Bank of America offering up to $30,000 for short sales

Bank of America offering up to $30,000 for short sales - May. 15, 2012

WHAT MAKES AN OFFER MORE ATTRACTIVE THAN OTHERS

Some things are out of the buyers control.  A 100% cash offer at the asking price is always the most attractive offer to a seller.  If there is none, then the next best thing is whichever offer has the highest down payment.  This is where the problem lies for a buyer that is only able to make a very small down payment.  In a hot market where there are multiple offers, you will run into trouble and have a hard time finding a seller that will accept your offer if you are making a low down payment.  A FHA loan with the minimum 3.5% would be a prime example.

The reason a low down payment is less attractive than a higher down payment is because with a low down payment the seller sees more potential for complications and because that’s just the best way to pick the most attractive offer if they are receiving the same asking price from a few different buyers.  There are other factors of course but money is always the main one.

One thing that might come up is the loan to value that a lender is willing to lend and the buyer will have to make up for the rest.  With that in mind, a higher down payment gives the buyer more wiggle room.

If you are in a slow market or neighborhood then it is no big deal having a low down payment because the seller will have no other choice.  Your offer is probably the only one that has been made on the home so they will just have to accept your offer either way and take their chances.

This really goes back to clients that ask me how much down payment they should make.  There really is no definite answer and the best way to approach it is the higher the better because it makes your offer that much more attractive and you will have a lower mortgage payment.

Rude awakening

Bidding Wars Catch Buyers Off-Guard

DAILY REAL ESTATE NEWS | MONDAY, APRIL 30, 2012

Home buyers are unexpectedly finding more competition this spring in landing their dream home. Bidding wars are increasingly being reported in markets across the country, from California to Florida, The Wall Street Journal reports. 

"It's a little surprising because we thought bidding wars were done with," Andy Aley, a home shopper in Seattle, told The Wall Street Journal. Aley says he was outbid on a home earlier this year, even though he offered to pay $23,000 above the listing price and also waive inspections and other closing conditions.

Home buyers are frustrated and caught off-guard about the bidding wars re-emerging, real estate professionals report. 

"We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," Glenn Kelman, chief executive of Redfin Corp., told The Wall Street Journal.

Why are things getting so competitive? Many housing markets are seeing a drastic decrease in the number of homes listed for-sale, leaving home buyers with fewer options and more bidding on the same house. Housing analysts say the shortage in supply is from sellers unwilling to take much less for their home than what they originally paid for it and pulling their homes off the market. Also, a surge in investors has made the market more competitive, as investors snatch up homes in bulk in all-cash deals. 

“The bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump,” The Wall Street Journal reports.

Indeed, the National Association of REALOTRS® reported late last week that pending home sales in March reached their highest level in nearly two years and are up 12.8 percent from a year ago.

Source: “Stunned Home Buyers Find the Bidding Wars Are Back,” The Wall Street Journal (April 27, 2012)