then it's in contract, i think this is where the mortgage application happens, probably more paperwork? some kind of 60 day closing period but I am unsure what is happening in the meantime.
8. You get it at the end of the closing period
this might be off/simplistic but it is how i understand the process (pls correct me if i'm wrong!)
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also they want like the entire down payment as an earnest payment, which seems sketch to me.
also, we just don't have the entire down payment on hand, liquid cash ready to sign over right now.
plus, the entire down payment as earnest money??? that seems odd?? again, no experience, no way to tell...
The entire down payment as earnest money? Only if you have a really tiny down payment...
nope it's not a tiny down payment!! it is quite a lot. it is more than my annual salary.
good to know this is odd too. condo, minus another 5 points.
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also they want like the entire down payment as an earnest payment, which seems sketch to me.
also, we just don't have the entire down payment on hand, liquid cash ready to sign over right now.
plus, the entire down payment as earnest money??? that seems odd?? again, no experience, no way to tell...
The entire down payment as earnest money? Only if you have a really tiny down payment...
nope it's not a tiny down payment!! it is quite a lot. it is more than my annual salary.
good to know this is odd too. condo, minus another 5 points.
Very very weird. My condo's earnest money was around 1% and held by the title company until closing.
I also paid a separate deposit of $100 to the seller for going under a contingent contract while the home inspector came in. That gave me the option of backing out if the inspection went south.
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I thought it was customary not to get an inspection or appraisal until after the contract was signed and locked in? Once you verbally agree on a selling price, then you sign and agree to purchase it with some strings attached. Those strings being it passes inspection and appraises for what they say it's worth and your lender agrees to loan you the money for this specific property. If any of those conditions aren't met then the contract is rescinded and it's back on the market.
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Too many red flags for me. I would run for the hills. Even if it was something cheaper, like a used car, this is too many red flags. But we're talking about A HOUSE, in illiquid investment where the down payment is more than your salary?!? And they want the entire down payment as earnest money?!? And the HOA can't get their members to stay current with dues, and loses their meeting minutes so you're not sure what's going on anyway, and puts everyone into an extra $150/month debt for the next 30 years?!?
For what it's worth, the last time I bought a house I gave earnest money of $500.
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as to earnest money...
Now, I live in a low cost of living area.... and I've only purchased single family homes... But, I've never put down more than $500-1000 as earnest money.
...and I've actually walked away from one (where I lost the earnest money) due to inspection problems. You don't want to walk away from a BIG pile of earnest money... and they know that.
Run.
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I live in a condo building..... RUN!! There are way too many financial red flags here. Unpaid HOA fees? HOA can't come up with funds for a major repair? Low association reserves? Does the HOA have insurance for repairs? No minutes from board meetings?
I don't care if Channing Tatum came by every afternoon to take off his shirt, serve me drinks, and let me watch him work out on the patio, I would get the hell away from this place - it has the potential to absolutely destroy your financial future.
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You need to get your stuff in writing, not verbally. Typically once you make an offer and the seller accepts it (in writing), the property is pending and no new offers from others can be accepted. While it's pending, you get your inspection, HOA review, etc.. Your original offer should have been written in a way that you can get out of it if you find any issues with inspection, HOA, etc...
You need a better real estate agent that knows what they are doing.
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I thought it was customary not to get an inspection or appraisal until after the contract was signed and locked in? Once you verbally agree on a selling price, then you sign and agree to purchase it with some strings attached. Those strings being it passes inspection and appraises for what they say it's worth and your lender agrees to loan you the money for this specific property. If any of those conditions aren't met then the contract is rescinded and it's back on the market.
it is our understanding and we've all been operating under the procedure of offer, then inspection, then purchase contract, then mortgage application, then closing. the purchase agreement has the string/contingency of buyer's financing coming thru. so it's on the market until someone signs that contract. if we sign it, the only way we can back out is if our financing falls through, then it would be back on the market.
we haven't heard anything yet of an appraisal though- good to know.
maybe it's regional differences what goes pre-contract signing and what goes into the contingencies?
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Too many red flags for me. I would run for the hills. Even if it was something cheaper, like a used car, this is too many red flags. But we're talking about A HOUSE, in illiquid investment where the down payment is more than your salary?!? And they want the entire down payment as earnest money?!? And the HOA can't get their members to stay current with dues, and loses their meeting minutes so you're not sure what's going on anyway, and puts everyone into an extra $150/month debt for the next 30 years?!?
