Home Purchase Negotiation Thread (1 Viewer)

[Otis]

In this down real estate market, what is a "reasonable" opening offer on a home? I have to imagine that the people who are selling in this down market, particularly in the dead of winter, are people who are pretty seriously interested in getting out. Assume the home appears to be reasonably priced as a starting ask price (plus or minus 5% of what you think fair market value of the home may be, though that's just your rough, non-expert guess).

Is there a standard "discount" from the asking price that should be the buyer's starting offer? Also, is there a standard increase in the opening asking price on the seller's end to account for the expected negotiation? If so, what is that?

Or is there no commonly accepted number, and it just depends on the property and situation?

Thanks,

 

[Dragons]

In this down real estate market, what is a "reasonable" opening offer on a home? I have to imagine that the people who are selling in this down market, particularly in the dead of winter, are people who are pretty seriously interested in getting out. Assume the home appears to be reasonably priced as a starting ask price (plus or minus 5% of what you think fair market value of the home may be, though that's just your rough, non-expert guess). Is there a standard "discount" from the asking price that should be the buyer's starting offer? Also, is there a standard increase in the opening asking price on the seller's end to account for the expected negotiation? If so, what is that?Or is there no commonly accepted number, and it just depends on the property and situation?Thanks,

There is no commonly accepted number. It depends on the property, whether it's properly priced to begin with. It depends on the sellers, how motivated they are to sell.The sale price of any particular home is the value a buyer and seller are willing to agree to.

 

[Tiger Fan]

All depends on the situation. Could be any reason for moving: need the money, moving for work and work will pay the bills (so they have some leverage in the sale), want to upgrade, etc.

Some people get insulted if you start too low and don't want to work with you again, some understand its part of the business.

Make sure your agent does his/her homework on the property and trust their opinion

 

[mon]

7-8%

 

[Otis]

There is no commonly accepted number. It depends on the property, whether it's properly priced to begin with. It depends on the sellers, how motivated they are to sell.The sale price of any particular home is the value a buyer and seller are willing to agree to.

All depends on the situation. Could be any reason for moving: need the money, moving for work and work will pay the bills (so they have some leverage in the sale), want to upgrade, etc.Some people get insulted if you start too low and don't want to work with you again, some understand its part of the business.Make sure your agent does his/her homework on the property and trust their opinion

Kind of figured this would be the ultimate answer, but I was just wondering if there was something common in the industry. My old man hasn't bought a home in years, but his view is that in most transactions, you can expect to get about 10% off an asking price. Obviously there are a million variables, but that's his very rough rule of thumb. It's funny to me because I get that when we're talking about certain transactions, but if you're looking at homes in the NYC suburbs with prices climbing near and well beyond $1M, I find it strange to consider a six figure sum a "discount."In my particular situation, the seller's agent informed us that the seller is "anxious" -- we have the impression that something happened with the family, perhaps a divorce or the like, and that the father just wants to sell the house and get out as soon as he can. It looks like his wife may no longer be living there. Through public records I know what he paid for it 8-9 years ago, and even if we cut more than 10% off his asking price, he'll still make a (small) profit. I figure in this real estate market, if you can get out with any profit, you are probably happy.We're looking to make an offer that's even beyond a 10% discount with the hopes that we can get a deal done at round the 10% off range. Maybe wishful thinking, and I frankly think that would be a steal for this house, but I'm no expert, and like you guys said, it's worth whatever he is willing to sell it for, end of story.These negotiations are so interesting to me. Working in litigation I've negotiated big dollar settlements/licenses plenty of times, but it's just a totally different dynamic when you're dealing with real people (not corporations) and their own money. Of course, plenty of the same rules of the game still apply. But the game is definitely an interesting one...

 

[Tiger Fan]

There is no commonly accepted number. It depends on the property, whether it's properly priced to begin with. It depends on the sellers, how motivated they are to sell.The sale price of any particular home is the value a buyer and seller are willing to agree to.

All depends on the situation. Could be any reason for moving: need the money, moving for work and work will pay the bills (so they have some leverage in the sale), want to upgrade, etc.Some people get insulted if you start too low and don't want to work with you again, some understand its part of the business.Make sure your agent does his/her homework on the property and trust their opinion

Kind of figured this would be the ultimate answer, but I was just wondering if there was something common in the industry. My old man hasn't bought a home in years, but his view is that in most transactions, you can expect to get about 10% off an asking price. Obviously there are a million variables, but that's his very rough rule of thumb. It's funny to me because I get that when we're talking about certain transactions, but if you're looking at homes in the NYC suburbs with prices climbing near and well beyond $1M, I find it strange to consider a six figure sum a "discount."In my particular situation, the seller's agent informed us that the seller is "anxious" -- we have the impression that something happened with the family, perhaps a divorce or the like, and that the father just wants to sell the house and get out as soon as he can. It looks like his wife may no longer be living there. Through public records I know what he paid for it 8-9 years ago, and even if we cut more than 10% off his asking price, he'll still make a (small) profit. I figure in this real estate market, if you can get out with any profit, you are probably happy.We're looking to make an offer that's even beyond a 10% discount with the hopes that we can get a deal done at round the 10% off range. Maybe wishful thinking, and I frankly think that would be a steal for this house, but I'm no expert, and like you guys said, it's worth whatever he is willing to sell it for, end of story.These negotiations are so interesting to me. Working in litigation I've negotiated big dollar settlements/licenses plenty of times, but it's just a totally different dynamic when you're dealing with real people (not corporations) and their own money. Of course, plenty of the same rules of the game still apply. But the game is definitely an interesting one...

