Best and final: which offer to take?

[ssmjlm]

We had a terrible experience with a VA buyer who was 100% financing. In the end, it was a bad deal for the buyer because they have no wiggle room. It was obvious she was young and dumb and as PP said above, wanted ALL THE THINGS during inspection, even things that made nose sense from a code standpoint and the age of the house.

[Susie]

purplinsky, some of the "angst" (lol) at these buyers is related to things so far unsaid.  They and their agent have done a variety of sketchy things aside from this appraisal contingency that have really given off an ick vibe.

These buyers made an offer on day 1 of showings of $330k with an escalation clause to $350k.  We were clear from the very beginning that we weren't going to entertain any offers until the end of day 2 of showings, and we weren't going to cancel any showings on that first weekend.  Nonetheless, their agent HOUNDED our agent all weekend to accept this offer and call off showings.  He had that escalation clause in there for CYA but really didn't want it to get exercised!  And he was super unprofessional in the degree to which he would not take no for an answer.  She didn't mention this to us until later.

After we accepted, he sent his buyers to our agent's HOUSE to deliver the earnest money.  He didn't do it himself, and he didn't have them take it to her office.  He sent these randoms to her house, without checking with her first, and without knowing or being friends/familiar with her.  Who does that?

Then the appraisal contingency that they're trying to insert is just one of a few... there was another whole clause about permits, COs, etc. etc.  Lol.  We are not the original owners.  Any brief perusal of the disclosures would indicate that (because we provided a copy we had of the previous owners' new roof just before we bought).  There have been no changes to CO status during our ownership.  We included a copy of the fence permit with the disclosures.  Back off.

Then they scheduled their inspection for the middle of a Saturday afternoon, so we have to clear our kids and pets out at nap time, when standard around here is to do it on a weekday, and not be a pest.

It's just been one thing after another, some big, some little.  So yeah, we are annoyed.  

On the appraisal in particular, in the current local market, buyers are expected to cover any gap between appraisal and contract price.  It's just how it is, everyone agrees.  We're covering a $15k appraisal gap on our purchase, because if we don't, they'll sell it to someone who will.  In that context, it's not insane to expect our buyers to follow convention, and it's not insane to be uninterested in covering the gaps on both our purchase and sale.

As I said above, I expect we're likely to actually come away from this with only $335k-340k anyway, and not the $350k that three separate parties offered us, because I know you can't get blood from a stone, and none of our buyers are particularly equipped to cover the gap.  It sucks to be in a market where "buyer covers" is the expectation, you're being held to that expectation as a buyer, but then your buyer is short.  However, my willingness to work with a buyer on that only goes as far as I feel like they're willing to work with us.  These buyers don't even want to commit to good faith negotiation should the issue arise.  That's where the breakdown is.  They wanted a clause to walk if the property doesn't appraise for $345k (which it won't).  Lol.  Why would I accept that?  We all know that contract is not worth wasting weeks in escrow on.  

Even their desired terms:

"In the event the appraisal is below $345,000.00 and the parties cannot agree on a reduced Purchase Price, Purchasers reserve the right to cancel the contract."

don't require good faith.  If the appraisal comes in <$345k (which again, it probably will), they can simply refuse to budge a dime.  We're weeks down the road, probably own two houses by then, and have no cooperation from them whatsoever.  Why would I accept that approach over another offer?

Finally, as for the appraisal itself, it might be the ideal for appraisers to be uninfluenced by buyers or sellers, but my experience so far is that this isn't the case.  I posted about the appraisal gap issue on our purchase on MM, and at least one agent there said that she shows up to the appraisal with suggested desired comps in hand when there's a potential issue, in an effort to encourage a higher appraisal.  It's totally conceivable that low comps could be provided in the same way here, to our buyer's benefit.  When our appraisal came in low, we discussed with our agent, who supplied us with at least one comp to consider using if we chose to appeal.  So I am not persuaded that an appraisal by the buyer's lender would be completely neutral.

[amandakisser]

Apr 26, 2021 12:25:32 GMT -5 origami said:

Apr 26, 2021 11:09:20 GMT -5 amandakisser said:

However, it is a STRONG seller's market right now and that means if buyer 5 can't/won't come up with the additional $5k to bridge the appraisal gap...someone else will. 

