Current thoughts in 2011...

[irvinehomeowner]

Considering how tight credit is and the problem with appraisals, all-cash offers make more sense even if at a lower price because even if the buyer can qualify, if the bank doesn't appraise at the higher offer... in most cases it's a no go.

 

[usctrojancpa]

Considering how tight credit is and the problem with appraisals, all-cash offers make more sense even if at a lower price because even if the buyer can qualify, if the bank doesn't appraise at the higher offer... in most cases it's a no go.

Even though my buyers waived the appraisal contingency?  They were also putting a lot more than 20% down and can afford a much more expensive home so going above comps was a non issue for them or their lender.

Btw, credit IS NOT tight if you have good credit, have a stable job, good income, and a 20%+ down payment.  Some lenders will let those kind of buyers go up to a 45-50% DTI.  So much for tight credit.

 

[IndieDev]

Looks like 25 Torrey Pine closed.  The price was $865k which was LESS than what my buyers offered (they even waived the appraisal contingency).  You know, I'm really getting sick of these damn cash buyers.  Why don't you guys give my financed buyers a chance??!!

This is what causing housing prices to drop in Irvine.  Sellers taking all cash buyers.  I can't blame them myself.  It's almost a sure thing in closing the deal.

Kind of the opposite, there's no other city in OC that has as many cash buyers as Irvine does hence prices being sticky.  I would have personally financed my buyers if I had the cash, that's how strong financially they were.  Money is money and still green, whether cash or borrowed.  I'm getting tired of having to have my buyers compete against these cash buyers, especially when they outbid them.

Yeah I've never understood the appeal of "all cash" especially if the appraisal contingency is waived. I'm guessing the sellers may have been burned by a buyer who couldn't get their financing together?

 

[usctrojancpa]

Looks like 25 Torrey Pine closed.  The price was $865k which was LESS than what my buyers offered (they even waived the appraisal contingency).  You know, I'm really getting sick of these damn cash buyers.  Why don't you guys give my financed buyers a chance??!!

This is what causing housing prices to drop in Irvine.  Sellers taking all cash buyers.  I can't blame them myself.  It's almost a sure thing in closing the deal.

Kind of the opposite, there's no other city in OC that has as many cash buyers as Irvine does hence prices being sticky.  I would have personally financed my buyers if I had the cash, that's how strong financially they were.  Money is money and still green, whether cash or borrowed.  I'm getting tired of having to have my buyers compete against these cash buyers, especially when they outbid them.

Yeah I've never understood the appeal of "all cash" especially if the appraisal contingency is waived. I'm guessing the sellers may have been burned by a buyer who couldn't get their financing together?

I could understand if my buyers were FHA buyers or only putting down 20% and didn't have additional funds to cover any appraisal issues, but them waiving the appraisal contingency and putting enough down where the appraisal is a non issue made them semi-cash buyers.  I'm upset for my buyers....I guess this is one reason why financed buyers opt to buy a new home and not deal with what happened with 25 Torrey Pine.

 

[irvinerealtor]

Looks like 25 Torrey Pine closed.  The price was $865k which was LESS than what my buyers offered (they even waived the appraisal contingency).  You know, I'm really getting sick of these damn cash buyers.  Why don't you guys give my financed buyers a chance??!!

This is what causing housing prices to drop in Irvine.  Sellers taking all cash buyers.  I can't blame them myself.  It's almost a sure thing in closing the deal.

Kind of the opposite, there's no other city in OC that has as many cash buyers as Irvine does hence prices being sticky.  I would have personally financed my buyers if I had the cash, that's how strong financially they were.  Money is money and still green, whether cash or borrowed.  I'm getting tired of having to have my buyers compete against these cash buyers, especially when they outbid them.

Yeah I've never understood the appeal of "all cash" especially if the appraisal contingency is waived. I'm guessing the sellers may have been burned by a buyer who couldn't get their financing together?

I could understand if my buyers were FHA buyers or only putting down 20% and didn't have additional funds to cover any appraisal issues, but them waiving the appraisal contingency and putting enough down where the appraisal is a non issue made them semi-cash buyers.  I'm upset for my buyers....I guess this is one reason why financed buyers opt to buy a new home and not deal with what happened with 25 Torrey Pine.

There's more to the story on this deal... much more.  But it has nothing to do with appraisal issues.

How much was the losing bid for, and what were the terms?

 

[irvinehomeowner]

While this may not be related to an appraisal issue, I do have a question about the appraisal contingency.

I was under the impression that it's the lender who requires a certain appraisal value in order to fund the loan so even if the buyer waives that contingency, that doesn't take the lender off the hook.

Say the offer price is $800k and the buyers are putting down 25%, that's a loan amount of $600k... what if the house only appraises for $550k? Will the lender still fund that?

Put yourself in their shoes, are there other reasons why a lower all-cash offer would be more attractive than a financed one? Are there any other issues outside of the appraisal that will prevent a lender from funding? Are there more fees/requirements for the seller in a financed transaction? Maybe the sellers wanted a faster escrow.

As IR is saying... it may not just be the difference in offer price or that it was all-cash.

