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53T and others..making an offer on a house..how low do I go?(16 posts)

53T and others..making an offer on a house..how low do I go?CARBON110
Dec 24, 2003 9:09 AM
Thanks for everyones information on housing recently. So, now I have found a place I really love. The market in the area is close to dead and the location of the house is way out there but has a nice view. Its custom built house and is listing for 490K Its not finished and the real estate agents son in law built the place and does not have a good rep in the area. But I think he sub contracted. Any way the quality and materials are superb. However its not worth even close to that amount in my approximation

So what kinda offer do I start bidding at for a house that muuch in a market like this? How many times to you go back and forth with the builder/agent negotiating? 2x?3x?

Thanks everyone :D
Do your research...Brooks
Dec 24, 2003 9:31 AM
Check with other realtors, multiple listing, local building inspectors, for an idea of the comparable worth of this house. A good building inspector can also give you an idea of how much it will cost to finish the house. The seller may not move much at all on the price because he built it. We had a similiar situation when we were looking several years ago. The couple that owned the house alos built it themselves and there was a lot of sentiment attached to the house. But it was overpriced, substantially, for the neighborhood and area. We offered a reasonable amount without trying to undervalue the house, they didn't really move off the selling price, so we passed. Ended up with a slightly older (15 years), substantially bigger house in a better neighborhood, for quite a bit less.

Good luck,
Brooks
from a sellors perspective:4bykn
Dec 24, 2003 10:57 AM
When we sold our house 5 years ago one prospective buyer low-balled an offer hoping we were desperate to sell. From that point on any offer from him was rejected if it wasnt our asking price. I'm not saying this works in all transactions, just don't offend the sellor with a ridiculous offer.

Ride in Peace...Mike
from a buyer's perspective:MikeBiker
Dec 28, 2003 2:45 PM
I put in a offer that the realtor said would insult the sellers. He called back the next day and in a shocked voice said that they had accepted the offer. Sometimes low-balling works.
from a buyer's perspective:4bykn
Dec 29, 2003 6:37 AM
Wow, you must have caught the seller in need of a quick sell. Congratulations (and I sincerely mean that).
the gamemohair_chair
Dec 25, 2003 12:16 PM
The best place to start is to take their price and subtract what you'll think it will cost to fix things you want fixed. In other words, if the roof is bad, subtract $10-20K, and so on.

Then, you also have to decide if the seller has jacked up the price with the assumption that people will come in lower and he'll get his real price somewhere in the middle. Your realtor should be able to tell you how long the place has been on the market and what the previous asking prices were. If a place has been out there for a long time and the price keeps dropping, clearly it was overpriced to begin with.

It's a game, and you need to play it. Your realtor should be a big help here. This is part of their job, and if yours isn't helping you, find another one. A long time agent can really be an assett, because they'll know the area and they'll know the agents. A lot of times, the seller's realtor will drop hints about what the seller really wants you to offer, but this is an agent to agent thing. Expect to go two rounds (you offer, they counteroffer, you respond, they accept) if your offer is serious and the seller is serious. Three rounds is not unusual, but any more than that might mean you've descended into trivialities.

One must do is to go down to the bank and get yourself prequalified for a loan. This will show the seller that you are a serious buyer, and it will give you a better picture of what you are able to offer.

Good luck.
another question for you then please.....CARBON110
Dec 25, 2003 5:13 PM
I plan on paying about half in cash and the rest through the bank. So not to worried about being pre-qualified BUT what they are asking is ALOT more then what its worth. By that I mean its a brand new house and a custom one at that. It doesnt need anything excpet for the 3rd floor (basement) to be finished and thats not a big concern to me. Then just trivial things like vanities and such. Otherwise Id move in next month. On the other hand, it doesnt have a garage,pool, or anything like that. It has til,porcelin,custom wood work,fireplace,radiant heat et5c etc. These things I can attribute the price in jumping BUT not that much more.

For what they are asking I can get anything anywhere. The place I want though isnt even anywhere other then far from everything and thats why I want it. It has a view etc. but the builder is the realators son in law. So I think I might wait out 4 months and see if they drop the price. The area is known to be kinda expensive but is quite frankly dead as far as people actually buying places. Its a ski area so its not quite "beverly hills" but its not cheap either. Also, the place is like 10 miles from the Mtn so its not Prime realestate by any means. As a matter of fact the location is beautiful but not near anything really
what to domohair_chair
Dec 25, 2003 8:36 PM
This is where you'll need a good realtor. One that is a dealmaker. Discuss all these concerns with your realtor. Tell them you want to make an offer, but it's overpriced and you are afraid you'll be seen as a lowballer. If your realtor is any good, he or she will contact the selling agent and say they have a well-qualified buyer (50% down is very well qualified), but the place is overpriced and you can only offer $X. Your agent should then suggest to the seller's agent that the seller drop the price, or that the seller at least seriously consider the offer and counter. If it is obviously overpriced, the seller's agent probably already knows that, so you may find a good ally. If you are dealing with good agents and a reasonable seller, you should get the deal done. In my area, offers are typically done this way--agent to agent contact first, before the official offer is written up.
Agree, but use caution53T
Dec 29, 2003 7:03 AM
Agent to agent phone calls can cut through a lot of guesswork and avoid misrepresentations. However, remember that both agents are working for the seller, neither is working for you unless you have hired (paid for) a buyer's broker. This is an unusual step, so I assume you have not done so.