For what it's worth, the last time I bought a house I gave earnest money of $500.
ha, yeah, all summed up like that it looks like a pretty terrible deal. it's been hard to come around to, it is a beautiful space but just has too many issues. i'm thinking this is why it's been on the market for so long.
thanks for the earnest $ quote. that's more in line with what we were thinking.
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as to earnest money...
Now, I live in a low cost of living area.... and I've only purchased single family homes... But, I've never put down more than $500-1000 as earnest money.
...and I've actually walked away from one (where I lost the earnest money) due to inspection problems. You don't want to walk away from a BIG pile of earnest money... and they know that.
Run.
yeah, we were expecting like more in that ballpark, or like a quarter of the down payment or even half... but the entire down payment? very excellent point about them not wanting us to walk away with all that money in the air.
wait... sorry if this is obvious. if you put down the earnest $ and buy the place, it is applied to your down payment, right? but if you put down the earnest $ and walk away, you forfeit it?
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I live in a condo building..... RUN!! There are way too many financial red flags here. Unpaid HOA fees? HOA can't come up with funds for a major repair? Low association reserves? Does the HOA have insurance for repairs? No minutes from board meetings?
I don't care if Channing Tatum came by every afternoon to take off his shirt, serve me drinks, and let me watch him work out on the patio, I would get the hell away from this place - it has the potential to absolutely destroy your financial future.
haha your experience and enthusiasm are very much appreciated!!
we both thought it looked squirrely, but we are both lifelong renters, we have no real basis for comparison.
we will look for a place without the channing amenities :( darnit
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Where in the hell is your realtor?
If you don't have one, get one, because you don't know what you're doing (nothing personal, it is your first time).
If you do have one, fire him/her, because he/she should be answering all these questions to your satisfaction instead of an anonymous internet chat board.
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Oh my god, my heart is pounding just reading this. Run for the hills. Seriously. You do not want this deal, whether there's another buyer or not.
I've never heard of that order of things (verbal offer, inspections, contract). It's ALWAYS verbal offer, contract contingent on due diligence and financing, the inspections and whatnot. That just seems insane.
Yes, the way earnest money normally works is that you get it back only if there's a serious due diligence or financing issue. No way in hell I'd give them as much as they're asking. A couple-three grand, tops!
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Where in the hell is your realtor?
If you don't have one, get one, because you don't know what you're doing (nothing personal, it is your first time).
If you do have one, fire him/her, because he/she should be answering all these questions to your satisfaction instead of an anonymous internet chat board.
er... the seller's agent or the buyers?
we have a buyer's agent and they have been helping us along, setting us up with lawyers who are digging up the information we're requesting.
fwiw, our buyers agent is an old colleague who has done very well in the real estate business so we called them up. i trust that they are not trying to screw us over as we've known each other for years, but are they not doing as well as a normal buyer's agent should here? should we say thanks but no thanks and hire someone else formally?
big thanks to everyone who has answered though. immensely helpful to have neutral third parties opinions, even if they are anonymous strangers on the internet, lol.
edit: our ignorance in this whole deal is kind of annoying, lol. we've been reading books but there just seems like so much information and so much is conflicting. is there like a class somewhere one takes, or do you just learn though (costly, time consuming) experience?
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Oh my god, my heart is pounding just reading this. Run for the hills. Seriously. You do not want this deal, whether there's another buyer or not.
I've never heard of that order of things (verbal offer, inspections, contract). It's ALWAYS verbal offer, contract contingent on due diligence and financing, the inspections and whatnot. That just seems insane.
Yes, the way earnest money normally works is that you get it back only if there's a serious due diligence or financing issue. No way in hell I'd give them as much as they're asking. A couple-three grand, tops!
haha we thought the heart pounding was normal real estate palpitations ;)
so it's verbal offer, THEN purchase contract contingent on inspection and financing, then the inspection/assessment/financing, then the closing? just trying to keep things straight.
good to know about earnest money. i was thinking it would get returned if we didnt get financing or whatever, but if they're being sketchy about everything up to this point, idk how comfortable i feel about putting up so much cash. (i know how i feel about it, pretty terrible!)
