We have nine offers in on Dixon, and the seller/bank countered for their highest and best offer. Later today we should have a winner somewhere in the mid-$300,000s.
One of the offers is $367,500 VA, and they’re asking for a 3% credit for closing costs, and another 3% for discount points.
Typical closing costs for buyers run from 1.0% to 1.5%, where does the other 4.5% to 5.0% go?
We probably won’t have to worry about it, because the REO managers are going to take a lower offer with a higher net, and not have to sweat an appraisal issue.
If your loan broker is telling you that you need an extra 4.5% to 5.0% packed into your offer, and to just raise the price to compensate – go find another lender!
Here are the guesses for our contest:
| Guess | Guesser |
| $1 | shadash |
| $199,000 | arizonadude |
| $305,000 | Genius |
| $310,000 | Kook1315 |
| $311,000 | Wes |
| $312,000 | NateTG |
| $314,000 | greenlander |
| $314,900 | No_Such_Reality |
| $316,000 | REB |
| $318,500 | Erin |
| $319,000 | The Wood |
| $320,000 | jose |
| $321,000 | GameAgent |
| $321,500 | mybleachhouse |
| $322,500 | CA renter |
| $323,000 | Dwalla |
| $323,500 | DKO |
| $324,000 | gywright |
| $324,600 | Custerdome |
| $325,000 | Susan |
| $325,000 | nolongerjoerenter |
| $325,000.43 | Renter Pete in Carlsbad |
| $327,000 | bobfather99 |
| $327,500 | IRE |
| $327,900 | no bubble here |
| $328,500 | mtb |
| $329,500 | sosad |
| $330,000 | Steve |
| $330,000 | Geotpf |
| $331,000 | m |
| $331,500 | 4s Renter |
| $332,000 | Dave |
| $333,500 | CB Mark |
| $334,000 | Erica Douglass |
| $335,000 | Kwaping |
| $336,000 | Poorhouse |
| $337,500 | Blissful Ignoramus |
| $338,000 | OCVulture |
| $338,500 | Angela |
| $338,500 | mab |
| $339,462.20 | Mozart |
| $340,000 | Kompeitou |
| $340,000 | tjandthebear |
| $340,250 | rbresident |
| $340,500 | Al in IC |
| $344,800 | Rob Dawg |
| $345,000 | doughboy |
| $346,000 | Atenbrown |
| $346,800 | FreedomCM |
| $347,000 | sd nerd |
| $349,000 | Don Q |
| $349,500 | Myriad |
| $355,000 | Mojo |
| $362,000 | Stephen Waits |
| $415,000 | newbie |
The list price is $314,900. Here is the link to the original post on the contest, with video:
Four Padres Tickets!
I put in a guess the other day for $349,500, but its not on the list.
I love this audience – you keep me on my toes!
You wrote: “If your loan broker is telling you that you need an extra 4.5% to 5.0% packed into your offer, and to just raise the price to compensate – go find another lender”!
I am currently neg. a loan where the house is listed at 500,000. I put in another 15,000 to be paid back by the seller for closing costs, so my loan will be 515,000 (This is a short sale, btw)
Is this the type of thing you are talking about? Do you think my deal should raise any red flags?
In this case, the mortgage originator is probably charging excessive fees. 5 points? Some may go towards buying down the interest rate, but this is how mortgage guys skim extra profits by putting some, most, or all of the 5 points in their pocket.
In your case, if your closing costs are 1.5% and the lender is charging another 1.5% for his service, and you want to add it to the sales price, that is your choice. If the short sale doesn’t have competing offers, and the appraisal won’t be an issue, you should be fine.
In my case, the VA deal is a net $345,450, if there is another offer anywhere close, maybe as low as $340,000, the VA deal is going to lose – because the risk of a low appraisal on the $367,500 is high when we have a $330,000 model match five doors down. An appraisal of $340,000 or even $350,000 would probably be do-able.
One of the offers is $367,500 VA, and they’re asking for a 3% credit for closing costs, and another 3% for discount points.
$367,500 -6% = $345,450
$344,800 Rob Dawg
Even though I won’t win I take a certain satisfaction that JtR has taught me enough to recognize SD value. I declare JtR the real winner here.
Thanks Dawg
This is more proof on the buyer’s psychology on overbids – even those that love a home, mentally they cap out around 10% over list.
$314,900 + $31,490 = $346,390.
What do you think of the tactic of having the list price be a complete low ball, basically setting up an unofficial auction with a starting bid of nil and seeing where it will end up? That is, the McMillin Chula Vista house basically was like this-16.7% under comps, 40 offers. If people will only go up 10% of list, then they lost money than if they listed it closer to the comps. I’ve seen this to an extreme in Riverside-there was a house listed for $110k that was next door and across the street from two houses listed at over $300k. (The two $300k+ homes were significantly larger but on significantly smaller lots, and the $300k+ prices were dreamville, but $110k was equally ridiculous.)
I think the REDC auctions are experienceing that very problem. They are advertising opening bids that are 10-20% of peak-pricing, thinking it will attract a big crowd.
The crowds are good-sized, but they come to buy for the opening bid, or a little higher. They know the opening bids are ridiculous, but they sure don’t want to go much higher.
Off-topic: Nightline has a story running on its website about the Lake Las Vegas Bust, featuring Carlsbadian Jeff Woolson, golf-course broker!
Nightline website, “Dream Home Nightmare”
Mrs. Dawg was still sitting around Mon at 11:35 when I asked why she wasn’t taking her usual bath. She was waiting for your TV debut. Major disappointment at your postponement.
Lake Las Vegas is surely a poster child.
Anything over list is stupidity.
Ever heard of the wisdom of crowds? Take a bunch of guys off the street, ask them to count the number of jelly beans in a jar. The guesses will be all over the place, but if the sample size is big enough, the midpoint is often remarkably close to the actual number of beans.
Take that logic and apply it to the guesses here. If the price is 345-350K, it shows that the crowd here is simply too bearish for the reality of the market. Not saying this is bad, nor am I saying the reality of the market wont change & come down to our level. Im just pointing this out.
Hmm, Dixon… Did you mean “Dioxin?””
Looks like the midpoint of guesses was closer to $325k or so. I think readers of Jim’s blog may be more bearish on pricing than the general public.
Not more bearish, just a little ahead of the crowd.
“I think readers of Jim’s blog may be more bearish on pricing than the general public.”
Not surprising really, blogs like this can suffer from a adverse selection problem. Blogs like the oc realtor blogs attracts a certain subset of people, incredibly bearish by nature. They will miss the bottom by a mile.
This blog? Probably skewed too bearish, but not by much. TJ is right. The bearishness will make this blog ahead of the crowd on the way down, but behind the crowd on the way back up.
Again, not saying this is bad, just making an observation. Lurkers out there beware!