Advice on offer for house at the top of our range (contingent, disclosure)
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I am in a sales profession, but I know only the basics about the real estate market. I would appreciate any advice here.
We are currently looking for a house in the Atlanta area. My wife and I decided on a high end budget of $300K. We were pre-approved for $325K on a house that we loved. We ended up not making an offer when they admitted to structural issues that weren't on the disclosure.
We have done the math, and we can probably stretch up to $350K based on our income. Our credit is very good, so that isn't much of a concern. That said, $325K is the highest we were looking to go.
We went to see a property today that has been listed for just over a month. It currently sits at $350K. It is in a desirable area and hasn't been under contract yet. We believe that it is probably slightly overpriced at the moment, or it would be gone by now. However, we loved the house and think its perfect. We want to at least give it a shot.
That said, we have a few things working against us:
-We currently own a home. Its in a hot neighborhood in which we have seen houses going under contract within 1-2 days. Still...the offer would be with the contingency of selling our home and we realize that's a disadvantage no matter how quickly we believe our home would move.
-We would need to ask for $5K in closing costs to avoid being cash poor after we sign.
I'm debating between two strategies. Both would be contingency offers for the house we need to sell.
A) Offer $325K or $330K, asking for closing costs. Explain that we understand this is a bit low, but this is truly our max and just thought we'd take a shot.
B) Plan for the counter and offer something more to the tune of $315K with closing costs.
Not really sure which way to go. My fear with option A is that they politely say no thank you and don't counter because we've said this is our max. (However, I truly think that should be our max). My fear with B is that they don't even bother countering because it a is a $45K lowball when you include the $5K in closing costs.
Before addressing tactics, have you asked your agent to do a CMA to determine the market value of the property? Without knowing that, you really don't know if $325K is a lowball offer or a reasonable one.
Knowing what's going on in your market from what I hear and reports I read, neither of those options is a "good" option. You need to get with your agent and actually come up with a good option, and if you're not willing to pay for the house, you're in over your head and should be looking at lower-priced houses.
Before addressing tactics, have you asked your agent to do a CMA to determine the market value of the property? Without knowing that, you really don't know if $325K is a lowball offer or a reasonable one.
He has sent us a list of comparable sales in that neighborhood. They vary by quite a bit. We've seen other houses, even on the same street, with similar square footage and features that were recently sold anywhere from $309K to $400K.
He has sent us a list of comparable sales in that neighborhood. They vary by quite a bit. We've seen other houses, even on the same street, with similar square footage and features that were recently sold anywhere from $309K to $400K.
That's a pretty large range for truly comparable homes on the same street but, if that is right, it looks like they split the difference, too, which may mean that they aren't so sure of the value, either. If your agent can make a case for a lower number, they might consider it more seriously than you might expect. If they don't go for it, ask them to keep it in their pocket, so to speak. If nothing else comes their way and they decide to lower the price, your low price might be regarded as reasonable at that time. The way I see it, your problem isn't the price as much as it is the house to sell. In a hot market, sellers don't want to put up with that unless the offer is extremely good in all other aspects.
If you think you will be able to find another house fairly readily, you should put yours on the market now, get an offer, and then go make offers contingent on your closing. At least in that case, the seller can see that you have a contract and a closing date.
1) Never count on selling your house fast. Things can happen that you cannot plan on, and the pressure to buy (and stretch your loan amount) could cause you to price your own home incorrectly.
2) If you will be THAT cash poor that you cannot cover closing costs, you probably should not stretch that much. There are moving expenses, especially if you are moving across state lines, and set-up costs that you cannot anticipate, like repairs you don't count on or just new stuff you want.
3) Having a contingency on the sale of your home will be a big negative. Your sellers would probably place a kick-out clause on your offer, which means if they get another offer you will have a time period, like 24 hours, to remove your contingency.
You really should sell your home first so you can be ready to bid and also have a very concrete idea of how much you are bringing to the table.
I will try to be constructive, but you need to be realistic...
Quote:
Originally Posted by mjedwards409
I am in a sales profession,If your income varies due to commission this is useful info, otherwise, not so much... but I know only the basics about the real estate market. I would appreciate any advice here.
