One more reason to clean that report up! Many insurance carriers will check your credit. I totally disagree with this but the fact remains that they do. I had a homeowner's insurance quote jump an extra 450 a year because of credit. I wasn't even aware that they pulled credit. So that was an unpleasant humiliation. Most people doing credit repair have a goal, and a common goal is to get a house. Be aware of this, even when you get loan approval and a GFE take a look at the house insurance estimated and be prepared to add a couple of hundred dollars to get an actual policy. I can say this from experience. Don't know if it's a increase just in my area or all over but my lender says that several of thier clients are unhappy with the quotes they are being given. My advice is put in the time to make several quotes, it's time consuming and a pita but beleive me, it's necessary. You get enough surprises in your quest for a home, don't let insurance be one of them. Just FYI, Tegleg
Auto insurance policies now pull your credit also, it has become a standard procedure in the insurance business. THey even have their own "FICO models" for scores. The industry states that they have done numerous studies, and that those with higher credit scores submit less claims and are less likely to have accidents or suffer damages. It goes back to the "behavioral model" of the FICO scoring. I understand about the "suprise" of having it pulled. My auto insurance provider pulled mine right in front of me (credit score), and thankfully I had a good score as this was a good friend of mine who owned the agency! He went into details about how these factors of credit reports and scores, education and profession, effect your insurance premium. The insurance industry stands firm on this practice, they reference the numerous studies and data banks they have to show the correlation. They say it is one of the best "predictors" for their industry. Just one more reason to improve the credit. Just remember to go back for a new quote as your score improves!
The +450 bump came from an Exp pull which is my worst report. Exp is brutal to try to get any inaccuracies on your report removed. I've even filed FTC complaints on them and it hasn't budged them a bit. I am currently on a hiatus from fighting with them until my mortgage is closed. Then they are gonna have a tiger by tail! Luckily another agency pulled Equifax and I got a decent quote that I am going to take. I will have to put my auto with them but I won't be paying anymore than I was before. Overall though the GFE the lender first gave me was an estimated 750 which I have found to be totally off base for my area. I ended up going with a 940 a year policy which kinda sucks because that will run me about an extra 20 a month that I was going to apply on principal. 920 was the lowest quote with a really crappy coverage and an unknown carrier and my highest quote was 1500. /faint Now if the appraisal would just go through I am set. Our area is rural and the appraiser is having trouble getting comps due to the meager amount of listings to go by. They have called the seller's realtor to find out how they priced and did they use comps. The last I heard the realtor told our lender he had used FSBO's. The realtors, lol are both in thier 70's and the lady, bless her heart, you have to talk really loud to because she can't hear you. At this point I am scared that they didn't use comps at all and they are being very slow to get the information to the lender. "Bad knee" and other ailments have been quoted. All in all I know theres nothing to do on my part. If it appraises well then all is well, I would like to say I see the value in the property but it isn't my opinion that will decide. If it's lower then there will be renegotiations to be done. I am not spending anything on appliances or other things until I know for sure. The price was listed so that the seller would agree to down payment assistance. If they have to lower the price I can imagine we will have to pay in more than we estimated. If the difference is too large I will have to pass as I am not going into anything upside down. Sigh, send me Tums! I am getting an ulcer! Tegleg
Teg, Don't worry too much about the appraisal, these things always seem to come in where they're needed to! It is pretty rare that the appraisal does not cover the loan amount. I have seen appraisals where the appraiser just drove by the property and gave it an astronomical value. Based upon the descriptions of the house you've given, I cannot imagine an appraisal under $100K. You are hard pressed these days to find a house under that!
