Delaware Home Finder Chronicles-This is the story of a Delaware Real Estate Agent working with Buyers trying to Find their Ideal Home in The Delaware Real Estate Market

Welcome to the Delaware Home Finder Chronicles.  Here we follow Delaware Real Estate Agents as they work through situations trying to help average people buy and sell Homes in Delaware. 


Day 1. 

Situation:  Delaware Real Estate agent Jason Morris is working with a 1st time home buyer trying to find a home for he and his young son.  The criteria that we're trying to meet is that the home must be larger than their current residence (1100 sqft), in an area convenient to one of the stores in the Christiana Mall where he works, and under a price of $160k.  There are just the two of them looking to move into the home so they really only need a 2 bedroom residence.  They are also fine with single family homes or Twins and townhomes.  The ideal would be a 3 bedroom single family home with a decent sized yard for his son to play. 

The search:  The first day we had 7 homes that the buyer selected to look at in areas ranging from Elsmere, Newark, Bear, and New Castle.  We had 3 townhomes to look at and 4 Single Family homes.  3 of the sellers declined showings stating that the times we wanted to look at their homes were not convenient.  Not wanting to re-order the entire tour to add those homes back in we simply eliminated them from the list of potential properties and looked at the remaining 4 homes.  The first was a townhome listed for sale in Bear.  The price was 142k.  The initial impression was poor.  The home had a worn exterior door, peeling paint on the facia boards, grime on the siding, and was in generally poor repair.  It was cold out and the front steps were icy and hadn't been shoveled.  The buyers son slipped and fell down the stairs while I fought with the lock that was difficult to open with the poor copy key provided.  Once inside the smell was the first thing we noticed.  Coming in from the fresh air, the smell of cat was extremely strong.  The home had obviously been quickly emptied out and gave the impression that the owners didn't want it.  The carpet was soiled with pet and child stains.  The kitchen was grimey and had crumbs/dirt everywhere.  The fridge smelled like mold.  Overall it was a filthy place.  The home 'had' potential but should have been cleaned thoroughly.  In this market if you're trying to sell a home it should be spotless with fresh paint, steam cleaned or new carpeting, and should smell pleasant.  Moving on. 

The home the buyer had selected to look at in Elsmere was actually very nice.  It had been owned by an elderly couple and while it was a bit dated, every room was immaculate.  The kitchen was spotless and freshly cleaned.  The hardwood had a newly finished look to it.  The basement had been drylocked and organized.  All of the mechanicals such as HVAC and water heater had been well maintained and cleaned.  The driveway had been shoveled and the front door freshly painted and cleaned.  The seller left their own original copy of the key in the lock box so that any real estate agent that was trying to show their home to a potential buyer would be able to easily open the door.  The home was well constructed, having been built back in the 1950's, and over all, was everything we could have hoped for.  The buyer had some concerns about the neighborhood so he called the local police headquarters.  They couldn't think of any specific problems on that street, etc.  Although the home was a bit more than he wanted to spend (priced at 168k) the buyer decided to skip the other homes on the tour and put in an offer on this home.  We met the next day and wrote an offer asking for a sales price of 158k, 3% assistance from the seller for closing costs to the buyer, a home inspection contingency, and having the seller pay for a home warranty.  We put together paperwork, wrote a check for a $1000 good faith deposit and submitted the offer. 

Unfortunately the offer was rejected.  While the numbers were good, the sellers had a real concern about having a buyer who had VA financing.  Unfortunately they had some past experience with VA financing from a time when they were not so easy to deal with as they are today and felt that they would end up having to make numerous repairs.  They countered saying that they would accept the buyers terms if the buyer would switch to conventional financing.  Given that conventional was at a higher rate, and required more money down, the buyer opted to move on and look at other homes. 

Summary:  In this case, everyone lost.  The sellers should have accepted the offer but their agent was unable to convince them that the situation was idea for them.  In the Current real estate market as it stands in Delaware, nearly all purchases in this price range will be either FHA or VA loans with some form of seller assistance and in many cases, help from the Delaware State Housing Authority (DSHA).  The sellers have very poor odds of getting any conventional offers given that their home is in a price range dominated by first time home buyers.  The offer itself was more than fair.  In fact, it was statistically dead on what they should be able to get for that home in that condition.  The buyer was very disappointed, and rightly so.  They should have been able to purchase that home.  So...for you sellers out there, be aware that your offers will very likely be FHA and VA.  They will come in between 4 and 10% below your asking price, and they will very frequently be asking for assistance for closing costs.  This is just how things are in todays market.  If you're not prepared for those realities you should wait to sell your home. 

