House #2: Under Contract

Well, I didn’t think I’d be writing this post so soon after yesterday’s post (about The Bulge House getting listed on the MLS), but as of about 8 hours after the listing went live, the house was under contract! The potential buyer was looking at another property listed by my agent, but when it turned out that one was out of her price range, my agent suggested she look at mine. Within a couple hours, an offer was faxed to my agent, and she brought it to me.

While it’s not a full-price offer, there are a lot of upsides to it:

• It’s only about $8K below full-price (with seller paying $2K in closing costs), well within my “acceptable range”;
• The buyer walked through with her father, who is a contractor, and had no issues with the house;
• While the buyer has a 10-day due diligence period, my agent believes that she may not even get an inspection;
• My agent believes that the buyer will be unlikely to ask for any further concessions;
• We believe the buyer’s loan has already gone through underwriting, meaning it’s unlikely that getting a loan will be an issue;
• The buyer put down a reasonably large amount of earnest money, given the price of the house (more than 1%);
• The buyer would love to close in 30 days, much less than most buyers these days.

All-in-all, a good set of circumstances, and I accepted the offer as-is.

The one tricky part of this deal is that the buyer is likely using an FHA loan (a loan secured by the government for first-time home-buyers). While this is good in that FHA loans are the easiest to qualify for these days, they have the downside of having very stringent requirements on the property. First, there will be an FHA appraisal done, which may be tougher than a typical appraisal done for traditional Fannie Mae/Freddie Mac loans; this actually isn’t too much of an issue, as I’m confident the house will appraise for the selling price.

Second, and more importantly, FHA loans have a rule whereby a buyer can’t buy a property using an FHA loan if the property was last purchased within 90 days. In other words, because I didn’t close on the property until August 21, another buyer can’t close on the property using an FHA loan until at least November 21. While the buyer can still put the house under contract, it will be another 8-9 weeks before I can close this deal, despite the fact that the buyer will be ready to close sooner (her loan will not be).

The buyer has given some indication that she thinks her lender won’t be restricted by that 90-Day Rule, so perhaps it isn’t really an FHA loan after-all, and perhaps we can really get this deal done in the next month. Not getting my hopes up, but that would be a nice little bonus…

Speaking of not getting my hopes up, a lot can happen between now and closing. First, the house has to go through an appraisal and be appraised for at least what it’s being sold for (I wouldn’t think that’s a problem, but these days, who knows). Second, the buyer has a 10-day due diligence period, during which time she can back out for any reason and get her deposit back. And, after that due diligence period, there is nothing forcing the buyer to actually close; of course, after the due diligence period is over, the buyer forfeits her deposit if she doesn’t close on the property.

So, this is far from a done deal, and until the ink is dry on the closing papers, I’m trying not to get too excited. That said, I think the buyer is getting a very good deal on a very nice house, and I hope for both our sakes, we can get this deal done.