Re: First timer, need to be creative - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on September 08, 2003 at 17:10:25:
Nice to meet you. So you will be joining us as a homeowner soon? Welcome to the club.
First, it sounds strange to me that the allowable price would go down. Usually I would expect it to go up. Try to find out why this has happened. Is it that property values are dropping in the area and you and the seller have not taken this adjustment into account? Maybe you have to buy at a lower price. The original agreement can be altered if necessary to make the deal work for you. Just think of the added time and effort that the owners will have to go to to get a new buyer in. Each added month just means more expense to them. A somewhat lower price on the existing sale may not be too bad for them. Even if it does not sell for below the ceiling price, perhaps some reduction there will allow you to do other things to make the deal work for you.
Then, check the effective date of the change. Perhaps it is after you will close. Also, it is possible that any purchase contracts signed when the old ceiling was in place are allowed to go through escrow on the old rules, so you don’t have to fool around at all. Check this one out cloasely. Maybe you could even get an exception to the new rules because of this circumstance, even if there are no written rules in this regard. Especially if there are no written rules AGAINST it.
Also, find out if the special loan can be gotten even if you have a seconed loan from the seller. If so, you get the seller to take the top part of their money over time with a note and second mortgage. Even if you don’t have to do this, it is probably a financially good thing, reducing the amount of your money tied up in the house. This gives you more to buy other properties.
Now I certinaly understand that you are studying the situation and trying to understand the consequences for the sellers, such as their tax issues. That can help you help them do a better job of selling. However, there is a danger, I think, in going too far to help them. I’m not saying you are at that point, but you might want to watch it. Remember who comes fisrt in this deal–you, right? If the sellers suffer a little bit because of changes necessary to get you what you need, you leave that to them to handle. Don’t be so emphathetic that you hurt yourself.
Also, if this is their home, the capital gains exclusion probably applies and they will not have much tax to pay, perhaps none.
Anyway, having to lower the selling price because of problems with an appraisal for the financing is common. If you have not had the appraiser in yet, be there when he or she does the appraising and mention the ceiling of the loan. No insistence that the appraisal come in below the ceiling. Just a mild concern expressed that it not come it too high.
Good InvestingRon Starr***