Do you think one of those other 4 buyers has the cash to do better than an appraisal + $5K though? I don't b/c I'm assuming they'd have made a better down payment if they had that kind of cash, or they'd have said that in their original offer. 

If there was a buyer 6 with a mountain of cash this would be a no brainer, but I can see why Susie is really thinking through the pros/cons of every buyer. It's not cut and dry when you don't have a bid from Scrooge McDuck and his pool of gold coins

Oh no, sorry, I was speaking in more general terms. 

I do agree with you purplinsky , regarding the angst about buyer 5 walking away - I don't blame them for doing that. If they didn't waive the right to appraisal contingency in their contract that is (I can't remember if that was one of the contingencies and I am honestly too lazy right now to go back and check lol).

ETA: ok, just read Susie's last post. Yikes! I'd be angry at them as well - especially seeing the shit their agent has pulled already!

[TR]

If the buyer didn't want to have to cover more than $5k over what they expect to be a lower appraisal, then they shouldn't have bid so high. It's disingenuous to bid high to try and win a bidding war when you know good and well the appraisal might be iffy and you can't cover your ass. No one MADE these people bid $350k.

[redheadk]

Susie, We dealt with a PITA buyer when we sold our last home. NEVER again. I know it's a business transaction but I have no interest in dealing with shady assholes in a sellers market. The odds of the rest of this process going smoothly are basically nil.

[Susie]

Apr 26, 2021 14:05:22 GMT -5 TR said:

If the buyer didn't want to have to cover more than $5k over what they expect to be a lower appraisal, then they shouldn't have bid so high. It's disingenuous to bid high to try and win a bidding war when you know good and well the appraisal might be iffy and you can't cover your ass. No one MADE these people bid $350k.

EXACTLY.

[hbomdiggity]

I’d be really tempted to move on. I’m confused (as in I’ve never sold in a state that does it this way) by this attorney review process but it sounds like you haven’t come to terms... so there is no contract.

While the end result may be the same because none of the offers have piles of cash, I’d rather deal with rational people who negotiate in good faith. I thought the aggressive bid was a positive as they really wanted the house and do anything to get it, but that seems not the case. It’s a business transaction but these assholes are costing you time. (Although maybe the condo selling people made a profit?)

[aspentosh]

Apr 26, 2021 14:05:22 GMT -5 TR said:

If the buyer didn't want to have to cover more than $5k over what they expect to be a lower appraisal, then they shouldn't have bid so high. It's disingenuous to bid high to try and win a bidding war when you know good and well the appraisal might be iffy and you can't cover your ass. No one MADE these people bid $350k.

I think this is ultimately what gets me. Why did they settle on an escalation clause of $350k when it wasn't what they were comfortable with? I'd assume their agent (who seems like a PITA) educated them on comps and what could be expected from other offers. I highly doubt they just plucked that number from thin air. And that is mirrored in the other offers Susie got.

[Susie]

I think we’re at that break point. We told them (third time now) that the appraisal contingency wasn’t acceptable, and we wanted an answer by today as to whether they were striking it or canceling the contract, so we could move on to other buyers in the latter case. So far, radio silence, and it’s 5pm. Our agent just reached out to theirs (again) for an answer. It’s looking more and more like we’re going to cancel the contract with them in the morning.

Not only did they offer $330k with escalation to $350k last Sat, but then they offered $350k straight up when we asked all buyers to submit best & final last Mon. So they had several days to think about that number in that time, and still offered it.

ETA: omg, this is absurd. Their agent is now proposing we extend attorney review to next Monday, do the inspection on Sat, and order a rush appraisal, and see where we net out. This is a fishing expedition for reasons to lower the price, and is 98% likely to result in his clients wasting $1k between paying for inspection and appraisal, us wasting a week in a contract we’re going to cancel, and the deal falling through next week instead of now. What an idiot. Not that this is my concern, but never in a million years would I pay for those services as a buyer before clearing attorney review, or advise that a client do that. No. We are moving on.

[icedcoffee]

That’s insane. At first I was team purplinsky that the seller needs to meet in the middle with the buyer if it doesn’t appraise but the more I think about it I don’t agree in this situation. It’s one thing if they offer list price and it doesn’t appraise but these people knowingly offered more than they thought the house was worth and are now rescinding. I’d walk.

