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I wanted some advice or just thoughts about a house we're going to place an offer on.
Some background information: We're in Northern California, and we're looking at an area that has had declining home values for the past 6 months. There have been many foreclosures and short sales, and homes have been staying on the market for 6 months or more. In the particular city/county we've been house hunting in, few homes have sold over $500k in the past two months. Those that have sold are either much larger (4+ bedrooms) or in more upscale areas of the city. We're both professionals with well-paying jobs, and we've been pre-approved for a $500k loan.
At any rate, we found this home that we like. It is not a stretch to say that it is simply the best-looking house in its neighborhood/vicinity. It is 2 bedrooms, approximately 1400 square feet, and has a decent sized lot.
The asking price is $600k. The house started at $650k in November, and it has since dropped in price twice. In February, it was listed at $625k, and in March, it was listed at $600k.
The owner of the house is the listing agent. We assume she's an investor or landlord because she owns at least 10 other properties in the same city; some are small apartment complexes.
We're considering offering $500k. I know it's a lowball offer (almost 17% off asking price), but the city/neighborhood isn't hugely desirable, the home is near a drug treatment center/halfway house, and all other home values have dropped considerably since this housing "meltdown" began.
Our agent has spoken with the listing agent, who seemed to say that $600k is probably as low as she'll go. But we also got the impression that she hasn't gotten any other offers, and it has been on the market for a long time.
I'm curious to hear what anyone else has to say about this situation. If she's investor, I know that some investors buy a piece of property, and use that property's equity to purchase more, and so on. If she's overextended, then I feel like she would be more willing to cut the property loose due to property taxes and the cost of maintaining it.
If she's a real estate agent, she must know that homes in the area have not sold for more than $500k, typically. Yes, the house is nice, but its location is not nearly as nice.
Any advice? Has anyone dealt with a similar situation? Does anyone think we have any shot at all?
offer what the comps say is a fair offer. if you feel that 17% less is fair then offer it. you have to start somewhere. i offered 21% less on my house (and got the house for 15% less - not in CA). just out of curiousity, why would you want a house that is located in a less than desirable location? that drug treatment center is probably not going anywhere.
Because the median home prices in more desirable areas are between $700k and $1 million
We don't have children or plan to have children, so quality of schools isn't terribly important. Of course, if we did have kids, I'd certainly want to be in a very safe, nice neighborhood (without drug treatment centers), but those aren't the circumstances.
As such, we save a good deal of money and buy a home we can enjoy.
It really doesn't matter whether the seller is an agent or not. So treat it like you were making an offer to any home owner.
The seller of a home will naturally want to get as much money as they can for their property. You as a buyer want to buy at the lowest price.
You and your agent should study the comps to see what the current market value is today, and then determine your top dollar. You should not convey to your realtor what your top dollar is. Your realtor's job is to try and get your offer accepted.
The verbal discussion with the seller by your agent may not mean much. The seller should not disclose what he will take for the property, so don't read anything into what he says at this point.
Determine your offer and have your agent present it have him prepared to justify the offer with the comps in hand.
Gee, I don't miss Northern California (at least not the high real estate prices!). Wow, $600k for 1400 sq feet and 2 bedrooms. My neighbor has her 3,000 sq ft home on the lake for sale at $549 - but we're in Spokane, WA not N Cal.
Make an offer. Keep in mind that when you go to get your loan your lender will require an appraisal to be done. Hopefully you have at least 10% for a down payment because lenders have dramaticallly reduced the maximum amounts they will lend in the "declining markets."
The fact that the seller is the listing agent and/or an investor is irrelevant to the transaction. The value of the home is pretty well determined by what has CLOSED recently in the neighborhood (make sure you ignore LISTED properties in your analysis - if they haven't sold they don't count).
Good luck.
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