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I think we'll be making an offer on a house tomorrow and this is the second house we've ever bought. The last house we bought for full price because there was nothing that needed work on, the price was below comps in the neighborhood, and we knew it would sell fast.
This current house we're looking at is listed at a very reasonable price and below some of the comps in the neighborhood and is in a great neighborhood (right where we want to be). The kitchen is outdated, there in no dishwasher, no air conditioning, the roof looks like it might need some TLC, and it was built in the 1920's. So obviously we're going into this house with some substantial expenses that are must haves. The house has only been on the market for a week and I think it's a pretty fair price. Do we offer full price? Can we offer less in hopes that taking these factors into account it's fair to offer less? How much below an asking price is ridiculous? I would LOVE some advice from people who have bought homes or deal with this type of thing.
I'm so sorry I've been dominating the board. Thanks for being so wonderful and helpful!!!
I've given full price for both of the houses that I've bought because I thought they were good values and wanted them. In this market, I doubt any seller is overpricing a home.
If you offer $10,000 below the ask, and they get a full price offer the same day, you'll lose the home.
So, I think the bottom line is, if you think it's a good value and can afford the needed repairs and upgrades, offer full price and be done with it. Life is too short to haggle and maybe lose a home you really love. A car? Sure. There are lots of cars to pick from. But there's just one of the home you want!
My $0.02.
Last edited by Diamond Dave; 07-26-2008 at 07:17 PM..
Reason: kan't spel
I bought an older house several years ago (my first) and was in a similar situation. In my case, I was lucky to have an eager seller and she readily agreed with a number of the "have-to" fixes (roof replacement, etc.). She wasn't obligated to take less, but she was willing to because she'd already bought her new place and was eager to get there via a quick, clean (pre-approved financing) closing with me. Because we agreed on what "had to" be done, I simply itemized a reasonable list of repairs and itemized them as a deduction in my written offer.
She wasn't obligated to accept, though. And if someone offered more, she certainly would've had every incentive to take it. Ironically, when I sold the same house, I took the second best offer (of six) because it looked like a "cleaner" transaction that wouldn't get held up with after-offer haggling.
Older houses are great -- often better built than new -- but they're not equipped like new houses, and I'd keep my offer-lowering list to obvious, non-cosmetic and non-aesthetic issues. The more reasonable your list, the more likely the owner will be to do business -- in my experience. Roofs usually must be in good shape to pass muster for a mortgage, the a/c and kitchen issues are more likely the reason the price is below comps.
Do you know if it's the owners' primary residence or if they're downloading an "investment?" That can also tell you a little about their feelings about the place -- and how flexible they might be. If it's their current home, it can useful to write your offer in such a way that the owners feel flattered that you appreciate and want (and possibly need) the house rather than see it as a list of projects that they haven't attended to.
I'm not a realtor or any kind of RE expert -- these are just a couple of things that have worked for me in the past 20 years, the first in a "hot market" and the latter in a slow one.
Good luck.
Last edited by whynot?; 07-26-2008 at 07:31 PM..
Reason: clarification
Sarah,
Your agent should be explaining all of this to you. Yes, you can offer lower and even give a reason if you would like but it is not necessary. Can't really tell you how much lower as I don't know the property and area. You said it is already priced lower then some of the comps in the area. So it may be that they have priced it as it is because of the needed repair. In my area 10 to 15 thousand lower is a pretty good start and the seller will counter offer or they may jump at the chance and take it. No haggling.
I will say that if you go too low on your first offer it can sometimes insult a seller and they won't even bother to counter. I recently had a home listed that mainly needed some TLC nothing major. I was presented an offer that was 1/2 the listing price, the buyers decided to give a reason along with their offer. They claimed the whole house needed to be totally gutted and redone. Yes I can see Kitchen upgrade and maybe the bath. But they wanted the sellers to pay for the total GUTTING by selling the home for half price. I cringed but, I had to make the offer to the sellers. I was instructed not to even return the phone call but to wait until the buyer agent called me. Then I was to tell the agent that they were willing to negotiate but the offer was an insult and to please don't bother submitting another offer as they saw nothing but haggling in the future if not over the price then over something else.
Also if you see it as such a good deal, other may also. With any property there will always be a chance of multiple offers. Even with full price or higher offers the terms of the offer may be different. Financing vs, Cash deal, closing time (1 month vs 3 months) Home inspections (yes vs no ) have to sell your own home first.
In other words:
Couple 1: makes a cash offer that is 10 thousand below list. Close in 2 months. No home inspection.
Couple 2: full price offer, contingent upon financing, want a home inspection, close in 2 months.
Couple 3 want the home badly so they make an offer 5 thousand over list. Contingent upon them selling their home and obtaining financing, want a home inspection and close in 2 months.
Right off the bat the difference in offers is 15,000 but who knows what a home inspection will find. could be more money, maybe not.
Lots of variables. You never know what is going through a sellers mind. Make an offer you are comfortable with. Don't make one that you can't handle if they take the offer just in order to get the house.
Good luck!
They would more then likely take the offer that is the least complicated.
