Know Your Numbers

Know Your Numbers By Theresa Grant Real Estate columnist I want to tell you about a story that was relayed to me through a friend. I came to know this by way of dinner conversation with this friend when I inquired about a mutual acquaintance. I was shocked but not surprised. We both knew this couple that were looking for a house to purchase. They had an agent and were actively looking. After seeing many houses this couple found a house they really loved so they put an offer on it. What happens when someone puts an offer on a house is, the listing agent sends out a message to anyone who has viewed the house either through an open house or a personal tour. The message is to let those people know that there has been an offer registered on that property in case they may have been mulling it over. It essentially brings everyone to the table. If you had walked through and were thinking about it, now was the time to make an offer and everyone gets a chance. It’s also how agents whip up bidding wars. That is exactly what happened in the case of this couple. They ended up losing the house to someone who bid higher than they could afford to go. This actually happened not once, but a couple of times. The couple grew somewhat despondent, thinking that they may never be able to purchase a house if this was the process with every offer. The couple were drawn to this beautiful house that had absolutely everything they wanted in their new home. They put a offer on the house knowing there would probably be at least one more coming in. They had a plan. When the agent came back to them and asked if they’d like to improve their offer, they said yes. They had launching into the bidding war. The problem being that they could only afford a certain number. They were just so desperate to get the house, they kept raising their offer. Eventually the agent informed them that they had won, and that the sellers were going to work with their offer. They were thrilled. Now came the real problem. While they had been approved for a certain dollar value in terms of the mortgage, the bank ordered an appraisal of the house. That is common in most cases. The appraisal came back far below the offer price on the house. That left the couple in a real bind. They could either come up with the difference between what the bank said the house was worth and what they had offered to pay for the house or, the sellers could sue them. This is a situation that played out during Covid-19 far too often as people got caught up in desperately trying to purchase something for fear they would not have an opportunity down the road. In this case the couple was able to come up with the difference, but in most cases the situation winds up in court. The whole process of house hunting can be an emotional roller coaster but my advise to everyone is to never panic, and always know your numbers.