4 ms·

Have you purchased housing in any of the more desirable areas of California recently? If you have, please tell me where this fantasy of your played out and I w

by iaw 9y ago

Have you purchased housing in any of the more desirable areas of California recently? If you have, please tell me where this fantasy of your played out and I will buy there. What happens to someone with a $100K-200K down payment and a bank willing to cover another $900K on top of that is that they put in a $1.1M offer with the required bank contingencies and then someone puts in a $1.1M offer with no contingencies and the cash offer wins. Having a bank willing to lend you money has not been sufficient to purchase a home in most areas since the housing collapse because there's so much speculation in cash.

zaroth 9y ago
What is this required bank contingencies you speak of? Just because you are getting a mortgage doesn't mean you need a mortgage contingency in your offer. You are taking on the added risk of actually closing on the loan, but that doesn't mean it had to be in the offer letter. If you know what the house is worth and what your credit score is and how the underwriting works, just make a "cash" offer like everyone else. It's not like you literally show up with a briefcase of cash in any case.
- iaw 9y ago
  I get the feeling that you have not purchased a home either. Required banking contingencies usually fall around home inspection and other verification efforts that the bank undertakes to validate the value of the security being offered for the loan (the house). The bank doesn't just give you a check and say "go for it," they have a set of contingencies (incl. inspections) in order for them to shell out the money. Otherwise people could readily defraud the loan process by borrowing more than the security (the house) is worth. Typically both parties enter into escrow with the expectation that the contingencies will be met during that period and for that period the money is held in trust along with the deed while all of the contingencies are validated. A cash offer is a check, it requires no escrow period. Frequently home deals fall apart during escrow for a wide variety of reasons, this is a time-value risk on the appreciation of a million-dollar asset. Any sensible home seller would take the offer with no escrow period and equivalent dollar value. The house I purchased (in a much less desirable region of California) would've been a lot nicer if it wasn't for this phenomenon.
  - zaroth 9y ago
    I've purchased several houses both with and without mortgages. If you are getting a mortgage, the underwriter will need an appraisal in order to calculate your loan-to-value ratio. They will need title insurance (for which you probably want to get Owners coverage anyway) which requires a title search. I've never had an underwriter ask for a home inspection report. But in any case that doesn't mean you need to write a contingency into an offer that the house will appraise for a certain amount or else the deal is off. Even in "cash" offers there is the offer letter with a check with a deposit amount, but there's still a time period for you execute a purchase and sale agreement and make the final payment. This is where you do things like title search, prepare the P&S agreement, prepare other documents like fire certificate, septic certificate, etc. This always takes at least 30 days anyway, so if there's an appraiser ready to go on Day #2 there's time to get your loan closed before closing day even on a "cash" offer with a quick close. I'm not quite sure what you mean "no escrow period" but in no case does anyone simply show up at Open House day with a check for the full offer amount and expect to close on the house that day... that's simply not what "cash offer" means. A "cash" offer with no contingencies simply means your offer amount will not change even if the house appraises for less (requiring a larger down payment to achieve the same LTV) or if there are issues discovered by a home inspector (e.g. roof needs to be replaced). Note even in a "cash" offer there's still plenty of room to negotiate if non-obvious things are discovered about the house because the seller is still providing a property condition statement (at least in any state I've done business in) where they attest to the overall condition and any adverse issues like septic failing certification or prior insurance claim for flooding or things like that which you discover after making a "cash" offer -- all of it the seller had a duty to disclose and frees you from the offer if you decide to walk away before signing the Purchase and Sale and accepting the quitclaim deed.
echaozh 9y ago
I guess most of you have never purchased housing in any of the major cities in China. $180,000 is over RMB 1mm, which is way above what an average Chinese white collar can earn in a year. And an apartment can cost much more than $500,000, with a 30%~60% down payment. People do afford the apartments, with life's saving from parents. I am not saying it's a good thing, but it is possible that people afford housing even with a ridiculous price.
- yladiz 9y ago
  The way housing and society works is significantly different in the USA and China. It's not really fair to compare the two. I don't know anyone in USA that has used their parent's life savings to purchase a house, because that kind of way of doing things isn't nearly as common there compared to China.

