bidding and prices
I’m looking for a house in a few different neighborhoods in Brooklyn, basically Flatbush, Kensington, Midwood, outer Ditmas Park, Borough Park and Sunset Park. Our budget is about 850k for a 2 family. I know that there are houses that are closing at this price and a bit less. I’ve been looking for about a year. Lately I’ve noticed that every listing is for 950-975k. This is for unrenovated houses, renovated ones, single family houses, detached or semi-detached, near a hip area and in the middle of nowhere. There is basically nothing at 850k. Then at 750k you start to see a bunch of fixer-uppers. A 2 family near the Windsor Terrace border needing no work is 975k but so is a 2 family needing a total gut at the southern edge of Kensington. Why is this the magic number? Obviously not all of these are going to sell at this price; some of them probably quite a bit less. Why do brokers price so high? Some have even been on the market for 6 months at this price and the brokers haven’t come down. Is it reasonable to bid on a house like this at 850k, which is more than 10% off? Is that in fact what the brokers are expecting?
chemosphere
in Real Estate - Sales 11 years ago
10
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10 replies
chemosphere | 10 years and 8 months ago
Thanks for the advice everyone. It was all very helpful. We are in contract on a house in Flatbush. Kensington was still a possibility, but seems to be rapidly rising with very little inventory. Anyone looking in this price range should seriously consider Flatbush and East Flatbush near the Nostrand ave subway stops at Winthrop, Church, Beverly and Newkirk. Deals are to be found.
anonCH | 11 years ago
And try to befriend the broker, get him/her on your side too.
anonCH | 11 years ago
Yes you can get a house by bidding under asking – it all depends how much other interest there is in the house. The key is to see the house FIRST and jump IMMEDIATELY. Go out on rainy days and snow days when no one else is out looking. And get your offer in first. That will make all the difference.
jay | 11 years ago
Mr Hancock – I guess that’s the best way you can articulate yourself. Highly intelligent reasoning. Adam, as always – thanks for the detailed explanations.
mortgagepro | 11 years ago
There are some valid concerns as well as misconceptions regarding FHA financing. In no order of priority, here are some factors that come into play with FHA financing: – FHA will finance up to 96.50% and with the following maximum loan amounts for Kings County: Single Family $625,500 Two Family $800,775 Three Family $967,950 Four Family $1,202,925 – FHA financing incurs both Up Front Mortgage Insurance (UFMIP) as well as an Annual MI paid monthly. It is this monthly MI that heavily impacts monthly mortgage payments and can be quite a hindrance. – On 3 Family and 4 Family properties, FHA Underwriting guidelines dictate that the total rent roll of all units must be able to cover the total monthly housing payment. Depending on the rent roll (determined by the appraiser as to what is customary based on comparable rents in the area), this may be problematic and cause the loan not to qualify for FHA financing on 3-4 family properties. – FHA financing does not take any longer than conventional financing and Underwriting approvals are obtained very quickly. – FHA does allow sellers concessions up to 6% of purchase price, towards closing costs and prepaid expenses, which in Kings County are high primarily due to NY State Mortgage Tax. – FHA requires the buyer to prove at least 3.50% of the down payment from their own funds, and the remainder can come from gifts from family. Re: down payment, 95% FHA financing does have a slightly lower monthly MI factor than 96.50%) – While monthly mortgage payments are higher due to the monthly MI, FHA financing does provide low interest rates with generous lender credits to offset the high costs associated with NY. – FHA appraisals do cover more criteria than conventional appraisals. As most FHA transactions have buyers entering ownership with finances relatively lower than conventional financing the FHA appraiser, like conventional appraiser, needs to note whether there are any indication of hazards or deficiencies that could be problematic for the buyer. FHA list of concerns is a bit longer than conventional as any peeling paint (interior or exterior), improper drainage where water can harm foundation, water damage or leakage, and other deficient factors would need to be corrected prior to closing. With homes >100 years old there is a predisposition that they will not pass FHA requirements. The fact is that FHA financing is still quite prevalent throughout Brooklyn, but each scenario is unique and must be evaluated on a case by case basis. While not like it was 10 years ago, there are a variety of loan products available and FHA is just one of them. Conventional, Portfolio Jumbo, and even 80/10’s (while currently limited) are available in some cases. Obviously the higher down payment will provide more options. Plus I must comment that on every scenario possessing an excellent credit history is always a priority and key to having options available to you. Adam Roberts South Shore Mortgage NMLS# 1310 631-956-0111 x218 adamr@southshoremortgage.com http://www.zillow.com/profile/user9512449/
MrHancock | 11 years ago
“How is “95% FHA Financing” a ridiculous contingency?” – JAY LOL
jay | 11 years ago
How is “95% FHA Financing” a ridiculous contingency?