I am beyond frustrated....and ready to pull my hair out. We get a call from our lender this afternoon. The appraiser has contacted them and has said that they are unable to get any comps on the property and that the realtor has not given any comps either. So the appraiser has not done the physical part of the appraisal but states in the groundwork he has done they are only coming up with 80K so far. We need 88.4K =(((( the lender then asks do we want to go ahead with the appraisal knowing this? So I ask the lender, since the appraiser has not physically seen the property is he aware that there is a 900 SF shop included that has a bathroom? I say I am asking because the realtor dot com listing for the house does not mention the shop and has no pics of the shop. The lender says she is not sure whether the appraiser knows that or not. So I email her a link to the actual realtor's website listing which has a pic of the shop. She has forewarded that to the appraiser for him to see. I also ask her to work me up some other GFE's reflecting a lower cost so I could see what our part would be. Because if the seller agrees to a price reduction I doubt he will agree to seller down pay assist or closing cost assist. And undoubtedly our price to get in will be higher. She says she will do that and is also going to run our loan a couple of different ways to see if 100% financing could be obtained. I have contacted the realtor and told him there were issues with the appraisal and would the seller be open to reducing the price if the appraisal comes out lower. The realtor says he doubts it but will contact the seller and ask. So I am stuck here obsessing over 3 things: 1. Does the appraiser know of the shop and has that been factored into the price? And what kind of difference could the shop make in the appraisal? Should we pay for the appraisal to be completed with it currently at 80K with the shop value possibly unknown? 2. Will the seller agree to a price reduction if the appraisal is low? And will we be able to afford all the costs on us if they do? If they won't, and the property does indeed appraise at 80K I think they will have trouble with 90% of the buyers out there who are like me. 3. Our contract states the sale is contingent on the inspection and appraisal results, we have paid 500 earnest down. I am thinking we may be roped into the appraisal regardless or else lose our earnest money. This all just sucks! =((((((( Tegleg
RE: I am beyond frustrated....and ready to pull my hair out. I am a realtor in Orange County, NY with over 70 closed properties over the last 2 years...I just wanted to give you a few pointers as I have been following your posts over the last several weeks since I joined and I've been getting very excited for you on your home purchase. 1. You have to be careful with how hard you push about there being a shop there. The reason I say that is because now you move more away from residential and go towards mixed-use and commercial and commercial loans are much harder to underwrite because it's not just the value of the property, but it also then can become a business loan and the bank may want to see a business plan for something like that. As for the appraisal itself, it can change the type of appraisal that is done from a basic comparable market analysis to a income potential model. But either way, definitely push to get the appraisal done either way, because then you know exactly what it comes in at, don't be afraid to get a second appraisal from someone that was not recommended to you by the mortgage broker. I would even ask if the appraiser is local to the area, because sometimes it can be difficult to pull comps on properties if you aren't very very familiar with the area. 2. If the appraisal comes in lower than the deal price...you can always negotiate with the seller and maybe split the difference (that's what I push for in that situation if it's a small difference)...If it's a large difference, you really have to look at it closely and really think about whether it's worth you coming up with the defference. Just remember in your negotiation that you have the upper hand because any buyer is going to have the exact same issue with the appraisal and they've took how long on this deal, they might as well negotiate down, especially in this market where buyers are much more scarce than they were 2-3 years ago. 3. Yes, you have to do the appraisal in order to back out of the deal without losing your $500.00...now if you do the appraisal and end up losing the deal (don't quote me, your atty would have to advise you on this) because it doesn't appraise high enough, you may be able to get reimbursed by the seller for all the money you lost because you expended it and they won' tbudge on a home that isn't worth what they are asking. Like I said though, talk to your atty. Lastly, the reason appraisals have gotten so tough lately is because the mortgage and appraisal industry is being heavily scrutinized with the raise in foreclosure rates across the country because of loose mortage practice and loose appraisal practice. They are being closely monitored to ensure that they are doing everything by the book otherwise they can and will lose their licenses for being shady in the least bit. Once again...best of luck and remember....STAY CALM!!! I know it's tough...but just relax, there's nothing you can do, just relax and don't get too excited. ~Joey Credit updates to come soon....
