Making an offer for a house help

[cannman]

Good day everyone!

SWMBO need to make an offer on the house and we need some help making an offer in terms of under pitching the list price.

I was wondering if anyone in the industry who had inside access to numbers could help us make a good deal.

The house has been on the market for a while and has come down $30k in the last 60 days.

We were wondering if someone could help us figure out what the current mortgage is and how much they owe so we could play as competitively as possible (if legal).

If you could contact me privately, any help you provide would be graciously return in shipped homebrew.


Thank you, :fro: Cannman and SWMBO

 

[Rhumbline]

I wish you luck with the house hunt.

Not sure about California, but around here the county property appraiser's web site has a lot of good info. You can see when the property changed hands, and the price paid.

As for how much is left on the mortgage, that would be a tougher one and I'm not sure how much help it would be. I've known folks willing to sell at a loss just to get away, and others who held out for three times what they paid just two years earlier.

Sorry if that isn't too much help, good luck!

 

[cannman]

I wish you luck with the house hunt.

Not sure about California, but around here the county property appraiser's web site has a lot of good info. You can see when the property changed hands, and the price paid.

As for how much is left on the mortgage, that would be a tougher one and I'm not sure how much help it would be. I've known folks willing to sell at a loss just to get away, and others who held out for three times what they paid just two years earlier.

Sorry if that isn't too much help, good luck!

We were looking to find the mortgage amount to know how much to undercut the listing price by

 

[MindenMan]

Any realty office in your neighborhood will have information on "comps". These are compatible prices for the other homes near you that have sold within the last year. This information is also free. Good luck.

 

[Onkel_Udo]

We were looking to find the mortgage amount to know how much to undercut the listing price by

Realistically this does not exist as public information. What the guys were implying about the County Assessors information allows you to back into it.

If you have the prior selling price and date, you can back into their equity to debt. Find out the prime rate on the month of purchase, add 1.5% and use a mortgage calculator for a 30-year. It is basic math for any good online mortgage calculator.

In the end, though, your offer is not about what they owe. Your offer is about what it is worth to you, what it appraises at and what the seller is willing to sell it for.

I can tell you from experience, if they have dropped the price already more than 5%, they likely have little room to move without loosing money unless they lucked out and have a "single party" sale going on so they only pay about 3% realtor fees. Again, all this is assuming a normal mortgage and a normal real estate market.

 

[Bobby_M]

What they owe is irrelevant. I understand that it may affect some selling decisions like used cars where the seller just wants to be clear of the payments but no. What if they paid the house off last year? Offer a dollar? They are asking what thier realtor told them they can probably get. See what Zillow says about the value which is just a computed comp but you have to use your own personal data based on what other properties are listed for and how it fits your needs.

 

[Rhumbline]

I'm also curious why you think the balance due on their loan is important. There's no way that I would ever consider selling my house for even twice what I owe on it.

Make them a low ball offer, the worst they can do is say no. Go 20-30% less than they are asking.

 

[fj605]

This is quite the opposite of the housing market in Denver, CO. Wife and I started house hunting and most offers are starting at the asking price and going up. There's no lowballing in this market.

 

[SlickTX]

What they owe on the house is but one data point, and probably the most irrelevant as others have said. Other, more relevant data, should be considered. Why are they selling . . . moving for a job soon, already moved; downsizing after kids have grown (house is probably paid off or close to it); can't make the payments due to job loss (this is where what they owe might be relevant), etc? Good luck getting any answer, let alone a straight answer on any of those. They don't win if you see their cards.

 

[GHBWNY]

We were looking to find the mortgage amount to know how much to undercut the listing price by

Regardless of final offer/acceptance, when we took on a mortgage 4 years ago, the bank required 20% down. Just sayin'.

 

[Trail]

We lowballed our offer on our house (68k, against an 82k asking price) and the seller counteroffered 74k. No big deal, we accepted and everybody won that day.

If you make them an offer they don't think is sufficient, they'll counter if they want to sell it. If they don't counter they think they can get more, so you'll need to consider carefully before your counter-counteroffer.

 

[TeamAshBrewing]

Stop worrying about how much the house costs, its only money. The real question you should be asking is... Where am I going to make beer in this house?

 

[soccerdad]

Good advice here - especially on comps. I would only add that NEITHER realtor works for you. They both work for the seller (and themselves) .. the higher the final price, the more they make. So if you want to bid $X dollars and a realtor says, "Oh no, that's too low," just tell them to contact you next week. Your agent should, at times, squirm as much as the seller does.

