@Amanda Kwem- I didn't read this whole thread, but props to you for asking if the agent represented the seller. That's pretty risky for the seller's agent to do. California has a lot of case law frowning upon it.
*For informational purposes only, not meant as legal advice.
Hey thanks so much! Something seemed off about the whole thing so I figured I asked. I initially asked my friend and she said no smh.
Owner financing can help seller defer income taxes on the gain. Say they owned a long time and is one person the gain write down is $250000 plus improvements. They benefit by showing only the interest income during the years you pay until you lump sum pay them off, helps seller tax plan.
Likely it's worth $980000 and they know this. Why not get more from people you don't know?
Usually when listing agent gets a buyer they get their broker involved or another in office agent takes a tiny commission to keep the parties straight. It's legal in CA to represent both sides but not good for either.
Next time get someone who has tools to run comps while you are in the decision process. If it's not worth the price, there is no reason to spin ( yes spin not spend) time on it.
Time is MY MOST PRECIOUS COMMODITY - treat yours this way.
Can the three of you really live together? I humbly suggest you do so now and see if the one who never does dishes drives you crazy.
Thanks so much for your comment, very informative! "Spin" hmmm.
And your last tidbit is fair. I'm not thrilled nor interested in living with others and tbh I'm sacrificing a lot going in on the business but it's a sacrifice that I've accepted. Before this I was looking forward to getting a nice (likely 3,000 apartment) by myself and was looking forward to it! But hopefully this won't be for long. Each of us technically have "housing" somewhere else at this moment so I don't plan on living there full time. I will agree that a 3b/3b as I've constantly reiterated is not only preferred but necessary, prices here are tough though.
Lots to unpack here. My initial thoughts are to underwrite the deal, determine what you need to buy the property for, and stick to your guns. It doesn't matter what the list price is, what the agent is saying, or whether there are other offers. That is all just noise. If you're putting up several hundred thousand and getting a multi-six-figure mortgage, you need to be confident in your financial decisions. It's always caveat emptor out there (buyer beware). Remember that most properties are not good investments. Every house has a number that makes sense (even if that number is negative; aka they pay you to take it).
Don't fall in love with the deal and make emotional financial decisions. This is called naming the puppy and once you've done that your chances of making sound financial decisions is greatly decreased. Trust me, it isn't worth it! It is better to miss out on a potentially great deal than lose a ton of money on a bad investment. There are always more deals. If you're feeling the pressure to do this deal, even if the numbers don't work for you, then deal flow is your main problem to solve. If you had 5 other great houses you were evaluating on attractive terms, would you be stressing about this, or telling the agent to pound sand and standing firm.
As far as the seller financing goes, this needs to be written in the Purchase and Sale agreement, not "get seller financing later".
Now on to your questions:
1. We can't know for certain, but high pressure is not a good sign for your best interest.
2. Loan contingency is for you to get a loan. Seller financing is a purchasing term. You're talking about 2 separate items on the contract. The deal may involve a loan, a loan contingency, seller financing, or any/all/none of these items.
3. Dual agency is a legal and legitamite practice, but involves potential conflicts of interest. Therefore disclosure is paramount and the fact that it is lacking here is extremely concerning. Given your lack of experience, I would get a different agent to write up the offer for you, not use the listing agent.
4. They were bluffing on the other offers or their price/terms. Why indeed?
5. Seller financing is a tax mitigation strategy. Yes, they can foreclose, but that is not ideal for them. It may improve their cash-flows rather than getting a large chunk of cash upfront, they can get interest on the money and a consistent paycheck without any work. True mailbox money.
Not everything moral is legal and not everything legal is moral. You already know what to do here, you just want confirmation that you're correct. Trust your gut.
Thanks so much for your advice, it's truly appreciated! I've already decided to pass on the house even if things were to pan out perfectly because this whole fiasco just left a bad taste in m mouth and I feel it's not meant to be at this point. Just clarifying, is the "purchase and sell agreement" the offer letter itself? Or are these separate?
When it comes to loan contingency, that just means that in the specified amount of time if I don't get the loan the deal falls through and no money is lost correct? What happens if the seller agrees to finance but I don't like the terms, would I still beable to decline then walk away?
All of these questions are for future reference!
Understood. It sounds like you're taking action, which is the main thing that most people get hung up on. So don't get too worried about this deal and just focus on taking a learning lessons forward to the next one.