Hi Joey, it's nice to meet you~! Thank you for looking at my post, I appreciate all input! The previous owner was a saddle maker and they built the shop for him to work in. He never ran a buisness out of it that I know of. My hubby is a woodworker and wants to use the shop to whittle wood lol. We have no buisness plans, woodworking is just his all time hobby. He's got so much junk we need a shop to put it all in! Thank you for the 2nd opinion, we hadn't thought of that, would we have to pay for that? I would bet there is one more familiar with this area though. The current appraiser is from Arlington, bah. he prob appraises cookie cutter houses where all the neighborhoods are identical. Currently at our present offer of 88.4 the seller was going to do the down payment assist and contribute 2K to closing costs. We put 500 earnest down, 400 for appraisal and were due to actually have a credit at closing. Minus the 900 I have paid already I have maybye about 3K left to potentially put down if I absolutley had to. It would mean coolers and hotplates for awhile but it could be done. it would be helpful if I didn't have to put all that down though as I need to buy a stove & frig. But the payments would be less too so thats a plus. Asking for the appraisal fee back in case the seller doesn't budge is something I had not considered. That is a great thing to know and be aware of. I have a family attorney I could ask if that occurs. At this point I have emailed the lender and told her to go ahead with the appraisal since we will be in breach of contract if we don't. And I have expressed concern that a physical inspection needs done because the appraiser is not familiar with this area, has no comps to go by and is likely not considering the property as a whole. I don't care what his "numbers" say, he needs to walk the walk. Oh you ain't kidding about the mortgage lockdown. We had to jump through mile high hoops just to get our loan approved! And ours is a fixed rate, I would'nt touch a variable rate with a 10 foot pole! Orange county eh? Wowza! I bet real estate is extreme up there! Yikes! I need to stop obsessing, what's gonna happen is gonna happen. At worst we will be back to looking. /groan Thanks! Tegleg
Tegleg, Welcome to the wonderful experience of home buying, and the "Art of The Deal!! Fun isn't it! First, this will be a bit lengthy, so grab a cup/glass of your favorite beverage, and sit back and RELAX. You will get this house, and you will get it at a better deal for you. The goal is t get you this house (notice I didn't say "home" yet) at the BEST possible deal. The number one point to remember, this is a business transaction, not an "emotional" one. When buying a "home" it is nearly impossible to not already picture yourself owning it, and that is where the danger comes in. It "aint over until it's over", and you have to drive the deal there. At this point, I am suggesting things that are strictly negotiation items and tactics. Like any negotiation, the key is to be able to "walk away" from the deal. To do that you need to set hard "exit criteria", the point where it is not worth it to you anymore. Only you can make those decisions, but do it in a "business mindset, not an "emotional" one. So, prepare yourself mentally now to "walk away", as hard as it may be. You do not realize that YOU are in the position of strength right now, not the seller. You are the "Ready, Willing and ABLE buyer", you have financing ready to go, and you are ready to close subject to acceptable terms and conditions. I know where your head is at, and you MUST change it. I understand how badly you want this house, I understand how fighting out of bad credit drains your confidence, and I understand how much "emotion" is at stake here. But, you must step back emotionally, and from a business perspective, realize the strength of your position right now. If it were me, I would be tearing this seller and agent apart right now. Teg, it's time to play business "hardball". First, remember everyone's position and their wants(and needs) in this deal; how "motivated" is this seller? How "motivated" and "capable" is this real estate agent? Remember, the agent is NOT working for you, he legally works for the seller. Don't think of him as on "your side", think of him as an adversary (I apologize to the agents out there, but business is business!). So, if the appraisal comes in below the "asking price", (and that is exactly what it is, not a true "worth" number), then you have strong leverage to negotiate a lower price or better package. If the seller won't budge on his "asking price", then the realtor should be doing his job of "educating the seller" on the true market value, and the seller's expextations. Per my experience, the "first deal on the table" is usually the best. If you walk away right now, how long will it be before the next buyer? And what price will they offer? Let's figure out what it will take to close this deal the best for you! As for the appraisal, I would MAKE this appraiser do the physical. I would be getting my own in a situation like this and I would add to the costs the seller is paying, and I would use whichever was lower in my negotiations with the seller. Also, ask the agent how they came up with the "asking price", and have him explain the difference between appraised value and listing price. Put him on the defensive, and make him earn his commission (we'll get to that later!). Bluntly, this deal is starting to fall apart, and ALL parties need to come to the table to put it back together. Don't worry, this is normal, and to be expected. Your key need here is to get a deal where the value supports the financing, focus on that only. A couple of options/suggestions: 1) The seller lowers the price, and adjusts the down payment to make it happen:it is the agent's job right now to "educate his seller". 