 

[IslandLizard]

Real estate value is market based, and usually the market is inflated. The price is not based on the sum of materials and labor, minus depreciation, plus improvements and adjusted for the consumer price index.

The current appraisal is based on today's market value of comparable properties. The asking price is typically derived from an appraisal by the real estate company listing the property when it was put on the market, with a markup. The owners decide what the ultimate listing price is, and may lower it if it doesn't sell fast enough. Since it has been reduced, obviously it was priced too high originally, and they may have lost some prospective buyers due to that.

Regardless, you are the next potential buyer right now and you should make an offer based on research you've done (comparables, Zillow, tax records, market, school district, etc.) and what the home is worth to you and your family. Now you've arrived at your buying price, to which you can apply a discount when putting in your offer to "feel out negotiability." Keep in mind, you can always raise from a low ball offer. But once your offer is accepted, you cannot bring it down unless you bring substantial evidence why (appraisal, inspection, found undisclosed flaws, liens etc.).

Be firm about your offer, and make sure they understand it is your only and final one (at least for now, but don't convey that wisdom). Your real estate agent may not agree or even question you. You do not need to explain to anyone why and how you've arrived at that price and offer. Neither that you have a built-in cushion, through the discount you applied.

If you have a friend who is or can pose as an architect, or is knowledgeable building wise, take him/her with you on your "final inspection" before putting in the first offer. Talk about shortcomings, problems, concerns, make notes, etc. but do not discuss anything in front of the RE agent(s). You hired a "specialist" to derive a fair offer price, and gives your offer more clout.

Good luck, think for yourself, and don't be gullible. Real estate business is cut throat and only buyers pay the bill!

 

[b-boy]

I just went through this.

I think a motivated seller is the best way to get a deal. I got a good deal because my seller was very motivated. She was divorced, had a lot of equity tied up in the property, couldn't keep up the house, and needed money. I was able to get the house for ~20k below asking price. I went in low, made a solid list of reasons I wanted to pay less for the house. It worked.

The fact that your seller dropped the price may be a good indication of a motivated seller. Ask your real estate agent about it. She might be able to give you some color on the buyer. Mine was very helpful.

When you make your offer. Don't bend to pressure from the realtor. Like soccerdad said, they represent the seller for the most part. Technically, they represent the buyer as well, but the more they sell the house for, the more they make. I got my first house for about 10k less than my realtor wanted to go in with as my first bid. I had to argue with her to get her to submit the bid. By law, they are required to submit any bid received. Keep that in mind.

 

[obie]

if trees have to be taken down, if the roof is garbage, if the siding is trash, and the deck is leaning, send them a low offer. that's what I had to do.

 

[Onkel_Udo]

Regardless of final offer/acceptance, when we took on a mortgage 4 years ago, the bank required 20% down. Just sayin'.

That varies greatly as well. My best Mortgage offer was 6% down so I just used the extra 14% I hade in my pocket and made a large additional principal payment on my second payment. Two years later I had enough equity to ditch PMI and the mortgage company complied after much discussion...that saved me about 20% of my monthly payment.

 

[GHBWNY]

That varies greatly as well. My best Mortgage offer was 6% down so I just used the extra 14% I hade in my pocket and made a large additional principal payment on my second payment. Two years later I had enough equity to ditch PMI and the mortgage company complied after much discussion...that saved me about 20% of my monthly payment.

Good move. Did the same thing.

 

[Hello]

We were looking to find the mortgage amount to know how much to undercut the listing price by

You are going about that all wrong. These people, if they're selling their house at a profit, are not going to accept much less because they worked to pay down their mortgage. They're simply not. They will, as guided by their agent, sell the house for what the market will bare. If the comps support the asking price, you have some wiggle room, but you're never going to find someone who will take much less than FMV just because.

Think about this, if you buy this house and make additional principal payments each month, you will pay down the mortgage faster. If you're going to sell it, will you honestly take just enough to pay off the mortgage and shat away your equity? No way.

These people could be upside down (doubtful if this isn't a short sale situation) or they could be breaking even. If they're lucky, they're walking away with some cash. You pay within a tolerance of FMV not based on what they owe a bank.

 

[passedpawn]

zillow.com for comps.