 

[usctrojancpa]

While this may not be related to an appraisal issue, I do have a question about the appraisal contingency.

I was under the impression that it's the lender who requires a certain appraisal value in order to fund the loan so even if the buyer waives that contingency, that doesn't take the lender off the hook.

Say the offer price is $800k and the buyers are putting down 25%, that's a loan amount of $600k... what if the house only appraises for $550k? Will the lender still fund that?  If the appraisal comes in lower, the lender will loan a lower amount.  For example, if a buyer is putting down 20% on $800k purchase the loan would be $640k but if the appraised value comes in at $700k then the lender will only lend out 80% of $700k or $560k so the buyer would have to make up the $80k in additional down payment.  There are no additional fees or costs that the sellers incur for a financed buyer versus a cash buyer (it's the buyers that have additional costs to close).  My buyers had a full DU underwriting approval which means the lender got everything from them to pre-approve their loan and were going to close in 28 days which is how long the cash buyers took to close (usually cash buyers will close in 14-17 days).  Also, the owners wanted to rent back the home through the end of June which my buyers also agreed to. 

Put yourself in their shoes, are there other reasons why a lower all-cash offer would be more attractive than a financed one? Are there any other issues outside of the appraisal that will prevent a lender from funding? Are there more fees/requirements for the seller in a financed transaction? Maybe the sellers wanted a faster escrow.

As IR is saying... it may not just be the difference in offer price or that it was all-cash.

Removing the appraisal contingency on the buyers part takes away an out for the buyers to exit escrow and get all of their deposit back (in this case if the appraisal comes in lower).  If the contract price was $800k and the buyer puts down 80% then the lender would lend $640k but if the appraisal comes in at $700k then the lender will only lend $560k and the buyer will be responsible to make up the $80k difference via additional downpayment funds.  The lender doesn't reject the loan if the appraisal comes in below the contract price, it will just lend less.  There are no additional fees that the seller incurs if the buyers are financed versus all cash (it's the buyers that incur more closing costs).  The owners wanted to rent back until the end of June which my buyers also agreed to.  My buyers had a full DU underwriting approval for their loan and had provided all of their documents to the lender for underwriting purposes.  The buyer that purchased the home took as long to close as my buyers would have and besides they both agreed to the rent back until the end of June so timing of closing was probably a non issue.

 

[usctrojancpa]

Looks like 25 Torrey Pine closed.  The price was $865k which was LESS than what my buyers offered (they even waived the appraisal contingency).  You know, I'm really getting sick of these damn cash buyers.  Why don't you guys give my financed buyers a chance??!!

This is what causing housing prices to drop in Irvine.  Sellers taking all cash buyers.  I can't blame them myself.  It's almost a sure thing in closing the deal.

Kind of the opposite, there's no other city in OC that has as many cash buyers as Irvine does hence prices being sticky.  I would have personally financed my buyers if I had the cash, that's how strong financially they were.  Money is money and still green, whether cash or borrowed.  I'm getting tired of having to have my buyers compete against these cash buyers, especially when they outbid them.

Yeah I've never understood the appeal of "all cash" especially if the appraisal contingency is waived. I'm guessing the sellers may have been burned by a buyer who couldn't get their financing together?

I could understand if my buyers were FHA buyers or only putting down 20% and didn't have additional funds to cover any appraisal issues, but them waiving the appraisal contingency and putting enough down where the appraisal is a non issue made them semi-cash buyers.  I'm upset for my buyers....I guess this is one reason why financed buyers opt to buy a new home and not deal with what happened with 25 Torrey Pine.

There's more to the story on this deal... much more.  But it has nothing to do with appraisal issues.

How much was the losing bid for, and what were the terms?

Approx. $5k higher than the cash offer
Approx. 2% EMD
28 day close
no appraisal contingency
significantly more than 20% down with proof of funds showing plenty of cash to make up any appraisal difference
full DU approval from a direct lender
standard terms, no requests for credits and agreed to all the seller's requests on their addendum (including a rent back until the end of June)

 

[sonoma]

Maybe there was a cash side deal.  Therefore allowing the buyer to have a lower property tax basis and/or allow the seller to not pay taxes on that portion of the net gain.  Can this be possible?

 

[irvinehomeowner]

Approx. $5k higher than the cash offer

This is just me, but I would also go with all cash offer for only $5k less.

Regardless of strong credit, cash reserves to make up appraisal shortfall, and contingency waivers it just seems like there is more that can go wrong with a lender involved than straight benjamins.

And... like Noma said, there are other factors we may never know... like maybe the realtors knew each other... cronyism is ubiquitous.

 

[ucla bruin]

Very interested to hear what IrvineRealtor has to say.

 

[iacrenter]

How about what goes unsaid in the more competitive RE transactions? I've read about side payments to seller agents (more so with short sale/REO properties). Not necessarily what happened in this particular transaction but it does happen.

 

[usctrojancpa]

How about what goes unsaid in the more competitive RE transactions? I've read about side payments to seller agents (more so with short sale/REO properties). Not necessarily what happened in this particular transaction but it does happen.

