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This is our first time buying a home. We live on the Central Coast of California. Currently, there is a home that we are considering and the asking price is $374,000. We don't think it is worth that much and want to offer $335,000 plus seller pays closing costs. We would probably go up to $350,000. The seller owes $340,000 on the house.
Question: How likely is it that they might accept an offer for less than they owe? What is considered a "reasonable" offer? The house next door to them sold for $343,000 last month. The house we are looking at has new appliances, but that is about the only difference.
More importanly, what's the inventory situation in the area? How long has the house been on the market?
I'd suspect the area in question is like most of CA where there still needs to be a major haircut in prices (and a major reduction in inventory). Is that the case??
A "reasonable" offer is one that the seller will accept. To me, this is business. If he was a fool for buying at the peak and now he wants to sell, that's his problem. You want to buy the house for as little money as possible.
The inventory situation: there aren't a lot of homes for sale in the neighborhood that we want, but there are a lot of homes for sale in general. Also, pretty much all of the homes are just sitting on the market because the sellers haven't come to terms with the fact that their homes aren't worth what they were a few years ago.
The house has been on the market since the end of May. They started it at $484,000 (WAY TOO MUCH) and have reduced it to $374,000 (I'm not sure when they reduced it)
We just switched agents today because our other agent did not want to make the offer we wanted because he said there was no way that they were going to accept an offer for less than they owe. Our feeling is that it is up to the seller to make that decision - it is up to our agent to make the offer that we tell him to.
So, we are looking at a couple more properties tomorrow, but will likely want to go ahead and make an offer on the one I was talking about.
When we got prequalified for our mortgage, the agent said that houses are being sold for about 8% to 10% off of the asking price. 10% off would be $336,600 which is pretty close to what we want to offer. We feel that it wouldn't hurt to at least make the offer considering: 1) The house has been on the market since May 2) We are already prequalified for the loan - we just have to find the house 3) We don't have to sell our own home and can complete the sale at any time the seller wants and 4) the house next door sold for about the same price we want to offer just one month ago.
What do you think? Any tips in general on making an offer besides leaving emotion out of it?
Honestly, since they lowered the asking 25% they probably are coming to grips w/reality. I like the direction your going on this. Sounds like you have your ducks in a row here. Look, they'd probably be tickled to death that they have an offer from a QUALIFIED buyer w/no contingencies. 335K sounds like a nice starting point however, don't be surprised if they counter for like 360K or something...
I'd hold my guns and put an expiration date on the offer to put the screws to them. Just my .02....good luck.
If it is as bad where you are in CA, as they say in the state as a whole, then that might not be a bad offer. I hear that CA's market is a lot like Florida's if not worse and in Florida sellers are throwing in vacations and cars to entice buyers.
So if they can sell their home with a minimal loss, then they just might jump on it. When it comes down to it, the worst thing they can say is no. In a bad market, they should definitely counter, so atleast you know where they stand.
I don't have a good feel for the market. All I know is that houses are just sitting there on the market. It is not as if there are a TON of houses on the market, but the ones that are on the market are not selling.
I figure I'll make the offer and see what they do with it. I feel better about the offer after reading your advice. Thanks.
BTW: This is a total newbie question, but what do you mean by "no contingencies" - does that just mean it's not contingent upon the buyer having to sell their own house?
I don't have a good feel for the market. All I know is that houses are just sitting there on the market. It is not as if there are a TON of houses on the market, but the ones that are on the market are not selling.
I figure I'll make the offer and see what they do with it. I feel better about the offer after reading your advice. Thanks.
BTW: This is a total newbie question, but what do you mean by "no contingencies" - does that just mean it's not contingent upon the buyer having to sell their own house?
Yes, well that's the way I interpret it when I hear it. Before last year, nobody really worried about "contingencies" in general because most assumed the buyer would sell their house no problem. Now as you know that's not the case.
Just remember, its difficult, but most importantly, keep your emotions out of this deal. 10 years from now the seller won't pat you on the back for feeling sorry for him, so just get the best deal you can.
No one worried about first time buyers "during the Peak" of 05-06. Now we should all be worried about the sellers today? Give me a break!
Well you should have the typical contingencies still in there such as: a home inspection, and it appraising for the sales price or greater. But it is a releif to a seller if they don't have to worry about you selling your home to buy theirs.
I would caution about thinking about percentages when making your offer. Instead, look at the sold comps, look at how old they are, then look at their trend. After all of that, take a little more off your offer and then present it.
The reason I caution against thinking about 8 or 10% under their price relates directly to their price. What if they're so high that the comps are 25% under the asking. That appears to be what happened with these sellers when they first listed the house. If you had offered them 10% under their asking price at that time, you would have grossly over paid for the house.
I would say that these folks are prime for selling their house at this point. It's been on the market for a while and they've cut their asking price by a significant amount. They've come to grips with reality. It shows that they are no longer fishing for a sucker and that they're at least somewhat motivated to sell the property.
As for considering what they owe on the property, just forget about it at this point. You never know about their motivations and their mortgage status. It may eventually come into play as a bottom line in the price they will accept for the property, but cross that bridge at that time. You might just find someone who's late on their payment and about to go into foreclosure. Accepting a short sale, with the lenders approval, might save them more in the long run.
So, good luck with your negotiations.
BTW, are you looking in SLOB or the surrounding area? Just curious.
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