1. The purchase and sale contract is the offer, correct. It is what a real estate agent will write up AKA the contract. This contract is standardized for most states, although you're not required to use that exact document. To understand what I am talking about though, try to get a copy of your state's standard purchase and sale agreement. This document outlines all of the terms of the sale, including how money is to be exchanged and when. Most state contracts have a section in the financing section for seller financing. There is not a separate document needed to purchase real estate, but there are often addendums to the contract which may modify the original contract.
2. It is not required but most of the time buyers will put in earnest money as they show of good faith that they intend to move forward and close on the home. Once the earnest money has been submitted. It is held in a neutral third party escrow or at the lawyer's office for states that require a closing attorney. Again, read through your standard purchasing sale contract for your state to understand how this earnest money can be forfeited or retained. A loan contingency is saying that this contract will only proceed if a loan can be procured by the selected date. If a loan cannot be procured by that date then the contract becomes null and void and the earnest money is returned. If you miss the deadline but can't secure a loan, then the seller can keep the earnest money. And if you cannot get a loan in the time allotted, then you can simply back out of the contract. If you wave the loan contingency but then are not able to secure a loan, you cannot get out of the obligation to buy the property due to loan contingency also known as a financing contingency. You may still be able to get out of the contract on other terms but not financing ones. Cash buyers will almost always wave a loan contingency because they do not require a loan given that they are going to be purchasing the property with cash. It does make your offer stronger to waive contingencies, but you bear more risk as the buyer.
3. Seller financing is defined in the original purchase and sale contract or in an addendum that modifies this original contract. Seller financing would be disclosed up front in that contract or if it was negotiated after the original contract in an addendum. At no point would you be obligated to sign a purchase contract with terms that you do not find favorable, including seller financing. It is highly unusual that an agent would say don't worry about signing the contract. We can get seller financing later. The seller financing is a condition of the purchase and sale and so represents an entirely different purchase contract than the one they were trying to get you to sign. In writing this out I can see how it would be confusing. Again, my recommendation is to take a look at your states standard purchase and sale contract and you'll see what I mean.
Best of luck!
Incredibly informative, thanks so much again! This may sounds stupid and redundant so my apologies in advance but it's just the bolded statement that I'm still having some confusion on. So if you can't get a loan by the selected date than your earnest money is returned? But if you miss the "deadline" you forfeit it? I'm not understanding this part.
And I see, so the initial contract that I signed should have stated seller financing initially. Interesting.
On the contract it lists initial deposit as 3% of the purchase price (36,000) which I'm assuming is the earnest money. Loan amount would be 960k than downpayment balance 204k. None of the boxes for seller financing or any kind of financing were checked. So would this have been addressed after the fact? Just hypothetically if we signed and they accepted, would we just owe 36k plus the 204k downpayment right away?
If we signed and they accepted but then said seller wasn't willing to do seller financing. Would we have been able to back out even if we could "technically" obtain a loan from elsewhere?
Three "friends" walk into a 2 bed listing and are buying owner occupied. Well that's going to take some creative 'splaining Lucy if you want a jumbo loan.
Illegal third bedroom means with a conventional appraisal it might need to be ripped out to close or have zero value. Is seller willing to get it grandfathered into compliance? I think the answer is no.
You do not have a pre-approved loan. You need a written commitment letter with the rate, terms, list of conditions needed to clear to close.
Listing agents want you to offer very high. Maybe this will get the seller to play but you have nothing, only sand.
Give me the address in DM I can find three comparables in minutes. Listing agent should have given you the comps. If there are no comps you cannot get a loan.
Seller is going to carry paper... cough... but you have no idea if the house is free and clear? Listing agent can give you title report. Your purchase offer should state the terms and conditions YOU want for the loan. Offer them 30 year loan fixed rate at 7% no points (you said 100% financing but really what seller is going to do that soooo risky but go ahead put it in the offer and let them counter). Have the loan be due and payable in seven years, this gives you time to figure out IF you can refinance or sell.
What is the agreement between the three of you as owners and buyers? Who gets the master bedroom who pays for what what happens if you lose your jobs what if you three divorce... who buys the toilet paper (be nitty gritty). You can't use a LLC for conventional owner occupied. Jumbo loans are picky about income and credit you must be financially strong.
