Sellers want to do business again...

IOBA · ‎01-26-2014

Last year, the deal we had was cancelled by the sellers.

The sellers contacted us and want to talk about a new deal. DH and I listened. We said no to the new offered terms. They were shocked.

The sellers contacted us again and asked if we would consider the previous deal we had. We did say we would consider the old purchase price (which is better deal than what was offered.)

DH and I not getting excited. Our finances have also changed. Technically, we are in a better financial state than we were last year, but not so

much from a mortgage stand point.

We have no "cash" savings. Then we had 8-12k in cash savings, plus floating balances in various accounts.

We have a bit more in "cd" and "retirement" accounts than we did back then.

We voluntarily gave up Jan and Feb pay to go to a good cause. (Using rental income to pay our bills, which normally we do not.)

We also paid off the majority of our zero percent cc debt. We have 6900 left. It doesn't have to be paid off until 11/2014. I would like to have that debt gone before we would re-apply for a mortgage. But it's only a 69 minimum payment. (I pay more than that each month.)

With some effort, I could come up with 20-50% down, pay off the one cc, and go out for a nice dinner. The majority of this would come from a HELOC on a rental property we own. The HELOC currently has a zero balance.

I guess I am trying to think of what to do.

We are not even to the point of a signed contract yet. DH and I are not rushing. But if we do go through wtih this, we obviously need to start planning and acting now.

Do I push and pay off the cc before an agreed upon close date?

Do I stockpile cash? <--- sounds more more exciting than it is.

Do I liquidate CD's for the down payment/reserves? <---- sounds easier said than done

Do I raid "reserve" accounts? <---- I save from each paycheck for taxes, insurance, maintenance, gas, food, etc.

We should credit wise and income wise be able to get the loan at 80% LTV. The 20% down payment would have to come from another source

(HELOC, stockpiling, liquidating, something!) since we do not have the funds resting in an account. We do have a mortgage inquiry and a line of credit.

I dunno. I don't want to get too excited about this property. DH and I do love it, but took the emotion out of the picture months back. Which was why we could say no when they came back to us and wanted us to buy it.

The other part of this is, we were willing to pay some of the closing costs, but now I don't feel like it. Especially since I no longer have the same cash advantage going into this deal. I pretty much have to finance 100% of the purchase price, in one form or another, unless I stockpile and liquidate.

Thoughts?

IOBA · ‎01-26-2014

PS -

* going out to dinner or having a special dinner is a must to celebrate! I do some of my best thinking/best planning over a meal with no dishes to wash at the end! Now if I cook the meal, I savor it...and can't do the thinking/planning.

* there is no close date, but the indication is that the sellers would like to close sooner than later.

* there is no realtor involved this time. So I would have an additional expense - if I choose - to have an attorney go over the paperwork or write up the paperwork. The sellers want me to pay their attorney to do ALL the paperwork. Like I said, I don't feel like it. I told them they had to pay their own attorney.

* since there is no realtor involved, they would like to me to give them a down payment of at least 40% (cash, of course!). A personal check would be accepted as well. I told them when we register the sale at the courthouse, you can have the down payment. They didn't like that very much.

* I am not sure how a no realtor involved deal would work. I would think that as with a normal mortgage, I would give the down payment at closing to the title company/closing attorney. I am not in the mood to give any ernest money to the sellers. They backed out once...who is to say that they wouldn't do it again?

So, do I act like I am going for a mortgage and start stockpiling cash? Pay off the once cc? The debt to income ratio is ok with the 69 payment plus mortgage. The lender said it was no problem. I won't have any left over cash to pay the cc once we get the new mortgage becuase we have to prepay the insurance...and it's outrageously expensive! I can't shop around because of inquiries hitting the credit report. We had two (mortgage) last winter.

Uncle Sam owes me two years worth of tax returns. So there should be some extra cash flow soon.

coterotie · ‎01-26-2014

@IOBA wrote:
PS -

* going out to dinner or having a special dinner is a must to celebrate! I do some of my best thinking/best planning over a meal with no dishes to wash at the end! Now if I cook the meal, I savor it...and can't do the thinking/planning.

* there is no close date, but the indication is that the sellers would like to close sooner than later.

