OT Advice Needed: Home purchasing and first offers

[19wisconsin64]

you never know. it's been on the market a while. might be over priced, might be a soft real estate market, might have some undisclosed problem. usually great homes go very quickly in almost any market.

i think you should be flexible with your price, and consider another home too in the area..... you seem committed to buying something, and you are smart enough to be looking in the better areas.

over the long term, 10% or so higher payments will make you back much more....you'll be happier, you'll be in a better house, you'll be in a better..........and the payments are partially tax deductible. most important, real estate begins with location. with this, you will get far more money and enjoyment than your 10% higher price up front.

me.....20 plus years investing in real estate in several states, and 18 years work in mortgages, and a business degree in research. .... real estate junkie...

you seem to know what you want.....just be careful as a first time buyer...buyer beware applies to houses, especially those on the market a long time. 14% is no insult. bigger question...it's not about the deal, it's about what is the best house for you long - term.

good luck!!!! (wait, that's a lie...you make your own good luck through a lot of research....)

[93legendti]

Originally Posted by Nooch

Man, I wish Michigan prices were New York prices, LOL.

Well, these are bungalows, usually in need of repairs, although one was in 100% rentable shape. 800-1400 sq feet, 3 bedrooms, 1 1/2 baths, some without garages and basements (more that can go wrong and they rent for the same price as houses with them and just as quickly-go figure!)

Taxes $1500/year or less.
Working class towns.

I am buying strictly for renting...an altogether different gig.

[MattTuck]

If you're worried about swinging a couple months of the lease, perhaps you do not have enough cushion to be buying a house quite yet... Not that you should waste your money by throwing it at a lease when you've already moved out, but that is something to think about.

As far as the low ball offer, I'd knock it down to 20% off asking. Houses are things. Real estate agents want buyers to have an emotional attachment to houses that support a higher valuation...

That being said, a market is made when a willing buyer and seller agree on a price. It doesn't require that the buyer be mortgaged to the hilt... bid what you can comfortably afford.

[oldpotatoe]

Originally Posted by Nooch

Given the sample size of the forum, I figure it's the best place to pose this question...

Found a house the wife and I really like. Unlike most in the area that we've seen, it's one that we wouldn't grow out of for a long time, it's in the best school district in the area, and it's conveniently located.

It's also out of our budget, at the asking price.

So I ask -- how low is too low of an offer to make for a first offer? We have a number that's 14% off asking price, that would open us up (if they came back) to a best and final that's probably 10-12% off asking. Is our 14% number too low, or insulting, to the owner?

Their agent has made it clear that the owner is anxious and eager to move -- he has a home in Florida, he's the original owner, his wife passed away, and they previously had an offer fall through because they couldn't get a mortgage.

The comps justify his price, but I know we just can't get the mortgage with the taxes being what they are.

So how low is too low for an initial offering?

Other bits of information that my wife is hung up on: so far we've only seen about 15 houses, and we're not in a serious rush as we're in a lease that expires in May. So i guess the other question is whether or not it even makes sense to try on this house rather than waiting until march to try and find something.. we started looking now with the intention of seeing what was out there and getting a feel for the areas we're looking. this one just happens to check all of the boxes for us..

The 2 worse things that can happen are either he says no or takes a higher offer. Nothing personal or shouldn't be.

Some other advice(son just bought a house), get a really thorough inspection before you buy. Son's took all afternoon, from windows to radon check to asbestos in popcorn ceiling test...

[93legendti]

What is your agent's advice?

[happycampyer]

153 days suggests that the asking price is on the high side to begin with, so an offer that is 14% below the ask is not unreasonable. If anything, you should start a little lower, expecting a counter offer. veloduffer's point is also a really good one—make sure that you have a budget for repairs, etc. Houses can be like black holes when it comes to expenses. Get a really good home inspector, and if the inspector uncovers issues with the plumbing, electrical, HVAC, etc., negotiate the expected cost of repairs from the sales price.

Mortgage rates have certainly moved in your favor recently. Who knows if it's a blip, but I wouldn't count on rates being this low forever. As far as the overlap with your lease is concerned, you might want to have at least some time with the house empty to take care of things that will be more difficult to manage after you've moved in. This is one place where the cushion comes in.

[happycampyer]

Originally Posted by 93legendti

What is your agent's advice?

This is an interesting question—in NJ, do they have the concept of a "buyer's agent"? In most cases, "your" agent doesn't actually represent you.

[Ken Robb]

I put together quite a few deals like this and emotions did play a factor. If the sellers raised a family in this property they will probably love hearing how much you would like to raise your kids in the same wonderful environment. This might be a situation where looking at the home again with your kids along when the owners are there to fall in love with your family. They may remember how they had to stretch to buy it when they were young. At the very least try to make sure your agent gets to present your offer to the sellers IN PERSON so he can paint you in a sympathetic light. This reduces the chance that you will be perceived as chiselers trying to steal a house.