You can always write an offer on yellow notepad paper and not be represented by an agent. Make bullet points, follow a Real Estate purchase contract but don't use the form as you are not experts. Everyone signs and dates. The title company/escrow settlement can type the contracts. Yellow note pad hand written holds in court and indicates you are not experts and this is important.
HAPPY to recommend a local agent. I'm in Moss Beach today and San Rafael tomorrow, stop by and chat. The three of you need to all be clear about your plan.
Things were indeed moving way too fast. Though their mortgage company gave us a pre-approvement letter certifying that they verified all our income and etc I'm aware that this didn't seem sufficient at all. (I've been through the homebuying process before, by myself, and getting any type of preapprovement anything was a long tedious process not overnight lol). So what benefit do they have writing us up a pre-approvement letter and getting us to sign an offer at 1.2 mil. If we truly may have not qualified, why would they do this?
100% financing is what the agent said he can get but I agree that didn't sound right. After some minor research I said to myself why would the seller carry on all that risk with no money in their pocket. My only thought was if 1.2 mil was a lot extra than what others were offering. Again he said the owner was retired so maybe that has some benefit to them. Or perhaps all of this is a bluff and another buyer signed one of those (I'll offer 10k higher than the highest bidder type things) so they just want us to sign to not pick up anyways? HAHA idk, maybe that's crazy thinking but again I'm after knowledge, not the house at this point.
As between us buyers. We already have another place in a different city in which one partner has the master, so for this house I would get the master or the 1st pick at the room of my choosing, not that it matters too much. We have drafted up a 9 page agreement (that we haven't signed yet) prob need to add a lot more to it. And thanks for that tidbit you're correct. It would need to be owner occupied (which we 100% plan on doing) while we build biz income and etc.
Hmm yellow notepad paper, not represented? As in a buyers agent won't get paid in the deal? Doubtful the listing agent would even present that offer to the seller?? but i will research that, didn't know it was possible.
And thanks so much! That's very sweet. I've talked to my partners and have recommended that we 100% hold off on buying a house for now (and at least 3-6 months imo) but again I'm the more cautious one. I will definitely take you up on the offer in the future or sooner if it comes to that.
The info you've given me is golden and I really appreciate it!
Lots to unpack here. My initial thoughts are to underwrite the deal, determine what you need to buy the property for, and stick to your guns. It doesn't matter what the list price is, what the agent is saying, or whether there are other offers. That is all just noise. If you're putting up several hundred thousand and getting a multi-six-figure mortgage, you need to be confident in your financial decisions. It's always caveat emptor out there (buyer beware). Remember that most properties are not good investments. Every house has a number that makes sense (even if that number is negative; aka they pay you to take it).
Don't fall in love with the deal and make emotional financial decisions. This is called naming the puppy and once you've done that your chances of making sound financial decisions is greatly decreased. Trust me, it isn't worth it! It is better to miss out on a potentially great deal than lose a ton of money on a bad investment. There are always more deals. If you're feeling the pressure to do this deal, even if the numbers don't work for you, then deal flow is your main problem to solve. If you had 5 other great houses you were evaluating on attractive terms, would you be stressing about this, or telling the agent to pound sand and standing firm.
As far as the seller financing goes, this needs to be written in the Purchase and Sale agreement, not "get seller financing later".
Now on to your questions:
1. We can't know for certain, but high pressure is not a good sign for your best interest.
2. Loan contingency is for you to get a loan. Seller financing is a purchasing term. You're talking about 2 separate items on the contract. The deal may involve a loan, a loan contingency, seller financing, or any/all/none of these items.
3. Dual agency is a legal and legitamite practice, but involves potential conflicts of interest. Therefore disclosure is paramount and the fact that it is lacking here is extremely concerning. Given your lack of experience, I would get a different agent to write up the offer for you, not use the listing agent.
4. They were bluffing on the other offers or their price/terms. Why indeed?
5. Seller financing is a tax mitigation strategy. Yes, they can foreclose, but that is not ideal for them. It may improve their cash-flows rather than getting a large chunk of cash upfront, they can get interest on the money and a consistent paycheck without any work. True mailbox money.
Not everything moral is legal and not everything legal is moral. You already know what to do here, you just want confirmation that you're correct. Trust your gut.
Thanks so much for your advice, it's truly appreciated! I've already decided to pass on the house even if things were to pan out perfectly because this whole fiasco just left a bad taste in m mouth and I feel it's not meant to be at this point. Just clarifying, is the "purchase and sell agreement" the offer letter itself? Or are these separate?