(it is embarrassing knowing this little in such a big deal! thanks everyone for helping. for shame, for shame, OP. any links to solid helpful resources are much appreciated since it's obvious i need a bit more knowledge in this arena)
also very helpful to have such an overwhelming negative opinion, lol. we were leaning towards no but now we're cemented pretty firmly in saying no way man.
are all condo sales this freaked out? continuing renting is looking like a pretty good option after all this, lol.
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What on earth would someone pay to have an inspection $, professional HOA review $, etc... if your 'verbal' offer could be rejected at any point. Makes no sense. Ditch your agent and interview 3 others. Get the name and number of the condo HOA president and see what's going on. You do not want this place if there is a large assessment in the near future., insufficent reserves for repairs, etc.. You are entitled by law to get copies of all the HOA minutes, etc...
This offer sounds real shady.
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I don't have experience with condos, but when I bought my house, it was very calm and my realtor (buying agent) walked me through each step. There wasn't a ton of pressure, though there was a bit of "oh there are a lot of interested people" which probably affected me more than I'd like to admit. Still, I felt good. My deposit (I guess what you call "earnest money") was $2000.
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I may be the lone vote for this, but I see very little downside to submitting your offer.
Once you're under contract, you're in the driver's seat. Make your offer with a more reasonable amount of earnest money, and put the closing date two months or more in the future so you have time to do your due diligence. Then do it. If you find something, anything, you always have the option to back out.
You're not bound to buy the place just because you're under contract, the point of the contract is to prevent them from selling to anyone else while you check the place out. If the loans or HOA fees are fishy, you can back out. If there is undisclosed damage you can back out. It's pretty hard for a seller to claim your earnest money unless the property is really really perfect. Buyers have all of the power in these negotiations because buyers have all of the money.
I'd talk to your lawyer about the benefits of getting under contract to give yourself time to check the place out more thoroughly. Maybe the rules are different in your area, but I think in most places a lawyer will confirm that it's relatively easy to back out of a deal if you find something you don't like. Have the lawyer write up a contract that gives you options.
And if you do end up losing the place to another buyer, take solace in the fact that they wanted to risk it and you didn't. That's fine. I've never regretted losing a real estate deal, because in every case I thought the other buyer was overpaying or neglecting their research or both.
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At this point, you probably don't need another condo owner to chime in and say drop this whole deal and run, but I'll do it anyway. And I'm sorry to say this because it sounds like this is someone you know and like, but you need a new buyer's agent if you're going to continue looking and condos. A good one will very patiently and kindly educate you on all these issues, and then get out there to get answers to all your questions. Not refer you to a lawyer and have you figure it out yourself.
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Yeah, tsk, tsk OP... ;-) Sounds like you should walk from this 'deal' - find one that won't put your FI plans in jeopardy.
But part of this is normal 'buyers remorse', which is typical. I had/am-having them myself.
2-weeks ago in the Seattle (HCOL) area, mindful of the winter 'lower home sales' season:
1. Made a 5% below list price offer for the cheapest 3br house in the area ($425k)
2. Put down 1% ($4250) earnest money, and went 'pending inspection'.
3. After my 'Holmes' inspection, and crawling around the crawlspace myself with the inspector, found water damage, heater & hot water heater issues, mold, etc. (thank you Mike Holmes!)
4. Countered for $25k off original price for damage repair (hoping to do some/most of the work myself). This is the 'negotiation' phase.
5. Threatened to walk, started looking again, but found nothing comparable in the area. Finally the seller came back, and agreed not only to the $25K discount, but to repair/service of the heater & hot water heater to minimize the risk the house will 'appraise' for the loan value.
6. Counter accepted all around. $80k now transferred from Vanguard and sitting in savings.
7. Currently awaiting bank appraisal...
Meanwhile, I'm thinking about DIY / mustachian ways to make the house more livable. Searched, and found 200 or so plastic campaign signs from the just-ended mid-terms for use as rafter vent baffles for the 'new' attic. Plan is to blow ~R50 of insulation after getting a 'skim' coat of foam on the attic joists. AND to dig around outside the foundation to coat the walls with membrane to keep water out of the crawl space.
Wishing you the best. And don't worry - there are better deals out there. Don't be pressured into ANYTHING.
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I may be the lone vote for this, but I see very little downside to submitting your offer.
