OMG I just want to buy a freaking house!

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Submitted by bookczar on October 22, 2009 - 10:55pm

Folks, I'm just having a really tough time buying a house in San Diego. Just about everything that we come across is a short sale or it's bank owned, or the seller will only take cash.

We've been trying since December to make something happen and it's just a big black hole when it comes to getting our offers accepted. Honestly, I'm beginning to think that nobody in this town will accept a VA loan offer. Our offers are serious, over list and at the top end of the comps in the areas we wish to buy in but still no luck.

Any advice out there for well qualified buyers with a loan backed by the VA that just wants to buy a place to live in this town? Seriously, what's it going to take besides a mattress full of cash to buy a house?

Submitted by an on October 22, 2009 - 11:20pm.

This is the same story I hear from people who are actively looking right now too. Good luck to you.

Submitted by analyst on October 23, 2009 - 12:00am.

For eligible borrowers, the VA loan is the very best loan to have. From the seller's point of view, it is the worst kind of loan.

The VA prohibits the borrower from paying several kinds of fees that are commonly charged to buyers. The seller must pay these, or convince people not to charge them, an undesirable complication.

The VA requires an inspection by a VA-specified inspector. The seller may be required to remedy certain conditions which would not become issues with other types of loans. As much trouble as it is, the VA inspection is not sufficiently detailed to be the only inspection. You should still engage an inspector working for you to give the house an exhaustive examination.

In a competitive situation, the VA loan will be the first one eliminated from consideration (unless you happen to be dealing with a seller who is also a veteran and feels affluent enough to give a fellow veteran a break).

Calculate whether you can tolerate an FHA loan with the 3.5% down payment, taking into account the federal tax credit, if eligible. If it doesn't work today, listen for the announcement of a larger tax credit, with relaxed eligibility requirements.

Submitted by greekfire on October 23, 2009 - 12:31am.

Hehe. Let not your heart be troubled. We are going through the exact same thing. The best word I can use to describe it is "shenanigans". Isn't it ironic that just a few years ago the banks were tripping over one another to over-leverage and loan money willy-nilly to anyone with a heartbeat? Fast forward to today - the banks have received their bailout funds to cover previous mistakes; yet they won't loan it to anybody unless they fall into their Dixie-cup criteria.

There was a time when this Dixie-cup criteria was the norm, and I understand the reasoning for it. We've grown so accustomed to easy credit over the years that we don't know which way is up or down.

My advice is to bear down, stay the course, and be patient. If you have an uptick in income or assets and can afford to put it down long on a property, then go for it. We could be in for another 1979-1980 style correction that brings rapid interest rate increases which will reduce home prices, rampant inflation might occur, or perhaps something in between will take place.

Stay liquid my friend.

Submitted by bill@yourfhaguru.com on October 23, 2009 - 1:35am.

VA loans are best for the buyer but It is difficult for VA buyers to get their offers accepted for several reasons.

It costs the seller more to accept a VA offer because the seller must pay the lender and escrow fees the VA buyer is not allowed to pay which amounts to about $2,700 on a $300,000 purchase. The actual amount will vary with the price.

Many sellers are concerned the VA Lender will require repairs that a conventional lender would not ask which is not necessarily true.

Many Sellers mistakenly think a buyer with a downpayment is the stronger buyer. The reality is that VA "qualified" buyers have a better chance of closing because conventional underwriting guidelines are much more stringent than VA or even FHA.

So, what to do?

You stand a much better chance with properties that are not bank owned but bear in mind when you are negotiating price the seller must pay more costs than other types of financing so structure your offer accordingly..

You should be working with a real estate agent VA experienced and your agent must have your formal VA loan approval to present with your offer.

Finally yet importantly, have patience, the prize is worth the fight.

Submitted by scaredyclassic on October 23, 2009 - 7:41am.

you will own a house within the next 365 days.

Submitted by recordsclerk on October 23, 2009 - 8:48am.

Save more money and make a strong offer. Ask for the minimun closing cost that VA allows. Remember that no matter how much you offer on the home it has to appraise for that amount, so over bidding does not help the deal. Show that you are willing to take the home as is, unless VA requires additional repairs.

Submitted by NotCranky on October 23, 2009 - 9:21am.

Go buy a house that other people don't want. There are lots of them.