I've only bought two houses but both times I offered less than the asking price, then the seller counter-offered, and a median number plus contingencies were agreed upon.
I see a good number of for-sale signs as I walk from my house to the co-op, and I've only seen one sign change to "sale pending" in the month I've lived here. You probably have more options than the sellers do, so if I were buying right now I'd decide on the max I'd be willing to pay, and bid less than that. Your agent can present your initial offer to the sellers' agent as "firm" or "negotiable."
Wow! Thanks so much for all the insight and advice. It's amazing how many knowledgeable people there are on this site. We were thinking of offering around 5,000 less (knowing that we would've taken anywhere around 8000 less for our house when we sold it- but we got full price! yay ). My only concern is what Diamond Dave suggested that someone else will offer the full price the same day. I'm hoping since it hasn't been on the market but a week, we'll have time to maybe do some counteroffering, but I'm not sure. I definitely understand the sentiment on not being worth the haggling. That was really nice about offering first price on our first house (and recieving full price when we sold it!).
Cdshifflett, I feel like the house is listed somewhat below comps because it's obvious that it does need a little TLC. And I believe we'd be couple #2. We definitely want an inspection, we already have our financing details worked out (pre-approved, down payment, etc.) because my husband works regulalry with our mortgage guy and we'd definitely like to close ASAP which seems like it would work because the house is vacant. We closed on our home in a little under a month!
headnsouth, that's what I'm hoping for is a slight counter offer and just a little bit less (although, full price would be fine too since we've set aside money in saving specifically for home upgrades). I definitely have noticed lots of houses that have been on the market for MANY months, but I feel like the really good ones don't last too long. And I think this one is a really good one.
whynot, how interesting about the "clean offer". I think someone else mentioned that in another thread. I like what you said about the offer written with the list of deductions. And the house is in very good condition in general, so I would be able to keep the list short and reasonable. I believe this was a primary residence and not an investment property. I'm glad you think older homes are often made better. It sure looks like it's in awesome shape for a 1927!
I guess I'll take all these thoughts and ideas with me when we go today and MAYBE our real estate agent will offer some helpful advice. I'm not going to hold my breath though.
Thank again!!!
Hindsight is 20/20. When we bought our prior house in Blacksburg in 2004 it was a seller's market and the house was in one of those sought-after family-friendly neighborhoods. It was being listed for $249K and I think we offered $248K w/ no contingencies other than a $5K home inspection clause. I think it had been on the market about 3 days. When we decided to jump ship from the suburbs and buy a farm just nine months later we listed that house for $271K and we had multiple offers by the end of the first day. I don't think Roanoke is that kind of market, and particularly not now, but if your gut is telling you it's worth the asking price then maybe - as you say - it's worth offering slightly lower. If its listed for $125K then offer $120K. My gut feeling is that everyone in a buyer's or even a balanced market bumps up the asking price about +/- 5%. If someone offers the asking price, wonderful. But if someone offers 5% lower then why lose that potential buyer? My experience is they usually counter and split the difference.
If it is an undesirable piece of property or it has unusual characteristics then I think there are more opportunities to offer 90% of asking price (or lower). If the entire house has been DIY'd by a moron and everything needs to be redone to bring it back to the neighborhood standard than that would be one example. Or if the house is the last house on the block with knob and tube wiring but it's priced comparably to those modernized houses then that's an example. Or a house that's been sitting on the market for twice as long as everything else. That was our experience with our farm. It was listed for $825K w/ 38 acres, an indoor riding arena, an outdoor ring, fenced pastures, a 10 stall barn, tack room, wash stall, and a massive 5 bedroom williamsburg inspired wood moulded brick colonial with a basement bigger than our last house. It was worth WAY more than asking price. I mean WAY more. But I was able to conduct some internet research on the sellers and I found out they were on the doorstep of foreclosure (thank you virginia.gov!) so I knew the sellers were pretty desperate. I also knew, because of some information purchased from MelissaData.com, roughly how much they owed on their own mortgage. So I offered $775K and the next day they countered with $785K which I expected and we accepted that.
We got it! We offered 9,000 less than the asking price, and they countered and we did and we ended up getting it for 5,000 less. We were expecting to pay right around the asking price which gives us an additional 5k in addition to the money that we have set aside for the renovations. I actually took a lot of the advice on here and when the real estate agent suggested writing in the offer that the sellers should pay for the home warranty we were going to buy I said "do you think that might deter them since it's not as 'clean' of an offer?" and she said "hmm, that's a good point." During the whole process things I'd read on here kept running through my head. So we made a very clean offer and it was accepted and we close on the 14th. It's kind of cool too because my husband I both graduated from Radford University and the guy we bought the house from is a professor at Radford. It's a very cute Craftsman style home (in SW Roanoke City) which I've always loved and the houses on the street are so pretty and well taken care of and I'm SO excited. I can't believe I'm going to be so close to downtown Roanoke. I can't wait to find out all the things ther are to do there! Sean, it sounds like you got an incredible deal and you're going to make a huge profit when you sell! Ooooh the houses I could've bought with that kind of money.
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