not a first time home buyer here - actually this my 3d time around, but I’m in a new situation. In short, I’m looking for a constructive and effective way to get a house that’s a bit out of my price range.
Here’s the dope:
asking: $295k
what we can really afford: $250k
time on market: 70 days
house is currently vacant. I believe the seller has moved out of state, or may have only used the place as a summer home.
the basic problem is that If I offer 250, I leave no room to negotiate. But I also fear that below that, I’ll be seen as lowballing & not serious. (People can be emotional about the value that someone else assigns to their property.) I’d like to genuinely convey that 250 is our real price. If they can’t meet that, then we’ll be on our way.
Of course, I don’t know the seller’s real bottom price. I’m going to get the purchase price when I have a chance to get to town hall. The info is not online.
So why are we going after this house that’s asking well over our price? It’s a low population area, and there aren’t many other options.
We’re also considering augmenting our ability to pay a higher mortgage by renting part of the house. We have experience in this regard. This would give me room to go a bit higher, but it’s not my first choice.
I agree with this. Also, it might be helpful if you were to be sure that the realtor(s) involved let the seller know something along the lines that you really do like the property/it’s just what you’ve been looking for/ but is out of your price range; as a way of preventing the sellers from thinking you were just lowballing them.
I don’t know that this would help, but had a certain party done this with the offer he made on our house in Florida a couple of weeks ago, I would have given his very low offer some thought instead of telling the realtor to tell the jerk to go play somewhere else and not even give him a counteroffer (I’m actually very much shortening the rant I went on). People do get emotional about the home they’re had for 20 years and you would want to defuse that up front IMHO while still giving it a try.
thanks. this is good. What kind of contingencies are typical? I also don’t want to screw myself making it easy for the seller, if it means a major structural problem slips by.
to be clear - I meant I was going to try to find out what the current owner paid. Always helps to know that to better understand the sellers frame of mind.
I’d not give out any information on it being the most you can afford. If I were selling a house, I wouldn’t give a shit what you could afford.
Instead, make the offer, state that it’s firm, and find some concrete reasons why you beleive you’re making a fair offer. What I paid for the house also has no bearing on my terms for sale (and if it does, that’s the sort of thing I’m likely to mention wen I counter your offer). You shouldn’t give a shit what I paid for the house, really, you should be focusing on offering a fair price, and if I overpaid for the house 3 years ago, that’s not your problem.
I beleive the type of contingency Dinsdale is talking about is (typically) the offer is contingent on the sale of the purchaser’s existing home. Other contingencies (ie a home inspection with no major flaws) should not be given away.
Are you sure that the seller is an individual? When we purchased our then-vacant home, the previous owner had moved due to a job reassignment, and the home had been turned over to a relocation company. We did a little Google research on relocation companies, and happened to find a court case that described the formula by which relocation companies decide the price range in which they will sell. After a little negotiation, we got it for a price right at the lower end of the range.
I think dealing with a relocation company is also a plus because they’re more dispassionate about the whole thing – no last minute jerking you around because of personal drama or to try to wring a few more bucks out of you,
This may be true for you, but if a buyer truly wants to make the purchase for the best possible price, the more he knows about the seller’s situation, the better.
I’d offer $240k, and if they reject it, come back with $250k and they cover the closing costs. If they reject that, then $250k. That gives you two negotiating points, and beyond that, they get to keep paying monthly mortgages until they get a higher offer.
Besides the other good advice here, research the number of foreclosures in the immediate area. They drive down the price, perhaps more than a seller who is moving more or less voluntarily wants to admit. Also look up the selling prices for similar homes in the neighborhood. That should tell you if your offer is feasible. Loss aversion sometimes makes people want to hang onto an unrealistically high price, since they may be hoping that the market will recover enough so that they get their price, no matter how unlikely that is. Lots of people will refuse to sell since they don’t feel there is a loss until the money changes hands.
Given that, you might want to offer $245. That isn’t low enough to be a lowball offer, but offers the seller a way of saving face since it might anchor the price to the low number (from the high one) and thus give him the feeling that he got something out of you.
Never, ever worry about offending someone with an offer. You shouldn’t pay someone extra so they can feel better about themselves.
If you find out the house is actually bank-owned, offer $200k or less.
My only issue is that they aren’t “lowball”. Offering a couple of % off your top isn’t realistic. What they want for the property is irrelevent, unless you must have that particular house. So lets assume you can walk away from this property, and 100 more like it until you find a distressed seller.