Submitted by Arraya on October 23, 2009 - 9:29am.

Just about everything that we come across is a short sale or it's bank owned, or the seller will only take cash.

http://market-ticker.denninger.net/archi...
I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include a financing requirement are being sold instead to people with actual cash at radical reductions from that price. This implies that these financing contingencies are regarded as not only potentially no good but factually no good, as if the banks know for a fact that the credit pipeline will (not might), within weeks or months (in the time required to close), disappear. There is no other rational explanation for this behavior.

Submitted by bill@yourfhaguru.com on October 23, 2009 - 9:50am.

Russell gave you good advice "buy a home that nobody else wants"

You cannot buy that home with VA financing because VA requires the repairs completed prior to close.

You can purchase it with a FHA 203K rehabilitation loan. One loan finances the purchase and the repairs or upgrades. The only downside for you is that the 203K requires a 3.5% Downpayment.

Submitted by NotCranky on October 23, 2009 - 9:52am.

Arraya wrote:
Just about everything that we come across is a short sale or it's bank owned, or the seller will only take cash.

http://market-ticker.denninger.net/archi...
I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include a financing requirement are being sold instead to people with actual cash at radical reductions from that price. This implies that these financing contingencies are regarded as not only potentially no good but factually no good, as if the banks know for a fact that the credit pipeline will (not might), within weeks or months (in the time required to close), disappear. There is no other rational explanation for this behavior.

I didn't read your link so I don't know if this is mentioned, but some listing agents have been concerned about taking offers,especially on potentially long lender approval or long escrow type deals, that are officially or unofficially contingent on the tax credit. These would obviously be some distressed properties.Dan, sdr and SDR could say more on the extent of this.

Submitted by an on October 23, 2009 - 10:01am.

Russell wrote:
Go buy a house that other people don't want. There are lots of them.

The houses that people don't want are usually overpriced ones. It doesn't matter how crappy it is, if you priced it under its market value, it'll get multiple offers.

Submitted by NotCranky on October 23, 2009 - 10:38am.

So you BID UP the underpriced ones with tons of competition and don't get it anyway, or you try to make a deal if the price is too high against no competition at all? I think the listing side might try to get that VA offer through a little harder too. Not gonna argue with you too much even though my style has given me plenty of case study support. I am taking the OP literally. Does he want to get in escrow or not? I bet he is not as motivated as "I just want to buy a freaking house" would lead one to believe,if he is, someone could help him and get him a good deal.

Submitted by an on October 23, 2009 - 10:51am.

Russell, agree with you on that point. I guess beggar can't be chooser. If he really want to buy a house, he can always put an offer on a house no one want, like you said. You gotta do what you gotta do.

Submitted by fun4vnay2 on October 23, 2009 - 11:25am.

Guys,
I am not so desperate to buy a house but if someone wants to buy a house in this market in san diego, there are absolutely no choices and this is happening in late fall.
Not sure, how can we say that prices are/would go down.

It looks like the prices have bottomed here n are only posed to go up.
But again with so many people losing jobs, how is it possible though it is happening/price rise for sure

Submitted by NotCranky on October 23, 2009 - 1:59pm.

AN wrote:
Russell, agree with you on that point. I guess beggar can't be chooser. If he really want to buy a house, he can always put an offer on a house no one want, like you said. You gotta do what you gotta do.

I don't consider applying the strategy of going after what other people don't want as begging. I seems that those competing with everyone and his brother are more the beggars , even if they are paying cash. Like you said though, you gotta do what you gotta do.

Submitted by CricketOnTheHearth on October 23, 2009 - 2:11pm.

dd123--

It doesn't make sense that prices have bottomed; either decent houses are priced out of reach of most normal incomes, or houses that are priced within normal incomes are scarce on the ground 'cause the "cash investors" got them all.

I think the main reasons prices aren't going lower is just that the system is locked up. Few people are selling at any reasonable price because most people are underwater in their houses. Few can afford to buy at the price most people need to stay above water, so sales (of higher-priced dwellings) are moribund.

The only thing that would spring these underwater houses loose into the market is (1) mortgage cramdowns for the borrowers, so they could sell at a lower price, or (2) if they are delinquent they are foreclosed upon and the house is then sold for whatever the market will pay for it. Banks/Congress/State Assembly/county dogcatcher have taken every superhuman effort possible to prevent either (1) or (2) so we are in lockup. This is NOT the same as a normal "bottom".

