Home buying sanity check Round 2: Comps

In My Humble Opinion
1

So we decided to try to buy The House. Call it FOO.

My offer was 8% below the listing price.

The seller rejected the offer, and cited the recent sale of a comp (BAR) in the neighborhood, which sold for just over the listing price on FOO.

FOO and BAR are reasonably good comps - same model from the same builder, for basically the same square feet. They both have 40’s era rag wiring. There are some differences, though…

FOO has:
[ul]
[li]3 beds[/li][li]2.5 above grade baths (and a toilet in the basement)[/li][li]0.5 acre lot[/li][li]150 square foot galley kitchen[/li][li]2 car garage[/li][/ul]

BAR has:
[ul]
[li]4 beds[/li][li]3.5 above grade baths[/li][li]0.75 acre lot[/li][li]325 square foot eat in kitchen[/li][li]1 car garage[/li][/ul]

Both FOO and BAR were last purchased at about the same time. FOO sold for 89% of BAR’s price at that time. Neither have had any substantial upgrades since they were last sold.

Being a nice guy, my offer on FOO was 90% of the recent sale price of BAR.

The seller countered with an offer that was less than half a percent below their listing price. Their agent informed my agent that the seller was unlikely to let FOO go for less than 95% of the recent selling price of BAR, and that my offer was verging on insulting.

By the way, FOO has been on the market for three months with no offers that anybody is aware of.

I mean, I realize that we’re talking single digit percentage differences here, but that’s extra cash in hand on my end for contingencies on stuff that the home warranty won’t cover.

Am I off base in thinking this seller is being unrealistic? I mean, a comp is a comp, and given that no two old-ish houses are going to be precisely the same, you adjust for what factors you can. I get that the value of a home is determined by the market, but right now I’m the market, and I think I have a pretty good case that what I’m offering is pretty close to what the house is worth.

2

Speaking as a homeowner (i.e., as a seller rather than a buyer) I don’t think the information you’ve provided is enough to say FOO deserves to be 8% less than BAR.

Did BAR need repairs like a new roof or HVAC that the buyer would use to lower the price? For that matter, has FOO been spruced up with new paint, carpeting, etc.?

FOO has a two-car garage. Are you in a car-intensive suburb with weather bad enough to make a two-car garage desirable?

Does FOO have a dining area right next to the galley kitchen and is BAR laid out so that you pretty much must eat in the kitchen?

FOO has a toilet in the basement. Is the basement finished, and is BAR’s basement unfinished?

If they both have approximately the same square footage, but FOO has only 3 bedrooms, does that mean FOO’s rooms are larger, or does FOO have a den or family room in place of BAR’s 4th bedroom?

How fast did BAR sell after it was listed? If it took awhile, maybe FOO’s owner thinks the market is naturally slow.

3

Ignore this. Offer what you think a fair price is, and if they won’t take it, either pay more or move on.

10% below asking isn’t insulting for a house that’s been sitting for months. But some sellers want to be insulted and are willing to wait forever for the price they think is right.

Where is all the extra square footage in FOO if it’s not in bedrooms, bathrooms, or the kitchen?

There are formulas used by appraisers to assign a value to various differences like this. I tend to think they’re basically nonsense (house appraisal is essentially decorated-up cooking the books in my opinion), but it’s possible that the seller would be persuaded by such a calculation. After all, it persuades banks to lend hundreds of thousands of dollars to people, so it has some power there.

4

Oh, I get it. I’m selling a house too. :slight_smile:

They pulled carpet up in a couple of rooms in FOO, but did not refinish the floors. The original hardwood is in pretty good shape throughout. BAR has awesome original herringbone hardwood floors.

The paint in FOO looks… old and dingy. They didn’t bother to clean out the fridge before they vacated.

Don’t know about the mechanicals in BAR, but I don’t know about them in FOO yet as we haven’t reached inspection. The AC is old and the furnace was installed before the current owners bought it.

The neighborhood is the inner part of an outer neighborhood within the city limits. It’s car-dependent, but so are 99% of the homes here. It’s Ohio, so the weather depends on the year.

Both have virtually identical dining rooms.

FOO has ancient vinyl tile on the slab in an enclosed, uninsulated section of the basement. They’re calling it a “family room.” The toilet is literally a toilet with a door under the stairs. No sink except for in the laundry area.

At one point FOO obviously had four bedrooms. Somebody knocked down a wall to create an enormous master, but who needs a 400sqft master in a 2700sqft house?