Is his asking price in line with all of the comps? If so, given that he's anxious, I would probably start below what he paid for the house and shoot for what he paid (plus a little)as your landing price. He'll probably counter above what he paid, then you go down to right around what he paid (plus a little) and be firm on that. Say that you like the house, but you "don't have to have it".This way, he feels like he gained a little bit by getting more then your original offer, and he didn't lose any money. One other tactic is that you can look up the data on home prices in the past 9 years, and tell him that he's lucky he didn't lose out (assuming the data shows that he should have).

 

[Rohn Jambo]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

 

[Rohn Jambo]

Your offer should not be unreasonably below "market value" even when the seller is anxious to sell.

How long has the house been on the market?

 

[Tuco]

My house has been on the market for about 3 months now. I don't have to move, but I would like to upgrade. I have a very nice house that is competitively priced compared to other homes in the area. I have had 25 showings in the 3 months.

My first offer came in this past week. They offered 85% of my asking price and for me to pay all closing costs. I did not accept the offer and did not counter. I wasn't offended by the offer, but if this buyer is looking to get a great deal off of someone's situation, they're looking at the wrong house. I'm open to other offers from them, but I haven't heard anything. Their realtor told me (my realtor) that this isn't how you do business. That their buyer got an initial offer of 100k less than their asking price and they were able to negotiate to an acceptable number. I simply said to make another offer.

I had two more showings yesterday. One buyer was seeing it for a second time and the other buyer said they will be making an offer.

Everyone's situation is different. It depends on a lot of factors, especially the interest being shown for the home. I will accept down to 95% of my asking price, but again, I don't have to move.

 

[DiStefano]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Since when is buying a home about being NICE? If he doesn't like the offer, he doesn't have to accept it.A lot depends on how long it has been on the market, and how desperate he is to sell. I lowballed an offer 7 years ago, offering 25% less. We finally settled on about 10% less than the listing, but it had been on the market for 134 days.

 

[Tuco]

Don't forget that the seller will most likely have to pay 4-6% for realtor fees that come off of their "profit".

 

[YSR]

I know you mentioned a seller's agent. First off, are you working with an agent? If you're only working with the seller's agent, you need to get your own representation, as the seller's agent obviously has additional stake (additional commission) in the game.

As for starting price, have your realtor pull the comps, review them, then make an offer based on the price-per-square-foot of the lowest comp.

 

[Rohn Jambo]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Since when is buying a home about being NICE? If he doesn't like the offer, he doesn't have to accept it.A lot depends on how long it has been on the market, and how desperate he is to sell. I lowballed an offer 7 years ago, offering 25% less. We finally settled on about 10% less than the listing, but it had been on the market for 134 days.

People who want to be happy in their new home do not make a deal that doesn't leave them with a clear conscience. Otis can decide for himself whether he wants to be able to sleep at night.

 

[Ditkaless Wonders]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Otis is not in the market for making friends, he is in the market for a house.In pricing property to sell realtors do minimal market analysis, most of which you can now do yourself thanks to online databases. They figure a comparable number and they like to price the home to sell so that they can get their commission. Some think they, the realtors, like to start high so that they get even more of a commission. In my experience this is not true. Realtors would rather price the house to get lots of views from interested and qualified persons and just get the sale, and get it quick. Owners always want to believe their house is worth more than it is. They will tend to take the comparable supplied by the realtor, and then boost it up since they know how much nicer their home is than the comparables, after all it is their home, reflecting their tastes, and they just know you will want to pay more for their little mermaid themed bedroom wallpaper in the kids room.My rule, and my rule alone, figure 12 months cost of a favorable mortgage on 90% of their purchase price which you have already found at the county clerk and recorder or county assessor's website. Subtract that total from asking price and that is your offer if the home was not unreasonably priced to begin with. This is the price they will accept.

 

[Rohn Jambo]

I know you mentioned a seller's agent. First off, are you working with an agent? If you're only working with the seller's agent, you need to get your own representation, as the seller's agent obviously has additional stake (additional commission) in the game.

As for starting price, have your realtor pull the comps, review them, then make an offer based on the price-per-square-foot of the lowest comp.

Yes, the price per square foot idea is very good. Do the comps take into account how well the owner has maintained the house?

 

[culdeus]

Even in a down market if you come in low in the first 30 days then there's really no point. Especially if the people aren't moved out yet.

 

[Rohn Jambo]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Since when is buying a home about being NICE? If he doesn't like the offer, he doesn't have to accept it.A lot depends on how long it has been on the market, and how desperate he is to sell. I lowballed an offer 7 years ago, offering 25% less. We finally settled on about 10% less than the listing, but it had been on the market for 134 days.

People who want to be happy in their new home do not make a deal that doesn't leave them with a clear conscience. Otis can decide for himself whether he wants to be able to sleep at night.

Oh, I forgot Otis won't get much sleep for a while because of the baby. I meant later.

 

[BobbyLayne]

I have no idea what prices are doing on the island. BIL recently bought in Bethpage at 20% off, but that was an estate sale home that had been on the market close to a year. He'll need to wait a few months while the kitchen and baths. I'm going to go ahead and assume given the outcome of your loft renovation, O is looking at move in condition only.

6-15% off ask seemed to be the norm the first half of 2010 in the city and brownstone Brooklyn. Things stabilized even more in Q3 and Q4, that discount window appears close at the moment. But even that is wildly overgeneralized. ALL real estate is local, and its always about locale. A few blocks in the city or one subdivision in the burbs, and you're in an entirely different, unrelated ball game.

