When we began this house-hunting mission with Trulia, I had no clue what to expect. I didn’t know if we’d get approved for a loan, I didn’t know what neighborhood we’d end up in, if we’d buy a tiny house or a big house, if the whole process would take weeks, months or years. But after some serious deliberation coupled with swift decision making, we put in our first offer on home! We decided on the ‘small and close’ house from this post. (Thanks to those of you that chimed in on the last post–I loved reading your comments and hearing your stories).
Putting in our first offer for a home was pretty scary. Our agent wouldn’t tell us how much to bid. He basically just urged us to bid the highest amount that we could afford. The house was listed at $530,000. We knew that it was a ‘sellers market’ (I’ve heard about 300 people tell me that over the last few months.) We also knew that there were eleven total offers on the home. Yikes. So as our first offer we bid over the asking price at $552,752 (yes we used my lucky number “52” TWICE because very superstitious like that). Then we waited a day or two and then had to come back to the sellers with a best and final offer. We were told that our offer had placed somewhere in the middle, there were offers higher and lower than ours.
This best and final offer thing was really tricky and annoying. At the end of the day, we decided that we kind of loved the house and that we’d basically go for broke. We were emotionally attached despite everyones warnings. We put in our best and final at $587,752. You many remember from this post we were pre-approved for $590,000. Then we waited.
A day went by (it felt like months) and we heard from our agent that someone bid $620,000. Wow. That’s a lot. We were bummed but just tried to remember all the things we didn’t love about the house…it’s small, the configuration is a little weird…and the little galley kitchen and the way the counter comes into the window?! The worst.
And then the phone rings. For some unknown reason, the buyers backed out. There was one other buyer who bid more money than we did but for some reason the sellers didn’t feel confident about their financials and we were next in line. Holy moly. We just may get the house after all. Back to thinking about all the good things about it! Haha. Um, hello amazing location, curb appeal and really bright and airy house!!
Once we decided to go for it, the next step was to put a deposit in the escrow account. I’ve heard the term escrow many times in my life but only this month did I really understand what it means. It’s basically like a holding account where the money goes while everyone makes sure that loans go through and all that. After the deposit was in the escrow account we had a few days to make inspections and negotiate on the price of the property based on how much work it needed etc. We had all kinds of different experts come out to assess the condition of the house: termites, electrical, plumbing, foundation, roof etc. It was expensive to get all of the reports but worth it to make sure we weren’t buying a lemon.
And then, in the middle of the inspections we got some bad news. Talk about an emotional roller coaster. The inspections were going fine, but the appraisal of the house came in low at $550,000. Practically speaking, it meant that even though we were pre-approved for a $590,000 loan, the house didn’t get approved. We’d have to come up with the difference in cash, or get the sellers to lower the price, or we’d lose the house.
We had already lost this house once and we didn’t want to lose it again, so we started scrambling. First we hit up our parents to see if we got desperate, just how much cash we could come up with in family loans. Then we started asking around to see if it would be possible to get another appraisal. Appraisals are created based on ‘comps,’ meaning similar houses sold in the area, so our agent helped us find comps that the appraiser may have missed the first time around. By now we were so deep into this process that the idea of doing this all over again seemed almost unbearable. We wanted this house bad.
Meanwhile the inspections were finishing up. The house was in decent shape and needed about $15,000 worth of work–not bad for a house built in 1926. So now it was time to tell the sellers how much we’d pay for the house. There was a lot to consider: the low appraisal, the 15K worth of work, and the fact that anything that was over $550K was coming out of pocket from family loans, etc.
And this part was actually kinda fun–nerve-racking, but fun. We knew very little info about the sellers but we did know that it was three siblings who were selling the house and splitting the money. Since both Jason and I have two siblings we kinda tried to put ourselves in their shoes and think about the whole number, but also we looked at the number divided by three–to see how much each person would walk away with. We were trying to guess what was the lowest amount we could offer without turning off the sellers.
And then, amidst negotiations, (and once both parties had agreed to $573,000) we got notice that the house had been re-appraised at $590,000. Hallelujah. We were getting the house for a lot less than our best and final offer, and the bank would finance the entire loan. So…we got the house!!!
Holy yay. Stay tuned for many, many blog posts about renovating and decorating our sweet little Jungalow by the river!! Eeeeee!!!!