When it comes to loan contingency, that just means that in the specified amount of time if I don't get the loan the deal falls through and no money is lost correct? What happens if the seller agrees to finance but I don't like the terms, would I still beable to decline then walk away?
All of these questions are for future reference!
There's no way to tell where reality and fiction blend here. If offers were truly due right away and you don't have your own agent, yeah, it's probably too fast to find an agent and put everything together.
The agents don't have to disclose dual agency until/unless you sign an agreement for them to rep you- until they are repping you, there is no dual agency and therefore nothing to disclose.
This post is exactly why 1; I don't like dual agency, it's impossible for a consumer to tell if they are being duped or given proper representation. 2; it's vital to have your own agent that you trust.
If there are multiple offers, it make dual agency even worse, IMHO, especially if you are an inexperienced buyer. Go get your own experienced and knowledgable agent and get to work with them.
This makes a lot of sense. Thanks so much for your input.
are you forming an LLC? or just splitting it into thirds? what kind of loan are you getting? why not just house hack individually?
We have almost completed the process of forming an LLC. My friend has an existing business/LLC and we are combining/adding dimensions to that existing business to form a new one. For now we are just purchasing and splitting into thirds. House hacking/rentals isn't necessarily apart of the business but can be a secondary consideration. Ultimately house hacking together on 1 house while building the business would be ideal. At this point individually may be better until we can buy under our LLC since my friend is more ambitious and I'm more cautious. Conventional, fha, special program we were open to anything.
i struggled to follow what is happening so i'll just ask a question
how are the 3 of you jointly buying something?
The 3 of us are co-buying a house. we ultimately plan on jointly buying multiple houses.
The dual agent knows the other offers not me. I’m simply wondering what the motivation to get us to “sign” asap for this specific amount is for if they have other offers well over asking as they have claimed.
most of bay area realtor attitude is like this, they create a condition in such a way that you would emotionally overbidding.
realtor in other region doesn't act like this.
one of realtor tactic is to making improper listing with lower price with the hope they get auction/multiple offers.
you really need an agent that really work for you and understand your concern.
do note that 2 BR is usually hard to sell here, especially with 2/1 setup.
I would guess this is 2/1 950 sqft setup ? :) LOL
No, don't crucify me but I guess I should have mentioned, there's an illegal 3rd bedroom, so its a 3/2 unofficially, but listed as a 2/2. 2000 sq ft actually....again not denying that it'll sell over 1 million, just interested in knowing the motivations of this whole set up
If they “have an offer for 1.25M” why would they tell you to offer $25k less?
Why would you care what terms the seller is offering if you already have an approval from a real mortgage company, the terms will probably be worse.
If this was part of a movie I would say they were partners with the seller and helping him sell for more than it’s worth by offering seller financing.
Look at the sales history see if it’s a flip, decide if it’s your dream home, if so decide what it’s worth to you, it doesn’t matter what others are offering. They might be planning to house hack or do STRs and they can pay more than you. If it’s not your dream home I’d just move on and see what it sells for eventually. You can always offer less if it doesn’t go pending in a week.
I REALLY do like the deadline that isn’t a deadline and being told to offer $200k over list and $25k less than another offer.
The bolded part seems plausible to me. Again in this particular area homes do go above 1 million but everything just seems off to me. Esp the insistence when there is supposedly other offers.
Anyhow will do but doubt it’s a flip. They told me the owner is a retired professor and firm on the price.
one million doesnt' really matter, but what is the comp ranges and PSF ranges.
I would never never never ever buy two BR for over a mil.
Same s*t box house 1 hour away maybe 40% cheaper LOL
I’ll need to look at comps. During this time I briefly looked at what the prices for homes in the area are and they were all for 1-2 million. All the 2 million ones were 4 bedrooms or so. But it seems this one was on the lower range personally (not necessarily for a 2b though).
And yes that’s true lol. This city is desirable though.
every house over 1 mil is of course desirable, the way I see it your realtor doesn't even educate you. saying one mil house doesn't mean anything seriously because avg house price in the area is 1.4 mil.
Yes trust me I’m aware that houses are selling over a mil. I’m simply comparing the asking price to the insisted offer price. I’m understanding now that it was likely purposely listed low.
The dual agent knows the other offers not me. I’m simply wondering what the motivation to get us to “sign” asap for this specific amount is for if they have other offers well over asking as they have claimed.