BAR sold in about two months from listing to entry. FOO has been listed since before Thanksgiving and had a 2% price drop in January.

5

Rule Number One of real estate is LOCATION, LOCATION, LOCATION! Two identical homes can sell for wildly different prices because one’s closer to a nice park, the other’s near a noisy bar, and so on…

What is “rag wiring?”

For the age of these houses, is that vinyl tile in FOO nine inch square or twelve inch? If it’s nine inch, it’s probably asbestos, and you may want to factor in the cost of remediation.

And where is this crazy place where you can offer less than the listing price? Do that around here, and you’ll be laughed out of town. I had to offer 10% over asking to even be considered, and even that was barely enough.

6

Ohio, which along w/ Michigan was hit hard in the housing crisis and many areas have not recovered entirely.

7

Having bought and sold far too many houses in my lifetime, I don’t get the concept of “insulting” offers. It’s a business transaction, not a personal attack. You think your house is worth X. I think it’s worth X minus Y%. You have to decide if the dollars if that percentage will be eaten up by additional mortgage payments as your house sits unsold for however many months.

Even if my reasoning is “How can you think this dump is worth X?? Just look at the paint colors you chose - you have no sense of style!!!” - it’s still a business deal. You’re entitled to take it personally and refuse my offer and sit on your house as long as you like. Or you can look at the hard dollar bottom line and decide accordingly. It’s just a house.

Isn’t that part of the reason we use agents - to go between the buyer and seller and filter out the personal stuff? Sorry for the hijack - this is just something that makes me crazy.

8

The houses in question are four doors down from each other.

It’s cloth jacketed wiring that they used post-K&T, pre-Romex. It’s kind of a pain in the ass to work with if you’re going to do stuff like change fixtures or fix outlets.

Good point - I’ll check that out if we do another walk through and definitely point it out to the home inspector if we get that far.

Ohio ain’t SF. You’d cry tears of Anchor Steam if you saw how much I’m trying to pay for what I’m trying to buy.

9

I’ve actually done more commercial real estate and B2B capital spending than I have residential real estate. Our current house if the first and only place I’ve bought.

Based on my limited experience, I’d say the left brained agents tend to get in to commercial or the investment side of residential; the right brains end up in retail residential.

10

This.

Look at your respective BATNAs (best alternative to a negotiated agreement). Can you find another house? Can they find another buyer?

The seller is taking an inflexible position, but that doesn’t mean you have to give in.

Whenever I was making an offer that the seller would reject, I would let them know that my offer had an expiration date. After that, we renegotiated.

Right now, they believe that their BATNA is your offer of 92% of listed price. If that is going to expire in one or two weeks, then it adds uncertainty into their picture.

11

Ugh.

I trust you’re going to rewire the house? Other repairs/renovations? I’d be willing to increase my bid if the seller would include some repair contingencies, particularly really annoying ones like this.

.

12

Your offer doesn’t seem insulting considering it’s been sitting empty for 3 months. Do you know if the seller bought it within a couple years and is trying to get at least what they paid or something like that?

You’ll drive yourself crazy trying to compare XYZ with the comp. The comp isn’t the end all be all, it’s just a point of reference. That said, I think the difference in lot size is a big point in your favor. If the city’s assessment breaks down the land value separate from the structure, I’d imagine that the difference between the FOO and BAR is substantial. You can easily point to that difference to back up your offer.

13

The last house I sold, my asking price was firm. I stressed this to my agent and I made sure it was understood. Yet I still got offers below my asking price, which I then countered with an amount above my original asking price, just to drive my point home.

It took a few months, but I got what I wanted (which was possibly more than the house was worth).:slight_smile:

14

Within days of when my mother died, old ladies from her social circle started contacting me to offer condolences and to tell me that they were looking to move into a new house just like my mother’s. They would take it off my hands immediately for cash. Of course, the price they offered was about 2/3 of what I eventually sold it for. When I told her other friends about this, they said it was common. The old ladies weren’t planning on moving, they just wanted to flip the house.

And then her neighbors started writing to offer condolences and to offer to buy the house for some ridiculously low price.

And then when it was first listed, a bunch of people offered absurdly low prices. And then there were the ones who offered my asking price and put down a deposit and then did an “inspection” and found a drop of water in the kitchen and demanded a $50,000 reduction because of the water leaks.
Sorry, but you put up with a lot of insults as a seller.