Need advice on putting in 'low ball' offer

14 years ago

Need some advice on putting in what may seem as a "low ball" offer but I donÂt think it is, IMO (of course, that is my opinion, and why IÂm seeking advice :-) We are looking to buy a home in a small-ish eastern town (which I donÂt want to name at this time) which has been fairly stable IÂd say job- and housing-wise. We are looking to move into town to be very close to work and nice schools.

Larger houses in town can be expensive due to location, and I understand that (Nothing is really old enough to have any particular historical value). But I think the prices on some of the homes weÂre looking at are astronomical. The town has a nice searchable online database where you can find dates and prices of house purchases, as well tax documents with assessed value. The only downside really is that it doesnÂt include square footage. Homes on the same street can vary considerably in size.

IÂll give a few examples of homes we are looking at Â one we are looking at was built in the 1950s and nothing has been updated since then. The most recent comp I could find on the same street sold for $440K in 2007, and its 2009 assessed value is $416K. The $440K previous sale appears to be about the same sq footage as the one we are looking at, approx. same amount of yard, and it appears to be somewhat newer of a home. The house we are looking at today is listed at $565K! The most expensive recently sold houses I could find on neighboring streets went for $375K, $365K, and lower $300K in 2008. There is another house in the same neighborhood listed at $600K, but its been on the market for a little over a year now.

Two other houses we are looking at today have similar scenarios. We are looking at a second that is listed at $459K, I think because the people refinished the hardwood floors and probably upgraded the baths and kitchens. (IÂll find out more when I see it). But they bought a virtually identical house next door for themselves to live in for $300K last year.

Another older house we will be looking at today is listed also at $565K, but the most expensive recent sale on the same street for a comparable house was in 2007 for $250K (I need to check the sq ft of this one). The most phenomenal older house on the street is assessed at $400K.

If I wanted to put an offer in on one of these houses, should I feel any angst about putting it in a good bit lower than the asking price (especially since they all would likely need some fixing-upping or upgrading)? More in line with what I see to be the more recent sales and assessments? Granted, these houses havenÂt been on the market for a huge length of time (a few months), but the one has been on since February. There are other examples I could come up with that have been on the market longer. I havenÂt brought this up with our BA yet to get her opinion but I wanted to see if anyone out there has any insight or thinks IÂm missing something in my "analysis".

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Comments (7)

xamsx
14 years ago
jenny_from_the_block If I wanted to put an offer in on one of these houses, should I feel any angst about putting it in a good bit lower than the asking price

Of course not. This is business. You should not have any qualms or guilt about putting in a lowball offer. But, do not be surprised if the homeowners are "insulted" by your lowball bid and refuse to counter back. Just because you see it for what it is, business, does not mean the sellers see it the same way.

Are you working with a Realtor? If so, they will have current sold comps as well as square footage and house condition. If you have supporting documentation to back-up your low offer, that might make the homeowners less angry and more willing to counter your lowball offer.

Depending on where you live the town's assessed value can mean nothing. In my area reassessments are done yearly so assessments are fairly close to reality (within 10%) but not all areas assess as often or use full market assessments.
Billl
14 years ago
Most towns do a horrible job with assessments, so I would toss those out the window.

As for the comps you are pointing out, they need to be recent. Sales from 2 years ago are not good guides. If you have an agent, they should be able to help you out with pricing. A general strategy is to find recent homes that have sold in the area and calculate the price per square foot. That should give you a range for "reasonable" prices.

As for strategy, there is no downside in making a fair offer. If the owner doesn't think your fair offer is in the ballpark, then you are going to be a match. A"lowball" offer is where you purposely give them a below market offer to see if the are desperate. That does have the potential to backfire because the owners may be insulted and unwilling to negotiate back towards a fair price. If your idea of fair and their idea of fair are nowhere close, no amount of strategy is going to make a deal happen.

