Maybe I Shouldn't Have Countered

Hmmmm... No response from the short sale lender after we put our counter-to-their-counter in writing. Is it possible that the delay is caused by a new boss at BofA's troubled mortgage servicing department?

I initially thought BofA's lack of an immediate response as a sign that it's crunching numbers to decide whether to accept our counter. I would think that if BofA was planning to stand firm, it wouldn't have asked for a written counter and just rejected us verbally. But now I'm wondering if BofA is entertaining other offers right now? Am I being cheated on???? Surely they've read the most recent bad news in the San Diego housing market, right?

I don't deal with uncertainty in my personal life too well. I dwell and obsess. Maybe that's why I've never been married and am still single. Hmph.

I guess I need to think about the bright side - - the longer this is drawn out, the better, because my apartment lease doesn't end until November 3o, 2011. If we had a sales contract now, we'd probably close by the end of September, leaving me with double housing payments (rent + mortgage) for two months.

And perhaps I just need to remind myself that if this doesn't go through I'll still be okay...

Counter Offer

I'm not exactly thrilled with my agent. When the short sale lender countered at $375,000, I was expecting my agent to discuss with me viable arguments with which we can counter. But instead, my agent's attitude was, "comps are comps." It was almost as if "comps" were gospel and irrefutable. W T F?? The only advice I got was an unscientific/unproven hypothesis that a short sale lender will likely accept an amount that equals 95% of its counter.

Fine. I decided I'll play them at their own game. I carefully examined the comps. As I previously noted, the "comps" weren't exactly comparable to my unit. When I pointed these out, my agent responded, "Those are all cosmetic. At most, it will get you a $10,000 discount."

Okaaaay. I then looked at the numbers.

1. Comp #1 (a 1185 sq. ft. unit) closed escrow on 7/15/11 for $410,000.
2. Comp #2 (a 997 sq. ft. unit) closed escrow on 6/10/11 for $375,000.
3. Comp #3 (a 997 sq. ft. unit) closed escrow on 3/8/11 for $367,500.
   

I wrote to my agent:

After careful consideration, please counter with $342,500. My unit does not include upgrades and appliances of the other comps such as newer carpet, paint, hardwood floors, kitchen appliances and washer/dryer. I believe that the upgrade/appliance/repair allowance is valued at $10,000+.

The price per sq ft of one of the comps was $345.99 (i.e., $410k div. 1185 sq ft). Using that price, I've calculated: $345.99 x 1019 sq ft = $352,562 - $10,000 = $342,564.

The short sale lender based its counter on June/July comps, but I think it's worthwhile to point out that the stock market took a significant dive in August, which has reduced the net wealth of many potential buyers, including myself. I imagine that other buyers' purchasing abilities have been similarly affected.

I thought the last argument about the recent market dive could be irrelevant. But according to the WSJ article titled, New Round of Upheaval Reduces Home Buyers' Urgency to Do a Deal (Note: click on top search result to get full article), many buyers are actually reducing their offers because of the market dive. Maybe it wasn't superfluous at all.

My agent verbally conveyed our counter on Thursday to the short sale negotiator (whose fee I agreed to pay if this deal went through). Yesterday, the short sale lender requested that we put our offer in writing.

Will the short sale lender accept? Or will they counter? I'm on pins and needles.

The Short Sale Lender Countered - And I'm Not Happy

I just got word that the short sale lender countered... $46k above my offer. The counter was based upon comps of recent sales in the development.

But comps are a peculiar thing - - they're not necessarily apples-to-apples comparisons. First of all, the "comps" conveyed with a fridge, washer and dryer (approx value $3k) and my unit would not. The other unit had wood floors (kitchen and bath), newer carpet and range/oven/dishwasher upgrades. So even without taking the condition of my unit into consideration, there should be a discount.

I've asked my agent whether I can look at the property again. After all, I suspect that there are issues with the unit that I didn't catch the first time around, like a leaky toilet that the seller tried to hide with towels.

I learned that the seller owes approximately $450,000 on the unit. The short sale lender wants $375,000. My agent says that with her experience, a short sale lender would more likely than not accept a counter that equals approximately 95% of the approved amount. In other words, my agent estimates that the bank would be hard-pressed to reject a counter of $356,250.

I'm having a hard time right now separating out emotions and sound financial judgment. My bank has already pre-approved me for the full $375,000 amount. And if I can seal the deal now, I can get a mortgage at 3.75% APR (with 3 discount points).

I can make the payments, but I'll be seriously house poor. And I'm not sure whether the home is worth $356,000 to $375,000. Based upon the sale prices of comparable units from 1989, it looks like the home values are back to what they were in 2003. But if you look at the graph below, 2003 was in the beginning stages of the housing bubble.

Of all the properties that are on the market right now, I like this unit the best for the intangibles -- a south facing patio/windows, a "walkable" location, beautiful landscaping, etc. But... I'll also be paying a premium for these intangibles.

I have until Thursday to make up my mind. I'm not sure whether I should walk or buy.

My Offer Was Accepted

I got an email Monday morning from my agent that the Seller accepted my offer. Egads! I meant, yahoo. I meant, OMG. I meant, hurray. I meant, "What have I done????"

One of the "minor" concessions I had to make was that I needed to deposit $3,290 of earnest money into escrow within 3 days of the Seller's acceptance, not when her lenders approve the short sale. Feh. July was a three-paycheck month - - I's got the money!

But when I checked my bank account, I had barely any money. WTF??? It looks like an inter-institutional transfer from my primary checking to an online savings bank that I set a while ago, but canceled over the weekend, was pushed through nevertheless. I called both banks to cancel the transaction, but no dice. Frick! The money is floating in the cyber-transfer ether for the next 3 days and possibly inaccessible until after the due date. F#$K!!

Fortunately, my sister agreed to wire the earnest money. Truth be told, the only reason why I'm able to purchase this property at all is because my mother is lending me a portion of my dad's life insurance proceed for the 20% down payment. My sister is the trustee of the funds so it made sense that she pay the initial deposit. Mini-crisis resolved.

I have a good feeling that the Seller's lenders will approve the short-sale. A comparable unit in December sold for $333,000. Another comparable unit (but with hardwood floor upgrades) sold for $375,000 in June. Looks like I'm in the ballpark.

Even if the short sale is rejected, I'll be okay. After all, my cost of living will skyrocket and I'll be living on rice-and-beans for the foreseeable future if this goes through. Assuming the short-sale is approved, this is my new housing budget: (Oh, God, I'm feeling sick.)

Mortgage (P&I): $1,275
HOA Fee: $320
Property Tax: $340 (est.)
Payback Mom: $225
Condo Insurance: $60
TOTAL: $2,220/month.

Do you see why I won't really be disappointed if the the short-sale is rejected?