Buyers, particularly inexperienced buyers, are often distracted by lumber and paint issues such as unfinished basement, incomplete landscaping and other trivialities (such as the reputation of the builder, and his relationship with the agent). The real value of real estate is the ground it sits on. You say it has a great view, this is irreplaceable, but make sure it is permanent, i.e. there is of possibility that some other developer will build a structure that will block or mar your view. Take a close look at the roads around the house, and the road network servicing the house. Is there substantial traffic out your front door, or is it a cul-de-sac or loop with essentially no traffic? Are you likely to be stranded in or out of your home by snow blockage, flooding, etc.? How is the noise? Can you hear traffic from the nearest arterial road, or railroad? How about when the wind is blowing the other way?

You have to become comfortable with your assessment of the lot, separate from the house. The value of the house (the "improvements") is far easier to estimate, divorced from the location, even if it is a custom build.

Your question: low ball offers. After doing some basic research, I would never hesitate to offer what I thought a house was worth. Your opinion, as a buyer with 50% cash, is just as valid, if not more so, that the seller's opinion of what the house is worth. How long has the house been on the market? Around here in Massachusetts, 4 weeks is a very long time, you mention waiting another 4 months, so this is a little foreign to me. In my opinion, if a house doesn't move in a month, the asking price is obviously way to high. I wouldn't hesitate to offer 400K on a 490K listing, if I thought it was the correct value. You will get a counter offer, if they are serious about selling. If they are not serious, what have you lost?
another question for you then please.....innergel
Dec 29, 2003 12:11 PM
You should be able to work out a reasonable offer for this place based on land values in the area. Your realtor can get you a list of all properties sold in this same area for x years and you can compare what they are asking to what is reasonable. It would have to be something outrageously above everything else around to command a premium over the neighbors places.

Once you have the land/lot value established, you could call a couple of custom builders and ask them to give you a ballpark figure for building a similar house for you. They should be able to work you up a good figure to compare against what is being asked. The upgrades on the finish will increase the price, but once again, they would have to be huge upgrades to command a substantial price increase.

When you've worked out the land value and the build price, you can make an offer in the same range, which is completely fair. If the builder is sentimentally attached to this house because he's built it, and he thinks this deserves a premium price, then he's being unrealistic of his worth in the market and the true value of the house. At the end of the day, it's just a house and a lot. There are plenty more out there that are just as nice that can be had for a fair price.

Also remember, if you overpay because you've fallen in love with "the house", then you are going to be in a more difficult position when/if you try and sell in the future.
Excellent points.......CARBON110
Dec 29, 2003 1:24 PM
Allow me to add a few things. This builder must be paying a mortage. The place has been for sale at least for 3-4 months and the area being pretty slow in buying real estate lately I really can't conceive of it going soon. The finishing stuff doesnt bother me at all. I know it will get down. However, the builder, as I have become very aware literally has apparently a bad rep. for "short cuts" I interviewed quite a few people who offered this info and had nothing to gain. I am going to have an out of area builder inspect the place myself and find out if the guy (builder) sub contracted.

but for 400K here or even in Burlington where real estate is pretty hot I could get alot more house for the money. That's why I am even thinking of offering high 300s since as much as I want the house Im not about to piss my $$ away..not30-50 grand anyway. So offering 100k less then the list is a pretty low offer right?

thanks again your opinions have been informative
Excellent points.......innergel
Dec 29, 2003 3:42 PM
The builder's financial position in this deal should be of no concern to you. If this guy is having to pay a mortgage on a house he built on spec that hasn't sold like he wanted, how is that your concern? Remember that YOU have the power in the deal, not him. You have cash in hand and are ready to buy, IF the price is right. If he won't meet a fair price you're willing to pay, then you go find something else. If this house was such a great value, then why hasn't it sold in 3-4 months?

