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First-time home buyers face competition in market
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Q: I am highly disappointed with the resale market. It looks like we are slowly heading toward the dreaded bidding wars again. My daughter and son-in-law are first-time buyers (or, lack thereof, I should say) in Henderson. They looked at dozens of townhomes only to get discouraging news a few days later because the banks are letting people submit multiple offers. What ever happened to taking the first offer and perhaps one backup offer like back in the day? My daughter put an offer on a home in September and paid for an appraisal and inspection. She asked the bank to pay for her closing costs. They agreed. After the appraisal came in $2,000 less, the bank reneged on the offer and refused to pay closing costs. She lost about $500 on this deal.
They found another townhome, submitted an offer that same day it hit the market, only to find the next day multiple offers were placed on the property. The bank sent an e-mail telling her to "submit her best offer." She did that already! Someone needs to put a stop to this tomfoolery. I'm just sayin'
--Evelyn A., Henderson
A: First, I hope your daughter and son-in-law are working with a qualified local Realtor who can guide them through this process. They can help clients compete with multiple offers, advising them on the right offer to make on the right property at the right time.
As your family has discovered, buyers and sellers are free to make and consider multiple offers -- and to change their mind before a deal is done.
You also point out another issue facing first-time homebuyers, many of whom are surprised to learn how much competition they face when trying to buy a home. Although it doesn't make many headlines, our local housing inventory has actually been declining, while existing home sales are soaring. Homes in good condition are becoming especially scarce in popular areas, in lower price ranges and with certain types of properties, such as townhomes. I suspect that's a factor in your family's search for an affordable townhome.
As for the appraisal coming in for less than the purchase price agreed to by both parties, this remains a common complaint in a local housing market being dominated by bank-owned homes.
I've written recently about appraisals that buyers, sellers and Realtors believe are undervaluing homes all over Southern Nevada. I've experienced similar situations. In one case, I was able to convince a seller I'm representing to lower her price to make the deal work. Keep in mind that appraisals are not necessarily designed to get you the best price for a home, but primarily to protect your lender in case you default on your loan. Banks want to know that the home they're financing will be worth enough to cover their investment.
Banks want conservative appraisals -- even if you have a great job, solid credit, plenty of money in the bank and the ability to offer an ample down payment. It's also no secret that banks have tightened their lending standards after dealing with massive losses and millions of foreclosures nationwide.
I've seen banks remain obstinate on their contract prices and do other things that can frustrate would-be buyers. I know it can be frustrating dealing with bank-owned homes, competing offers from cash buyers and related issues. I think the best advice is to enlist the best help you can find and then remain as flexible as possible until you find the right home.
Paul Bell is the president of the Greater Las Vegas Association of Realtors. To ask him a question, e-mail him at ask@glvar.org. For more information, visit lasvegasrealtor.com.
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Paul: I think you answer is excellent. I had the same question regarding if they had been represented by a competent agent, some of the story sounds like they were not. The whole story about the bank reneging on the agreement to pay CC doesn't make sense. Here in Atlanta where I live, if the property does not appraise the buyer can request that the seller/bank reduce purchase price to the amount of the appraisal price. The seller /bank can refuse. If they do the buyer can still buy the property but does not have too, but if they do their loan terms will be based on the appraisal price and they will have to make up the difference between the appraisal price and the contract price themselves. I think they should have considered going ahead and buying the property without the seller paying the $2000 closing cost. Even if your laws in Nevada are different, I believe that if the buyer was properly represented by a competent Realtor and had an executed binding contract, they should of had that right and been advised to consider that. The more I read the question I am convinced that the buyer was not represented or at the least very well, which has added to their problems and frustration in the home buying process. Step one from here would be interview several Realtors and commit to working with one exclusively that is expereienced in working with buyers and dealing with foreclosures.
Evelyn, here's a strategy for you to think about....GO TO THE LISTING AGENT AND HAVE HIM OR HER WRITE YOUR OFFER....The agent will be entering into dual agency and you will need to sign a form acknowledging that fact. Maybe that will work. Good luck!