Once you're under contract, you're in the driver's seat. Make your offer with a more reasonable amount of earnest money, and put the closing date two months or more in the future so you have time to do your due diligence. Then do it. If you find something, anything, you always have the option to back out.
You're not bound to buy the place just because you're under contract, the point of the contract is to prevent them from selling to anyone else while you check the place out. If the loans or HOA fees are fishy, you can back out. If there is undisclosed damage you can back out. It's pretty hard for a seller to claim your earnest money unless the property is really really perfect. Buyers have all of the power in these negotiations because buyers have all of the money.
I'd talk to your lawyer about the benefits of getting under contract to give yourself time to check the place out more thoroughly. Maybe the rules are different in your area, but I think in most places a lawyer will confirm that it's relatively easy to back out of a deal if you find something you don't like. Have the lawyer write up a contract that gives you options.
And if you do end up losing the place to another buyer, take solace in the fact that they wanted to risk it and you didn't. That's fine. I've never regretted losing a real estate deal, because in every case I thought the other buyer was overpaying or neglecting their research or both.
i appreciate the devils advocate opinion- it's hard to find in this situation. we both talked about offering a lower earnest money deal, but we're hanging tight until next week to see if this other buyer was a bluff. you guys have given us a lot of food for thought if we even want to keep pursuing this place. it is gorgeous but dodgy- lots of pros but lots of cons.
good to know about the earnest money. people are so sharky out there, lol, we're unsure who to trust where.
we talked long and hard about losing the place to someone else and decided if they wanted to charge ahead ahead of us with more money and less concerns, we can't help that, cest la vie.
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At this point, you probably don't need another condo owner to chime in and say drop this whole deal and run, but I'll do it anyway. And I'm sorry to say this because it sounds like this is someone you know and like, but you need a new buyer's agent if you're going to continue looking and condos. A good one will very patiently and kindly educate you on all these issues, and then get out there to get answers to all your questions. Not refer you to a lawyer and have you figure it out yourself.
https://www.youtube.com/watch?v=Y_kNHtg-FxQ
you speak the tru tru
yeah maybe we need to re-assess and possibly use someone else. they offered their services gratis so we are happy to have the (free) help, but it sounds like we need more handholding.
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Yeah, tsk, tsk OP... ;-) Sounds like you should walk from this 'deal' - find one that won't put your FI plans in jeopardy.
But part of this is normal 'buyers remorse', which is typical. I had/am-having them myself.
2-weeks ago in the Seattle (HCOL) area, mindful of the winter 'lower home sales' season:
1. Made a 5% below list price offer for the cheapest 3br house in the area ($425k)
2. Put down 1% ($4250) earnest money, and went 'pending inspection'.
3. After my 'Holmes' inspection, and crawling around the crawlspace myself with the inspector, found water damage, heater & hot water heater issues, mold, etc. (thank you Mike Holmes!)
4. Countered for $25k off original price for damage repair (hoping to do some/most of the work myself). This is the 'negotiation' phase.
5. Threatened to walk, started looking again, but found nothing comparable in the area. Finally the seller came back, and agreed not only to the $25K discount, but to repair/service of the heater & hot water heater to minimize the risk the house will 'appraise' for the loan value.
6. Counter accepted all around. $80k now transferred from Vanguard and sitting in savings.
7. Currently awaiting bank appraisal...
Meanwhile, I'm thinking about DIY / mustachian ways to make the house more livable. Searched, and found 200 or so plastic campaign signs from the just-ended mid-terms for use as rafter vent baffles for the 'new' attic. Plan is to blow ~R50 of insulation after getting a 'skim' coat of foam on the attic joists. AND to dig around outside the foundation to coat the walls with membrane to keep water out of the crawl space.
Wishing you the best. And don't worry - there are better deals out there. Don't be pressured into ANYTHING.
totes magotes, man. if we bought this place, it's at the tippy top of our budget so we wouldn't have as much wiggle room...
congrats on your possible new purchase! hahahaha glad to have another holmes inspector fanatic XD
omg i skimmed your insulation plans thinking i had no idea what you were saying but
I KNEW EXACTLY WHAT YOU WERE SAYING
holmes inspector for life
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I have bought 3 condos in my life & many homes. I have never put up more then $1000 for earnest $ & the title company kept it not the sellers. After the offer was accepted in writing we did inspections & received all the information from the HOA's. You really need to see that info because if they have a lot of expenses coming up without large reserves to cover it then it would be a bad deal. They can then have a special assessment of each unit to cover the cost which can be very expensive. Also if the sellers owe the HOA $ they should have a lien on the condo & upon sale they take their $ from the proceeds to settle the debt before the sellers get paid. We had one like this & the debt was paid off in this manner..
