Dear Buyer, sorry you didn't get the house you wanted....

By
Real Estate Agent with Alain Pinel BRE 01367196
https://activerain.com/droplet/4F8C

My dear Buyer,

I'm sorry you didn't get the house you wanted. I know you had your heart set on it.

May I take this time to revisit the importance of looking at cost to buy versus sales price.

 

What is your actual cost to buy? 

For our purposes, cost to buy is a combination of your down payment and closing costs. We will also compare monthly mortgage payment at certain price points. Since you are in an enviable position of having $300,000 as a down payment, your buying ability is certainly so much more solid than some other buyers who are competing to buy a house as well.  

 

Let's analyze the past offer you made. We discussed writing an offer at $800,000, but you decided to be more conservative and write an offer for $780,000 instead. At first glance it may have seemed that the difference between $780K and $800K is significant. After all, it's $20,000! However, one does not come up with the money all at once; rather, that money is spread over 30 years during the life of the loan.

 

I don't want you to miss out next time, so perhaps you should take a look at this matrix and see what that $20,000 difference looks like, and what other purchase prices/cash outlay may be at higher prices. This assumes $300,000 down payment at 4% interest for 30 years.

 

 These are mere estimates, and your lender can probably give you a more detailed and better explanation/matrix. 

 

Sales Price

         780,000

800,000

825,000

850,000

Down payment

300,000

300,000

300,000

300,000

Closing costs

22,478

 

23,053

 

23,777

24,492

Total cash outlay

322,478

323,053

323,773

324,493

Monthly payment (principal, interest, taxes and insurance)

 

 

3,332

 

 

3,454

 

 

3,606

 

 

3,759

 

See the difference between a purchase price of $780K and $800K?    Although the purchase prices are $20K apart, take a look at actual COST of buying:

 

---Your cash outlay for the offer at $800,000 would have been $323,053 or $575 more than if you offered at $780,000.

---And your monthly payment would have been $122/month more

 

As of this writing, inventory is still quite low ---- there are few houses on sale and to choose from. At the same time, prices are continuing to rise,  and so do interest rates.  Waiting to buy may you cost you more.  Steve Harney blogged: Buying a House? Consider Cost not just the Price.

 

Shall we do this exercise again next time you write an offer?

 

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home buyer should consider cost of buying in terms of downpayment and monthly mortgage

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Rainmaker
2,638,187
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Pacita, Buyers just don't want to believe, or simply cannot grasp what's happening in our hot sellers' market. 

Jun 13, 2015 10:42 AM #1
Ambassador
2,159,329
Fred Griffin
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Trying to save a few bucks, and losing the house that you wanted.  A very poor decision.

Jun 13, 2015 11:26 AM #2
Rainmaker
769,339
Troy Erickson
Diverse Solutions Realty www.ChandlerRealEstate.weebly.com - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Pacita - You bring up some great points. It's hard to find just the right home, so a buyer should never try to save a few bucks when they do find their perfect home.

Jun 13, 2015 03:51 PM #3
Rainmaker
1,741,660
Tom Arstingstall, General Contractor, Dry Rot, Water Damage Sacramento, El Dorado County - (916) 765-5366
Dry Rot and Water Damage www.tromlerconstruction.com Mobile - 916-765-5366 - Placerville, CA
General Contractor, Dry Rot and Water Damage

Well Patricia, we can only hope that they have learned form the experience.

Jun 13, 2015 04:52 PM #4
Rainmaker
709,042
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Kathleen --- it's still a crazy market not only for home sales but also for rentals. House hunting is a real challenge for buyers.

Fred --- we can only try to keep educating them. Eventually something will stick

Troy --- buyers focus on price. It's important, but they should see the real big picture.

Tom -- one can only hope.

 

 

Jun 14, 2015 05:03 AM #5
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Rainmaker
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Pacita Dimacali

Alameda/Contra Costa Counties CA
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