SF Saga: Making an Aggressive Offer (part 3)

Happy Friday, everyone! This is the third of a six-part series on my San Francisco Real Estate Saga, a months-long period involving countless house tours, sleepless nights, gut-wrenching decisions, and a total of three separate moves. The goal is to give people a sense of what’s involved with buying real estate, no matter the location or price. In the first and second installments, we heard how we moved to San Francisco and found a condo we loved. Now, we write up an offer and cross our fingers. Little did we know the roller coaster ride awaited us!

In our last installment of my SF Real Estate Saga, we had found a condo that excited us, and late the night before Thanksgiving, we had our realtor Tim write up an offer.

The view from our condo. We loved the feeling of being in the middle of a city.

Our logic in proceeding with the condo was this: We would live in it for 2 years, then once the neighborhood was a bit more gentrified (after the shopping mall across the street opened), rent it out as a vacation or corporate rental. The location was great for tourists or businesspeople, and some online research we did on furnished rent rates in the area showed we could at least break even on our mortgage. The idea was to maximize our flexibility–we would be happy to live there, but there was income potential as well.

Knowing it was a buyer’s market, we decided to be aggressive in our offer. Tim advised us to be as aggressive as we wanted, but keep in mind that if we lowball the seller too much, they could stonewall us and we’d got nowhere.

The asking price was $440,000, well within our price range. We’d been pre-approved for 95% financing at a 5.25% interest rate. (For the record, we had more to put down, but with FHA loans, there was little incremental benefit to putting down more than 3-5%, unless you put down 20% and thereby avoid PMI. It’s a strange incentive structure for a government program, but we went with it.)

We offered:

• $435,000 purchase price (note: we needed this lower purchase price, so that our 95% financing wouldn’t put us into higher-interest Jumbo Loan territory with a loan higher than $417,000)
• Seller pays closing costs and transfer tax (about $10,000)
• Seller pays 18 months of HOA dues ($9,000)

Then, we waited. The next day was Thanksgiving, and while we’d promised ourselves we wouldn’t jinx the deal by talking about it, we couldn’t help but spill. The whole family was now eagerly waiting for word from Tim. The seller had 24 hours to respond (which is typical), but with the holiday we weren’t sure if we’d hear.

Real estate stops for nothing–not even Thanksgiving–so we didn’t have to wait long. The seller responded within hours. He’d received multiple offers and was counter-offering.

The seller’s counter offer:

• $435,000 purchase price
• Seller pays transfer tax ($3,000)
• Seller pays 6 months of HOA ($6,000)

We’d essentially asked for $5,000 off the sales price, plus $19,000 in up-front credits. The seller agreed to the price, and offered $9,000 in credits. We could tell Tim was a bit surprised that he was “playing ball” with us, given how low our offer was.

We were thrilled. We had shot for the moon, and even though we didn’t get everything, we felt we’d landed among stars (sorry to be hokey…it was an emotional time!). We accepted his counter offer.

Then we waited. Two days passed.

Then the news came: we didn’t get the place. The other buyers had promised all cash and a shorter closing timeframe, since they wouldn’t need to go through the lengthy FHA application process. All cash appealed to the seller, who wanted to close ASAP.

We were bummed out. We’d already started fantasizing about how we’d decorate the place. Oh well, there was little to be done. Now it was winter and the real estate market had slowed even more. We’d hibernate over the winter, and start hitting the pavement again come spring.

But then, a week later, we got a pleasant surprise. Or so we thought.

Read the full story:

• Part 1: Mad Dash Real Estate Hunt
  
• Part 2: A Diamond in the Rough
• Part 3: Making an Aggressive Offer
• Part 4: Back in My Arms Again, But Do We Want It?
• Part 5: Perfection Discovered