Now the fun stuff begins - offers and counter-offers!
The buyers did not want to agree to my counter offer to make the earnest money non-refundable after the inspection period, so that deal is gone. My agent says this, along with the use of an FHA loan (which is usually used by people with poor credit), indicated a weak buyer.
But we've got another offer on the table. This one is for $185,000, which is $5,000 more than the list price. However, the buyer wants a seller's contribution of 3%, which is $5,550. Now this buyer also did not want a home warranty and there is no $410 fee associated with an FHA loan like the last offer, so on the surface, it looks like there is only a $140 difference between the two offers. However, I would need to pay commission on the higher selling price. That's an extra $200 I'd have to pay, meaning this offer is now $340 less than the previous offer. Other details are a $1,500 earnest money deposit and a $5,500 down payment. The buyer has a FICO score of 805, which is great. Apparently he's got money, but it's in accounts he doesn't want to touch - IRAs, 401(k)s, etc. This is the reason for the seller contribution.
We're countering back with a seller's contribution of 2%, or $3,700. As before, we are asking the earnest money deposit be non-refundable after the inspection period.
Monday, August 15, 2005
Offer Fell Through, But New One Received
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7 comments:
Wow, I'm amazed at the speed the offers are coming! Congratulations! I'm happy to see you doing so well after the cabinet fiasco. I'll keep my fingers crossed that your counter is accepted.
Interesting... I have never heard of this "seller contribution" thing before. Why would one do that, rather than just make a lower offer?
I first noticed the rise of the seller contribution terms here. Now that I've got more expierience, I suspect the use of this is to reduce the amount of cash the buyer has to bring to closing. For instance, this guy seems to have no problem with funds, but they might be tied up in accounts he doesn't want to touch - if it's in an IRA, for example, there are tax consequences to pulling it out. By increasing the buying price and then having the seller give it back at closing, the total down payment the buyer needs to bring is lessened or eliminated. This is a way to get aruond a lender requiring a large deposit from the buyer on the property. Of course, if the seller is not careful, he could end up losing money because he'd have to pay commission on the higher selling price.
Hey Shaun,
Great to see your hard work and patience pay off. I'm hoping your blog can help me get into contact with a real estate investor in the Miami area as I am going to move there next year (currently living in the Netherlands).
We need more guys like you, sharing their knowledge with others! Keep up the good work!
I had a seller's contribution when I purchased my house. I needed it to pay out my lease. It was basically some cash back in order to allow me to close sooner.
Michael - I have thought about rising the price, but I'm not going to do it. I'd like to sell this thing quickly and move on to the next one. I may leave a bit of money on the table, but I'll be making enough as it is. If I had this thing on the market 2 months ago, I probably would ask for more, but 6 months is about as long as I want to hold on to a property.
Bginvestor - Wow!
Andrew - I don't know anyone in Miami, but I have noticed a couple links to my blog from a Florida blog in the past. Nothing recently, so I can't provide a link and google doesn't show it either. I'll keep an eye out for it though. If I find it, I'll post it here, in the comments to this entry. You're in the Netherlands, huh? My daughter is named Holland :-)
Andrew - The blog I was thinking of is Gulf Returns. Unfortunately, they focus on southwest Florida, not the Miami area (which is in the southeast).
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