Going in for the Kill

Now we never thought that we would get this house for the price we wanted to pay for it.  The original asking price when the house first went on the market was around $450,000.  That was almost double our price point.  As months ticked by, however, the house was shown to hundreds of people who all loved the potential, but not the price.  They didn't want to take on the structural issues, the roof, the electrical revamp, and the lack of air conditioning.  Truthfully, neither did I.  I never wanted a project house.  I though that if I was going to stretch my budget, it would be to pay for renovations that someone else had already done for me.

BJ and I went back and forth with structural engineers, family friends, general contractors, all giving us prices of things that had to happen during the first phase of the project.  We narrowed it down to 3 lists:  Must Haves, Wish List, If We Win the Lottery.  The must haves were no glitz and glam.  My dream closet would have to wait until we won the lottery apparently.  We had to focus on getting realistic quotes from actual contractors to know exactly how much we were going to need to budget, and also, how much we could afford to offer for the house.

By this time we had already gotten involved with our mortgage guy to discuss the FHA 203k loan program.  I am not FHA expert, but essentially it is a loan that gets wrapped right into your mortgage from the bank.  The funds from the loan go towards making renovations and other major upgrades such as those we are making.  It is highly regulated by a loan supervisor and subject to a home inspection every single time the contractor submits to take his "draw", (a.k.a get paid).  The process has been pretty easy to navigate so far, but FHA does have a lot of regulations that you must adhere to in order to pass inspection.

Once all the numbers came in, this is what we had in front of us to work with:

• Roof fixes -anywhere from $3,000-$30,000.  Thank you for that narrow range.
• Structural - Approx. $10,000.  I asked you for real numbers here, people.
• Install central air and convert from oil to natural gas-$25,000
• Electrical overhaul-$20,000
• Remove plaster on 3rd floor, insulate and replace with drywall-$8000
• New windows (as many as we can with budget) -$10,000
• Kitchen-$10,000
• Bathrooms-$5,000 x2
• FHA requirements for asbestos and lead paint abatement: $2,000

GULP.  So with that I could offer the sellers $100,000 for the house.  No, just kidding.  But that is what I wanted to offer them.

We had conference call after conference call with our mortgage guy to go over numbers.  He gave us monthly estimated payments based on different offer prices and interest rates.  He calculated PMI and all kinds of other acronyms that I cannot remember.  But in the end I looked at my husband who was drooling over this house and I said, "We can do this."

We devised a strategy for our low ball offer that we were going to throw at the sellers.  It consisted of predicting what they would counter with, and then what we would finally end up buying the house for.  Our initial offer was $35,000 under asking price.  Yeah, we went that low.  The intention was that we would eventually negotiate to about $10,000 under asking price.  We put in contentions for the sale or rental of our existing home and for settlement to be 90 days from the date of the offer.

On March 4, 2012, we submitted our offer.  We would later find out that another person who had not been working with a specific agent was also feverishly trying to submit an offer that day.  Unfortunately for him, by the time he got in touch with someone to write up the offer, the seller had already negotiated a counter offer to us.  Sucks to be him.

When we got the counter back we thought they forgot to make changes.  Our offer price was accepted.  The only counter was that settlement happen in 60 days and we remove the contingency to sell or rent our house.  Holy crap!  They accepted our offer price!