2) The real estate agent "kicks in" by giving up some commission to the seller, this is common. Right now he is "double dipping" by being the listing and selling agent. I would "bring up" to him your "consideration to bring in a "buyer's agent", then he would be splitting his commission, and his agency's in half. You have the right to do this, and you may want to seriously consider this option, having a "pro" go to bat for you, and it won't cost you anything! 3) The seller maintains his "asking price", but increases the down payment to make the financing happen. He'll balk I'm sure, but who cares! 4) You take your "appliance money" and use it as an increased down payment, BUT...amend the PS&A to have the seller put NEW appliances (acceptable to you) in the house. Look around the house and see if there is anything you would throw into the "improvements" list to raise the value of the property. Do NOT be afraid to ask for anything! 5) The seller holds a "second mortgage", in the form of a "balloon", where the difference in your financing amount and the selling price gets paid to him in say five years (and nothing in between). I would put 0% interest on this option. (P.S. your projected current mortgage amount would be lower on the primary mortgage) 6) Have the seller get an appraisal (that they pay for!) that does support the financing. (Put the pressure on him and the agent!). 7) In all your "counter offers", put down a drop dead time, force the seller into action and decisions. Also, talk with your lender, find out their lending amounts in the various "what if" scenarios, information is power. Next, here's the tough one, start looking for other properties, create a back up plan. If you get a buyer's agent, they will start doing this for you! The main point that is killing me is that I KNOW you can get this property at a better deal than the current one. It is excruciating to have followed your threads and progress to see you not getting the best possible deal! Somehow, you and the agent need to figure out what the seller's "net" has to be to make the deal. BUT...you need to figure out what your "net" is NOW also. Use this appraisal twist to your favor, I would be targeting $5K -$10K off the deal right now! A couple of key items for you and your confidence: a) The overall real estate market is a "buyer's one now, if you walk away when will the next buyer come along? And at what terms? If it were me, I would have offerred $65K cash deal! b) Forget the credit report "negativity" in your mind, that is behind you. You HAVE financing in place, you have STRENGTH! You are an "Able" buyer! c) This seller is being unrealistic right now, he should consider himself lucky you are still dealing in "good faith"! d) Openly consider a "buyer's agent", maybe a "pro" at this point in the deal would be good for you, and make it easier! (Believe me, if you mention this to the agent right now, things WILL start to happen!) e) Step back, and sit down, evaluate if you are letting "emotion" cloud your business sense right now. Assess if you are "paying too much" in the light of this appraisal development! As badly as you want this right now, it's nearly impossible to think in the big picture. As a real life example, my current home was a negotiating nightmare. The seller had it on the market overpriced by about $140K. It sat for 1 1/2 years in a "hot market". The listing agent did not present or market the property well. In the end, I made an offer I KNEW the seller would reject, but just enough to entice a counter offer. They did, and we went back and forth. We haggled over everything, and as a brutal example, I thought I was going to get into a fist fight with the seller's son at the closing! After we signed the PS&A, they tried to get out of the agreement, and I threatened legal action against them. And it was scary negotiating, my wife REALLY wanted this "home", and we had already had a hard date for moving out of our previous property, so if the deal had fallen through we would have been without any place to live (with a newborn baby I might add!). But, the moral of the story is that I got my home at about 20% below market value. So, you can do it too! Gear up! Get the "killer instinct", and realize the strong position you're in right now! Last, if this deal doesn't happen, accept that it wasn't meant to be, and something even better will come along. Keep your eye on the big goals of what is best for your life! Sorry about the lengthy read here..........