There are huge downward pressures on housing prices in the fundamentals arena (incomes, unemployment, NODs, unlisted deliquencies, etc) so I don't think this is a stable situation either. The Fed and Treasury can blow only so much money at the situation then something's gotta give.

I know it is wicked frustrating; I myself have chronic neck cramps from the frustration. But my gut says, "not now".

Arraya, thanks for the heads-up, I sent it to my friend who is a small business owner and has already seen his line of credit cut. Gives validation to my gut, too.

Submitted by jpinpb on October 23, 2009 - 2:30pm.

Somewhat OT - I know a small law firm - lawyers been in practice for at least 16 years. They lost their credit line. This is after getting a $12 million judgment. They are hunkering down and not spending.

I know many say we're at bottom and the only thing I can say is if we really are at bottom, we're going to be here for quite some time. I still say it's a false bottom. It is a manipulated and well-orchestrated bottom and I doubt sustainable, though everything will be done to try to maintain it.

Submitted by fun4vnay2 on October 23, 2009 - 3:14pm.

Thanks Cricketonthehearth,
Even my gut feeling says that the bottom is yet to come at the sametime don't underestimate the power of govt.
They can at least keep the housing prices stagflate for years to come .

Let's see, only time will come

Submitted by drboom on October 23, 2009 - 3:19pm.

No advice to offer, just an anecdote.

My wife and I closed on a short sale in July. Our offer wasn't the highest, but the higher offers were VA/FHA--and the seller was flat broke. Further, there was a ton of junk on the property accumulated during the seller's father's 50 year tenure, and all of the other buyers wanted said junk gone before closing. I knew we couldn't offer more, so I made disposal of the junk part of our offer.

11 Dumpster loads later, I think we're two thirds done getting rid of stuff (anyone want 20 pounds of canned spinach flakes dated 1973??). It has been an insane amount of work, and we're doing it on a shoestring.

The point is that I took a look at the whole situation and tailored our offer to give maximum benefit to the seller--she wasn't going to make any money, so any other benefits I could throw her way would help us quite a bit. The rest was up to the bank (short sale, remember), but that's a roll of the dice no matter what.

You have to make your offer stand out somehow, and that means you have to talk to the seller and pay attention to what they say. We made three offers during our house hunting. One house was snapped up by someone with more money than sense (cash offer almost 20% over highest "norrmal" offer); our other two offers were accepted, both on short sales. The first of those fell through when BofA decided to play hardball with the sellers, who sensibly walked away. It is still vacant 6 months later.

Submitted by sobmaz on October 23, 2009 - 3:28pm.

May I ask what price range you are looking?

Thanks

Submitted by Wickedheart on October 23, 2009 - 3:30pm.

Kelly Bennett saw your message:
http://tinyurl.com/yfttegg

Submitted by equalizer on October 23, 2009 - 3:57pm.

Wickedheart wrote:
Kelly Bennett saw your message:
http://tinyurl.com/yfttegg

Yahoo had Kelly's link for a minute on front page in local news section.

Submitted by SD Realtor on October 23, 2009 - 4:16pm.

I don't have anything more to add then what has already been discussed. I think Russ and Dr Boom made the best point. With regards to Dr Boom, you need to figure out a way to minimize the prejudice that accompanies any VA offers. VA offers are great deals. I had a listing in the spring and the buyer was VA and we sold it to them. It went off without a hitch. They overbid the other offers and we took it. As previously mentioned, the VA inspection, (which is also true for FHA) is such that any items flagged MUST be payed for by the seller. So maybe you figure out a way to overcome that, perhaps making sure that all these things are remedied prior to the inspection at your expense rather then the sellers. How you do that, well you need to be creative. You may have to extend yourself and there will be an element of trust...

As for the market conditions and market bottoms? No I don't see it being a bottom at all either. We have already bounced in many areas. Which is more frustrating, no jobs or no good deals on homes? It all sucks and is all manipulated. Yet it continues and will continue. For all those who wish for the tax credit to go away, it could very well be replaced by a bigger one!!! How f'd up would that be? Alternately there are some who predicted that the entire economy would be crashing around Halloween or so... maybe that will happen.

