Real Estate Life

Saturday, January 16, 2010


I'm currently working with a client who is a first time home buyer. He and his wife are in the process of buying a home. The buyers and I have found them a home they are willing to buy and have successfully executed a deal with the seller.

This is the second time the buyer and seller have agreed on a purchase price and buyers conditions. The first time the buyer was not willing to commit to the purchase of the property due to issues that had been brought up during the home inspection.

Usually a buyer will request the seller to compromise with the cost to repair the issues since a home and its features are exposed to wear and tear. Doors, carpet, flooring, furnace's... wear out and eventually need repaired and or replaced.

There are 6 ways to approach issues found during the home inspection.

1. Ask the seller to repair or cure the issue. e.g. fix a broken window.
2 Request the seller reduce the purchase price for the cost of repair.
3. Depending on the actual issue the buyer might compromise with the cost. e.g. living room carpet has wear. cost to replace $1500, seller agrees to pay $800.00
4. Buyer rescind their offer and walks away from the deal.
5. Buyer may purchase property as-is and makes the repairs themselves or lives with the issues.

Yesterday evening I received a phone call from the lender of this client informing me the client has been laid off. This is going to present a problem since the lender requires the buyer to have a job.

Now back to the fact that this is the second time the buyer has had an accepted offer for this property. The buyer wasn't interested in approaching the seller about making the repairs and decided to look for another home.

Then after a couple of weeks of looking at homes the buyer realized this home is going to be the best fit for them. Now they buyer and I have approached the seller again with a new offer reflecting a lower purchase price.

The new purchase price is lower than the originally agreed on price since the buyer is gong to purchase the property without requesting the seller to make any repairs or updates.

Instead of requesting the seller to make repairs the buyer plans on obtaining a mortgage higher than the purchase price agreed on between the buyer and seller in order to finance the repairs the buyer would like to have made to the home.

The loan the buyer is planning on using is called a 203k streamline loan. These loans have been around for many years and are more common now that many homes purchased these days are bank owned that are in need of repairs and updates.

Since the buyer decided to look for another home this caused a delay. Then back to the original home to negotiate a new deal created a delay, in addition the buyer chose to avoid asking the buyer to make or assist in repairing the home this caused additional delays, streamline financing takes additional time since the repairs being financed need to be accompanied with quotes, and the fact this deal started just before Christmas/New Years causing even more delays.

The point to all of this is now that the buyer is unemployed the lender will not sell the buyer a loan and this deal will be dead. Had the buyer taken the professional advise given to them weeks before there would have been a chance the original deal could have closed before he became laid off.

There is an additional fact this buyer is in a trade where layoffs are very common and expected. He is probably accustom to this and financially this might not effect them. However the bank doesn't look at it the same way.

You do your thing, I'll do mine!


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