Spotsylvania News

Jeff Branscome writes about Spotsylvania County.

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My home searching experience

Here is a perfect time to offer a personal story of how my house-hunting experience is going in this horrible market packed with foreclosed homes.

If you can find a way to buy a home, now is the time to do it. But this story I am going to tell you will boggle your mind because it has mine.

There is a house I am focusing on and although it needs a new roof soon, new carpet and some refurbished bathrooms, the profit margin is there when the housing market recovers—and I estimate that could be in five to seven years.

I am going to give hypothetical details here as to not to be too revealing.

House went on market for $200,000. Market analysis showed that most homes were selling 10 percent under asking price, so I offered below the 10 percent mark, and sent an offer for $170,000 and bank pays full closing costs. Yeah, I low-balled the offer, but so what. It was days after Congress passed the bail-out plan. 

Bank refused outright.

Price drops to 182,000.

I make offer of $172,000 and bank pays 6 percent of closing costs.

Bank countered $182,000 and 3 percent closing. Deal dies.

Price drops to 169,000, below what I originally offered.

I offer full price and bank pays 3 percent closing, but I increased the price to include the other 3 percent in closing. I am doing this because I have a specific amount saved and I would use every penny to close at the FHA-mandated 3 percent. I cannot pick more cash from the tree. By increasing the price to include the remaining closing costs, the bank’s bottom line does not change. They get full price of the house and still only pay 3 percent of the closing costs.

Bank refuses offer and says its policy is to only pay 3 percent of closing.

Does this make any sense at all?


I chatted with a business reporter today and we both assume that the tax treatment of a principal write off is better than the expense of paying the closing costs. But what is so frustrating is the bank is still only paying 3 percent of the closing costs and getting full price for the house. The other 3 percent is taken from the increase in the contract price, which I do not understand how it affects the bank’s bottom line.


With the bailout plan Congress passed, you would think any bank would accept a reasonable offer like this. Apparently banks in Texas are not reasonable.

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  • lgross

    what does that mean?

    Many years ago.. if you did not have 20% down,
    you had to pay MGIC “insurance”.

    We had 30% and we thought we could buy some
    land with it and the land would also count as

    Wrong! Not only did we have to pay the MGIC but
    we had to pay it for almost 20 years before the
    bank would allow it to expire.

    Moral of the story. Bankers are SOBs.

    and unless you are really fixed on that house –
    walk to a better deal and let them eat it.

    good luck!

    Now what’s this about Texas?

  • gramps

    headquartered in Texas. Dan, you have stumbled on the real truth about these “economic stimuli” and the financial bailouts. The banks gladly took the taxpayers money from the govt and then promptly salted it away instead of making loans. I have not seen one iota of evidence that the Bush/Paulson actions are doing one whit of good. That is because there were no real “strings” attached by either Bush/Paulson OR our friends in Congress. In short, I think the taxpayers were scammed and if we aren’t careful the Congress is getting ready to do it again in order to please the UAW.

  • misty40

    And it appears that Bush/Paulson will do it since Congress hasn’t. I would say “unbelievable”, but unfortunately it isn’t any more.

    To Dan: good luck. May want to show bank your entry with the entire sequence of events laid out so someone (possibly even someone with sense) could re-evaluate. But probably a waste of time. May want to consider talking to local bankers to see what inventory they may have.

  • dantelvock

    Yes, the bank is in Texas.

    Misty, I am probably done. I went back to the house Sunday to check it out again and noticed that there is a lot more work than I originally saw. The wood surrounding the roof, the facia board, is water soaked. Roof rafter may be rotted, too. The place needs $15,000 of work and possibly new windows soon. But the bank has a policy of only paying 3 percent of closing, and I now have to thank them because they would have hosed me if they accepted my offer! HA!
    If it drops to $110,00, I might try a different loan that allows me to borrow more to fix it. But I doubt it.

  • dantelvock

    Larry a bit unfair to compare your 20 percent down required to today. I bet you when you were putting 20 percent down, it came out to the same exact amount of my 3 percent down. A house 30 years ago in Spotsy was affordable ;)

  • lgross

    I wasn’t making light of your down – just pointing
    out that the mortgage companies get their
    pound of flesh in many different ways.

    My attitude about “affordable” is that for each of
    us – no matter how much we earn or what kind of
    house we buy – we have a duty and a
    responsibility to not buy more than we can afford
    to pay for.

    That was what the 20% down was all about – the
    buyer having enough “skin” in the transaction so
    that walking away from it would be walking away
    from 20% of your own money also.

    As opposed to now days when walking away is a
    valid strategy – for some.

    I don’t know if 20% is the “correct” amount now
    days but I do think that the “purpose” of the
    down payment was to have the buyer have his
    own money involved also – and that’s a good
    policy IMHO.,

  • lgross

    Part of the reason is that when a house is bought
    with a very low down-payment.. with ARM
    financing that the primary reason an ARM “works”
    is in the house goes up in value because you
    could always sell it and at worse -break even.

    But when houses lose value – the mortgagee can
    go “underwater” …owing more on the house than
    what it is worth.. and when the ARM notches up to
    a higher monthly payment – and the mortgagee
    does not have it – then his best option is to walk
    away and they are in droves.

    If they had more of their own money involved via
    a substantial down payment – they could not walk
    away as easy cuz they’d lose their own money

    A substantial down payment is a powerful
    incentive to stick with paying that mortgage.