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they offered their services gratis so we are happy to have the (free) help, but it sounds like we need more handholding.
Well, that makes more sense, then. Normally your buyer's agent gets a commission on the sale (and the seller pays it, not the buyer). If they're just doing you a favor and aren't making money on the deal, I suppose that is nice of them, but it isn't giving you the help you need.
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as to earnest money...
Now, I live in a low cost of living area.... and I've only purchased single family homes... But, I've never put down more than $500-1000 as earnest money.
...and I've actually walked away from one (where I lost the earnest money) due to inspection problems. You don't want to walk away from a BIG pile of earnest money... and they know that.
Run.
yeah, we were expecting like more in that ballpark, or like a quarter of the down payment or even half... but the entire down payment? very excellent point about them not wanting us to walk away with all that money in the air.
wait... sorry if this is obvious. if you put down the earnest $ and buy the place, it is applied to your down payment, right? but if you put down the earnest $ and walk away, you forfeit it?
That's my limited understanding. I'm not a Realtor. I've walked from one due to inspection issues and it did cost me my earnest money. (They did later come crawling back with "we will fix that problem *and* take less money" ... but I'd already bought something else.)
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When we had inspection problems we asked the buyers to take the cost of repairs off the price of the house & have done the same when we were the sellers. If the deal falls through the buyers get their $ back. I have never not gotten it back. However, I would certainly never put down more $ then what is customary for your area and the entire down payment being expected is ridiculous.
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My experience of the same situation:
1) I get shown Condo A, price is X. Agent says it was shown to someone else yesterday.
2) I agree to buy A. It's "the only one in the building" that fits my stated needs.
3) Agent sends me to lunch. Surprise! After lunch he tells me he "just" got a phone call that someone put in a counteroffer. Will I raise the price?
4) I tell him hell no, (not in those words), that I came 1000 miles to do this prerelocation real estate trip, and that I will just rent for 6 months until another 2BR in this building goes on the market.
5) Surprise again! There's another 2BR in the building, but it's not one of *his* properties - for sale by owner - and he didn't think I'd like it because it doesn't have a dishwasher. And it's 20K less. I buy it. Then I buy a dishwasher.
call the agent's bluff
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Everything in NYC is more complicated than anywhere else. But no, don't give in to the high pressure tactics.
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Jesus I am glad I do not currently live in/want to live in NYC.
This does not sound even vaguely similar to any real estate deal I have ever been involved in, and I've been involved in a decent number in a variety of roles. Either you have misrepresented/misunderstood the situation or someone is trying to completely screw you. Do not buy. Do not pass go. Read some books about real estate and come back next year.
-W
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Wait, do you have a buyers agent? Don't make this large of a purchase without representation unless you've done it a number of times
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fwiw, our buyers agent is an old colleague who has done very well in the real estate business so we called them up. i trust that they are not trying to screw us over as we've known each other for years, but are they not doing as well as a normal buyer's agent should here? should we say thanks but no thanks and hire someone else formally?
edit: our ignorance in this whole deal is kind of annoying, lol. we've been reading books but there just seems like so much information and so much is conflicting. is there like a class somewhere one takes, or do you just learn though (costly, time consuming) experience?
You do realize the job of the agent is to answer these questions for you - they should be walking you along the process where you can answer every question, concern, etc... and they should be so available to you and knowledgable (or have resources for you) that you don't need to refer to a book or a class. if you feel this ignorant this far into a deal, then walk away from it and get yourself a new agent.
Also, agents get paid through a commission when the sale goes through - that's also something they should have talked about day 1 (because you can negotiate with your agent on that percentage). My agent gave me names and numbers of former clients and insisted I do due diligence on her before we proceeded to look at any homes.
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Do NOT put down more than 1% earnest money. If the deal falls thru and they choose to be difficult you could be out the earnest money or in court for a year to claim it back. All they have to do is refuse to sign it back to you, as pressure to buy. It has happened to me! Was 1% so I had to go to small claims to get it back. Took ages and I was glad it was small.