Bizwiz, have I told you lately you are awesome? I'm sure you already know that lol. I have been reading and re-reading your post. And applying your words to our situation. I am incredibly lucky to have found this board and to receive the information I have received. Hubby and I had a very long talk about this current development, actually we have done nothing but obsess about it but thats besides the point. We came to the agreement that if the appraisal comes low and the sellers were unwilling to negotiate then we would simply walk away. That was hard for us but we will not spend every dime we have to go upside down into a property. I had sent an email to the lender last night asking that the appraisal be completed because: a) we would be in breach of our contract if it is not done and .... b) we felt like the appraiser was not going to be able to give an informed valuation if he has no comps to go by and has not physically viewed the property. It will be our luck now to have a pissed off appraiser who is steamed that we didn't follow his original recommendation to not complete the appraisal and is forcing him to drive to the boonies and look at the property. Lol. That being said I think we know our "Exit criteria". Unwillingness on the part of the seller to work with the appraisal amount = find another buyer. I received a call from the realtor this am. He says he has contacted the seller and informed him that there is a possibility that the appraisal may come in low. The seller states he will work with us on whatever the appraisal price turns out to be. So that is good news. They want to sell, we want to buy. But at what price? That is the question. Nothing has been stated so far as to having a second appraisal done. It appears the seller is open to work with whatever amount is deemed with the current appraiser. One thing I am not sure of with FHA loans. If an appraisal comes in at 80K for example, what would be the max the lender will loan on that? Is there a % of leeway? This could make a big difference in how we are going to be able to negotiate. My guess is we get the true appraisal amount and restart negotiations from there. Hopefully the seller's willingness to work with the appraisal price will eliminate the need for some of the hardball recommendations you gave me. I did ask the realtor this am how they came up with the asking price. The realtor stated that it was the amount the seller came up with based on what he originally paid for the property and the improvments made (remodeling and shop addition). So now we are awaiting the appraisal amount to come in and how to compromise on that. I am not wanting to delete my savings on down payment and closing costs. I am not fond of coolers and hotplates. Plus I need a portion of my savings to pay an extra month of rent here and pay for moving costs and utility transfers. I have 900 in so far. I get the feeling the sellers are tight on funds and won't be able/willing to produce appliances for the home. My guess at this point is to get the appraised price and then work out with that amount what we can cover and what the sellers can cover. An updated GFE I see would be in order to break down the costs. I anticipate hopefully to make an offer below the appraisal amount to compensate and allow seller down payment assistance with a compromise of more closing costs covered by us. The original contract was 85K offer 88.4 proposed with the seller down payment assistance (the down pay was 3.4K)and seller contribution of 2K on closing costs. This proposal was going to give us an actual credit back at closing. I am hopeful to get this done with no more than 600-1000 on our part (in excess of the 900 already paid) and have cheaper payments to boot. And keep the original closing date. I just don't know if a total of 1500-2000 on our part will be enough. Am I insane? I wonder if I am being unrealistic here. Thank you! Tegleg
Good work Teg, So far you're doing all the right things, it's great that you and huby had the talk about "exit criteria", it's tough, but it is the best thing! You're biggest objective right now is to find out the lending criteria from your lender, i.e. how much Loan To Value ratio they'll work with, that will determine evrything. As for the appraiser, he's just being lazy in my opinion! Too bad that he has to drive to the property! Appraisers like to be able to complete an appraisal in 3-4 hours, works out to a great hourly rate for them. I can't believe he even suggested dropping the appraisal, did he suggest dropping his fee also? As a note, my suggestion regarding the appliance implied that the sellers could finance the purchase, they could do a Home Depot 0% finance for 12 months. I suggest that you go to the Town/City Hall where this property is, and look up the sales price for the property. This information is a public record and easily available. You can also probably look it up on line with your county records, if you know the sellers' names. Then you can also look up what they posted for the building permit to build the shop. As a business note, it doesn't matter "what he paid, and has into the property", the only thing that matters is "what a buyer is willing to pay". The two have nothing to do with each other. If the sellers made a "bad purchase" on this property, that's no reason for you to make up for their mistake, period! But, the good news is they're willing to work. See, you've found the first "chink in their armor"! Hold off the tactic of the agent and his commission until the appraisal comes in. Don't play all of your cards right now! If money is that tight for both you and the seller, perhaps a way to help both is for you and your husband to "rent" the property for the time until the closing. This saves you the extra rent, and the "rent" gets something into the pocket of the seller. Two months of rent might be a wash to you, but may help take the edge off the seller's sting. Just an idea.....