Oh I don't doubt that those sort of things go on, it's just the nature of the beast.  Hey, if an agent is willing to put their license on the line to do something like that then good luck to them.

 

[sonoma]

If this is the case, this would really skew our perception of what is going on in the RE market.  Using Redfin for comps really aren't accurate.  Only the sales of new homes is the true indicator of prices.  Still in this case, you don't know how much/if any incentives were given to the buyer.

 

[usctrojancpa]

If this is the case, this would really skew our perception of what is going on in the RE market.  Using Redfin for comps really aren't accurate.  Only the sales of new homes is the true indicator of prices.  Still in this case, you don't know how much/if any incentives were given to the buyer.

Not quite true because builders can throw in incentives, credits, broker co-op, reducted interest rate programs, etc to get a home closed and that will never show up in the public records in the closing price.  So the closing price, on paper, will be overstating the value of the home given everything that the builder can throw at the home to get it closed besides lower the price.  Remember, lowering the price is the last thing the builder will do because they want to keep their comp values up.

 

[davenlei]

Looks like 25 Torrey Pine closed.  The price was $865k which was LESS than what my buyers offered (they even waived the appraisal contingency).  You know, I'm really getting sick of these damn cash buyers.  Why don't you guys give my financed buyers a chance??!!

This is what causing housing prices to drop in Irvine.  Sellers taking all cash buyers.  I can't blame them myself.  It's almost a sure thing in closing the deal.

Kind of the opposite, there's no other city in OC that has as many cash buyers as Irvine does hence prices being sticky.  I would have personally financed my buyers if I had the cash, that's how strong financially they were.  Money is money and still green, whether cash or borrowed.  I'm getting tired of having to have my buyers compete against these cash buyers, especially when they outbid them.

Yeah I've never understood the appeal of "all cash" especially if the appraisal contingency is waived. I'm guessing the sellers may have been burned by a buyer who couldn't get their financing together?

When I sold my house in Irvine I received FHA financed offers, 20% down financed offers, >50% down financed offers and 100% cash offers. 
I did not entertain the FHA offers even though it was for a little more than the other offers because the details of the offer made it seem like they were stretching to make it happen.
I countered and did not accept the all cash offer because they were low balling me.  Their agent came back upset saying that "It is all cash, they want a discount for paying all cash".  I responded by telling them I don't care where the money is coming from (cash or finance), when it hits my bank account it has the same value regardless of it's source.
I countered back and forth with the 20% and >50% offers which showed they were strong buyers (financially) and picked the one who gave me the highest number.
And in the end I was right, the numbers in my bank account did look the same regardless of the source of the cash. 

 

[freedomcm]

I too am curious about IR2's take/info!

 

[irvinerealtor]

Nothing nefarious to report. 
There were over a dozen offers in on the property, including at least one with the listing agents.
Although the listing agents represented one of the potential buyers, it did close with an outside agent, so I would be careful deigning the issue as cronyism.
Also note that the starting price was not necessarily the ending price.
That's about all I can comfortably share.

@trojancpa - I've made a concerted effort to be nice, so I'll just make the suggestion that it is better to simply stand accountable and shoulder some responsibility when things go wrong, instead of blaming everyone else. 

Experience matters in getting lower offers accepted or ensuring that a top offer from a qualified buyer does not get passed over.
I agree with your assessment in the education thread, regarding schools and networks, that "who you know" makes a difference in getting the job.
But "what you know" makes the difference in keeping the job.
Both are significant and are not to be overlooked.

-IR2

 

[irvinerealtor]

Removing the appraisal contingency on the buyers part takes away an out for the buyers to exit escrow and get all of their deposit back...

This is misleading.
Just because the appraisal contingency is removed, does not relieve the buyer of still having all the rest of their "outs." 

To use an analogy:
If I told you that if you tried to shoplift at akim's new home and get away with all of his wife's Louis Vuitton collection, you'd get shot with an icicle gun by the omnipresent IPD if you exited on Bryan, would said couture clutches be any safer?

There are better ways to present a stronger statement to the seller, while still protecting the buyer.

-IR2

 

[akim997]

been thinking of many things as of late with regards to real estate... 

first, regarding home loans... the mortgage market is very far from perfect, and i think you would have more willing buyers if capital were readily available.  but that won't nor should it really change.  the current underwriting guidelines are as a result of the fraud and money free for all that existed a couple of years ago.  but until the market can connect eligble buyers with sources of capital, upward pricing pressure in irvine will be largely non-existent, unless the market is fueled by all cash or largely cash buyers (super qualified).    my thoughts?  we are a long ways away from efficent markets, the supply of cash buyers will eventually dry up, and mortgages will become even less attractive as rates increase, and conforming loan limits decrease.  i dont know the magnitude, but the arrow definitely points south....

lucky for me in my current situation, i know the right people, including people in private banking with access to portfolio lenders.  i explained my situation and got a green light after a 10 minute conversation.  no joke.  10 minutes (of course, subject to verification of all the facts i explained).    comment i received, "yeah, the market is tough out there... you are lucky... unless you know someone, you could find yourself in a difficult situation"...  in any event, i can get my purchase finished shortly...  if i want...