As for a specific offer, you have to look at comps. You have to evaluate those comps - proximity, how stale, relative size of the houses, etc. You can't begin to formulate an offer until you have a good sense of whether the house is fairly priced to start with.

Inventory is super low right now. Not seeing a lot of quality listings. You might assume anyone listing now is motivated, but I see a lot of listings expire because folks come to realize they need to wait a few more years. Each situation is unique.

Oddly enough, if someone has been price chopping every 30-60 days trying to get a deal done, my advice would be 10% or more under current ask. They might say yes; and if not, they'll probably counter. They want to sell. The guy with the inflated price that has been listed 270 days without coming down is not the guy who is ready to play ball.

 

[Otis]

I like the price per square foot idea.

The house has been on the market for about 5 months. About a month after it was first listed (overpriced), he dropped the price 10%. If he is willing to do that again, we'll have a deal.

Another odd thing is that it is a tough property to do comparables on because of the unique terrain. It is an oversized lot but very hilly -- there is a long stairway up from the driveway to the front stoop. Our suspicion is that some buyers would be very turned off by that inconvenience. Also although the lot is oversized, the terrain is hilly such that you don't have all useable lawn space -- you have some flat lawn, but lots is very hilly and as a result they havent bothered to do a whole lot with it. These are things that we like about the property, and we think over the years we can do a ton with it, but it might be a big negative for others and so hopefully has limits the interest in the property.

 

[Bottomfeeder Sports]

My rule, and my rule alone, figure 12 months cost of a favorable mortgage on 90% of their purchase price which you have already found at the county clerk and recorder or county assessor's website. Subtract that total from asking price and that is your offer if the home was not unreasonably priced to begin with.

Interesting. Let me see if I am understanding this. Suppose the house was bought at $1Million. So 90% is 900K. Open Excel, create a worksheet using the Loan Amortization template. Plug in 900K for the loan amount. Guess at say 5% for interest rate on a 30 year (12 payments a month) loan. The template throws out a monthly payment of $4831.39. So twelve times that is $57,976.68 add in annual taxes and insurance premiums, round off and that is the discount you ask for.Is that roughly your rule?

Do you take average interest rates 8 or 9 years ago, or do you assume that the loan was refinanced some where along the way. Assume that they were in some creative loan that reset high?

I mean 5% was $57,976.68

6% would be $64,751.46

7% would be $71,852.67

I doubt I'll be buying anytime soon, but this reply was interesting.

 

[Otis]

I have no idea what prices are doing on the island. BIL recently bought in Bethpage at 20% off, but that was an estate sale home that had been on the market close to a year. He'll need to wait a few months while the kitchen and baths. I'm going to go ahead and assume given the outcome of your loft renovation, O is looking at move in condition only.6-15% off ask seemed to be the norm the first half of 2010 in the city and brownstone Brooklyn. Things stabilized even more in Q3 and Q4, that discount window appears close at the moment. But even that is wildly overgeneralized. ALL real estate is local, and its always about locale. A few blocks in the city or one subdivision in the burbs, and you're in an entirely different, unrelated ball game.As for a specific offer, you have to look at comps. You have to evaluate those comps - proximity, how stale, relative size of the houses, etc. You can't begin to formulate an offer until you have a good sense of whether the house is fairly priced to start with.Inventory is super low right now. Not seeing a lot of quality listings. You might assume anyone listing now is motivated, but I see a lot of listings expire because folks come to realize they need to wait a few more years. Each situation is unique.Oddly enough, if someone has been price chopping every 30-60 days trying to get a deal done, my advice would be 10% or more under current ask. They might say yes; and if not, they'll probably counter. They want to sell. The guy with the inflated price that has been listed 270 days without coming down is not the guy who is ready to play ball.

This makes sense to me. I've done some ballpark analysis of comparables myself, but maybe I should do something more concrete to pass along to his agent when we make an offer to explain how we arrived at it. He may not care at a -- he may only care aboutthe bottom line and that's that, but worth trying. The whole comparables thing seems a lo like lawyering -- I can find a case of a low price that I think can guide us to a certain outcome, but as noted above, he can always come up with reasons for distinguishing his property from those and arguing it is better.

 

[Rohn Jambo]

I like the price per square foot idea. The house has been on the market for about 5 months. About a month after it was first listed (overpriced), he dropped the price 10%. If he is willing to do that again, we'll have a deal. Another odd thing is that it is a tough property to do comparables on because of the unique terrain. It is an oversized lot but very hilly -- there is a long stairway up from the driveway to the front stoop. Our suspicion is that some buyers would be very turned off by that inconvenience. Also although the lot is oversized, the terrain is hilly such that you don't have all useable lawn space -- you have some flat lawn, but lots is very hilly and as a result they havent bothered to do a whole lot with it. These are things that we like about the property, and we think over the years we can do a ton with it, but it might be a big negative for others and so hopefully has limits the interest in the property.

Living on the hill means you don't have to worry about flooding. I'd guess older folks won't like the long stairway but empty nesters won't be looking to buy a large lot that requires more maintenance. How easy will it be to mow the lawn and shovel snow in this hilly terrain? But then, you can always get a goat.

 

[culdeus]

I have no idea what prices are doing on the island. BIL recently bought in Bethpage at 20% off, but that was an estate sale home that had been on the market close to a year. He'll need to wait a few months while the kitchen and baths. I'm going to go ahead and assume given the outcome of your loft renovation, O is looking at move in condition only.

