Wednesday, September 28, 2011

Plan Number 2,673

I have been racking my brain trying to figure out how to raise enough cash by Saturday to be able to bid on that cheap house. Finally it dawned on me....401k loan. That doesn't mean I have to do a 401k loan. All I have to do by Saturday is provide proof of funds. I just show them my 401k statement and bingo, I can submit my offer. That will give me more time to think up some creative financing or find a loan. I could do a 401k loan and then pay it back with a home equity line of credit, or just pay myself back. I'm still weighing the pro's and con's.

My realtor wants me to tell the agent from the other house that I want that I am bidding on this other house. Is that necessary? Do I have to disclose that I am trying to buy a different house? I was hoping that I wouldn't have to stop the process with the short sale because I don't have a lot of money to use to bid on this second house so there is a good chance that I won't get it. I would hate to lose both houses.

9 comments:

Anonymous said...

Careful. Some lenders do not want to see any part of the downpayment borrowed, even if you are borrowing it from your own funds. As long as payback is mandated by the terms of the 401K then it will be considered borrowed. Can you just withdraw from your 401K for this purpose or must it be a loan?

The disclosure question is tricky. Technically, the agent works for the Seller so the agent might feel some obligation to disclose the second offer.

Most mortgage brokers deal with secondary market sellers and not lenders who hold their own paper. Have you asked the listing broker for advice? Most of the time there is one broker in the office who handles the bank's REO properties and they quickly get to be very good at knowing alternative financing sources.

Daizy said...

Anonymous, the 401k loan plus the cash on hand would cover the entire purchase price so no lender needed. It would be kind of nice to not have to have a bank looking over my shoulder. My banker did say that after I purchased the house I could get a HELOC to either pay my 401k loan back or make improvements.

Am I allowed to talk to the listing broker without telling my agent? I hate all these rules.

Anonymous said...

Fabulous that you could be in a position to pay cash!
The Heloc part is also tricky. Most of the ones I see in my area are variable rates, definitely not something you'd want. Also, some Heloc lenders prefer to be in second position and won't write a first. Still others require a minimum of $50K for the best rates which means your house would need to appraise out higher. Then there are the tax ramifications to think about - check with someone to see if you can write off the interest if you don't use the Heloc for improvements to the house.

I think whether you contact the listing broker or not depends on your comfort level. Most agents don't like you speaking with the listing agent because they don't want the listing agent to steal you as a client, not because there are any rules against it. The only rule would be that if after speaking with you, the listing broker wrote up the Purchase Agreement leaving your agent out of the commission split because he was dealing with you directly now, then you get into who was procuring cause of the sale and who deserves the commission. Happens more than you'd think it would. But as long as you make it clear to the listing agent that you are having your agent, Ms. X, put together the P&S and just have a quick question about financing, you should be fine. Your agent probably won't like you contacting the listing agent but perhaps it will inspire her to be more assertive on your behalf.

Lizzie @ her homeworld said...

Just dont end up buying both unless that is what you really want.........

Petunia 100 said...

Are you wanting to buy both houses? If so, which would you live in? Do you have any pictures of the 50k house?

Daizy said...

Anonymous, I feel like I should read a book on real estate etiquette or something. So many rules and practices that I don't know.

Daizy said...

Lizzie, I decided that buying 2 wouldn't be bad but I doubt I will get them both.

Daizy said...

Petunia, yes, I decided that I want both. I'll see if I can post some pics today.

Anonymous said...

Daizy - that is your problem LOL. Real estate is not an etiquette based business, especially the REO division. Those contractors or investors are wheeling and dealing for their own best interest, and not according to protocols and etiquette standards. I don't get the idea that your agent is at all familiar with, or connected within, the REO biz. The next time you go house shopping, try picking out the agent in an office who is loud, pushy, has a desk overflowing with offer sheets, an appointment book filled with closing dates, and whose phone never stops ringing. This is the dealmaker you need and probably the type of agent a nice person such as you would shy (run) away from. You don't need to change the polite and honest way you negotiate, but in the REO world neat paperwork and polite phone calls isn't going to be enough to get you the deal.