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I'm going to come at this from a different angle and encourage you NOT to buy at the tippy top of your range, leaving you with no wiggle room. Because you know what? Wiggle room is the best thing ever. It could be what takes you to FI.
We bought at the top of our range in 2007, thinking we would stay in the house 7-10 years and my mister's income would increase, thereby giving us the comfort of wiggle room again. Well, two years later, we chose to make a big life change, my husband's salary dropped by half, and we sold the house in the summer of 2009, losing $80K in the process. OMG, the STRESS.
And I strongly encourage you not to go to the tippy-top of your range by buying this particular condo. There are just too many red flags.
The thing that tipped it for me is the HOA taking out a loan so big that it will increase the HOA monthly amount for every unit by $150 for THIRTY YEARS. That's... crazy. And it tells me the HOA doesn't have its shit together. They had inadequate insurance for the storm, inadequate reserves to fill the gap in insurance, and then decided to punt the responsibility for the difference THIRTY YEARS into the future. And if they've already coughed up the info that 20% of residents are behind on their HOA dues, AND there are no HOA minutes because of a "computer crash"? NO. NO. NO.
And please, please, please, do NOT give them more than a year's salary as EARNEST MONEY. That's INSANE.
I apologize for getting all CAPS LOCK OMG on you, but it seems like you're still considering buying this place, and in my view, the best thing to do would be to withdraw the offer completely.
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hey guys!
thanks to everyone for their amazing answers. i got a little tripped up trying to reply to everyone, lol.
my SO and i had a long chat and we are going to withdraw our offer. we don't like the earnest money situation, the HOA situation, the high pressure, or maxing out our budget. we're calling on monday to withdraw our offer, and we're gonna take a couple months and save up some more money and try again somewhere else :)
wow big learning experience! we both feel a lot better prepared for all kinds of real estate pressure tactics/negotiations.
we're relieved to be able to call their bluff, or at least i am on a personal level. haha i've been checking the zillow listing and it still says for sale ;) might still be updated but we haven't heard anything from the buyer's agent about the signing happening yesterday or anything.
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Do NOT put down more than 1% earnest money. If the deal falls thru and they choose to be difficult you could be out the earnest money or in court for a year to claim it back. All they have to do is refuse to sign it back to you, as pressure to buy. It has happened to me! Was 1% so I had to go to small claims to get it back. Took ages and I was glad it was small.
i feared as much. everyone seems to say oh it's no big deal you can get it back but with such a huge sum of money i'm sure there are ways to jerk people around and not give it back. that's the thing about nyc, lol, you know everyone is out to get you, the trick is to figure out how... lol.
glad you got your earnest money back!! good to know their offer was just bananas.
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I'm going to come at this from a different angle and encourage you NOT to buy at the tippy top of your range, leaving you with no wiggle room. Because you know what? Wiggle room is the best thing ever. It could be what takes you to FI.
We bought at the top of our range in 2007, thinking we would stay in the house 7-10 years and my mister's income would increase, thereby giving us the comfort of wiggle room again. Well, two years later, we chose to make a big life change, my husband's salary dropped by half, and we sold the house in the summer of 2009, losing $80K in the process. OMG, the STRESS.
And I strongly encourage you not to go to the tippy-top of your range by buying this particular condo. There are just too many red flags.
The thing that tipped it for me is the HOA taking out a loan so big that it will increase the HOA monthly amount for every unit by $150 for THIRTY YEARS. That's... crazy. And it tells me the HOA doesn't have its shit together. They had inadequate insurance for the storm, inadequate reserves to fill the gap in insurance, and then decided to punt the responsibility for the difference THIRTY YEARS into the future. And if they've already coughed up the info that 20% of residents are behind on their HOA dues, AND there are no HOA minutes because of a "computer crash"? NO. NO. NO.
And please, please, please, do NOT give them more than a year's salary as EARNEST MONEY. That's INSANE.
