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I'm not seeing the downside here. Make an offer for what you think the house is worth. Be sure there is an appraisal contingency. Let the appraiser come in and be as thorough as possible, nitpick every little thing, tell you that the house is worth your asking price minus 20%. Tell seller to drop the price or else walk away from deal. It protects you from paying too much for the house.
If the other area comps are 30% less than they're asking, offer them 30% less than they're asking and tell them it's because of the comps in the neighborhood. They either accept the offer, counter offer or tell you to get lost. If they accept the lower offer, great! If they counter offer, then it's game on. If they tell you to get lost, then up your offer and try to get them to negotiate. If they're a flipper, they don't have a whole lot of sentiment into the house but they'll be trying for the highest price.
In any case, have your agent write up the contract you want and present it, that's her job, after all.
I've only bought homes to live in and enjoy. In the last 30 years, I've lost money on two homes and made money on two homes. I never thought about making a profit or losing money when I bought any of them.
the house that I am very interested in was a foreclosure that sold two months ago for short money. .......at most, a few thousand dollars worth of work ? And have now put it on the market at over a hundred thousand dollar increase from what they paid.
Many foreclosures I've seen have issues that make them un-mortgageable. Meaning no bank will lend money on it. So cash buyers only.
So lets say a place is un-mortgageable and the best its going to get is $100k. Now lets say the comps are $200k for a similar house in the town. So the person buys it for $100k, repairs the hole in the roof or fixes the no heating system, etc. and makes it qualify for a mortgage by fixing it. And lets say he only spends $10k. Is it worth $200k now? Yup.
A property is worth what similar comps are worth. Period.
If you want to offer $19k below asking, your buyers agent should be putting it in. Even if s/he doesn't think it will work.
Also, if they are asking say $199K and you offer your $19k below and offer to pay $180K and they accept, but the appraisal comes back that it's only worth $150k, you have the right to reduce your offer to $150k {or below if you want to risk it}. That is your prerogative. Of course the seller doesn't have to accept it and may then order their own {higher} independent {or not} appraisal to counter your appraisal.
The ONLY time THAT won't work is IF houses comparable are selling for more than appraisals dictate because of a hot market.
Best of luck, but I'd advise you to be careful to NOT pay too much.
If your agent doesn't want to present a low offer, fire her.
DO NOT offer more than you think it's worth to you and expect the appraisal to save you.
You say there are other houses that have more features and are listed for less, but you are still drawn to this house. You may be focusing on only the bad and not the good. The features you like may be what others in the area desire and the appraisal could be higher than you think.
And, there are appraisers out there who never met a sales price they didn't like. What would you do if a "number hitter" appraised it at full offer price? Are you willing to pay more than it's worth to you?
Offer what it's worth to you and see what happens, then move on, either to another home or to closing on this one.
The house is in Massachusetts. The town is an old mill town, so it has it's issues. One of the typical "stay away from the downtown" when buying a house.
The market around here, we've been looking for a few months now, seems to be ...if it's low listing, it goes very quickly. We have seen other houses come down significantly in price a week at a time when they start out at the higher end.
The other issues is our lender, as mentioned above. We are going USDA for our loan, which means our appraiser will be extra diligent when doing his inspection, esp with it being a flip.
Our agent has already been discouraging when we even suggest making a lower offer than we believe a house is worth. Esp when we know the comps don't come close to touching the price of the house.
We do love this house, and would very much like to put an offer in ...we are just worried it won't appraise higher, or at the offered price and sellers won't be willing to compromise. Or that we pay a lot more than it's actually worth for some paint and flooring.
I would just urge you to be super cautious since this house has had two owners within fairly short period of time and some remodeling work done that sounds piecemeal...
Sewer line especially might signal more serious problems once you start to do a serious remodel
Your agent is required to present your offer to the seller, regardless as to what they think. They may counsel you based upon comparable sales and recent MLS contracts in the neighborhood to gauge the price, but if you want to offer $19k less, do so. However, set a limit in your mind that is not going to be moved, and be sure that you have contingencies on a home inspection and appraisal. If there are any red flags, I would walk away. Don't get emotionally involved with a house that you do not own, since you will invariably pay more, and you will be more willing to overlook flaws that can be expensive to remedy.