6-15% off ask seemed to be the norm the first half of 2010 in the city and brownstone Brooklyn. Things stabilized even more in Q3 and Q4, that discount window appears close at the moment. But even that is wildly overgeneralized. ALL real estate is local, and its always about locale. A few blocks in the city or one subdivision in the burbs, and you're in an entirely different, unrelated ball game.

As for a specific offer, you have to look at comps. You have to evaluate those comps - proximity, how stale, relative size of the houses, etc. You can't begin to formulate an offer until you have a good sense of whether the house is fairly priced to start with.

Inventory is super low right now. Not seeing a lot of quality listings. You might assume anyone listing now is motivated, but I see a lot of listings expire because folks come to realize they need to wait a few more years. Each situation is unique.

Oddly enough, if someone has been price chopping every 30-60 days trying to get a deal done, my advice would be 10% or more under current ask. They might say yes; and if not, they'll probably counter. They want to sell. The guy with the inflated price that has been listed 270 days without coming down is not the guy who is ready to play ball.

This makes sense to me. I've done some ballpark analysis of comparables myself, but maybe I should do something more concrete to pass along to his agent when we make an offer to explain how we arrived at it. He may not care at a -- he may only care aboutthe bottom line and that's that, but worth trying. The whole comparables thing seems a lo like lawyering -- I can find a case of a low price that I think can guide us to a certain outcome, but as noted above, he can always come up with reasons for distinguishing his property from those and arguing it is better.

Don't bother.

 

[Otis]

I have no idea what prices are doing on the island. BIL recently bought in Bethpage at 20% off, but that was an estate sale home that had been on the market close to a year. He'll need to wait a few months while the kitchen and baths. I'm going to go ahead and assume given the outcome of your loft renovation, O is looking at move in condition only.

6-15% off ask seemed to be the norm the first half of 2010 in the city and brownstone Brooklyn. Things stabilized even more in Q3 and Q4, that discount window appears close at the moment. But even that is wildly overgeneralized. ALL real estate is local, and its always about locale. A few blocks in the city or one subdivision in the burbs, and you're in an entirely different, unrelated ball game.

As for a specific offer, you have to look at comps. You have to evaluate those comps - proximity, how stale, relative size of the houses, etc. You can't begin to formulate an offer until you have a good sense of whether the house is fairly priced to start with.

Inventory is super low right now. Not seeing a lot of quality listings. You might assume anyone listing now is motivated, but I see a lot of listings expire because folks come to realize they need to wait a few more years. Each situation is unique.

Oddly enough, if someone has been price chopping every 30-60 days trying to get a deal done, my advice would be 10% or more under current ask. They might say yes; and if not, they'll probably counter. They want to sell. The guy with the inflated price that has been listed 270 days without coming down is not the guy who is ready to play ball.

This makes sense to me. I've done some ballpark analysis of comparables myself, but maybe I should do something more concrete to pass along to his agent when we make an offer to explain how we arrived at it. He may not care at a -- he may only care aboutthe bottom line and that's that, but worth trying. The whole comparables thing seems a lo like lawyering -- I can find a case of a low price that I think can guide us to a certain outcome, but as noted above, he can always come up with reasons for distinguishing his property from those and arguing it is better.

Don't bother.

That was my initial inclination. Nobody cares how we arrived at our calculation. He just cares about the If his broker says it is low, or otherwise challenges it, I can let her know that we looked at the comparables and it seems like the fair price.Also, the property taxes on the property are high -- even his broker conceded as such, and several times has said that, if we do get it, we should grieve the taxes. But we can try to grieve them all we want -- nothing guarantees they get lowered. So that's another negative that should impact value. (I suspect they are high based on the size of the lot, but everyone recognizes that the entire lot is not traditionally useable space, and I think that is reflected somewhat in the price).

 

[culdeus]

I have no idea what prices are doing on the island. BIL recently bought in Bethpage at 20% off, but that was an estate sale home that had been on the market close to a year. He'll need to wait a few months while the kitchen and baths. I'm going to go ahead and assume given the outcome of your loft renovation, O is looking at move in condition only.

6-15% off ask seemed to be the norm the first half of 2010 in the city and brownstone Brooklyn. Things stabilized even more in Q3 and Q4, that discount window appears close at the moment. But even that is wildly overgeneralized. ALL real estate is local, and its always about locale. A few blocks in the city or one subdivision in the burbs, and you're in an entirely different, unrelated ball game.

As for a specific offer, you have to look at comps. You have to evaluate those comps - proximity, how stale, relative size of the houses, etc. You can't begin to formulate an offer until you have a good sense of whether the house is fairly priced to start with.

Inventory is super low right now. Not seeing a lot of quality listings. You might assume anyone listing now is motivated, but I see a lot of listings expire because folks come to realize they need to wait a few more years. Each situation is unique.

Oddly enough, if someone has been price chopping every 30-60 days trying to get a deal done, my advice would be 10% or more under current ask. They might say yes; and if not, they'll probably counter. They want to sell. The guy with the inflated price that has been listed 270 days without coming down is not the guy who is ready to play ball.

This makes sense to me. I've done some ballpark analysis of comparables myself, but maybe I should do something more concrete to pass along to his agent when we make an offer to explain how we arrived at it. He may not care at a -- he may only care aboutthe bottom line and that's that, but worth trying. The whole comparables thing seems a lo like lawyering -- I can find a case of a low price that I think can guide us to a certain outcome, but as noted above, he can always come up with reasons for distinguishing his property from those and arguing it is better.

Don't bother.