Finally in terms of sellers thinking that nobody will get residential loans anymore and dumping properties for well below list price for cash? Not so sure about that.

I have seen more then a few homes go for below list price because of cash deals but moreso because they will not get the loan due to damage, remediation or other items, not because the lender secretly thing the bottom is falling out of the residential loan industry.

I believe Obama will peel money out of his wallet personally to finance your home before he lets residential lending go belly up. So I don't see that as a concern.

We recently took a cash offer on one of our deals that was about 6% lower then the financed offers we had received but that was also accompanied by a 12 day escrow. We did it because of the rollover of putting that money into another opportunity, not because we felt the residential loan industry was kaput.

Try to keep the faith. Also as posted by others, work with a good VA guy hang in there.

Submitted by fredo4 on October 23, 2009 - 4:20pm.

I feel your pain. My advice would be to do what we did and find a really great rental house (perhaps in the area where you'd like to eventually buy) and hunker down for the next few months (or years)until things are less weird. The truth is that nobody knows how this is all going to pan out with all of the government intervention. Why fight over the few crummy houses available to buy? Wait until buying conditions are more in your favor. It's better to keep liquid in these uncertain times anyway.

Submitted by SD Realtor on October 23, 2009 - 4:40pm.

Definitely cannot argue with your advice Fredo.

Submitted by CocoaGoddess on October 23, 2009 - 10:37pm.

First post here. Yay!

I don't know where you're looking to buy, or what your price range is, but maybe you should look into buying a new build? That's what we ended up doing this year, we found a cheap townhouse in an area we are very happy in, and the builder was happy to accept FHA and VA.

A lot of other military families took the same route, as there are at least 7 other military family just in our little cluster of 12 townhouses.

Good luck to you! I have many friends who have been in the housing market game for at least a year, and have yet to have a single offer accepted--the rejection wears on you after awhile.

Submitted by bookczar on October 24, 2009 - 8:02am.

Thanks, Folks for all of your advice and comments. I have news on our situation...The house that we really wanted, a short sale that we placed an offer in April is now being finalized with the negotiator, so we may be closer than ever to getting this deal through. I'll beleive it when it happens. The timing of everything does seem controlled as many here have suggested.

Thanks again!

Submitted by davelj on October 24, 2009 - 8:43am.

jpinpb wrote:
Somewhat OT - I know a small law firm - lawyers been in practice for at least 16 years. They lost their credit line. This is after getting a $12 million judgment. They are hunkering down and not spending.

My bet is that this was an unsecured credit line. I'd be willing to bet that their bank gave them an unsecured credit line years back and when it came up for renewal the bank said, "Look, we'll keep the line in place but we need some collateral to back it." The law firm, offended, said, "No thanks," and they parted ways. (Also, it's often a huge hassle for partnerships - the firm is probably an LLC or PC - to post collateral due to complications it causes for each individual partner.)

I know a few very creditworthy individuals this has happened to in the last year. But, they posted some collateral and life goes on.

Any - I repeat ANY - borrower - commercial or individual - that has good credit and appropriate collateral can get a loan at a very low interest rate right now. The problem is that our idea of what's "normal" in terms of qualifications and collateral coverage has been warped over the last 15 years. Now, it's back to prudent underwriting. The problem is that too few folks remember or know what that entails. Now they're learning (or re-learning, as the case may be).

When the credit spiggot goes from Full Blast back to Normal, there's a lot of pain. As there should be.

Submitted by treehugger on October 24, 2009 - 9:25am.

I feel your pain, I have put in several offers and am at a loss. I am going conventional, due to all the issues with FHA etc. The competition is fierce for anything that is in a decent neighborhood and reasonably priced. The properties literally go in hours! Search that against anything overpriced, sits for months.

On the VA note, a friend of mine is a marine up on Pendleton, was having the same problem, no one would accept an offer with a VA loan. He ended up finding a retired marine, that was selling reasonable, guy gave him a good deal and accepted a VA loan, even though there were some hangups and variances with the appraisal. I guess it is true, once a marine always a marine....it was pretty cool to hear how some people still have ethics.

Submitted by Zeitgeist on October 24, 2009 - 10:31am.

That is a wonderful tribute to the Marines.

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