[ellipses84]

Just catching up on this crazy situation. It’s hard to tell if the buyers are being unreasonable or they are following their overly aggressive, shady realtor’s poor advice, or both. If I’d seen your OP right away my answer was going to be “the offer with buyers that seem like they’ll be the least PITAs.” As awful as it is to be a buyer in a sellers market, I had a worse experience as the seller and your story is giving me flashbacks.

I will say, don’t entirely discount the VA financing. They may not be offering a lot down because they don’t have to and they want to be able to close an appraisal gap or have money leftover for other things for the house. Your house should have no issue meeting their VA requirements. Also, for all of the potential buyers, there are ways to come up with the appraisal gap they may not consider right away, like taking out a 401k (some allow no penalty or a loan for buying a home).

[Susie]

Because I know everyone is waiting with baited breath for the resolution of this saga, lol...

We've cancelled with Buyer 5 as of this morning, and our agent reached out to the agents on the other 4 offers from last week.  3 are still interested (buyer 4 has gone under contract on another property):

Buyer 1: $350k
* $5k earnest money
* prequalified to borrow $315,000 on a home with $350,000 purchase price (putting 10% down)
* mortgage contingency for $315,000, conventional funding
* financing is contingent on sale of their condo, scheduled for 5/21, supposedly through inspection & appraisal.  
* Originally asked for 5/28 closing with us.

Buyer 2: $350k
* $10k earnest money
* preapproved for $350k 100% financing VA loan
* no mortgage amount listed in contingency. 
* Originally suggested 5/31 closing with us, but expressed flexibility.  They rent a duplex in walking distance of our house.

Buyer 3: $335k
* $5k earnest money
* no prequal. or preapproval provided.
* mortgage contingency amount: $301,500 (putting 5% down), conventional funding

Obviously buyers 1/2 are the ones in the running.  A lot will depend on whether Buyer 1 can work with us on closing date, we are looking for late June.  We had 6/25 with our original buyers, and that was great.  We also want to be sure their condo sale is on track.  If any of that is a no, we will go with Buyer 2.  They are more likely to need a seller's concession to get it over the finish line, but at least we have a better feeling about them, and our agent has worked with theirs before.

[TR]

I'm glad you canceled with the previous buyers, they were a pain in the ass and they're realtor sounded terrible.

Honestly, I think Buyer 2 sounds slightly more attractive. The fact that they're doing 100% financing doesn't mean they don't HAVE cash, they may just be taking advantage of low interest rates. The fact that they're currently renting and can be flexible with closing sound good to me.

[thejackpot]

I think Buyer 2 is the best case. I would not want to deal with the condo sale contingency. Also the flexibility on the closing would be helpful. I agree with PP that full financing doesn't mean cash is not available. The interest rate is so great that keeping your cash is not a bad thing. Good luck.

[dcn]

Yeah I’d actually go with #2. N of 1 and all but we are under contract with a va loan bc the interest rate was lower than a conventional. We have cash to put down but aren’t bc we don’t have to.

I hope one of them works out!

[KellyEasterbrook]

Oh wow, what a nightmare. Just wanted to +1 on VA Loan financing. We bought our current house in a sellers market in 2019 with a VA Loan and 0 down specifically so we’d have cash on hand in case it didn’t appraise high enough (turned out the house appraisal was fine). Per our agents recommendation, we didn’t tell the sellers we had that cash on hand for that purpose. Good luck!!

[boiler717]

I would also do Buyer 2. Buyer 1 sounds tight, and Buyer 2 has more earnest money and is likely approved for more than the preapproval indicated. Can you do some recon on Buyer 2? Our realtor was first skeptical of a 100% VA loan, but it was clear they were very well qualified after speaking with their loan officer.

[Susie]

Buyer 1's agent "thinks" they'd be fine with pushing to 6/25 to close.  Buyer 2 says her buyers are excited, want to see the house again.  We've offered them Thurs. to see it, which gives us a night or two to clean.  In any event we're going to be in limbo for a few more days before any decision is made.  I'm honestly not sure which way it'll go.

I know this is rich after only one weekend of showings, but I'm so mentally exhausted after getting the house perfect 2 weeks in a row for photos and then showings, with my kids destroying it in the days after each effort.  It's just so hard with everyone home all the time. 