I looked at a below market house that was a foreclosure since the prior owners had funny money dealings and walked away with the cash from the house, and it went to auction. The numbers did not work with what the bank wanted and the renovation that was needed. It was subsequently bought by people who had watched too much reality television, who paid too much at auction and tried to get too much when they sold, with largely off-the-rack finishing from the big box stores. That was a strike against them in the DC suburb where the house is located, and the second was employing an army of sub-contractors in unmarked white vans as opposed to an established design-build firm whose sign actually sells houses that are being flipped because of the contractor's reputation.
When the flip was finished, the listing was way over market, initially as a FSBO, and the house sat for months. I toured it at an open house, and was shocked at how someone could misread the prevailing tastes of the area so much. They finally sold it, and by my rough estimates, when the dust settled, they made nowhere close to the profit originally intended. When I looked at it and went to the auction, the house had been neglected to the point where I wanted it for land value, and that was my offer, give or take $50k.
The poor couple who bought the house in record heat, nearly a year after the whole thing began, had an air conditioning repair truck at the house no fewer than six times in two months. My friend lives two houses down, and said that the flip was so inept that they didn't do a proper HVAC upgrade, and there were plumbing problems too, including a main sewer line that failed. Contrast that with a smaller house in the neighborhood that had high quality renovations, like a steam shower in the expanded master bathroom, well designed new kitchen with custom cabinets, and great curb appeal, that was on the market at the same time. The smaller house had two fewer bedrooms and is about 750 square feet smaller, yet it sold over asking price with multiple bids in one weekend of showing, and settled for a higher price than the larger flip with its lower quality finishing.
The number where you want to arrive is not related to what the seller paid in the short sale transaction. Rather, look at the base market price for similar homes in similar structural condition and add for any new features and finishings that increase the value. So, if the house should sell for $175k, and there is about $15k in new value added, your offer of $190k would be appropriate, regardless as to whether or not the seller paid $100k or $10k for the house. Look at the house from that perspective, since that's how your appraiser will see it, as a short sale is not really a valid comparable, unless the entire neighborhood has had short sales. If that's the case, find another neighborhood.
At the end of the day, a house is merely a structure in which you can create a home with your family and friends. You may imagine yourself in this particular house, but don't lose focus as to the overall picture of finding the best property for you at the price point you want to pay. If you let it go because they will not budge on price, consider yourself fortunate in that you can then explore other options, and may have a "what was I thinking?" reaction when pondering the initial house that was lost. And, if they take your offer, and it all checks out structurally, systems inspections, and financially with the appraisal -- enjoy creating your new home.
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All the world's a stage, and all the men and women merely players: they have their exits and their entrances; and one man in his time plays many parts, his acts being seven ages.
~William Shakespeare (As You Like It Act II, Scene VII)
We saw a home in a prime location that was sold for $144K. We were in the process of shopping for a home and met several times with the person who was flipping the home. She initially said she expected to list at $260,000. I was suspicious because that was still quite a bit less than other homes in that zip code/location so looked at a lot of comps and we were prepared to pay around $280,000.
So, when the house was complete, she contacted us and others who had expressed interest in hope that she could avoid listing on the MLS and paying agent commission. We had planned to have a real estate attorney draft our purchase contract and approach her without an agent to have a better chance at getting the house. But, when she got back to us, her price was 300K. Which was much more than what she originally told us she was expecting to ask and more than what the comps supported. There were other homes of the same size in the 300K price range that sold but they were stone or brick and had park-like yards and other great features that this home did not.
When we found out pricing, we started looking at other homes in the 300k price point and found we could get much more for our money so we passed on even making an offer.
Ultimately the home listed on the MLS for $299,000 and did not sell. It is still on the market but now down to $288,000. We are still watching it to see what it eventually sells for.
The lady had us on the hook and, if she had came in close to the $280,000 we probably would not have looked elsewhere. But, we didn't feel like a lower offer would be accepted so chose to let that one go.
What is the real estate market like where you are? Is it a strong seller's market or are homes lingering for a while?
You mean to tell me that putting in a new floor and and some pine cabinets isn't worth an additional $40,000????
$19k lower is not a huge drop from the original price; however, it all depends on the market in that area. Here and in the Chicagoland area homes are being sold for over asking price and about 10-30% more than last year. You need to find an experienced realtor and they will tell you what the market is doing and what that home is worth next to comparable sales.
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