That was my initial inclination. Nobody cares how we arrived at our calculation. He just cares about the If his broker says it is low, or otherwise challenges it, I can let her know that we looked at the comparables and it seems like the fair price.Also, the property taxes on the property are high -- even his broker conceded as such, and several times has said that, if we do get it, we should grieve the taxes. But we can try to grieve them all we want -- nothing guarantees they get lowered. So that's another negative that should impact value. (I suspect they are high based on the size of the lot, but everyone recognizes that the entire lot is not traditionally useable space, and I think that is reflected somewhat in the price).

Does a sale price not change the taxable value in NY? It does in TX.

Send an offer, a number not some real estate summary. They say no you move on. It's not that hard.

 

[Sarnoff]

Something is only worth what someone else will pay for it. You set the price, not the seller. The seller could ask for the moon and your firstborn. You can always start off at $1. You'll probably settle somewhere in the middle, but make sure it's where you think it should be.

Unless you're not willing to walk away... in that case, he's got you by the ##### and you gotta pay whatever he wants.

 

[Ditkaless Wonders]

My rule, and my rule alone, figure 12 months cost of a favorable mortgage on 90% of their purchase price which you have already found at the county clerk and recorder or county assessor's website. Subtract that total from asking price and that is your offer if the home was not unreasonably priced to begin with.

Interesting. Let me see if I am understanding this. Suppose the house was bought at $1Million. So 90% is 900K. Open Excel, create a worksheet using the Loan Amortization template. Plug in 900K for the loan amount. Guess at say 5% for interest rate on a 30 year (12 payments a month) loan. The template throws out a monthly payment of $4831.39. So twelve times that is $57,976.68 add in annual taxes and insurance premiums, round off and that is the discount you ask for.Is that roughly your rule?

Do you take average interest rates 8 or 9 years ago, or do you assume that the loan was refinanced some where along the way. Assume that they were in some creative loan that reset high?

I mean 5% was $57,976.68

6% would be $64,751.46

7% would be $71,852.67

I doubt I'll be buying anytime soon, but this reply was interesting.

My presumption is that at the price points Otis or I would be discussing that the mortgage would reflect more or less competitive market rates at this time. My further presumption is that folks are irritated by paying a monthly nut on something they want out of and that they have done this calculation. They will know what it will cost for them to hold the house another year, a year they would rather be paying into something else. They have seen other houses sit for months, sometimes more. They are contemplating this down side.

If the house is unreasonably priced make an offer that is reasonable in your mind, wscrew the mind of the seller. You are the one that has to live with your price going forward.

 

[Ditkaless Wonders]

Something is only worth what someone else will pay for it. You set the price, not the seller. The seller could ask for the moon and your firstborn. You can always start off at $1. You'll probably settle somewhere in the middle, but make sure it's where you think it should be.

Unless you're not willing to walk away... in that case, he's got you by the ##### and you gotta pay whatever he wants.

Houses are like HBFA. There is always another one out there. You may be interested in one, but you don't sell out to get it. The costs are always a factor for a long term committment. If the cost is wrong move on, fly another route or another airline to a similar or wholly different destination.

 

[NorvilleBarnes]

If you're not embarrassed by your initial offer, it's too high.

 

[comfortably numb]

Something is only worth what someone else will pay for it. You set the price, not the seller. The seller could ask for the moon and your firstborn. You can always start off at $1. You'll probably settle somewhere in the middle, but make sure it's where you think it should be.

Unless you're not willing to walk away... in that case, he's got you by the ##### and you gotta pay whatever he wants.

I think it gets a bit more complicated than this.Say you actually like the house and it is $300k.

Comps are selling at the $290 range, but you want to go in as low as possible to get a great deal due to the bad market, or the guys wife left him etc...

You come in at $260 hoping to land at around $280.

The seller may be offended at your initial offer and not even want to entertain a second offer from you (much less a counter) due to the fact that your unrealistic initial offer may lead him to believe you may be unrealistic in regards to what you want repaired after the home inspection.

It may be easy to say, oh well you made an offer and it was refused move on, but you may have had a real interest in purchasing that particular home, but due to being too unreasonable you may have offset the ability of the seller wanting to work with you.

 

[BobbyLayne]

If you're not embarrassed by your initial offer, it's too high.

WINNING

 

[BobbyLayne]

Does a sale price not change the taxable value in NY? It does in TX.

The assessor can estimate the market value of property based on the sale prices of similar properties. A property can also be valued based on the depreciated cost of materials and labor required to replace it. Commercial property may be valued on its potential to produce rental income for its owners. In other words, the assessor can use whatever approach provides the best estimate of a property s market value; they must be assessed at their current-use value.

GFD, eh?

 

[jamny]

If you're not embarrassed by your initial offer, it's too high.

 

[Bottomfeeder Sports]

My rule, and my rule alone, figure 12 months cost of a favorable mortgage on 90% of their purchase price which you have already found at the county clerk and recorder or county assessor's website. Subtract that total from asking price and that is your offer if the home was not unreasonably priced to begin with.

Interesting. Let me see if I am understanding this. Suppose the house was bought at $1Million. So 90% is 900K. Open Excel, create a worksheet using the Loan Amortization template. Plug in 900K for the loan amount. Guess at say 5% for interest rate on a 30 year (12 payments a month) loan. The template throws out a monthly payment of $4831.39. So twelve times that is $57,976.68 add in annual taxes and insurance premiums, round off and that is the discount you ask for.Is that roughly your rule?

Do you take average interest rates 8 or 9 years ago, or do you assume that the loan was refinanced some where along the way. Assume that they were in some creative loan that reset high?

I mean 5% was $57,976.68

6% would be $64,751.46

7% would be $71,852.67

I doubt I'll be buying anytime soon, but this reply was interesting.

