The Most HILARIOUS real estate advice from a San Mateo broker
I caught this little gem called How to Buy the Home You Want Without Insulting the Seller from Trulia. This was written by a Burlingame based mortgage broker about five months ago. Here are some highlights of this article.
“Let’s face it – most of us would like to buy more home than we can afford.”
This is how the article opens up. Really? Is that really true for most of us? Or is it just true for those who can’t really do math?
Next it goes on:
Suppose you see a house that you really like that is listed for sale for $800,000. You are going to make a 20% down payment. You want to offer $775,000.
….
You are worried that the seller is not going to accept this reduced price offer, and you certainly don’t want to insult them, because you truly want the house. So you decide to use the seller paid buydown strategy.
Lets do the math here. 775k on a 800k home is 96.9% of the listing price. In San Mateo/Burlingame/Belmont the average sale to list ratio is about 96% to 98% so I would say that 775k is a VERY reasonable offer, and I highly doubt that it would insult a seller. Seriously, some of the troubled sellers would be ecstatic to get such an offer.
Next this broker reveals the strategy he is proposing.
Instead of offering $775,000, you make a full price offer of $800,000, and you ask the seller to credit $25,000 toward your closing costs.
What do you do with this $25,000 credit? You buy the interest rate down to 4.25% by paying almost 4 points, for example.
By buying the rate down to 4.25%, your monthly payment has been reduced to $3149 per month. The property taxes are slightly higher, $733 per month. The down payment is $5000 more. But look at the impact this strategy has – a monthly savings of $397 per month!
Now, here is the icing on the cake – although the seller made a contribution to buy your rate down, you get the tax deduction for the $25,000 in points paid all in the year that you purchase (check with your tax preparer to verify)!
Wow! A savings of $397 per month!!! Guess how much money you just let the bank earn here. $25,000 on the 4 points upfront, and 30 years of interest on an extra $20000 of principal. Of course, a bigger loan is better for the mortgage broker if they are taking a fee from this. So this is very good for the broker, but not necessary great for the consumer. Seriously, who in their right mind does a 4 point buy down? It is much cheaper to offer the lower price, and then pay 1 point or less to do a refinance later if interest rates come down.
The bottom line is that I don’t think buyers should be worried that they will be insulting a seller with an offer lower than the listing price. I think everyone should always offer what you are comfortable with and what you can afford. If your offer isn’t accepted then just move on. In the example given by this broker, if an offer of $678,500 were accepted then that would also lower monthly mortgage by more than $400, and the buyer would save around 25k in downpayment. It is not like we haven’t seen homes drop more than $120k from their original listing prices here.
Real estate listings with main pictures of anything but the house
This is a funny thing I have been seeing here and there. Some real estate agents are listing pretty pictures of things other than the house as the main picture of the property. Here is a prime example at 212 Shoreview Ave, Pacifica where the first picture you see is:
This is definitely a nice picture of someone having fun, but does it really pump up the price of the small beach home to nearly a million dollars? Am I buying the ocean with that person in it? Granted, there are photos of the actual home on the listing, but it’s pretty confusing to put that picture up as the first thing.
411 MIDWAY Ave San Mateo, CA 94402
411 MIDWAY Ave San Mateo, CA 94402
Price: $1,099,000
| Beds: | 2 |
| Baths: | 1 |
| Sq. Ft.: | 980 |
| $/Sq. Ft.: | $1,121 |
| Lot Size: | 10,004 Sq. Ft. |
| Property Type: | Detached Single Family |
| Style: | Cottage/ |
| Stories: | 1 |
| View: | Neighborhood |
| Year Built: | 1920 |
I have started a new category called “delusional sellers”. This tiny little house close to Hillsborough is listed at $1121 per square foot. What I love about the listing is that the real estate agent doesn’t seem too enthusiastic about it, either. Here is what he/she wrote:
A beautiful 10,000 square foot lot in much sought after San Mateo Park. The home is small with very little updating, but seems sound. There is a pool in back that doesn’t look too bad, but needs some repairs. It’s probably a tear down, but you be the judge. Marvelous opportunity.
So basically the realtor is saying that it is a good lot, and a crappy house. I’m glad this agent isn’t using words like “cozy” and “cute”. At this price chances are this will linger on the market for quite a while. Most of the homes in that neighborhood have very big lots, and 10000 square foot isn’t really that spectacular.
Offers
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