I told our agent that as between these two buyers, my #1 priority at this point is whatever her 6th sense can tell us about drama.  We need a no drama buyer who knows what they want.  I do not want to do this again.

[hbomdiggity]

Don’t fret too much about cleaning the house for #2. They are excited. Weren’t they super bummed they lost your neighbors but then liked yours more? It’s prob been an emotional ride for them as well. It’s kind of a 180, but I may lean towards them as well. The larger earnest may be the signal they have some cash. Sometimes what looks the best on paper isn’t necessarily the right choice.

[origami]

Fingers crossed you get drama-free buyers shortly!

I love that you were like BYEEEEEE to buyer 5.

[lo]

Ok I’m curious if you know how your original buyers took the news?? And their shady realtor?

We bought and sold 2 years ago (from a neighbor with no realtor, NEVER AGAIN) and as my corny dad joking husband says, “my next home will be the nursing home.”

[Susie]

Apr 27, 2021 15:55:08 GMT -5 lo said:

Ok I’m curious if you know how your original buyers took the news?? And their shady realtor?

We bought and sold 2 years ago (from a neighbor with no realtor, NEVER AGAIN) and as my corny dad joking husband says, “my next home will be the nursing home.”

I don't know... and I wish I could've been a fly on that wall!  From what I understand it's really unusual for sellers to cancel the contract, usually it's buyers.  

Our agent thinks their agent was shady, but that the buyers were the underlying pain.  Either way, as much as limbo sucks, I'm glad to be free of dealing with all of them.  FX this next round works out better.

[jwright]

I’m angry on your behalf at the original buyers. They offered $350k but clearly had no intention of paying that much. Or at the very least were trying everything possible to not have to pay the amount they offered. Good for you for canceling on them!

[Pilsy]

I think it's good you moved on, in part because nobody needs extra stress! And I don't blame you for feeling the way you did about all the back and forth, because home sales/purchases are stressful, and you are sort of doubly exposed to any hassles because you're acting as your own counsel (I think...maybe I imagined that).

I'm sure this is an UO, but appraisals very often land at the purchase price, so I don't think the original buyers were necessarily being shady. Their RE sounds like a piece of work, and they may have been pains in the ass in their own right, but I don't agree with everyone who thinks they never had any intention of paying $350K. I think they didn't have a lot of cash to bring to the table and were counting on the appraisal being high enough to get them the mortgage they needed, and they needed to protect themselves in the event that didn't come to fruition. Just my opinion, and maybe I am being too forgiving. Regardless, good riddance to unnecessary drama, stress, etc.

I hope this next buyer is The One!! Fingers crossed.

[libbygrl109]

I’m glad you moved on from the first buyers and am hoping you have a drama-free experience from here on out.

[heygrey]

So much drama! You made the right choice cancelling with #5. It would be a long, long 2 months dealing with them.

I wouldn't write off the VA loan. Can you ask for confirmation of financing that they are eligible to borrow $350k? When we bought in the fall, the sellers accepted 2 offers prior to accepting ours and both fell through related to financing. When we tried a 3rd time, they asked for proof of financing before accepting our offer. I got a letter from our mortgage broker saying that we were pre-approved and could secure a loan for the offer submitted.

[Susie]

Apr 27, 2021 22:33:21 GMT -5 heygrey said:

So much drama! You made the right choice cancelling with #5. It would be a long, long 2 months dealing with them.

I wouldn't write off the VA loan. Can you ask for confirmation of financing that they are eligible to borrow $350k? When we bought in the fall, the sellers accepted 2 offers prior to accepting ours and both fell through related to financing. When we tried a 3rd time, they asked for proof of financing before accepting our offer. I got a letter from our mortgage broker saying that we were pre-approved and could secure a loan for the offer submitted.

Oof, the idea of 3 tries is exhausting!  I'm tired on #2.

We already have a copy of their preapproval letter, and it looks good - preapproved for $350k through USAA, with a date in the last month.  They included it with their offer last week.  My worry about their financing isn't so much about THEM as the appraisal, since they can only borrow 100% of appraised value.  If that's lower than contract price, it creates a gap that many buyers can't/didn't plan to bridge.  

