Terrific Broth

The life of two scientists, creating a small home, in big mountains

Category: Life Happening Page 3 of 10

How We Bought Our First House – Convincing the Bank to Buy Our House

Welcome back! You are reading the 6th and the last post of our “how we bought our ranch house” series. To recap, we got pre-qualified during the first week, started looking at houses and even put our first offer down during the second week. After failing a bidding war, we are lucky to find our ranch and put an offer on it during the our 3rd week of house-hunting. After some inspection and negotiation, we were successfully under contract in week five!

Week five and six – Appraisal and loan application – 5.22-6.1

Now both the seller and we were locked into the contract, whether this deal would work through is depending on if we could get our loan approved.

As our broker promised, the same day we put down an offer (in both offers), she sent the realtors in both parties our pre-qualification letter. And the day we were both locked in, she started to prepare our loan application.

We switched from talking to our realtor on the phone, to emailing back and forth with our broker. In addition to the loan application, our broker also, along with our realtor, took care of the paperwork with the title company. We did drop off an earnest check, as a deposit for the contract, as soon as we locked the offer. And the appraisal was ordered through our broker immediately.

This is what happened during the fifth week:

  1. Dropping off an earnest check for $2000 (a deposit of our contract and will be used towards our down payment in the end)
  2. Ordered appraisal ($750) for the ranch
  3. Appraiser came out on Wednesday and looked at the house (usually within a week but this guy acts fast! No complains there!)
  4. Appraisal report sent to bank and our broker. Pass!
  5. We got a pre-approval notice from the bank and our broker

The appraiser is ordered by the bank and paid by us, but he/she (in this case it was a “he”) is an independent party in the whole process. He is supposed to inspect the house (similar to an inspector, so we knew what he would find already), do the comps like our realtor did (so we knew what the result will be too), and produce an honest and non-biased report to the bank to say “this house is worth $xxx”. He shall also determine if the house is safe to live in, which means if we had a roof that is giving in, we would have to fix it before moving.

The house appraised for $320K, which was very fair. According to Kerry, our realtor, appraisers usually report conservatively, a practice adopted after the last housing crash. That means our $310K house (or $315K + $5K concession, depending how you look at it), is DEFINITELY worth $320K and possibly more, AS IS TODAY.

The appraisal process could break a deal even though both the seller and the buyer want to follow through, because IT IS THE BANK WHO BUYS THE HOUSE, not you. Let us say that a house is worth $300K, and you love it so much that you are willing to pay $350K for it. The problem is that you have only $40K down payment and needed the bank to give you a $310K loan. The appraiser came in and said it is not worth $350K, but $300K, which is lower than the amount of the loan you need for the house. At this point, since the bank would not give you a penny more than $300K, you are $10K short and cannot buy it.

This is the general concept and the real calculations is a bit more complicated with closing costs. Buy you get the idea. Unless you have CASH, even you are able to get a $350K loan for a $350K house, you cannot get a $350K loan for a house that is only worth $300K. So if you are on a seller’s market and need to overpay, you’d better have more down payment.

We got officially approved on 6/1, the beginning of the 6th week since we started the whole process. Based on an online estimate, homebuyers usually spend 30-60 days shopping and up to 60 days from contract to close. For first time home buyers, this process is usually longer. We consider ourselves very lucky. For us, from putting down our offer on 5/10, to getting everything cleared, it only took three weeks! Needless to say that we daydreamed the whole long weekend about the ranch, and we might have bought a few electrical tools. 😊

The rest of the week six and the week seven – Waiting.

We originally planned to close on 6/9, which would give us a few days to do some initial work on the house before moving in on the 15th. But it did not work with everyone’s schedule. We closed on 13th and immediately moved in without even a chance to clean the house. Needless to say that it was painful to wait the last two weeks, but we do need to give the seller’s family time to move out.  The family lived there for 20 years, I think all of their five children were born in this house. Judging on how well the house was maintained, I believe they care about this ranch a lot. Yes there is an old roof, but it is not leaking and the supporting trellises in the attic are in excellent shape. Yes there is a small dent on the garage slab, but the foundation is almost perfect – better than many younger houses we have seen. Yes there is an outdated kitchen, but from the awards and trophies on the wall, you can tell that the children are such good students and they are so loved.

