James Pine Has A Blog

Jump to PhotosIf you haven’t already, you might want to read part 1

Now came the hard part, should we make an offer and if so, for how much? We had not previously reached this point in the process and having < 12hrs to make a decision on a house we had seen for the first time < 2 days ago is insane; but that's the Bay Area housing market for you. We had one advantage, knowing there were already 2 offers submitted and supposedly a 3rd on the way. My wife had a spreadsheet of all the open houses we had gone to, their list prices and, if it was known, the eventual selling price. The average sale price of the nearly 30 homes we looked at was almost 8% over asking price. For the subset in Berkeley, it was above 8% over asking price, and for the 3 Berkeley homes listed for < $500k the sale price was just over 9% above asking. With 3 offers other than our potential one, it was all but guaranteed that the house would go for above asking. 9% above $475k is $517.75k. If we put 20% down and still intended to qualify for a conforming loan (max $417k), the highest we could bid was $521.25k. We discussed strategies with our realtor. Apparently, some realtors (not ours) have a reputation for steering their buyers into bidding more than they want to pay, with the intention that the price will come down after the inspection. Also, with a house in this price range, it was likely at least one of the offers would be made by someone who was "stretching" and might not be on solid financial ground. While the seller would like to get the most $ for their property, they also want the sale to go through, quickly; therefore if we were serious about the house, it was important to make a competitive bid AND show the seller we meant business and could close fast. According to our pre-approval, we could bid as high as the low $600s (not that we would want to) without having to sell our loft first. So it really boiled down to how serious we were about the house. Was this "the one"? After some brief discussion, we decided the answer was "yes". Therefore, we did not want to get beat on anything but our "best pitch" so to speak. We decided that amount was $518k. We figured we were just as strong as any other buyer, and if someone was willing to offer more, then so be it. The seller agreed to wait an extra day before reviewing the offers our realtor drew up the papers for a $518k offer and we went in after work to sign/initial around 50 documents. Our lender also provided us with pre-approval letters for a few other amounts ($495, $510, $521) in case we changed our mind at the last minute. That night we wrote a "letter to the seller". Our realtor had given us some examples and they all seemed to gush a bit too much about the prospective property as well as providing too much of a life history about the buyer(s). We wanted ours to be truthful but not overwhelming; you be the judge…

After sleeping on it we decided to stick with our decision and our realtor submitted our offer. To make our offer stand-out/appeal more, our realtor recommended shorter than usual contingency periods, since we were under the impression the seller wanted to close as quickly as possible. Therefore our inspection contingency was only 5 days, appraisal was 10, closing was 21. The clock on those would start ticking as soon as we receive a complete written agreement. That evening around 8p we received a text message stating the seller had verbally accepted our offer. If a written contract had followed that night, due to the Thanksgiving holiday weekend, we would have had to remove the inspection contingency on Monday. That meant if we had a general inspector come out on Monday and he found something, we would not have time to have a specialist come out. Because of this we decided to pay extra for a roofing inspector as the roof was 16+ years old. The furnace was another concern, but since the disclosures were such that the seller was not really responsible for it being in working condition as it was 60+ years old, we decided there was no point having more than a general inspection of it as we’d be responsible for any repair/replacement anyway.

As it turned out, we did not receive a full written acceptance until Friday so all the rushing to get ducks in a row the previous 2 days was a little unnecessary. We mailed our updated financial paperwork on Friday, but then had to scan/email a revised version the same day with more accurate closing costs, interest rates etc. Our loan was for a 30 year fixed @ 4.875% for just under $414k.

The following Monday we met with the general inspector. Overall the house was in great shape, especially the foundation. The only real concern was the roof. Both the general inspector and roof inspector seemed to think the roof needed to be replaced this rainy season, or before the next one at the latest. The estimate for the main roof replacement was $5600 and it was $2000 for the garage. The disclosures mentioned the age of the roof, but not that it had 0-1 years of life left, so we negotiated with the seller and he agreed to give us 50% of the main roof replacement cost at closing.

After a last minute scare from Met Life Home Loans (they were looking for documentation of an additional $500 of assets [if they had been able to align the various bank statement dates they would have seen they were missing $8k which was in transit between a couple of our accounts]) we went to First American Title to sign/initial another boatload of documents and handed over the largest check I’ve ever signed (slightly disappointing that it wasn’t six figures, since I’d written a check for 3% of the price when making the offer, the remaining 17% + closing costs came up just a hair short). Three days later, on Friday December 18th, we had keys.