Real estate / mortgage / buying a home advice needed

Is it possible you’re misremembering the sequencing?

What you’re describing is what happens at the close of escrow. A bunch of papers get signed, the bank releases the money, and it goes to the appropriate places (to pay off the remaining mortgage, to the seller, to the realtors.

That can’t all happen on the day the offer is made because the bank isn’t going to give a mortgage on nothing. They give a mortgage secured on a specific property that they have appraised.

So, the reason that the seller will care how big the buyer’s down payment is is that between the offer and the close, the mortgage might fall through. The constraints under which a bank will give a mortgage with 20% down are more generous than with, say, 10% or 5% down. If something comes up and things need to be adjusted, the 10% down buyer might not have any financial slack to adjust, while the 20% down one will.

I think you two are misunderstanding each other - correct me if I’m wrong. You get cash at settlement, which is typically weeks or months after signing the contract. I’m not sure how that relates to the discussion of lying about a 20 percent down payment.

The point about the down payment is that a larger down payment is better from the seller’s viewpoint for several reasons. First, as a seller, if a buyer puts down only 3 or 5 percent, I am thinking that they are strapped for money and might not be able to come up with closing costs. Or if there is any sort of hitch with the inspection or appraisal, there is no room for negotiation or working out an agreeable compromise. Second, loan underwriting is stricter with less money down. A lender will look more favorably at a buyer who is putting 20 percent, or 50 percent down, than one who is putting 3 or 5 percent down. As someone mentioned above, as a seller evaluating two similar offers, I would accept the one with a larger down payment, all other things held equal.

ninja’d by previous post.

Yeah, I may have misunderstood the previous posts. I thought Reticulating Spines meant that it takes a month after the closing and recording of the deed to get all their money, which isn’t my experience at all. But it’s not like you get the 10% down or 20% down in cash before closing anyway - whatever money the buyer puts down ahead of time gets escrowed until the closing, so that 10% or 20% is unavailable to the seller. So from that point of view, 10% or 20% doesn’t matter - you get 100% (minus whatever mortgage and expenses exist) at the time the deed is signed & you hand over the keys.

I think you’re getting two concepts mixed up. Earnest money is money that the buyer pays into an escrow account and that the buyer gets back if the seller cancels the deal, the seller gets if the buyer cancels, and otherwise goes towards buying the house. The down payment doesn’t go to the seller at all, it goes directly to the bank (or whoever is lending the money) and then the bank sends money to the seller for the sale price of the house minus the amount in escrow. (Typically the money gets split more than ‘straight to the seller’, since they often have other obligations - for example, if the seller has a mortgage then their bank gets paid out of the money before the seller gets his hands on it).

The reason a seller wants the buyer to put 20% down instead of less is that a buyer able to put 20% down is more likely to have financing work out and actually go through with the sale in the end. It doesn’t affect when the seller gets money or how much he gets.

Your daughter should interview more than one agent and then sign a buyer’s agency contract with one of them so that her interests are protected. And at the same time have the agent review the buy/sell agreement, go over all the paragraphs so she understands what is required of her to submit an offer, the contingencies that come into play with financing, and inspections. Every state and MLS has different rules!

Seller’s usually pay the commissions, most brokerages charge a flat fee (about $250) per side, inspections are highly recommended. I would skip the generalist inspector and go for the specialist depending on what you find in the house, old plumbing, poor ventilation, roof etc. Ask the agent to research the history of the house on the MLS, many times you’ll find disclosures that reveal stuff the current owner claims no knowledge of.

CHela of Five STar Real Estate :slight_smile:

Well, she didn’t get the house, but she learned a lot.

Another question: her agent suggested that she stipulate within the offer that she will get the inspection done within 5 days of the offer being accepted. He said this would make the offer stronger.

Our concern is what would happen if we could not find an inspector available on such short notice (would she lose her deposit?).

Also, what is the typical time frame specified for an inspection?

ETA: And does the inspector who signs off on, say, the roof have any liability when the roof leaks the next rainy season?
mmm

Is your daughter going to have the house inspected before putting an offer on it ?

Inspections, of whatever kind, would fall under contingencies for the sale. One would usually stipulate a certain time period for releasing all contingencies. Inspections are one kind. Financial contingencies (such as final loan approval) might be called out separately. Flood reports are another.