I was the lowest of 3 bidders when I bought the house I'm in now. Why did they sell to me? They liked me. They liked my wife, and we brought my adorable daughter, and they liked her. You probably think this is crazy, but it was a corporate move and I don't think they were sweating the money, and the seller's realtor lives next door (which is how I know all this).

Anyway, it can't hurt to just be really nice. It's a house to you, it's a home to them. They probably want somebody to continue taking care of it after they are gone. They might also feel some responsibility to the neighbors.

 

[HarborTownBrewing]

So much of how this all works can come down to the customs in your area. Where I used to live, it was common for the buyer to offer, then the seller counter-offer, then that was it. Take it or leave it. Where I live now, the un-written rule was for the buyer to offer, seller counters, buyer counters, seller counters, buyer places final.

When my realtor told me this, I thought she was nuts. Well, we put about 5 offers in, and despite how competitive we were, she was right and it followed that routine each time. That said, the seller may have set the price based on local offer tendancies. Or maybe not. It all depends.

The absolute best reference is going to be your agent though. Unfortunately a lot of people here have noted the agent isn't always on your side, which is true - they get the percentage based on final list price. It's so important to have a good realtor who truly is on your side. I was extremely lucky and our realtor would simply not let us spend more than she thought places were worth, even if we thought we wanted the place. I was kind of irritated, but she was right, and she saved us a bunch of money.

Oh, yeah, and like @PassedPawn said, it can really help if you show your true colors to the seller. Unbeknownst to us, our realtor wrote a letter to the seller about us and how much we loved their place - lots of buyers do this. In our case, it got us the place and we love it.

Getting a great realtor is the tricky part but it can pay so many dividends. Best of luck!

 

[Brettomomyces]

This is quite the opposite of the housing market in Denver, CO. Wife and I started house hunting and most offers are starting at the asking price and going up. There's no lowballing in this market.

We just closed on a house in Thornton, had to bid 4% over asking for a house that desperately needed some updating.

 

[hio3791]

The thing about real estate transactions is that both parties let their emotions clutter their logic. You or your wife fall in love with the house and feel this *is* the house or the seller has unrealistic expectations as to the value of their home because it's their home and they raised their kids there or maybe it was their first home or maybe it has been in the family for a long time, etc.

Regardless, you have to go into it as a business transaction, take all feelings aside. If the sale falls through, so what? Will you be on the street homeless? Well, I hope not, it just means you have to find another house. First off, look at the tax records. This should be public information and should tell you what the house has sold for in the past along with dates, etc. That's just a starting point. You then cross reference that with comps in the area. You need to look at the house, have they made any remodels? Does the house need repairs? How does the house compare with other houses in the area?

As others said, what they owe on the house is irrelevant. Maybe the house is paid off, maybe they have refinanced the house several times to get cash out, who knows, who cares. Having a good realtor on your side will make this easier but keep in mind that the realtor gets a commission and it's based on the sale price of the house so as others suggested, if you don't feel comfortable assessing property value, take someone with you that does.

If the realtor isn't treating you fairly or gives you, what you believe to be, bad advise or continues to show you properties just at or above your max, fire them. We've bought/sold plenty of properties. When buying, I never tell my realtor what the bank approved me for or how much I feel comfortable spending, why? Because they will always show you properties at or above your max. So unless you went into some type of contract with your realtor, which I hope you didn't, nothing says you cannot walk away from your realtor and find someone else. Make it clear to the realtor that if they aren't willing to listen to you that you'll find someone that will. It is a cut-throat business and that's a loss for them for you to walk away.

 

[cannman]

You are going about that all wrong. These people, if they're selling their house at a profit, are not going to accept much less because they worked to pay down their mortgage. They're simply not. They will, as guided by their agent, sell the house for what the market will bare. If the comps support the asking price, you have some wiggle room, but you're never going to find someone who will take much less than FMV just because.

Think about this, if you buy this house and make additional principal payments each month, you will pay down the mortgage faster. If you're going to sell it, will you honestly take just enough to pay off the mortgage and shat away your equity? No way.

These people could be upside down (doubtful if this isn't a short sale situation) or they could be breaking even. If they're lucky, they're walking away with some cash. You pay within a tolerance of FMV not based on what they owe a bank.