* there is no realtor involved this time. So I would have an additional expense - if I choose - to have an attorney go over the paperwork or write up the paperwork. The sellers want me to pay their attorney to do ALL the paperwork. Like I said, I don't feel like it. I told them they had to pay their own attorney. The lack or presence of a realtor means nothing here, they don't add value to the transaction in this instance. Each side should be represented, if they don't want an attorney fine, you have one and pay yours. No legitimate attorney will agree to represent them with you paying the fee. Around here, title companies do most of the closings and an attorney is not customary, but in the case of a FSBO, it wouldn't hurt, see also my reply to next question.

* since there is no realtor involved, they would like to me to give them a down payment of at least 40% (cash, of course!). A personal check would be accepted as well. I told them when we register the sale at the courthouse, you can have the down payment. They didn't like that very much. I don't understand this at all, what are you registering at the courthouse? If it is owner financing, then you absolutely need to get a title company and an attorney involved and none of them will close a deal with a personal check as they would be on the hook if the check bounced. Certified funds are all that will be accepted. The attorney/title company will take care of filing at the courthouse. Again, always give yourself someone to sue if things get FUBARed.

* I am not sure how a no realtor involved deal would work. I would think that as with a normal mortgage, I would give the down payment at closing to the title company/closing attorney. I am not in the mood to give any ernest money to the sellers. They backed out once...who is to say that they wouldn't do it again? Given their flakiness, absolutely get an attorney involved to draw up the contract and act as the escrow agent, they will hold the earnest money not the sellers. Make sure there are penalties for non-completion, if they don't like it -- tough toenails, they came to you. I'm not sure why you keep flipping back and forth between realtor and mortgage loan involvement. It's easy to close a FSBO with a mortgage company, in fact it is exactly the same level of difficulty as if it was a listed property.

So, do I act like I am going for a mortgage and start stockpiling cash? Pay off the once cc? The debt to income ratio is ok with the 69 payment plus mortgage. The lender said it was no problem. I won't have any left over cash to pay the cc once we get the new mortgage becuase we have to prepay the insurance...and it's outrageously expensive! I can't shop around because of inquiries hitting the credit report. We had two (mortgage) last winter. Sure you can shop around for the mortgage, getting quotes doesn't cost you an inquiry. Give them your anticipated score, LTV, etc. and make them give you a quote. I have done this and it isn't a problem at all. When you decide who you want to work with, then you can let them do the inquiry etc. As far as the cash, I'll let one of the mortgage guys tell you what is most advisable.

Uncle Sam owes me two years worth of tax returns. So there should be some extra cash flow soon.

StartingOver10 · ‎01-26-2014

Agree with most of the answers above^^.

Under no circumstances is it wise to give the funds to the sellers directly. That is done at closing when you receive the deed and keys. Keep the money in escrow with your attorney or the title company. Yes, funds need to be in clear funds (wire, cashiers check). We don't close with personal checks. Close with an attorney or title company so that you know you are getting clear title. Pay your own attorney. Don't pay for their attorney. Definitely have an attorney draw up the contract between the parties. If their attorney draws up a contract, bring it to your attorney to review before signing.

How many months has it been since the deal was cancelled? I bet the seller didn't want to pay the Realtor a fee for the last contract so they canceled the deal and have waited the time period specified in the listing agreement to avoid paying the commission that was due under the last contract.

IOBA · ‎01-27-2014

Thank you for the replies. I will try to answer the questions as I remember them. (Hey, it's early morning and I have not had any coffee to drink!)

* I agree - I will pay for my attorney, but not theirs! I am in a funk of "they need to pay all closing costs since they backed out last minute before."

* They want/need cash now. Thus, the requirement of at least 40% down, cash, to them. Regardless of how it's finances - seller financing or a mortgage - I am not giving them any money down.

* I have already told them owner financing was an option before (the previous times we had talked), but I am not considering it this time. I am getting a mortgage. It will cost me a ton more money in the end, but as I told the sellers, I don't want to owe money to my neighbors. This also contributes to my bad mood - that it will cost me a ton more in the end, so they should pay all closing costs.

* I agree there should be a penalty if they delay or back out of the deal. They don't agree with this. I should be ok with letting things just flow along and let them get to closing at their own pace. Of course, they would have 40% of the sales price already in their pocket...so they no longer have a strong "need" to get to closing.

* I agree that the title company or attorney - whoever handles closing - should be the ones to hold onto any "ernest" money. I am not inclined to put any ernest money down. I don't want to loose it. And I know I am already on the hook for paying the closing agent (title company or attorney).

* I do have mortgage inquiries (hard hits) on my credit report from last year, when we were going to close before. I had already decided back then not to do owner financing. I sold my house and was ready to go to closing when the sellers dropped their bombshell.