resident2 | 11 years ago
Your line: “I know that there are houses that are closing at this price and a bit less” is what is holding you back. Many people feel that they have access to real information on “public record” web sights. There are a million scenarios as to what goes into a “closing price”. Many of these low priced closings were never on the open market and you never would have had the opportunity to buy them. (families buying each other out, long term “community relationship” sales as well as just out right fraud to avoid paying the mansion tax, bartering etc. I know of a house on my block (Crown Heights) everyone in the community knows it sold for $1,250,000 – 1,300,000, the public record shows $989,000! This is not so blatant in all neighborhoods, but still insider trading happens. I know of another house in Kensington that appears to have sold about 25% below market, it did not. They buyer bought a condo for the seller in Florida, gave it to the seller plus about 70% of the market price in cash for the house in Kensington, the seller avoids paying so much capital gains and transfer taxes, the buyer avoids paying mansion tax! So how do you become an insider? Focus on one neighborhood, walk the blocks, look for “For Sale by Owner Signs” no matter how old and tattered the sign looks….ring the bell…if they like the look of you and like the way you pay your respects…. yes this does happen, they may sell you their house! But also remember there is always a reason something sells cheap, it is just a matter of if you can handle the reason it is cheap….sometimes it is condition of the property, (in which case it probably will not qualify for conventional financing, or a rent controlled tenant or just that the seller is crazy, the sellers broker is lazy, but if you cannot cope with the reason that it is cheap….you have just bought a nightmare. But remember most sellers sell due to death, divorce or some other disaster….they sometimes do irrational things. Focus on one neighborhood, spend all your time walking the blocks, talking to the mail people the local street people…. If you are within the realms of reality pricing you will find it. But do not ask for ridiculous contingencies! Like seller concessions and 95% FHA financing….this is not Kansas!
mortgagepro | 11 years ago
You are not alone. I know of a number of prospective buyers that have been searching for over a year, fully qualified for up to 850-900k, and encountering the exact same price environment you describe. In some cases where the property is listed and quickly enters into contract I have also observed seller’s not totally prepared to vacate that fast either. Maybe these higher selling prices are related to the dollar figure of what it will take to make someone move when they do not really have to, or even want to, but that is the number that will do it? While some listings have encountered bidding wars resulting in selling prices above appraised value there are still those that sell at true market based on comparable sales. There also remain distressed sales with banks soon to foreclose on some sellers. Plus I still see sellers accept offers influenced by a prospective buyers letter detailing their desire to enjoy and raise their families in the home and contribute to the neighborhood’s environment. (The world is smaller but even more diverse, especially in BK!) While there are statistics on how long it takes from listing to contract I wish there was a study done on how long Brooklyn buyers searched until they closed on their new home. I know of quite a few families from Brooklyn whom have given up buying locally and eventually purchased in Westchester, Manhattan, and New Jersey. Do not give up your search and keep your offers coming. The warmer/sunnier weather is opening minds as well as eyes of others, with buyers walking the streets and speaking with neighbors and getting an expanded feel of what may be coming to market before a Realtor even has the listing. (I highly recommend this activity.) Any qualified buyer with an offer is a better offer than no offer and when both parties have some flexibility agreements can be made. Good luck! Adam Roberts South Shore Mortgage NMLS# 1310 631-956-0111 x218 adamr@southshoremortgage.com http://www.zillow.com/profile/user9512449/
suzy | 11 years ago
I think it’s reasonable, if it’s in line with what that kind of house in that neighborhood is actually selling for, but I don’t know how often you can get the sellers to see the madness of their pricing. When we were looking for a house (in roughly the same neighborhoods and price range as you, but a few years ago), I noticed that the houses with crazy prices tended to linger and then just not sell. I wonder if there are people who have some dream price for which they would be willing to sell, but are otherwise not really serious about moving? Anyway, I started to see reasonable (in line with comps) pricing as a sign of a seller and broker who were sane and serious about selling, and those were the people I wanted to deal with.