I apologize for getting all CAPS LOCK OMG on you, but it seems like you're still considering buying this place, and in my view, the best thing to do would be to withdraw the offer completely.
hahahaha, when you put it like that, how could we refuse? psych. caps much appreciated for the ridiculousness of the situation. it's difficult to see how crazy it is from the inside when you're standing in the place being bowled over by it, but yea, when you type it all out in black and white it just looks like a terrible deal.
in our meager defense, the place is gorgeous. but, it's turning out it's overwhelmingly not worth it. i told my SO all i really wanted was the nice tiles in the bathroom there, lol. we can just buy some cheap place and retile it with the fancy tiles and i'll be happy :)
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If you're happy with the decision, then it was the right one.
Is there a lower price at which you'd consider buying this condo? I ask because there's a nonzero chance that the other offer was a complete bluff and you're the only fish on the line, so when you back off they might come crawling to you with another lower offer.
Even crazy red flags can be dealt with for the right price, but the place would probably have to be a real steal. You're probably better off waiting a bit, finding something more suitable, and then retiling the bathroom.
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we talked about the possibility of that- walking away and seeing if they came back now or later. we decided we'd be open to counter counter negotiations if 1) they brought the earnest money down to like $5k and 2) they accepted a lower offer. we're thinking we could split the difference between our first offer and the counter. if those two conditions were met, we'd seriously reconsider. but for now we're moving ahead with the assumption that won't happen.
i think for we got a little overwhelmed and need a cooling off period, lol. we are declining this offer and sitting tight until like feb when our $ reserves are built up a bit more, then looking around and seeing what's available, and where to get the fancy tile :) it's the iridescent kind, very pretty.
hey on a side note, a few of you have mentioned learning more about the process which i am really in to. do you guys have any recommendations for books, articles, websites that would outline this stuff a little more clearly? i have a few basic personal finance books (total money makeover, smart women finish rich, some misc others), but something more specific to home-buying would be really helpful.
thanks in advance :)
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NYC is a whole different ball game real-estate-wise from the rest of the country, from what I understand. From reading this whole post my suggestion is to find NYC-specific sources of info to research up for next time, and interview several realtors who are not personal friends, and hire one who you feel is the most knowledgeable. It sounds like the realtor you had in this instance really didn't do a good job serving your interests and when you know them personally outside of the transaction its hard to hold them accountable in the same way you would otherwise.
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What on earth would someone pay to have an inspection $, professional HOA review $, etc... if your 'verbal' offer could be rejected at any point. Makes no sense. Ditch your agent and interview 3 others. Get the name and number of the condo HOA president and see what's going on. You do not want this place if there is a large assessment in the near future., insufficent reserves for repairs, etc.. You are entitled by law to get copies of all the HOA minutes, etc...
This offer sounds real shady.
+500!
Three different cities and I never paid for lawyer, title insurance, or inspection until the initial offer was written. With subject toe, but still.... In a hot market, I did waive the inspection once on a condo, but had very detailed hoa inspection reports and documents.
We have only ever paid between $2000 and $10000 earnest money, which was never more than 5%. And the largeset amount because they asked, we had it in cash already , and knew we would not back out except if one of our contingent clauses blew up. (Like a bad inspection or how depreciation report or how financials ). Earnest money is to prevent you from walking away even if all inspections and docs are great. It needs to be high enough to make you pause, and low enough to let you walk away, painfully, should a major issue come up, like a meth lab next door, or you get injured or lose a job.
Given that it is verbal and the realtor you have is a friend. I would counter with an offer to RENT the place. Good decision to back out.
The other suggestion of how low would you accept? Is good for thought. I would reduce the offer by $150 x12x 30 years, and then another $15k on top. $15k was our assessment when the whole building needed to be tripped for plumbing. So plan for another big assessment as they won't be able to create any reserves without forcing sales after it is voted in.
Way too many how issues with no reserve ( what is hoa plan to pay next 15 years of repairs?)and not able to claim missing hoa dues until owners sell their property. Heck your seller could be one of the ones owing.
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I stopped when the original poster said that her offer was accepted verbally.
Do not buy this condo.
Beyond that: do not buy any property offered by this seller's agent.
Further: Fire your buyer's agent for letting you consider this deal.
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in our meager defense, the place is gorgeous. but, it's turning out it's overwhelmingly not worth it. i told my SO all i really wanted was the nice tiles in the bathroom there, lol. we can just buy some cheap place and retile it with the fancy tiles and i'll be happy :)
Wow. Just wow. We are about to sell our first home in MD (as in offer/counter-offer stage started today) and it is crazy how different the rules and standard practices are in different areas. We can't have anything verbal, all must be written initialed etc from the get go.