My presumption is that at the price points Otis or I would be discussing that the mortgage would reflect more or less competitive market rates at this time. My further presumption is that folks are irritated by paying a monthly nut on something they want out of and that they have done this calculation. They will know what it will cost for them to hold the house another year, a year they would rather be paying into something else. They have seen other houses sit for months, sometimes more. They are contemplating this down side.

If the house is unreasonably priced make an offer that is reasonable in your mind, wscrew the mind of the seller. You are the one that has to live with your price going forward.

So roughly the exercise I did was correct (ignoring the actual numbers) and somewhere around 5% was probably correct enough (nice round number for this exercise). So if we figure the house is now $1.2 million (because Otis said 10% would still leave a small profit and I'm lazy and want to use round numbers). So 60K would be 5%, add 2% for taxes (how high is high?), and 1% for insurance and he should ask for 8% off.Oh and I found it interesting not because I disagreed but because I found a compelling logic in it.

 

[Hipple Long Ware & Peete]

And frankly take what your RE Agent says with a grain of salt. Mine screwed me (in my opinion) by not doing enough legwork/being more motivated by completing a deal vs getting you the best price. Especially in this economy, the key is to not get 'married' to one particular house and be willing to lowball. You'd be suprised. Many of these list the house 10% above where they want anticipating this.

 

[Mr. Retukes]

I like the price per square foot idea.

Fool's gold.

 

[Rohn Jambo]

Does a sale price not change the taxable value in NY? It does in TX.

The assessor can estimate the market value of property based on the sale prices of similar properties. A property can also be valued based on the depreciated cost of materials and labor required to replace it. Commercial property may be valued on its potential to produce rental income for its owners. In other words, the assessor can use whatever approach provides the best estimate of a property s market value; they must be assessed at their current-use value.

GFD, eh?

Won’t my property taxes go down if my assessment goes down?Not necessarily. To demonstrate the relationship between assessments and taxes, consider the make-believe hamlet of Seagull Village, which is a community of two homes. Each resident owns a house valued at $100,000. Seagull Village’s property tax levy is $2,000 which is the amount needed to cover its expenses. Since each resident owns 50% of the total property value, they each pay 50% of the levy giving them each a tax bill of $1,000.

If property values in Seagull Village go down 10%, then each property is assessed at $90,000. The amount they pay in taxes, however, remains the same because the tax levy amount has not changed, even though the assessment has declined. Each resident still owns 50% of the total property in Seagull Village and must pay 50% of the $2,000 tax levy, which is $1,000. Even if the properties’ assessments increase to $110,000 each, the taxes stay exactly the same. They each still own 50% of the total property and Seagull Village still needs to collect $2,000, therefore they will continue to see a $1,000 property tax bill.

An increase or decrease in the assessment of an individual property is not an indicator of whether the tax bill for a property will go up, down, or remain the same.

Link

 

[T Love]

I know you mentioned a seller's agent. First off, are you working with an agent? If you're only working with the seller's agent, you need to get your own representation, as the seller's agent obviously has additional stake (additional commission) in the game.

As for starting price, have your realtor pull the comps, review them, then make an offer based on the price-per-square-foot of the lowest comp.

Actually both seller's and buyer's agents are actually incentivized to have you pay as much as possible. Usually split commision so there is a small incentive to get you to pay a little more.

 

[Hugonel]

That's a Seller's dream mindset. Clearly the last choice is the answer. You mix how much you want the house, the reasonable alternatives, the demand for the house, how much of a rush you are in and then you offer a number you know the seller won't accept. You go from there. If you are desperate on time then maybe you start with a higher offer.

 

[Orange&Blue]

So how much off do you suggest for a foreclosure? There is a home I've been looking at that sold for 310K in 2007, but the fannie mac site shows it for $244k. Are banks set on that price or are they prepared to go down more and if so how much?

The house needs some work as when the previous owners left they trashed it a bit, but I've redone the floors, fixtures, paint to my current house so a bit of work isn't a problem.

Also, when you buy a foreclosure, will your taxes be based on that purchase price or the market value? I know when you buy a house that isn't a foreclosure they use the purchase price, but I wasn't sure if that was the case on a foreclosure.

TIA!

 

[Orange&Blue]

Does a sale price not change the taxable value in NY? It does in TX.

The assessor can estimate the market value of property based on the sale prices of similar properties. A property can also be valued based on the depreciated cost of materials and labor required to replace it. Commercial property may be valued on its potential to produce rental income for its owners. In other words, the assessor can use whatever approach provides the best estimate of a property s market value; they must be assessed at their current-use value.

GFD, eh?

Won’t my property taxes go down if my assessment goes down?Not necessarily. To demonstrate the relationship between assessments and taxes, consider the make-believe hamlet of Seagull Village, which is a community of two homes. Each resident owns a house valued at $100,000. Seagull Village’s property tax levy is $2,000 which is the amount needed to cover its expenses. Since each resident owns 50% of the total property value, they each pay 50% of the levy giving them each a tax bill of $1,000.

If property values in Seagull Village go down 10%, then each property is assessed at $90,000. The amount they pay in taxes, however, remains the same because the tax levy amount has not changed, even though the assessment has declined. Each resident still owns 50% of the total property in Seagull Village and must pay 50% of the $2,000 tax levy, which is $1,000. Even if the properties’ assessments increase to $110,000 each, the taxes stay exactly the same. They each still own 50% of the total property and Seagull Village still needs to collect $2,000, therefore they will continue to see a $1,000 property tax bill.