Also of note, if you are looking in "transitional" neighborhoods where people are making major improvements to older homes, it is not unusual to see a renovated house going for say 500k+ while the houses that haven't been renovated sell at half that. This can be confusing for both owners and buyers in terms of pricing.
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My husband and I almost threw away what we considered a low-ball offer. My husband had lived in the house for nearly 20 years and it'd been his grandmother's house before he bought it, so he was very much emotionally attached to the place. At first, he was offended by the offer. But after much talking, we realized this may be our only offer and we better work with it. At the time, the house had been on the market for three months and we had an accepted offer on another house with a sale contingency. We countered and ended up with a compromise. We didn't get as much money as we felt we should have according to the comps or as much as we would have liked to have, but the house closed and we moved and we're happy. This was almost a year ago and, in our area, the housing market has gotten even worse since. I agree with Triciae...this is a tough market that demands a lot of give and take from sellers--mostly give. I would not counter with full list price. This will only say to the buyer that you are unwilling to give. I'd come back somewhere in the middle and offer closing costs. We paid closing costs on the two houses we sold last year. I am SO glad we're no longer on the market!
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njtomato - I wish you much luck - please let us know how this all turns out. I have to agree with the triciae and the other posters who said you have nothing to lose by making a low offer. Seventeen years ago, my parents were going through a messy divorce and put my childhood home on the market. It had the potential to be a wonderful family home - had great bones, on acreage lot, in old, very affluent area, and was surrounded by beautiful, expensive properties. Unfortunately, my father had not wanted to put any money into the home for years, and it was badly in need of updating. Structurally it was sound - just needed paint, carpet, updated cabinetry in kitchen/bathrooms, landscaping, etc. It sat on the market for months because it did not show well and most buyers were not looking for a fixer-upper. Also, the real estate agent that my father insisted on using did nothing to aggressively market the home. Finally, a close friend of the real estate agent's son made a lowball offer - about $80k less than asking price. My father was ready to sell and accepted the offer, against the pleas of the rest of the family. (We always suspected that the real estate agent recognized that my father had reached the end of his rope so advised her son's friend to make the lowball offer....) Anyway, the house sold, and the buyer completely remodeled the inside and landscaped outside - it is absolutely beautiful and rivals the rest of the homes in the neighborhood. Moral of story - you never know the sellers circumstances and how ready they may be to sell....
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Thanks for answering, everyone. We can't buy without selling, no down payment. (We are not struggling financially, but coming up with 50,000 for a down isn't realistic and we are loath to go the "funny" mortgage route and end up with two properties and upside down on one of them.) I considered getting an appraiser, but we seem to be one of those areas where an appraiser "hits the number." They are in the real estate agents' pockets. The property is assessed for 220,000$ and last year those numbers were running pretty close to selling prices. My husband and I have decided not to go lower than 175,000$ (maybe 174,000$? I've seen some people on this board recommend countering like that.) That was our rock bottom price and it did get an offer; so who knows, maybe another one will come along before the end of the month. Also, although the offer was represented over the phone to me as "cash", it would be equity from the buyer's home and still has a financing contingency and an appraisal contingency, as well as a feasibility contingency (and only 1000$ earnest money.) I would be more likely to say yes if the guy actually had money in the bank and wanted to close next week. Oh, and our agent is working both sides of the deal, so I have to take what he is saying with a grain of salt, also. Margaret
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IMO, your agent should have asked for a copy of your buyers contract, spoken to their buyers agent and asked pertinent financial questions, found out all of their contingency dates, found out if their buyers have a loan commitment yet and so on. Should have done this prior to accepting their offer, just so you have a better idea of the overall picture. If you had found out that there was anything in their contract that incurred a higher risk to you, you could have used this info to negotiate your asking price better. It still will probably all work out, but it seems your agent is fairly nonchalant about the entire deal especially after having a couple fall apart already.
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User
Original Author
14 years ago
Thank you guys/girls for the input.
There doesn't seem to be a lot of stuff moving, so I can't always find something that came up for sale recently on the same street. There is that online database where I can look up recent sale prices for addresses.

Just to clarify, we aren't thinking about a low offer just because - the price range I am considering is to be within our budget considering some of the places could easily absorb $100K in repairs (like moss growing on the roof, rotting windowsills, etc). For something that needs that much work I guess that why is I have such sticker shock.

We are working with a buyer's agent. She hasnsn't mentioned pulling comps for me at all. She did make a few loose recommendations, such as one property we looked at she cautioned about "over improving" it. Otherwise she pretty much just shows us stuff that I see on the internet and we ask to see. We did work with her to put one offer on a fabulous house (again it needed a ton of work) but unfortunately the sellers pulled it off the market at the same exact time we put our offer in to them. Apparently they had rented out the place they were going to move into, and didn't tell their realtor til he presented our offer. >:-(
C Marlin
14 years ago
Go to your agent, asking for recent comps, any good agent will know exactly what to give you. The agent probably knows all the comps, then can tell you how comparable they are to adjust your offer. Have you told her you want to make an offer, she should be pulling comps for you right now? Don't give your agent too much info, don't say you will go higher than what you decide to offer. Just work to come up with a reasonable price, tell her to present. A place may need $100k in work, but it may already be reflected in price, we have no way of knowing that. Have you agent assist you, just don't give her any personal information about you. There is not reason for the agent to know that.
sweet_tea
14 years ago
What cmarlin says is very good advice.

Also realize that there is a lot more to comps that pulling what sold on the same street.
ncrealestateguy
14 years ago
Make your agent work... demand those comps, have her drive you by those comps to see the condition they are in compared to your subject. You will never get the right answer here.
User
Original Author
14 years ago
I flat-out asked, and my BA provided me with a list of all all houses sold in the area we are looking in since January of 2008 to present. The list she sent me has pics, list price / sale price, square footage, lot size, etc. It is really helpful. I can be more comfortable making a lower offer (nothing selling in that price range had a house that needed anywhere near as much renovation as one we are considering putting an offer on), who knows though what the sellers will think though. I guess you can but try.

Need advice on putting in 'low ball' offer

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xamsx

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Need advice on putting in 'low ball' offer

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xamsx

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