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The Scoop on the House

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Saturday, May 10, 2008

The Scoop on the House

We signed a contract Monday night.

We'll close on the North Carolina house on 21 July, and Dave is flying out to Omaha on 19 May to investigate military housing/rental options for us and perhaps get us into a lease ahead of time, which would be great so we could have an address with which to register Jacob for Kindergarten out there.

The contract we're in here is for less than our asking price but appropriate for the price-per-square-footage in this area. The other contract, which we turned down, was offering $3100 MORE than our asking price...

"WHAT? Are you out of your #$%^@# minds?????"

We felt badly for doing this, but the higher offer was coming with a VA (Veteran's Administration) loan that would finance 100% of the sale price and had a very very small "earnest money" check.

What many don't realize about a VA loan is that the VA provides the appraiser and if the appraisal comes in lower than the contract price, the buyer can walk from the contract, or else come up with the difference between the appraisal and contract price. The difference cannot be in the form of another loan (i.e. it more or less needs to be cash). So in reality, the buyer could put any number he/she wanted on the offer. They are only obliged to cover the appraised value...which we may not know for 30 days, considering the VA's backlog.

I know, I know, we're Veterans and should have more sympathy. Unfortunately, the market isn't what it used to be, and the VA has been appraising to the low end of the average costs-per-sq.-ft. around here. So a house in contract for $3100 more than the asking price, could appraise for $8000 less than our asking price. Throw in all the other seller's obligations with a VA loan (many of the closing costs, termite inspection, etc.) and that lower offer was actually looking more attractive.

So...we wanted an indication of whether the buyer would be willing to provide the difference if the appraisal would come in significantly lower. Our realtor asked for more earnest money in the counter-offer...asked for another $1500. When the buyer asked if they could provide the first $500 in a post dated check, and the remaining $1000 at their next payday, all sorts of alarm bells went off in our minds. There's a chance they may not be able to get the mortgage at all.

The other offer, although lower, was a conventional loan, the earnest money was appropriate for the transaction, and they were flexible on the closing date. Dave and I, with our realtors, weighed both options very heavily all day Monday and our realtors spent over 3 hours here over dinnertime running numbers, options and placing phone calls on our behalf with the two buyers' agents.

So there you have it -- we finally signed something at about 10:15pm on May 5th. We're coming out about $124 per square foot, right now most houses in our development are closing for $123-124 per square foot.

We commend our realtors, Gloria and Robert, for their hard work and late nights working with us.



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