A lowball strategy depends on finding a seller who has time or money running hard against them. You can’t do it if there are a handful of buyers panting over the property.
You need them to substantially invest their time and resources in your deal. You need them to be trying to maximise your offer, not the actual value of the property.
Offer $200k.
When they say that’s ridiculous point out:
It’s a low population area
the local schools are losing teachers because of falling enrolments
the number of foreclosures in the immediate area
all the low prices achieved in the area in the last 6 months
all the properties withdrawn from sale due to lack of interest
every structural issue with the house and pest control requirements
the XX months the property has been vacant
the faults in the houses adjoining suggest there’s a geographical issue
the housing costs of where they’ve moved to are even higher
the interest rates are probably going up in the next XX months
your offer is on the table, (near) unconditional and you can close today
etc. etc
Mention each and every point.
(*** all of these must be arguably true ***)
Leave them to think about it.
Get a friend to inspect the property and make an even lower offer, for the same reasons.
Then withdraw the offer.
Come back in 10 days time with $180k
Be prepared to walk away repeatedly. Disregard every concession they make as being trivial, and every concession you make to be the size of the national debt.
In other words if you want to play lowball, it’s got to be areshole strength. You are never going to deal with these people again. Zero sum game and all that.
Personally I don’t have the stomach for it. If similarly you are concerned about sleeping at night, don’t start. Haggle at the margins, and pay over your odds, like every reasonable person does.
penultimate thule raises a good point - i’m not sure that 250 is necessarily a ‘lowball’ relative to 295. I like the idea of offering 245.
I don’t know how long the property has been vacant. I googled the address & found an individual associated w/ that address, so my best theory is that’s the owner. That doesn’t rule out it being owned by a some other company since then. I should be able to find that out at city hall. Given the rural location and the information I gleaned about the presumptive owner, I’m more inclined to think it was a second home - and still owned by that individual.
as an aside, I also have the email & business phone of my suspected owner.
there’s just a few foreclosures in the county. As I mentioned, it’s rural, so there’s less of everything. There’s little comparable to it, so it’s hard to assess the market regarding whether it’s inline with similar properties.
How recently has the price beenlowered on the house? If it has been on the market at $295k for a whiel then you can try the lowball, but if it just was lowered recently to that price then they probably want to see how it does at the new offering.
I should mention I’m a horrible negotiator - there are precious few things I want badly enough to play those games. If I want it very badly, I’ll pay the asking price (or close). If I don’t want it badly, I’ll forgo it unless I can get it mighty cheap.
The main continguencies I’m aware of are sale/close of residence or financing.
Tho I have not had it happen myself, I’ve heard several folk tell of making a low offer for cars or houses, having it rejected, only to be called sometime later by the seller asking if the offer is still valid. I’m firmly of the school of thought that anything is worth only what someone is willing to pay for it at any given time, and as time passes and they don’t get any non-contingent offers higher than $250k…
Just remember that in all sale negotiations the first person to make a counter offer loses. They are admitting that the price they asked is really too high or the offer they made is really too low. The process then becomes a matter of lowering the too high asking price or raising the too low offer.
Make one offer that you are happy with and let them worry about it after that. I bought two investment properties where the selling agent pretended that he wouldn’t take our offer to the vendor because it was “insulting.” A week later the phone calls started. “My client would accept…” Was met with, “You have my offer.”
Offer a little less than you’re willing to pay. If they’re horribly offended, they won’t counter and you can move on – but, keep in mind, this can happen if you offer 5k less than asking or 50k, if the seller has a mind to it. I know someone who put in a very reasonable offer and was completely blown off (they ended up selling the house later for less than he offered).
I bought a house about a year ago and put in a first offer that my realtor heavily advised against. “That’s too low, you’ll offend them.” I said, “That’s my offer. It’s an unoccupied estate house that’s been on the market for 6 months, they have no other prospects, and it’s November. The market sucks and I’m not tied to selling another house since I’m a first time buyer. If they want to pay to take care of it all winter, that’s their prerogative.”
Turns out they counter-offered well below what I thought they would, and well below what I would have accepted. I even got them to throw some things in that I added just for extra wiggle room (some stuff still in the house, like a deep freezer, and paying for closing costs), and they accepted all of those things without question.
You have nothing to lose by making an offer. If they counter at $292k, you’ll know.
If they took your offer, your offer was probably too high. Piffle on the insulting crap - this is business, no offer is insulting. That’s why you negotiate through agents.