Last week was a particularly disappointing one. My offer on Waltham Street property #2, the highest of the group of five was not accepted. My counter offer the highest of the group was not accepted. Alan says not to take it personally, but of course it is personal to me. They left, I am guessing roughly $20K on the table, accepting instead a lower cash offer.
A cash offer can mean one of two things, the person is liquid to the tune of the asking price or more, or the buyer waives their financing contingency. If you are not familiar with this term it means you put at risk 5% of the asking price. A normal Purchase and Sale Agreement favors the buyer, giving them an out if they cannot obtain a mortgage – having gone to a single bank fulfills this obligation. When you waive the contingency you give the Seller the right to take your money if you are not approved. Seems straight forward but it isn’t exactly. Suppose you say to yourself, I have every confidence that I will be approved. I have excellent credit. I have 25% down, I have a good job, steady work history, and adequate income. All good – ca mache, non? NO. It’s not all good. The mortgage lender is only at liberty to lend you the amount at which the property is appraised. In Boston’s real estate bubble most property are not “worth” the amount for which they are selling. Suppose you are trying to buy an $800,000. property. You plan on putting $160,000. down – a fairly standard 20% down payment. If the property is appraised at $579,000. the lender will approve you for a mortgage of the appraised amount and ask that you put down the difference of $221,000. In the event you don’t have that money, you would not be approved, you would then be unable to complete the transaction and you would be forced to forfeit $40,000.
I don’t know about you, but when the Seller’s Broker asked me to waive the financing contingency and the property would be mine – I said no. I’m not one of those people that doesn’t know how hard it is to make the money. The sacrifices that I have made, covered in sawdust, dog hair, sweat streaming down my face as I painted closets, hauled bags of dirt over my shoulder up a 126 stairs to the roof deck to plant the garden. It’s hard, it was worthwhile, and there is no way I would risk letting it go. I still pick pennies up off the street.
So where does this leave me? Good question. I can’t turn myself into a cash buyer. I have already admonished myself for not working faster, harder to bring myself into that power position, but I am at the stage I am. So this weekend is all about the re-group. Enjoying the Cape, the beautiful weather, the smell of lilacs, and salt air, and regaining the certainty that somehow it will all work out, just as its intended.