An increase or decrease in the assessment of an individual property is not an indicator of whether the tax bill for a property will go up, down, or remain the same.

Link

I don't think all taxes are like that. Must be a california thing??? At least I know it's not here in Oklahoma.

 

[tommyGunZ]

Agree with everything DW is saying in this thread - both w/re to the motivations of RE agents and the thought process of sellers who are considering their monthly costs when analyzing offers.

THIS is the DW I thoroughly enjoy reading.

 

[Doctor Detroit]

I research the market conditions and averages based on the last 12 months of home sales in the zip code and then the specific area within that zip code.

The house I bought was already 8% off its original listed price so I didn't want to low ball them too much, and went another 8%. The average from list price was about 6% so figured they'd counter at 5%, but they countered at 6% off the top and I accepted. In the end I really, really feel I got about the best deal possible in the area givenn I looked at about 40 properties. The kitchen needs some immediate upgrades but the money I saved on this compared to similar properties (some as much as 15% higher) made that possible. That was in Maryland.

When I bought my vacation house in Michigan last year I offered 80% of the asking because I thought their price was a little high to start, and the down market in Michigan came into play (I got intel that only two people had looked at it in the 10 months it was listed). They accepted my offer, I think I got a fair but not great deal. Considering how much I love the place though, it was a great deal for me personally but they always tell you not to get too emotional about these kinds of decisions. In this case I had all the power though, I was buying a luxury not a necessity like a primary residence.

So it's based on market conditions. I would only tell you that IMO you should figure out what the place is worth to you and the market, offer below that and then only pay what you think its worth in the end. If you have a good agent they'll make their suggestion but not be pushy about it. Good luck.

 

[s&m]

While there is no set discount percentage amount to make an offer on a house, you want always start with a lowball offer in this type of market. Because no one knows what the new tax rules may be in the future. No one knows if the interest deduction is eliminated in the future. If those type items happen the value and price of real estate will collapse again.

Also if the house has certain traits that limit the potential buyers who will be interested, while you will overlook those items now, how will other buyers look at the house when you want to sell it. The fewer potential buyers the less value and price you will most likely be able to sell at. That is why you need to buy at the very most favorable price possible so you are mitagating those risks.

You need to factor the future risks and unknowns against the cost of providing usable lodging for you and your family. The difference between the basic cost of lodging and what a house payment will be needs to be defined and then factored against all types of issues such as, other investment value for that money , comfort and ease of living, commute, schools etc. And of course any "ego" or status that basic lodging or the right house may confer upon you and your family in your own mind and the mind of others.

I would lowball at at least 20%, if they don't counter you can always send another offer. Or better yet send a lowball offer from a strawman buyer with plenty of contingencies , so the purchase if accepted can be stopped or if countered you will know their thoughts on selling. That will let you know where things stand and you can come back personally at the right price for the sale if needed. Good Luck.

 

[rickyjgo]

I research the market conditions and averages based on the last 12 months of home sales in the zip code and then the specific area within that zip code.The house I bought was already 8% off its original listed price so I didn't want to low ball them too much, and went another 8%. The average from list price was about 6% so figured they'd counter at 5%, but they countered at 6% off the top and I accepted. In the end I really, really feel I got about the best deal possible in the area givenn I looked at about 40 properties. The kitchen needs some immediate upgrades but the money I saved on this compared to similar properties (some as much as 15% higher) made that possible. That was in Maryland.When I bought my vacation house in Michigan last year I offered 80% of the asking because I thought their price was a little high to start, and the down market in Michigan came into play (I got intel that only two people had looked at it in the 10 months it was listed). They accepted my offer, I think I got a fair but not great deal. Considering how much I love the place though, it was a great deal for me personally but they always tell you not to get too emotional about these kinds of decisions. In this case I had all the power though, I was buying a luxury not a necessity like a primary residence. So it's based on market conditions. I would only tell you that IMO you should figure out what the place is worth to you and the market, offer below that and then only pay what you think its worth in the end. If you have a good agent they'll make their suggestion but not be pushy about it. Good luck.

Thanks Doc!!! Market is good for new buyers, but it is scary to do this for the first time. Fantastic that this isn't the place you need to live in. Wish I were in the position to buy extra property...rough, but definitely some deals out there.

 

[Doctor Detroit]

While there is no set discount percentage amount to make an offer on a house, you want always start with a lowball offer in this type of market. Because no one knows what the new tax rules may be in the future. No one knows if the interest deduction is eliminated in the future. If those type items happen the value and price of real estate will collapse again.

Also if the house has certain traits that limit the potential buyers who will be interested, while you will overlook those items now, how will other buyers look at the house when you want to sell it. The fewer potential buyers the less value and price you will most likely be able to sell at. That is why you need to buy at the very most favorable price possible so you are mitagating those risks.

You need to factor the future risks and unknowns against the cost of providing usable lodging for you and your family. The difference between the basic cost of lodging and what a house payment will be needs to be defined and then factored against all types of issues such as, other investment value for that money , comfort and ease of living, commute, schools etc. And of course any "ego" or status that basic lodging or the right house may confer upon you and your family in your own mind and the mind of others.



I would lowball at at least 20%, if they don't counter you can always send another offer. Or better yet send a lowball offer from a strawman buyer with plenty of contingencies , so the purchase if accepted can be stopped or if countered you will know their thoughts on selling. That will let you know where things stand and you can come back personally at the right price for the sale if needed. Good Luck.