by iaw 9y ago

zaroth 9y ago

What is this required bank contingencies you speak of? Just because you are getting a mortgage doesn't mean you need a mortgage contingency in your offer. You are taking on the added risk of actually closing on the loan, but that doesn't mean it had to be in the offer letter. If you know what the house is worth and what your credit score is and how the underwriting works, just make a "cash" offer like everyone else. It's not like you literally show up with a briefcase of cash in any case.

iaw 9y ago
I get the feeling that you have not purchased a home either. Required banking contingencies usually fall around home inspection and other verification efforts that the bank undertakes to validate the value of the security being offered for the loan (the house). The bank doesn't just give you a check and say "go for it," they have a set of contingencies (incl. inspections) in order for them to shell out the money. Otherwise people could readily defraud the loan process by borrowing more than the security (the house) is worth. Typically both parties enter into escrow with the expectation that the contingencies will be met during that period and for that period the money is held in trust along with the deed while all of the contingencies are validated. A cash offer is a check, it requires no escrow period. Frequently home deals fall apart during escrow for a wide variety of reasons, this is a time-value risk on the appreciation of a million-dollar asset. Any sensible home seller would take the offer with no escrow period and equivalent dollar value. The house I purchased (in a much less desirable region of California) would've been a lot nicer if it wasn't for this phenomenon.
- zaroth 9y ago
  I've purchased several houses both with and without mortgages. If you are getting a mortgage, the underwriter will need an appraisal in order to calculate your loan-to-value ratio. They will need title insurance (for which you probably want to get Owners coverage anyway) which requires a title search. I've never had an underwriter ask for a home inspection report. But in any case that doesn't mean you need to write a contingency into an offer that the house will appraise for a certain amount or else the deal is off. Even in "cash" offers there is the offer letter with a check with a deposit amount, but there's still a time period for you execute a purchase and sale agreement and make the final payment. This is where you do things like title search, prepare the P&S agreement, prepare other documents like fire certificate, septic certificate, etc. This always takes at least 30 days anyway, so if there's an appraiser ready to go on Day #2 there's time to get your loan closed before closing day even on a "cash" offer with a quick close. I'm not quite sure what you mean "no escrow period" but in no case does anyone simply show up at Open House day with a check for the full offer amount and expect to close on the house that day... that's simply not what "cash offer" means. A "cash" offer with no contingencies simply means your offer amount will not change even if the house appraises for less (requiring a larger down payment to achieve the same LTV) or if there are issues discovered by a home inspector (e.g. roof needs to be replaced). Note even in a "cash" offer there's still plenty of room to negotiate if non-obvious things are discovered about the house because the seller is still providing a property condition statement (at least in any state I've done business in) where they attest to the overall condition and any adverse issues like septic failing certification or prior insurance claim for flooding or things like that which you discover after making a "cash" offer -- all of it the seller had a duty to disclose and frees you from the offer if you decide to walk away before signing the Purchase and Sale and accepting the quitclaim deed.

echaozh 9y ago

I guess most of you have never purchased housing in any of the major cities in China. $180,000 is over RMB 1mm, which is way above what an average Chinese white collar can earn in a year. And an apartment can cost much more than $500,000, with a 30%~60% down payment. People do afford the apartments, with life's saving from parents. I am not saying it's a good thing, but it is possible that people afford housing even with a ridiculous price.

yladiz 9y ago
The way housing and society works is significantly different in the USA and China. It's not really fair to compare the two. I don't know anyone in USA that has used their parent's life savings to purchase a house, because that kind of way of doing things isn't nearly as common there compared to China.