Sellers want 3 things:
1-Their price.
2-Their terms; usually all cash but sometimes an installment sale with them getting the proceeds over time reduces their tax liability. They might be willing to carry a mortgage as an attractive source of income.
3-A sure closing at a convenient time. Sometimes sellers want a sure closing but at a much later date because they haven't yet found their next home or it won't be ready for them for some time, etc. In this case if they have already closed on their new place it is safe to assume that closing ASAP is their dream. If you can close in 30 days your agent can point out that they might not get another offer for 30-60 days and then those buyers might want 60-90 days to close. That's a long time to carry two homes and/or lose income on the equity in the old place. Do not underestimate the motivation caused by the disappointment of a failed transaction.

When you find a place that checks all your boxes you would be foolish to not try your best to buy it. Good luck.

[HenryA]

Originally Posted by Ken Robb

I put together quite a few deals like this and emotions did play a factor. If the sellers raised a family in this property they will probably love hearing how much you would like to raise your kids in the same wonderful environment. This might be a situation where looking at the home again with your kids along when the owners are there to fall in love with your family. They may remember how they had to stretch to buy it when they were young. At the very least try to make sure your agent gets to present your offer to the sellers IN PERSON so he can paint you in a sympathetic light. This reduces the chance that you will be perceived as chiselers trying to steal a house.

Sellers want 3 things:
1-Their price.
2-Their terms; usually all cash but sometimes an installment sale with them getting the proceeds over time reduces their tax liability. They might be willing to carry a mortgage as an attractive source of income.
3-A sure closing at a convenient time. Sometimes sellers want a sure closing but at a much later date because they haven't yet found their next home or it won't be ready for them for some time, etc. In this case if they have already closed on their new place it is safe to assume that closing ASAP is their dream. If you can close in 30 days your agent can point out that they might not get another offer for 30-60 days and then those buyers might want 60-90 days to close. That's a long time to carry two homes and/or lose income on the equity in the old place. Do not underestimate the motivation caused by the disappointment of a failed transaction.

When you find a place that checks all your boxes you would be foolish to not try your best to buy it. Good luck.

^^ THIS ^^
Here you have it from a pro.

[avalonracing]

As a real estate agent I would recommend that you seek the advice of your agent. They should know the market.
You should you have an agent that you trust, have confidence in, and know that their fiduciary responsibility to you alone... and if you don't have an agent that fits that, release them and get another.

[Ralph]

Make your offer with a statement that you are able to close at that price. Offer a decent deposit to show you are a serious buyer. To a motivated sellor, it's not always about absolute best price, it's sometimes about just getting the deal done. Show sellor you can do the deal. That might be worth more than absolute highest price.

I'm going to be home shopping soon, probably making some low offers. I will offer a strong deposit, with assurance I can close whenever sellor wants.

[Climb01742]

Based on some hard earned experience, I'd offer this:

As a buyer, the asking price should mean nothing to you. Working with your agent, figure out what you think the house is worth. Crucially, define your walk-away price...and stick to it.

Try your best to keep the process cold, analytical, pure business. Be prepared to walk away and most times, you'll get the house at a good price. And if not? There are always other houses. I love houses as much as anyone but buying one too often gets too emotional to everyone's detriment.

[malcolm]

I'm with 93 on this one. I don't buy the insult thing. If you don't like my offer don't accept it. Negotiation can always go up but almost never goes down. If I were to make an offer I would start lower than I expected to get it for and work from there. Not to offend real estate agents and brokers but they work on a percentage, the more it sells for the more they make. It doesn't benefit you not to start low. If they become so offended they don't want to do business move on or if you must have it apologize and give them what they want.

[jlwdm]

Originally Posted by TBDSeattle

100% agree

It is up to them to accept or reject the offer. Real estate is not about feelings, it is about pairing a willing buyer and seller.

Motivations:
...
real estate agent = make a sell at any price so that they get their commission

...

It looks like you have had poor agents to make this statement about an agent's motivation. Great agents are in the business for the long term and are going to look out for the client's interests at all times.

I never worry about a short term sale or commission. That is how you sell a lot of real estate.

Jeff

[jlwdm]

Originally Posted by Ken Robb

...

Sellers want 3 things:
...
2-Their terms; usually all cash but sometimes an installment sale with them getting the proceeds over time reduces their tax liability. They might be willing to carry a mortgage as an attractive source of income.

...

No 2 is unlikely anymore as the for a married couple the first $500,000 of profit is tax free if they have lived in the house for two of the last five years.

Jeff