5 days from offer acceptance is short. I would only do it if the agent knows an inspector that can do it within the deadline. Bear in mind that you might want multiple inspections, either because you know already that you want a general inspection, a roof inspection and a pest inspection, or because the general inspection reveals areas that really need an expert to review them. I would recommend a longer inspection period if you can get it. If the market precludes a 2 week inspection period, then you are taking a risk with your earnest money if the seller chooses to be a hard-ass and you can’t get it all done before your time runs out. Many sellers will agree to extend inspection periods once you are in contract, but you can’t count on it.

I think what will really go farthest with a seller is the solidness of your finances. A letter from the bank would help here, indicating that you are pre-approved for the property on which you are offering.

Believe it or not, the other thing that helps is a cover letter from you or your agent. It doesn’t have to be elaborate, but, for example, I ended up winning in a competitive bid situation because the seller liked the fact that we had kids who would enjoy the house as much as her grandchildren did.

Buyer should ask for a 12 month home warranty, better that a seller already offers one. There could legally be up to 5 layers of shingles on a roof!

In a fast market with a housing shortage, one cannot under bid for a desirable property and ask for concessions too. I would talk to home inspectors now and find out what they do and what they charge and availability. They know the drill and move pretty quick to inspect a house. Ask your agent for names.

In my market buyers letters can be used but should be written by the buyer not the agent, still sellers can refuse to view so always clear it first with seller/agent. I Ask seller to initial the PA that they’ve actually reviewed your offer.:dubious: I don’t always get those back:p

Poster **chela ** (unsurprisingly) makes an excellent point. There is a gigantic difference between being a buyer in a slow market versus a fast one. Any advice needs to be customized to which market the OP’s daughter is stuck in.

In a slow market buyers can be all kind of demanding. In a fast market you’re competing with the richest most careless other person to get your bid in and accepted before they do. It can be a real dilemma between “haste makes waste” and “you snooze you lose” on each and every property.

I really appreciate the advice, but this:

is way over my simple head. I seriously don’t even know what you are saying. :slight_smile:
mmm

IME, a buyer’s letter is a personal letter the buyer writes to the seller. My agent recommended them when I was searching for a house over the past few months. They can make your offer stand out from others.

They were supposed to be what you like about their house, how it would be great for your family to get it, how much you loved their tulip garden and you would slavishly take care of it to the end of your days, etc. My 14 year old daughter actually volunteered to write them for me. They were nice, but not quite enough to overcome the 10k deficit between my offer and the next higher offer in the crazy sellers market my area is currently in.

Don’t know about the PA though. Purchase Agreement maybe? Where I am the offer is called a Contract to Purchase.

I have never heard of such in this market. Honestly, as a seller it would seem a bit creepy to me to get such a letter. I couldn’t care less what you do with the tulips, house or property after you buy it. Either you were the highest of the qualifying offers (Congrats on your new house!) or you weren’t (Sorry, Charlie!). A letter is not going to sway me either way.

[sub]well, maybe if the signature on the letter is worth more than enough to make up the difference in the offers…[/sub]

All I can think is that if there’s a tie in the highest offer, or you’re $1k under but a more qualified buyer (no contingency on selling your current house, for example). But yeah, it’s certainly not going to be worth taking a $10k hit.

And there absolutely are sellers out there, especially older people who are downsizing, who want to make sure the new owners will take proper care of “their” house. And would much rather sell it to a family starting out than to a flipper, for example.

Sellers have been asking for some kind of proof of funds or ability to pay, how payment will be made, etc. when accepting offers. The saying 20% without being able to demonstrate it is an easy tactic to defeat.

Oh, no doubt. I just can’t relate.

If you paid $10K financed at 2% interest for a house you’re now selling 50 years later for $400K, it all feels like a lottery win. Or so I’m told; I haven’t had the privilege myself. I’ve sold 3 of my 4 houses for less than I paid for them corrected for inflation and improvements. And that’s not even considering interest costs.

From my many years of working with realtors, the first words that comes out of a realtor’s mouth is, “Are you working with a realtor?”. Seems like this question should have been asked by both realtors and after explaining the situation it should have been made it clear who was going to be the realtor representing the buyer. If neither did that and there is no contract, it seems like the buyer is free to select either one of these two realtors or consider someone else.

I live in the UK so things can be different.

Last time I bought a house, I visited 3 estate agents (= realtors.)
All of them not only gave me details of properties online, but took me to see a property the same day.
Arnie sounds like a cr*p realtor.