[ellipses84]

Apr 28, 2021 8:52:12 GMT -5 Susie said:

Apr 27, 2021 22:33:21 GMT -5 heygrey said:

So much drama! You made the right choice cancelling with #5. It would be a long, long 2 months dealing with them.

I wouldn't write off the VA loan. Can you ask for confirmation of financing that they are eligible to borrow $350k? When we bought in the fall, the sellers accepted 2 offers prior to accepting ours and both fell through related to financing. When we tried a 3rd time, they asked for proof of financing before accepting our offer. I got a letter from our mortgage broker saying that we were pre-approved and could secure a loan for the offer submitted.

Oof, the idea of 3 tries is exhausting!  I'm tired on #2.

We already have a copy of their preapproval letter, and it looks good - preapproved for $350k through USAA, with a date in the last month.  They included it with their offer last week.  My worry about their financing isn't so much about THEM as the appraisal, since they can only borrow 100% of appraised value.  If that's lower than contract price, it creates a gap that many buyers can't/didn't plan to bridge.  

I’ve been a VA buyer and our Realtor and Lender both warned us of the appraisal as a big hurdle for a VA loan in a competitive market. We made sure to have money beyond the earnest money to help bridge the gap. Their earnest money is a lot for where I live for a VA loan but may be the norm where you are. Can that be used to close the gap? Say the appraisal comes back at $235k, they get a loan for $235k, plus the $10k earnest money gets them to $245k. That leaves a $5k gap which most people could meet, or you split it with them and agree on $247, 500 price which will still put you ahead by having the house sold and not having to risk this process again or paying more months of mortgage payments. I’d even say $5k would be worth it to get the house sold and be done with the hassle.

We sold our old house but I spoke with a lender a few months ago and she said we may not need to /want to use a VA loan next time we buy. We decided not to buy yet, so we didn’t get into what our other loan options are, or if her reasoning had more to do with us wanting a fixer upper, interest rates, etc.

[Susie]

Apr 28, 2021 12:08:23 GMT -5 ellipses84 said:

Apr 28, 2021 8:52:12 GMT -5 Susie said:

Oof, the idea of 3 tries is exhausting!  I'm tired on #2.

We already have a copy of their preapproval letter, and it looks good - preapproved for $350k through USAA, with a date in the last month.  They included it with their offer last week.  My worry about their financing isn't so much about THEM as the appraisal, since they can only borrow 100% of appraised value.  If that's lower than contract price, it creates a gap that many buyers can't/didn't plan to bridge.  

I’ve been a VA buyer and our Realtor and Lender both warned us of the appraisal as a big hurdle for a VA loan in a competitive market. We made sure to have money beyond the earnest money to help bridge the gap. Their earnest money is a lot for where I live for a VA loan but may be the norm where you are. Can that be used to close the gap? Say the appraisal comes back at $235k, they get a loan for $235k, plus the $10k earnest money gets them to $245k. That leaves a $5k gap which most people could meet, or you split it with them and agree on $247, 500 price which will still put you ahead by having the house sold and not having to risk this process again or paying more months of mortgage payments. I’d even say $5k would be worth it to get the house sold and be done with the hassle.

Yes, $10k is a lot in earnest money around here.  All the other buyers were in the $3-5k range, and we put down $5k on our purchase.  I didn't ask questions (I just wrote a check for what my agent told me to write, lol) but I deduce that it's normal and $10k is a strong outlier.  In theory you're right, the large deposit does help, but one question we have is whether they were planning to roll closing costs.  If so, closing costs will probably eat up all of the $10k and then some below the appraisal ceiling, so we're back to square one unless they plan to pay for that separately.  We did ask via our agent about that, but I don't think we got a clear answer.

[Susie]

OMG.  I cannot make this up.

Our agent just texted.  The buyers (#2) who were supposed to come see the house for a 2nd showing tomorrow AM, have asked if they could push their showing to Monday.  One of the couple was just admitted to the hospital, and they expect s/he'll be in through the weekend.  Some kind of abdominal issue.  But they don't want to miss out.

So they want us, after a week in a failed contract to sell, and with a pending purchase contract, to spend a week in limbo waiting for them to do a 2nd showing, so they can decide 100% whether to keep their offer in?  It is 100% understandable why they would hope for that, but this seems unreasonable to me.  They both saw the house 10 days ago. 

Why did no one prepare me for this absolute hellscape that is home selling?!