But that's not really relevant, what I wanted to say was I am sorry you lost your gorgeous condo and many of us know how hard it is to walk away from a dream home. But at the top of your budget, it is not worth it. Disaster loomed. And gorgeous (cosmetically) is achievable almost anywhere. You are so right with the tiles and everything else. You can find a cheaper one with less problems and a great location/building/whatever, maybe one that has been overlooked because it is ugly or old or dated but is all structurally sound, and make it into your gorgeous condo with more breathing room. We choose a cheap as dirt townhouse with stinky old carpets and terrible pink old lady decor, and turned it into a completely new modern house (except the kitchen, that would have been next) and people really are submitting competing offers saying they love our beautiful home and are desperate to buy it. 3 days after listing. And I will be so sad to leave because I love it too.
I don't know if you would get good roi in NYC with complete remodels and you would need to watch your budgeting and choices but I do think that you would have paid dearly for that "gorgeous" in the long run. And you might find tiles you like even better!
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because i love followups on old threads, thought i'd update.
we rejected the offer, they said fine. surprise, over a week later and the place is NOT in contract (on zillow) as the agent said it would be.
we found another place we're checking out, it's nearby, much more reasonably priced. it doesn't have the spectacular view the first place has, but the view is nice. the kitchen/bathrooms are definitely less flashy (but serviceable), but it's got a cool roof deck and lots of skylights. maybe this one will work out a little better ;)
definitely learned a lot of lessons on this go around. thanks everyone for their help!!
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Cool! Thanks for the update! You can always redo the kitchen & bath to match your desires. Here's wishing you much happiness in your new place.
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Thumbs up for your update. I wish your buyer agent would have helped you with your basic questions instead of needing this forum as a sounding board. Nevertheless I believe you probably dodged a financial bullet by not yielding to the high-pressure seller!
I don't know how it works in NYC, but house purchase contracts in Texas are not very long. It's worth the time to sit down and actually read everything before signing, and find explanations to any clauses that you don't understand.
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Cool! Thanks for the update! You can always redo the kitchen & bath to match your desires. Here's wishing you much happiness in your new place.
thanks! :)
we're not 100% sure if this next place is it- going to check it out again tomorrow, but everything about it seems a lot more legit than the other place.
totally! i've heard it's quite a pain to reno a kitchen/bathroom, but as i said they are serviceable, just not pretty pretty ;) so i might be a little grousey about it but honestly it's miles above what we have now.
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Thumbs up for your update. I wish your buyer agent would have helped you with your basic questions instead of needing this forum as a sounding board. Nevertheless I believe you probably dodged a financial bullet by not yielding to the high-pressure seller!
I don't know how it works in NYC, but house purchase contracts in Texas are not very long. It's worth the time to sit down and actually read everything before signing, and find explanations to any clauses that you don't understand.
thanks!
yeah, i think i was probably a little shy to ask since she was a friend, didn't want to take up too much of her time. we decided to just go it alone for the time being.
good to know about the contracts. i do a lot of contract reviewing at my job, so i'm not shy about marking things up, crossing them out, and revising all day long :)
ironically, at the new place we saw yesterday, the buyer's agent said they disliked the agent of the original condo, and that i didn't want it. she was like long story short, you dont want it.
wayyy curious now what's up with it.
possibly haunted... by bad business decisions
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yeah, i think i was probably a little shy to ask since she was a friend, didn't want to take up too much of her time. we decided to just go it alone for the time being.
Congrats on walking away from the deal - I know how hard that is to do with a house you love!
I do have to bring up a bit of a red flag I'm seeing in your post, though. You're talking about money and life decisions, which 100% needs to be about you and what's right for you. If you find a great place and have to move fast to get an offer in, you're going to be bothering your agent and taking up a lot of her time, but that's what you are hiring her to do. At that point, it's not about having an equal friendship - it's about business. She'd get a 3% commission out of the sale, right?
Would you feel guilty if you guys decided not to buy and she earned nothing for her time? Would it affect your friendship? What if you lost your dream house on account of something she did? I think sometimes we hire friends because it seems like the easy or comfortable thing (or we just want to help them out)... but down the road, it can get complicated. It's something to think through before getting much deeper, because friendships do get ruined over these things.