Since you owe 297K on the mortgage.

If you put it at 295K and give them 5K back at closing.

You have to come up with 295K * 6% (assuming realtor comission is 6%) = 17,700

+ 5K return at closing

+ 2K difference to current mortgage

+ any other fees sellers pay where you are at.

So you need a total of $24,700 to bring to the closing table.

Did I understand that part right?

I do think you should counter, just don't know how bad your market is to warrant that counter. Is your house priced according to comps ie recently sold units. How does the 295K fit with comps?

Would you be better off trying to convert your month-to-month tenants into a year-long lease, and deal w/ this next year, hoping the market is better?

If so, then counter coming down a little from your asking price.

Is your mortgage assumable? Would they qualify to assume it? That would be 100% financing. I don't know how the broker's fee would work into that, or if it's even possible.

Thanks for your replies.
First, I'm sure I have to come up with something out of pocket to get rid of the place, but I have a negative cash flow on it so I think I should get rid of it. I'm just rying to minimize my out of pocket cash. Besides, I already cashed out on the place 2 years ago when it appraised at 380k and I refinanced. (That's the reason I have a negative cash flow). I decided to sell now because our current tenants have to leave (job loss) and I've moved out of state myself and don't necessarily want to be an absentee landlord.

Mortgage is not assumable, but I am willing to do a lease with option to buy.

The broker fee is 4%. I don't think I'll be hit hard with capital gains tax as I have a lot of expenses related to renovations. And then there's the cost of the lawyer, maybe 900.

Well since you are aware of the cost then go with what seems reasonable to you and what would make the deal happen.

Say we agree on a 290k price, but officially put it at 295k and they get $5000 back at closing? Is that done?

You can do this if you disclose on the contract that the buyer will be receiving cash back at closing, otherwise it is mortgage fraud.

Capital gains could hit you hard and you should talk to the tax person first.

You can't go wrong countering for whatever price that makes you comfortable. It does sound like a lowball since it's nearly 50K less or about 85% (give or take) of asking.

Countering will at least give you an idea if they will come up. Given what you've described, I think your realtor may be right that they are testing the waters and trying to get a deal.

Of course, we don't know how much the appraisal comes in at.

You can call your own appraiser in before countering. Some can come out quickly. The 2 I've dealt with were always able to get us in within 24 hours.

I would go back with $299,999 and you pay all their closing costs. IMO folks needing 100% financing are cash poor and want to get into a home with as little outlay as possible. They seem to be willing to overlook a higher price if they are able to get into it without laying out any cash.

update: I counteroffered 299k and offered to pay $5000 towards closing costs, they counteroffered 275k, and I declined. I hope I won't regret it, as I know people who declined offers they months later would have jumped at.

Rather than offering a specific amount in closing costs, you need to word the counter so that you don't pay over and above - something like "up to 5K" or "not to exceed 5K". It's neither here nor there now since you declined, but it's good to know for next time. You can also state you won't pay points or prepaids like property tax refunds etc.

I don't understand. Why didn't you just counter again? You started $60k apart and then you went down $15k and they went up $15k, and now you're in the same ballpark with each other. You're asking for $299k and they're offering $275. You're less than 10% apart from each other. If you're close to your bottom line drop dead price, then just reduce it $1k or $2k rather than trying to meet them halfway. That way, they know that you're as low as you can go, and they have the option of recountering to come up to meet you. Anything is better than just declining a bona fide offer. Especially in this market.

Also I would look at your cost basis not your mortgage. If you bought for 200k and spent 30k renovating and then took out a 350k mortgage of which you now only owe 300k, and you sold for 290k (factoring in any cash back), then your overall profit is really 290-230, 60k plus the 50k you already paid off on your mortgage minus any subsidies you had to pay on the mortgage and taxes that the rent did not cover

Thanks again. I really appreciate your comments.

I AM looking at cost basis, not what I own, that's why I don't mind paying cash to get out of this house. But their offer is so low that I could let the house stand empty for over a year for the amount of cash I'd have to come up with now. Besides they said 275k was their highest bid.

I might just end up renting it out again. Within a year, I'd have another 5-6000 paid off.