We are currently looking for a house in the Atlanta area. My wife and I decidedHuh? on a high end budget of $300K. We were pre-approved for $325K on a house that we loved. We ended up not making an offer when they admitted to structural issues that weren't on the disclosure.
We have done the math, and we can probably stretch up to $350K based on our income. Our credit is very good, so that isn't much of a concern. That said, $325K is the highest we were looking to go.So you sorta can afford more, but feel comfortable staying under your limit, that is important.
We went to see a property today that has been listed for just over a month. Generally unmotivated sellers do not list homes around Christmas time. use this into to your advantage... It currently sits at $350K. It is in a desirable area and hasn't been under contract yet. We believe that it is probably slightly overpricedWhy? at the moment, or it would be gone by now. Is the market really that hot??? However, we loved the house and think its perfect. We want to at least give it a shot.
That said, we have a few things working against us:
-We currently own a home. Its in a hot neighborhood in which we have seen houses going under contract within 1-2 days. Even in the winter? That is not usually the case... Still...the offer would be with the contingency of selling our home and we realize that's a disadvantage no matter how quickly we believe our home would move.True
-We would need to ask for $5K in closing costs to avoid being cash poor after we sign.This seems at odds with your statements above that you could go up to $350k, "cash poor" is not consistent with being able to afford $50K more than you are pre-approved for. You need not to try to "fool yourself"...
I'm debating between two strategies. Both would be contingency offers for the house we need to sell.
A) Offer $325K or $330K, asking for closing costs. Explain that we understand this is a bit low, but this is truly our max and just thought we'd take a shot. No sane seller cares what your "max" is. They care if you can actually buy the house. That means in hot markets contigent offers are routinely rejected. If the seller is MOTIVATED because of unusual circumstances (which might be the case if they really did list around Christmas time...) they might be more willing to accept a contingent offer BUT the price has to be supported by SOMETHING
B) Plan for the counter and offer something more to the tune of $315K with closing costs.You seem to be "throwing darts" -- that is not a strategy to buy any house, let alone one in a hot market. Be serious! If things are hot a sane seller will not counter such low offer...
Not really sure which way to go. My fear with option A is that they politely say no thank you and don't counter because we've said this is our max. (However, I truly think that should be our max). My fear with B is that they don't even bother countering because it a is a $45K lowball when you include the $5K in closing costs.You need DATA! If your buyer's agent can supply the seller's agent with a nice comprehensive list of sold comps that support a price you should present that with your offer. Don't worry about telling the seller what your "max offer" is -- that is not a strategy! Similarly the double whammy of a "buyer" with a contingency AND a request for $5k in closing costs is just goofy -- if your house sells for what it is worth will not net enough to cover the closing on the new home?
Any thoughts are appreciated here!!
I hope you find the above helpful. Don't try to "over think" any thing. Don't confuse your "target max" with what you REALLY can afford. Don't assume that your own ideas about why you were pre-approved for a certain amount match reality -- if your income does vary it is well with the lender's prerogative to not allow you to "overspend". If you do not have much 'cash' for closing on hand on now you MIGHT be OK if your house sells for a nice profit, right? BUT realize that is the market is "hot" no seller is going to accpet a contingent offer -- can you perhaps sell first? How about selling and then leasing back for a month or so?
You're in a good/hot market. You even said your own house would sell quickly. Why would a seller take $315k for a $350k house in a good market? And you writing an offer and saying "that's as much as I can afford" means to the seller that you need to be looking at different houses, not theirs.
Don't listen and think what is the right price - just offer what you think you are willing and can pay for this specific house. DO NOT explain/ agree your offer is a low ball offer - it's not. If not, why the house is still on the market.
We experienced it so many times when both buyer and seller agents were rolling their eyes at our price, took few days and came back with acceptance of our (3 days before) low offer. You never know.
When we are talking about $300K house and shortage of $5K in cash if seller is not contributing to closing costs - doesn't look like you are in good shape. I would rethink either your downpayment amount or your top rage of the house. And keep in mind most lenders want to see money on your account to proof you can pay for house for few month in case you lose your job.
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I will try to be constructive, but you need to be realistic...