* Last year, I looked like a low risk, good mortgage candidate becuase I had lots of seasoned cash, minimal debt, and very good debt to income ratio. Now, I don't look so good. I am still low risk with a credit score of 793-800, DH's is 723. I just don't have the cash reserves aging in the bank anymore. I did pay off a lot of the zero percent cc's I had at that time, so I am would be walking into this with a small monthly payment of $69 (maybe 65 dollar) at time of closing.

* I have excellent assets. No liens. Good income. Very little (by my standards) of cash in the bank. I have an absolutely must be doomsday reserve account that I have not touched for 2 years...that will handle any small emergency that comes up. I have something like 32 CD's I could tap into if I had to. But I prefer not to.

* For the down payment with the MORTGAGE company - cuz I don't that I am going to do owner financing - will be coming from one or a combo of sources --

- stockpiling cash when the paychecks resume in March.

- cashing out the CD's

- borrowing from the rental property HELOC (this created an additional monthly payment, but keeps me under the max debt to income ratio)

I guess, I need to let things ride. Go with a mortgage company, not owner financing. Ask them to pay all closing costs. Stockpile cash so that I could be ok for closing and have two months reserves in the bank, be able to pay for home owners insurance (thank goodness the company will charge my cc for the amount!), and pay for the appraisal. AND pay for a third party to manage the closing!

So how do I get my down payment....

And when should I ask for closing....

IOBA · ‎01-27-2014

PS - The sellers cancelled last November, quite literally the day before closing. I don't remember the exact details or the exact timeline. I remember the disbelief and the scrambling to figure out things for us.

So it's been roughly 3 months since they cancelled.

The reatlor contract has been up for about 2 months. I don't have any realtor obligations/contracts on my side. I haven't seen hide or hair of my realtor in months. And I don't feel obligated to track her down. She literally did nothing. Didn't even show me the property.

The sellers never - in my opinon - understood how much they would be paying in commission to the realtor. I told them how much the commission was and they said no way. The sellers also told me that there were no fees for me to get a mortgage. (Seriously!) Mortgages are free!

Gunnar419 · ‎01-27-2014

This sounds even flakier than the original deal they bailed out of.

They keep contacting you to try to get you to buy the house -- which signals desperation. Then they make all kinds of demands on you -- which signals entitlement.

You sound like you have a good head on your shoulders and are being careful about this, but the sellers sound like serious bad news. Are you that much in love with their house that you'd be willing to deal directly with people who appear to be not just screwballs, but unreasonable and possibly dishonest ones?

coterotie · ‎01-27-2014

@Anonymous had a seller come back to us last week. Asking was 459,000. Last month we offered 389 and he had to tote the note for 5 years @ 2.5%. He blew us off. Came back and in essence accepted our last offer, getting ready to make him a final take it or leave it.

Patience is a virtue in our market which is still very much a buyer's market between 250K and 600K.

My suggestion is to write up an offer to them exactly like you want it, give them 48 hours to accept on your terms. Then stick to them. If they try to counter walk. Also, make them have skin in the game so they don't flake at the last minute. Something as simple as a damages clause in the contract. If they don't close they pay a break-up fee. Spell it out in the contract and get your mouthpiece on board.

@Gunnar419 wrote:
This sounds even flakier than the original deal they bailed out of.

They keep contacting you to try to get you to buy the house -- which signals desperation. Then they make all kinds of demands on you -- which signals entitlement.

You sound like you have a good head on your shoulders and are being careful about this, but the sellers sound like serious bad news. Are you that much in love with their house that you'd be willing to deal directly with people who appear to be not just screwballs, but unreasonable and possibly dishonest ones?

buyhouse36 · ‎01-27-2014

This is the weirdest situation I have ever heard of. IMHO...I would RUN!!!! They seem completely unaware of how this process works.

FIrst of all, I dont think they will agree to any legal terms. They want your CASH! Because you are not going to give it to them directly, I think they will not cooperate.

Second, if they did cooperate, it would merely be on the surface. Behind the scenes I would be concerned that they are damaging the place. Or neglecting maintenance at a minimum.

Third, even if you put some sort of penalty clauses in the contract, they will not honor them. You would spend more money in legal bills just to get fair and legal treatment.

Not worth it....RUN! Too many houses out there!!!

mynameainttracy · ‎01-27-2014

Buyhouse must have been reading my mind. Red flags are flying all over the place with these people.