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Which of these two offers on our house should we pursue?
August 27, 2014 1:28 PM   Subscribe

Complicated situation with two competing offers on our house (Missouri, USA). What should we do?

My husband and I are selling our lovely (from the outside) 1908 foursquare. It’s in a great urban neighborhood in Kansas City that’s very desirable to a lot of buyers. However, it needs a LOT of work — we’ve already had one offer with conventional financing fall through because the appraiser wouldn’t even bother submitting it to underwriting without some of the worst areas patched up. Before we went back on the market this past Saturday, our realtor said we just need to wait for the right buyer to show up with either cash or rehab financing, and that she was confident we’d find one soon.

It went back on the market on Saturday, and on Sunday night we had a full-price offer… with conventional financing. *Sad trombone*. Our agent told their agent that she was pretty sure the same thing was going to happen with the appraisal, and the buyers offered to fix everything that would be necessary to get through the underwriting, at their own expense. Our agent told us that that seemed too risky for everyone concerned and advised us to keep waiting.

Yesterday, we got another offer, $5K less than full price, but WITH 203K financing. Our agent told the first people’s agent about it, and then today we received a plaintive letter from the first buyers, saying how much they love the house and how they are willing to write into the offer that they will have licensed contractors come in at our discretion to perform the work that they need for the house to pass appraisal. It says they’re also willing to write in a clause that allows us to continue to market the house while they are in the process of getting the loan together. This seems kind of… well… crazy. On their part, especially.

Is our realtor right that we should take the lower offer with the 203K rather than taking these other people up on their weird proposal? On the one hand, I don’t want the liability for injuries during the time the work is being done, etc. On the other hand, it seems like these people are desperate enough to buy our house that they would agree to a contract that indemnified us completely and put all the risks onto them. Of course, we’d need the help of an attorney to do write such a contract, and yadda yadda yadda maybe not worth $5K of headache?

AskMe, what should we do?
posted by slenderloris to Work & Money (20 answers total)
 
What percentage of the price is $5K? Are we talking about a $30K house or a $300K house?
posted by griphus at 1:31 PM on August 27


Full price is $159,500.
posted by slenderloris at 1:33 PM on August 27


Take the second offer and ignore your feelings of guilt. They'll get over it and find another house, it's just part of the buying process.
posted by smoke at 1:35 PM on August 27 [13 favorites]


I would pursue the 203k financed offer, as it sounds a lot less complicated and less chance of the deal souring midway through. Tell them you have received another offer for full price, in the off chance they up their offer.
posted by Diddly at 1:37 PM on August 27 [5 favorites]


On the one hand, $5K is a chunk of change, but on the other hand it sounds like the amount of rigmarole involved to get that $5K wouldn't be worth it, especially if you'd need to hire an attorney to make sure the contract is on the level.
posted by griphus at 1:37 PM on August 27 [2 favorites]


(I'm going under the assumption that buying and selling real estate without an attorney is normal where you are.)
posted by griphus at 1:38 PM on August 27


Take the second offer, especially since you have experience with a conventionally-financed offer falling through for reasons of required repairs.
posted by tckma at 1:41 PM on August 27 [1 favorite]


Selling a house is intrinsically a complicated, stressful process. It will help you sleep at night to do everything you can to make it easier, faster, simpler, and less stressful. Go with the second offer.
posted by medusa at 1:43 PM on August 27 [3 favorites]


Is there an option c of waiting a week and seeing what other offers you get? You seem to have done very well so far.
posted by roomthreeseventeen at 1:43 PM on August 27


I would pursue all offers. The lower offer may fall through. Talk to the full price buyers about their financing.

When I bought my house, the seller paid for flashing and repairs to a door. I paid for a new, nicer door, since the labor was paid by the seller and the old door was crappy but passed inspection. You can structure the offer so that you benefit if it falls through.

In either case, 2 offers - yay!
posted by theora55 at 1:43 PM on August 27


The most I would do is tell Buyers #1 that they must come up with the difference between their mortgage appraisal and your agreed-upon price in cash. In other words, they deal with getting a mortgage for however much they think they can (say $100k) and they pay cash for the rest (say $160k) such that in the end, you get $160k. Clean and clear.

If they want the house, pay the money (they can refi later if they want a bigger mortgage), but with offer #2 in the wings, you should not take on the risk of a longer wait for #1's mortgage approval, or the risk of trying to repair it on their dime.
posted by Dashy at 1:53 PM on August 27 [2 favorites]


If it's this easy to get offers, why stress about it? Agree with roomthreeseventeen above -- stall a bit and wait a week and see what other no-strings-attached sorts of offers might come out of the woodwork.