We went through a similar deal a few years ago when we bought our house. We found a nice house in the neighborhood we wanted in our price range and made an offer that was accepted. After the inspection we learned that the roof was uninsurable and was going to cost $10k to fix. We asked the home owner to replace the roof or reduce the price accordingly. We haggled back and forth and finally I told them we were going to cancel the contract because we couldn't agree on a price. They pissed and moaned about having a second mortgage, etc. and them having to get their asking price to break even, and that the house was more valuable because "they are building a new Super Target around the corner". I just had to laugh. After we lost this house, my wife and I were pretty much devastated. But three days later another house less than two blocks away had a price reduction and we ended up getting it. It is the best thing that ever happened to us, not getting that first house.

Well the moral of this story is, no matter how much you love the house, there will be another one that is just as good that you can get for a price you are comfortable with. As much as not getting a house you love stinks, it's not worth overpaying for. Do your research on land values and construction costs, etc. Get as much professional input as you can. Use your realtor. That's what they are there for. Take all this info, set your price limit, and make a FAIR OFFER, regardless of what the guy is asking. If your offer is $100k lower than the asking price, so be it. If the guy doesn't take it, then he's an idiot and is unrealistic. Go find another house. It will be there. This is an INVESTMENT for the next 30 years. And as nice as having your dream house is, after a few mortgage payments that are higher than you want, and a couple hundred a month in repair costs for a few years, that dream house will not seem so dreamy. It will just be another house that is sucking up all your extra money. Houses have a tendency to do that anyway. Don't pay extra for that privledge. Don't make his current problem your long term problem.

Sorry for the novel. This subject is pretty close to my heart with the ordeal we went through. If someone else can learn from my ordeal, all the better.

Phew!
Thanks !CARBON110
Dec 29, 2003 7:04 PM
I appreciate you taking the time to write your experince and I have read and reread all the posts. I am consulting the 2 agents Im working with and learning about the local value in the area. Belive me Im on par with NOT paying more then I have to and I can walk away,reluctantly, but walk away if need be. I expressed this appropriately and have maintained the "Im in no rush" attitude to everyone over the place despite having seen it twice no and dream about where all my furniture will go privately LOL !

However, I am overly concerned with the remarks made about the man who may or may not have built the place. Words like " imbecile, never work with him again, you wouldnt believe, blah blah " have been made by half a dozen folk in the area with nothing to gain or lose by making the statements. This is why Im bringing in a private builder for me to look the work over b4 the house is complete so I can see if there have been "corners cut"

Besides, I have everything in my favor...no need to move out of where I am, no pressure no distance issues etc etc

thanks again
Thanks!innergel
Dec 30, 2003 6:42 AM
Good luck with this house. You are on the right track using the private builder to inspect it before you make an offer. Having two agents will help a bunch too. I'd be a bit concerned with those comments about the builder, but if the inspection goes through OK, you'll be fine.

Another thing I thought about last night was paying for an appraisal. Talk to your mortgage company and find out who they use. Pay them to go appraise the house. It's only a few hundred bucks, and is pretty cheap insurance when you are looking at spending $400k + on a new house. They'll give you a realistic value of what it's worth on the tax rolls. With the info you get from your builder and agents, you'll know what it's worth and can bid accordingly.

Good luck. Let us know how it works out.
Excellent points.......Duane Gran
Dec 30, 2003 9:19 AM
I agree 100% about there always being another house. The deal of a lifetime usually comes along every month, but the trick is seeing it. However I do have a nitpick with your statement below:

The builder's financial position in this deal should be of no concern to you. If this guy is having to pay a mortgage on a house he built on spec that hasn't sold like he wanted, how is that your concern?

A buyer shouldn't sympathize with the seller's situation, but it most definitely should be of concern to the buyer. For example, in my last house purchase I knew that the seller had already moved out and was straddled with two mortgages. Every month that the house didn't sell was costing him 1500-2000.

I made my initial offer to move in something like 5 months down the road and I lowballed the offer a little (but not too much). The seller was so distressed about getting me to move in ASAP that he gave me a lot of rope on the price. In truth, I was ready to move immediately.

I recommend for purchasers to know the pressure points of the seller. This only happens if you concern yourself with the seller's situation.
Excellent points.......innergel
Dec 30, 2003 10:06 AM
My statement above was intended to be applied to a pricing or offer situation from the buyer. Meaning the buyer should not pay more money for a house just because the seller is in financial difficulty. On the contrary, you should get a better deal the longer the seller has to eat a couple of extra mortgage payments. Don't underestimate the ass-whipping this guy is getting at home from his wife either. I can just hear it now "you said we'd make $50k on this house, and now you can't even sell it. All our money is going to a house we don't live in, and junior needs braces, and I want a new car, and the washing machine is broken, yada, yada, yada." Quieting a nagging wife can be a big incentive for a seller to lower the price :-)

"A buyer shouldn't sympathize with the seller's situation", as you put it, is a much better phrasing of my intent.

In the end, it's all about doing your homework and negotiating well to get the price you want.