Dear Michael: I want to make an offer on a house. The seller is asking $550,000. I can only afford to pay $500,000. How should I go about making the offer in order to achieve my goal of $500,000?
Answer: The price the seller is asking and the price you are willing to pay is within reach, but don’t get your hopes too high, as there is still a significant gap. The seller will want to negotiate to get his/her best price. If $500,000 is the price you are willing to pay for this home, then I suggest you make an offer at around $480,000 and hope for a counter. You may also want to consider asking your realtor to communicate to the listing agent that you are willing to go up on your $480,000 offer, but only by so much. This can be done before you submit your offer. You can also have your Realtor ask the listing agent if the seller would accept $500,000. If agreed, you can make an offer with no counters. Whichever way you decide to go, numbers of days on the market and the seller’s motivation to sell will play a major part of his/her decision. Good luck.
Dear Michael: I am filing my tax returns. What can be claimed as a tax deduction when buying a home?
Answer: I encourage you to follow up with a professional tax advisor. I am not qualified to give advice in two areas: legal matters and tax matters. Briefly put, providing you itemize deductions and own and occupy your home, you can deduct both property taxes paid on your home and interest paid on your mortgage. You can deduct the points and prepaid interest you make during the actual purchase whether you pay them or the seller pays on your behalf. Get a copy of your closing statement. Your tax preparer will need it. If you don’t have a copy, contact your escrow company, which will email you a copy.
Dear Michael: Why are banks unwilling to actually sell the short-sale homes? Don’t they need the money?
Answer: Banks are not in the business of selling homes. In a short sale, the bank does not own the house. The owner is attempting to get the bank to settle for a shortage on the mortgage payoff and still allow the buyer to get clear title. Because banks are not a party to the contract and are under no obligation, they can change course at anytime, even at the last minute (and they sometimes do). They only agree to a short sale because they believe they will be better off with the short sale (the lesser of two evils) than foreclosing on the property.
During a short sale, banks spend time investigating to see if this is the best price they think the seller can get, who the buyer is and whether or not the buyer is qualified to buy the home. It can take as long as three months for the short-sale lender’s approval. If you are in no hurry to purchase a home and have a strong stomach for it, a short sale can sometimes be a bargain.