Parenthetical question as a KC dweller myself: what area of the city is this in?
posted by killdevil at 1:54 PM on August 27


Agree with holding off a little in case another offer comes in with financing.

If not, take the lower money that's a sure thing. "they will have licensed contractors come in at our discretion to perform the work that they need for the house to pass appraisal" sounds like a nightmare to me - renovations are almost always longer and more disruptive than you expect, not to mention more expensive. It's a headache to deal with even when it's your own changes that you want to your own home - having to put up with the mess and scheduling delays and things that no one expected which up the costs and time, all for someone else who may change their minds and walk away and leave you with the half-finished work AND the house? Nope nope nope nope nope.
posted by Mchelly at 2:48 PM on August 27 [3 favorites]


Don't underestimate a motivated buyer. When we sold our last house we had several good offers including one that was 100% cash. That's the one we took. She was the buyer of doom and basically trotted around saying she could demand anything she wanted because she was full cash. It got really, really ugly.

We eventually told her to go away and that we were going with the second offer. It was a hot market with little inventory so the 100% cash buyer totally was SOL.

Everyone says 100% cash is king and I almost agree. However, a difficult buyer is a misery.
posted by 26.2 at 5:37 PM on August 27


I handle VA REOs. What they typically do when someone wants to buy a home but the lender requires repairs is have me get bids, (ME picking who I send the bids to), they choose one, and then having the repairs done before closing. The appraiser goes back out, and looks to make sure everything looks good. The buyers pay, either up front at closing or by increasing the loan.

Just so you know, the VA is telling me now that in future, they prefer to do repairs first then market, and inform people to find financing that will let them buy as is.

From my experience, it would be way less complicated and way safer for you to listen to your realtor. Because if something messes up you would be on the hook to pay the repairs. There are enough problems getting a house to closing without adding to things that could go wrong. If you never believe another thing I post believe THAT.
posted by St. Alia of the Bunnies at 7:28 PM on August 27


By the way, in my state at least, your agent should not have told the first people the amount of the second offer without permission from the second offeror. It is okay to tell both offerors that there are two offers on the table, and ask them for their highest and best.

MAKE SURE that that second offer's financing really will cover a home in your home's condition. You don't want any surprises.
posted by St. Alia of the Bunnies at 7:32 PM on August 27


saying how much they love the house and how they are willing to write into the offer that they will have licensed contractors come in at our discretion to perform the work that they need for the house to pass appraisal

I'm not seeing anything in your question about any proof that these people have the money to do this. Or about how they will be putting money in escrow to make sure the contractors get paid. In some states it's very common for contractors to put a lein on the house if they don't get paid for their work.

It says they’re also willing to write in a clause that allows us to continue to market the house while they are in the process of getting the loan together.

That doesn't make any sense. If you contract to sell the house to them you can't accept an offer from another buyer, unless things work very very differently in your state.

it seems like these people are desperate enough to buy our house that they would agree to a contract that indemnified us completely and put all the risks onto them

I'm not seeing that here at all. Frankly it sounds like they are making you a "too good to be true" type proposition.
posted by yohko at 8:45 PM on August 27


I was like the first buyers in your scenario. I couldn't get conventional financing either, despite my great credit, due to the condition of the house (which wasn't even all that bad--I moved right in after closing). I ended up getting a renovation mortgage through Wells Fargo, which involved less red tape than a 203k. I also put down slightly more than 20%, due to all kinds of horrible issues with the appraisal. I would have been heartbroken if the deal had collapsed. I would at least give them the opportunity to try a reno loan. If it's just a matter of the appraisal coming in low, see if they can make up the difference in cash. If it's a matter of them not being able to get a mortgage AT ALL without repairs, then yes, they probably need a reno loan.

The whole thing really left a bad taste in my mouth and made me hate the mortgage business, for what it's worth.
posted by Violet Hour at 10:41 PM on August 27


Take emotion out of it. It's a business transaction. You need to securely get out of your place so that you can get on to your new things, and you don't want to jeopardize that.

Unless you need the $5k desperately, go with the sure thing and save on the headache and emotional cost that would ensue from the first offer.

If the difference in price was $10k or more, perhaps that would change the situation.
posted by reddot at 2:18 AM on August 28


We pursued things with the 203k people and closed on October 15. Donezo!
posted by slenderloris at 2:14 PM on October 24 [2 favorites]


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