They even have a small dog.

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I have no doubt that Slav will make this house a wonderful home for our family. And Roxie and Charlie will enjoy the yard as much as this small dog does. We will love and protect this house as this family did for the last two decades. We wish them the best!

 

How We Bought Our First House – Putting Offer On Our Ranch

Week three (5.8.-5.13) – Our ranch

We, or more precisely, Slav, actually saw our ranch (😊) on the Saturday during our offer on the first house. Technically you can look other houses even after your offer is accepted, just not put new offers on other houses. At this point, our offers were not accepted (the seller passed out offer the first time), so we were completely free to tour other properties.

There were only one house we wanted to see that Saturday, and we did not have high hopes on it. We decided that I should stay home to give the dogs some much needed attention, and Slav could look at it himself with Kerry’s help. Within 5 minutes they could already tell that it was waaaay too much work and not a good fit for us. As they were leaving, an investor (people who buy houses with cash and flip them) came in, and they all started chatting about renovations. At some point, the investor guy asked, “what are you guys looking for?” And Slav told him. He said, “I’ve seen one you would like. It was an old ranch with two car garages, with a pretty big yard. The guy selling it asked waaaay too much, so it stuck on the market. It has been two months now – who knows – he might be willing to come down.”

Kerry immediately asked for the address and the contact information of the seller’s realtor, and scheduled the showing in half an hour! It is happened to be at our dream location – west of Denver, mature neighborhood, biking distance to Olde Town Arvada. We did not even look for houses there because of the high price tag. So the boys immediately headed there. Boy did Slav like it!  He was unsure if I would, because it was really dated. So he decided to “sleep on it”.

So that was Saturday. On Monday, we were bid out on our first offer, and needed to start searching again. Slav mentioned the ranch to me, and I became very curious. On Wednesday, when we decided to go to the city to tour more houses, I suggested to “add the ranch to the list” just so “I can take a look too”.

And that is it. The ranch is the first house we saw that day and I did not want to see more. It is messy and every bedroom is filled with books and clothes (they have 5 kids!) – but we felt weirdly comfortable in it, even a bit happy. Isn’t it magical? The previous house we got bid out did not make us feeling happy. And I think it means a lot.

The house is dated, but very solid. It checks everything on our list, the size, the layout, the yard, the garage, and the neighborhood. Kerry was pleased to learn that the seller was willing to drop the price from $350K to $315K, which put this house well within our comfort zone. The truth is, investors were offering $310K cash, and the seller turned them all down! We guess that he did not want to see it go to investors, but it gave us lots of confidence on what this house is worth.

We put down our offer that afternoon, $315K, as-is except for health and safety issues, and it was accepted a couple hours later. We are under contract!

Just like that, no competition, no bidding wars, just an over-confident seller and a solid house in a neighborhood we were priced out of. It is like we were not buying in Denver market at all. We got our diamond in the rough.

(To be continued…)

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This is the 4th post in our “how we bought our ranch house” series. You can find the rest of the story here:

Week one – Got pre-qualified by a broker, aka “know what we could afford”

Week two – Finding a Realtor and Learning What We Want

Week two – Our First Offer and the Bidding War

Week four – Inspection and Negotiation

Week five and six – Convincing the Bank to Buy Our House

How We Bought Our First House – Our First Offer and the Bidding War

Hi friends! I hope that you enjoy reading about our story so far on our house-hunt. Before we bought our ranch, we actually put an offer on another house. Unfortunately, we got into a bidding war and lost – maybe I should say, fortunately? Well, here is the story.

We put down our first offer on 5/5, the fifth day of our house-hunting with Kerry. It was only the end of the second week we started our house purchasing journey. And this is how this offer went down:

7:30 AM – Got up and fed the puppies. Took them out in the yard for some fresh air. They had been home alone for 4 days straight while we were out house hunting. So they were pretty bored. When they were hopping around and looking for troubles, we picked up their poops around the house.

8:30 AM  – Loaded the Kong with goodies. Filled up water bottles. Drove out. Forget water bottles.

9:50 AM – Toured the first house. Discussion, decision (not to buy), drove to the next house.

10:30 AM – Toured the second house. The house is on the big side (2200 sqft) but still within our budget. It has a killer deck and a big yard which overlooks a green belt. Slav loved the over-size two-car garage. We wanted to put an offer on it.