Until Next Time.......

Day 23.

      Working with the same buyer, but on a different house.  The situation has gotten interesting.  Here's the re-cap of where we are and have been.  We found a fantastic single family home near Old New Castle in a little neighborhood off the beaten track.  Nice quiet side street.  Houses in good repair.  Really nice all around.  The home's older.  About 50 years.  Large rooms for the price, gigantic back yard.  Basement, car port, and poured concrete patio out the back.  The asking price was 167k.  We looked it over and decided that it was in great shape in spite of being a bit dated, but still wanted to go for a better price.  We made an offer of $158,500 with 3% seller assist.  We asked for the seller to pay for a home warranty as well.  Great news!  We got it without a fight.  A few days later we had the home inspection.  Again, it went smoothly.  There were only a few areas of concern and we negotiated to have the sellers correct.   2 weeks after that the appraisal came back.  It actually appraised high.  The home was worth about 7k more than what we got for asking price.  This is something nearly unheard of in this housing market.  The buyer and I were feeling great up until about a week ago and then we got the lightning strike out of the clear blue.  Turns out that the home is located in a flood zone.  Nobody knew about it.  Not even the sellers.  It turns out that the home was paid off, and the flood zone was established back in the 70's.  It being the original owner, without a mortgage company to be concerned about the possibility of flood, they just had no idea.  Everyone was uninformed.   If you're wondering why the worry.  Flood insurance?  So what?  Well, the issue here is a few things.  1.  The money toward flood insurance could have been money put to principle.  It reduces value because it's a stigma on the property.  2.  The monthly payment required is increased significantly.  (in this area flood insurance is $2000 per year)  3.  The buyer's lendor might not cover the increase to his debt to income ratio.  4.  What a surprise!!   The buyer had no idea that the home would cost that much more.  At $2k per year that's an additional $167 per month out of his pocket.    So the problem at hand is how do we offset that sort of monthly payment.  Well, there are 3 ways.  1.  Get an elevation certificate that shows that while the 'area' is a flood zone, the individual home is not in jeopardy.  Flood certificates are about $800 and take a bit of time to acquire.  That, and there is no guarantee that there will be a reduction, and in fact, the amount could actually increase.  The min flood insurance is $308, and the max is over $6500.  That's a big difference.  2.  We could get the seller to lower the price enough to offset the monthly payment.  The buyer is using the DSHA first time home buyer Bond program which carries a rate of 4.25%.  At that rate, the home would have to be about $40k cheaper to offset that much monthly payment.  3.  We could get the seller to pay additional money toward the buyers closing costs to buy down the interest rate.  At a reduced interest rate the payment would go down, and so would the total of payments on the loan. 

As it turns out, option 3 was ruled out immediately.  While probably the best idea, the BOND program cannot be bought down further.  It's against the rules of the program.  What we are left with is options 1 and 2.  It turns out that we are going to try a combination.  The sellers are going to pay for the flood certificate to see if the property can be re-rated.  Hopefully that will negate 'some' of the payment issue.  We will then talk about trying to offset the remainder with a price reduction.  If that doesn't work, the buyer has a choice to make.  He can opt to keep the home and pay the higher amount, or he can request a release from the contract on the grounds that the stigma to the property was undisclosed.  We'll know more about what happens on Monday.  Until then........

Day 28

Well, I've seen everything now.  We were able to successfully negotiate for the seller to do a price reduction offsetting a large portion of the flood insurance to help the buyer stay in this house.  The sellers had a paid off home and just want to be done with the transaction.   Where we ended up is that the sellers agreed to reduce the sales price to 142,000.  That's 16,000 off the original sales price.  So now the buyer has managed to get a single family home in New Castle Delaware that is about 1500 square feet.  4 Bedrooms, 2 full bath, with a large back yard for $142,000.  While this is going to hurt the value of the homes in the neighborhood for a while, the buyer got a fantastic deal considering that the home had already appraised for over asking price.  So in summary, he walks in the door with $23,000 in equity, a payment of right around $1000 per month.  At an interest rate of 4.25%, the buyer will save $45,000 over the life of the loan in interest because of the massive price reduction we got for him.  It couldn't have gone any better.  He got exactly what he was looking for, at about 20% below market value.  He has VA financing so he doesn't have to put any money down, and with the seller assistance that we were able to keep in the deal, he'll show up to settlement with almost no money out of pocket, and may even get a check back for money he had laid out initially for inspections, etc.  We're still waiting to settle, but it would appear that this can be chalked up to another huge success for the Morris Associates and DelawareHomeGallery.com buyer agency team.  

Until Next Time...Happy Hunting!