I don't think I agree with this tactic at all. If you are in a stable market like the DC area if you lowball 20% or more they will never come back with a counter offer. You could have a top ten list and do it with every house and I seriously doubt you get a counter offer. Again, this stuff is very market specific. Not sure the real estate market in NYC but I don't think it's like Las Vegas, Phoenix or Detroit where someone may accept that type of offer or even counter. Again if you do market research which is really easy to find, consider your wants and needs in relation to that market and have a final list of 3-5 places you are comfortable with then you can get a pretty good idea within 2% IMO of what you should be offering. There just can't be a set percentage number for Otis, it is purely based on the market conditions where he is hoping to buy. I'm no expert but I've read enough, researched enough and bought recently so I think the approach of lowballing at a certain percentage is bad advice.

 

[Dragons]

I know you mentioned a seller's agent. First off, are you working with an agent? If you're only working with the seller's agent, you need to get your own representation, as the seller's agent obviously has additional stake (additional commission) in the game.

As for starting price, have your realtor pull the comps, review them, then make an offer based on the price-per-square-foot of the lowest comp.

Actually both seller's and buyer's agents are actually incentivized to have you pay as much as possible. Usually split commision so there is a small incentive to get you to pay a little more.

I've found the price to be immaterial to both agents. Their commission of a 2 or even 10% difference in price is miniscule compared to the overall commission they get, or do not get, by closing the sale. Closing the sale is of utmost importance to both parties.

 

[FUBAR]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Since when is buying a home about being NICE? If he doesn't like the offer, he doesn't have to accept it.A lot depends on how long it has been on the market, and how desperate he is to sell. I lowballed an offer 7 years ago, offering 25% less. We finally settled on about 10% less than the listing, but it had been on the market for 134 days.

People who want to be happy in their new home do not make a deal that doesn't leave them with a clear conscience. Otis can decide for himself whether he wants to be able to sleep at night.

What? This is a business transaction. It's entirely possible the market was overly inflated 9 years ago and the true value now is less than it was. Even if not, this probably isn't some 90 year old senile woman going it alone he's taking advantage of. We bought land over a year ago that had been on the market for just less than a year. He was selling two adjacent parcels (he was originally selling 4, but 2 sold previously). He wanted $85k for both or $45k separately. We offered $50k for both and he took it almost immediately, leaving me to believe we could have gone lower. This is within the range of other similar lots in the area at the time, which is the key. But of course the guy wasn't living on this land and his agent stated that he needed the money to help his son.

 

[Rohn Jambo]

The guy is already hurting from a divorce and you guys want to kick him in the balls with an offer BELOW his purchase price from 8-9 years ago? That is not very nice.

Since when is buying a home about being NICE? If he doesn't like the offer, he doesn't have to accept it.

A lot depends on how long it has been on the market, and how desperate he is to sell. I lowballed an offer 7 years ago, offering 25% less. We finally settled on about 10% less than the listing, but it had been on the market for 134 days.

People who want to be happy in their new home do not make a deal that doesn't leave them with a clear conscience. Otis can decide for himself whether he wants to be able to sleep at night.

What? This is a business transaction. It's entirely possible the market was overly inflated 9 years ago and the true value now is less than it was. Even if not, this probably isn't some 90 year old senile woman going it alone he's taking advantage of. We bought land over a year ago that had been on the market for just less than a year. He was selling two adjacent parcels (he was originally selling 4, but 2 sold previously). He wanted $85k for both or $45k separately. We offered $50k for both and he took it almost immediately, leaving me to believe we could have gone lower. This is within the range of other similar lots in the area at the time, which is the key. But of course the guy wasn't living on this land and his agent stated that he needed the money to help his son.

Clearly my answer was for someone who may have a conscience.

 

[Dragons]

Does a sale price not change the taxable value in NY? It does in TX.

The assessor can estimate the market value of property based on the sale prices of similar properties. A property can also be valued based on the depreciated cost of materials and labor required to replace it. Commercial property may be valued on its potential to produce rental income for its owners. In other words, the assessor can use whatever approach provides the best estimate of a property s market value; they must be assessed at their current-use value.

GFD, eh?

Won’t my property taxes go down if my assessment goes down?Not necessarily. To demonstrate the relationship between assessments and taxes, consider the make-believe hamlet of Seagull Village, which is a community of two homes. Each resident owns a house valued at $100,000. Seagull Village’s property tax levy is $2,000 which is the amount needed to cover its expenses. Since each resident owns 50% of the total property value, they each pay 50% of the levy giving them each a tax bill of $1,000.

If property values in Seagull Village go down 10%, then each property is assessed at $90,000. The amount they pay in taxes, however, remains the same because the tax levy amount has not changed, even though the assessment has declined. Each resident still owns 50% of the total property in Seagull Village and must pay 50% of the $2,000 tax levy, which is $1,000. Even if the properties’ assessments increase to $110,000 each, the taxes stay exactly the same. They each still own 50% of the total property and Seagull Village still needs to collect $2,000, therefore they will continue to see a $1,000 property tax bill.

An increase or decrease in the assessment of an individual property is not an indicator of whether the tax bill for a property will go up, down, or remain the same.

Link

This, in theory, is how taxes work in Connecticut. You have a town budget. You have the assessed value of every piece of taxable property within the town. You divide the budget by your total assessment (divided by 1000) to get your mil rate. In my town, the mil rate is 28.44. My taxes are my assessed value (divided by 1000) * 28.44. The assessed value of my house is not the latest sell price, but a figure established by the town (they re-assess every few years and I believe they try to use 70% of the current market value).So, in this case, with ~55,000 residents, if my assessment is reduced and no one else's changes, then my taxes will go down. If every property owners assessment changes by the same percentage, then everyone's taxes will remain the same.