11:00 AM – Toured the third house. Nah.

11:30 AM – The fourth.

12:00 PM, Standing in front the fourth house, we discussed the second house again. Decided to put an offer. Kerry, our realtor drove back to office to prepare the offer (there is no time for lunch!), and we went out for lunch (shame on us) to a restaurant Kerry loved (we are so terrible).

12:20 AM – Good-luck-to-us margaritas

13:30 AM – Headed home. Got Kerry’s call during driving and said our offer is ready for review (!)

15:00 PM – Got home. Let the dogs out.

15:15 PM – Totally ignored the puppies (sorry) and went over the 10-page offer with Kerry line-by-line on the phone/computer. This was the time that we signed the contract to hire him to represent us as well. Kerry insisted to put the offer acceptance deadline at 10 pm that night, because he felt that the house would be popular and he wanted to push the seller to decide before more offers coming in. We offered the asking price, and buying it as-is as long as there is no issues concerning health and safety (a common practice here due to the sell’s market)

16:00 PM – Played with puppies in the yard. Picked up more poops. Started waiting.

22:00 PM – Did not hear anything from anyone. Had a hard time falling asleep.

Next morning (5/6)

8:30 AM – Kerry called and said they decided to pass our offer in order to invite more. They are showing houses over the weekend and only accepting offers on Monday. We did not successfully prevent a bidding war from happening. 🙁

It is worth mentioning the bidding wars in Denver’s market. It is very common for a seller to put his house on market during the week, but does not accepting offers for a few days. This builds the suspension on the houses and tells the seller how much traffic the house could get. Then on weekend, usually a Saturday, the seller has an open house, and all offers are taken at Sunday night or Monday morning. This encourages bidding wars among interested buyers, because all the offers come in at the same time, and the seller’s agent can call the best two or three offers and invite further bidding. The perfect offer usually goes beyond asking price, does not ask for any disclosure, waives all the inspections (buy completely “as-is”), gives the most time for seller to move out.

Monday (5/8)

8:30 AM. We initially offered to take the house as the asking price at $300K, but now we were in a bidding war, so we had to adjust our offer accordingly. We offered to pay $1000 more than other offers as long as it is below $320K. That means we would likely be buying the house at $321K.

As I mentioned before, this is really common in Denver now. Some sellers even listed their houses lower than appraisal value on purpose, to invite more traffic and elevate the intensity of the bidding war. Like this house, it is worth probably $310K, but not $321K. The $300K asking price baited us into the bidding war, and we would have been overpaying $10K~15K for the house at the end. I do not like this practice because even though we are looking at houses $30~$50K lower than we can afford, someone might be looking at houses close to the upper limit of their loan. They may win the bidding war, but if the interest rate adjust a little bit between the time of their offer and the time of closing, the bank may not approve the loan at the end, which will hurt their credit and their chances of buying the next house.

16:00 PM: New offer in. 10 PM deadline on the same day.

16:30 PM: Kerry called and said the seller’s realtor called. Our offer was one of the strongest, and others included $320K, letting the sellers live there for free for up to 60 days after closing, or waive inspection (buy completely as-is). Kerry is comfortable with the first two requirements, but he is less comfortable with buying a house completely as-is.

17:30 PM: Kerry called again. He negotiated with the seller’s agent again. With a new promise of 60-day rent-free after closing, our offer became one the two strongest offers. The other offer was the same price, up to $321K, with 60 days-rent free, and completely buy “as-is”. However, the buyers only had $30K down payment, which was a fraction of what we had, so their offer was not as strong as ours. Based on the age of the house, we knew that there would be some water issues and possibly radon overload. Both Kerry and we decided to not buy it “as-is”, and stop the bidding from our end.

20:30 PM – The seller accepted the other offer. We felt OK with the result. It is a good house and we like it. We just did not love it enough to risk “as-is”.

(To be continued…)

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This is the 3rd post in our “how we bought our ranch house” series. You can find the rest of the story here:

Week one – Got pre-qualified by a broker, aka “know what we could afford”

Week two – Finding a Realtor and Learning What We Want

Week three – Putting Offer on Our Ranch

Week four – Inspection and Negotiation

Week five and six – Convincing the Bank to Buy Our House

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