House Hunting Redux

As some of you know, I've been trying to find and purchase a house in Bergen County, New Jersey. It's convenient to New York City where Mrs. Lawhawk and I both work, and is close to our respective families. We've made a number of offers - had one accepted only to lose it when someone showed for an open house and offered significantly more. The kicker is that the buyer in that deal ended up talking down the price to only $1,000 more than our final offer, and it took an extra month to sell.

Well, we found another house recently, and it was quite a nice house. 3br, 3 full baths, fireplace, living room, dining room, den, full finished basement, and convenient to transportation, shopping, and town facilities. We got the offer accepted and went to attorney review.

Everything was going great until we heard from our lawyer that we needed to await word from the seller on whether the banks would allow a short sale. For those who don't quite know what a short sale is - the seller was trying to convince the banks to take less money than the mortgage committments were. The seller's financial situation is a mess and was asking for time to get the banks to agree to the short sale. Attorney review, which is normally a 3-day process, was dragged on for nearly three weeks.

We got the news earlier this week that the banks refused to allow a short sale - they want their money and have stated that the seller cannot sell the house for less than the amount necessary to cover the bank committments. That's the banks absolute right. In other words, the seller is screwed.

We, on the other hand, are out only the attorney fees (couple hundred bucks) and have to keep looking.

Our broker has said this is the first instance he's seen in quite a few years where the seller's financial situation killed a deal, and not the buyer's finances. We would have been able to get the mortgage done within 7-days after the inspection. Our credit was excellent, but none of that mattered because the sellers were not allowed to sell the house at our agreed-upon price.

So, where does this leave the seller? Well, they can try to rent the house to recover some of the carrying costs, but that's a losing proposition and only lengthens the time they circle the financial drain. They can try to sell the house at the price necessary to cover their costs, but that is increasingly unlikely in the market - as mortgage rate pressures and the summer season lessen the number of buyers which simultaneously increases the buyers' ability to negotiate prices in their favor.

On the other hand, the banks will continue to demand payment right until the moment the sellers can't afford to pay - at which time they'll probably foreclose.

But the end result is that we're still in the market for a house and we're seeing more price adjustments downward into our price range. Just yesterday, we saw a house that was entering our price range, after a $40,000 price drop from the initial listing price. I expect to see more of these price drops, but know that good houses or houses that are fairly valued will still go quickly. Hopefully we'll find something nice in our range in the area we're looking at. Sooner or later, something nice will cross our paths and I can then report that we've got our house.