The reason why I'm so suspect is that 5 houses down, they purchased the home at REO 30K!!! Its now retailing at 300k Zillow 1 bed 1 bath and is used as comparison to our home 4bed 2 bath. If I know our owners will make a killing, I may not be as so quick to pull a lowball offer. If there is no wiggle room, we can cut to the chase asap.

 

[cannman]

Stop worrying about how much the house costs, its only money. The real question you should be asking is... Where am I going to make beer in this house?

It has a separate garage like structure that was used to house horse equipment with a cement foundation and 120v hookups preinstalled APPARENTLY, according to the electrical panel, there is also 240 outside. I haven't found it yet and the realtor didn't know the location either.

 

[cannman]

The thing about real estate transactions is that both parties let their emotions clutter their logic. You or your wife fall in love with the house and feel this *is* the house or the seller has unrealistic expectations as to the value of their home because it's their home and they raised their kids there or maybe it was their first home or maybe it has been in the family for a long time, etc.

Regardless, you have to go into it as a business transaction, take all feelings aside. If the sale falls through, so what? Will you be on the street homeless? Well, I hope not, it just means you have to find another house. First off, look at the tax records. This should be public information and should tell you what the house has sold for in the past along with dates, etc. That's just a starting point. You then cross reference that with comps in the area. You need to look at the house, have they made any remodels? Does the house need repairs? How does the house compare with other houses in the area?

As others said, what they owe on the house is irrelevant. Maybe the house is paid off, maybe they have refinanced the house several times to get cash out, who knows, who cares. Having a good realtor on your side will make this easier but keep in mind that the realtor gets a commission and it's based on the sale price of the house so as others suggested, if you don't feel comfortable assessing property value, take someone with you that does.

If the realtor isn't treating you fairly or gives you, what you believe to be, bad advise or continues to show you properties just at or above your max, fire them. We've bought/sold plenty of properties. When buying, I never tell my realtor what the bank approved me for or how much I feel comfortable spending, why? Because they will always show you properties at or above your max. So unless you went into some type of contract with your realtor, which I hope you didn't, nothing says you cannot walk away from your realtor and find someone else. Make it clear to the realtor that if they aren't willing to listen to you that you'll find someone that will. It is a cut-throat business and that's a loss for them for you to walk away.

What is interesting about this house is that the seller had moved out due to a relocation for work and was looking to rent it out. Over the winter, the house had it's pipes froze (nothing new out here). They filed an insurance claim and the insurance company ended up calling it a loss and most if not the entire structure was rebuilt. No one has lived in the reconstructed home yet. Everything is new inside from the floors, windows, roof, to the HE washer/dryer.

 

[Rhumbline]

The reason why I'm so suspect is that 5 houses down, they purchased the home at REO 30K!!! Its now retailing at 300k Zillow 1 bed 1 bath and is used as comparison to our home 4bed 2 bath. If I know our owners will make a killing, I may not be as so quick to pull a lowball offer. If there is no wiggle room, we can cut to the chase asap.

I'm just going to play the devil's advocate here...

Why should it matter to you how much the seller makes on the deal? If you get the house you want, for a price that is tolerable to you, then you win.

Would you really walk away from a house you're in love with, that you could get at a decent price, just because the owner was going to make more than you thought was appropriate?

It should be possible for both parties to walk away from the transaction feeling good, that's how I bought my house, cars, boats, motorcycles, etc.

 

[Hello]

The reason why I'm so suspect is that 5 houses down, they purchased the home at REO 30K!!! Its now retailing at 300k Zillow 1 bed 1 bath and is used as comparison to our home 4bed 2 bath. If I know our owners will make a killing, I may not be as so quick to pull a lowball offer. If there is no wiggle room, we can cut to the chase asap.

Nope, it doesn't work that way. The REO is sold as-is without warranty. It was probably a cash offer. Do you have cash?

The house you're on about is being sold by people likely looking to buy another. No way will they come well below market rate. Also, if I understood, you're comparing a 1 bed 1 bath to a 4 bed? Again, you can't just multiply $30k by 4, it doesn't work that way. The house you're looking at has more marketability and is likely not an REO ****hole. Not all REOs are ****holes, but frankly, you don't know what that REO looked like.

Either way, make your offer. You can actually put in the sales price of the house into an amortization calculator and use an assumed interest rate that could have been the rate back in the day, and sort of figure out what they may owe. Again, you can make your offer based on that, but if and when they counter, they will show their cards on what they really want to get.

I'm with @Rhumbline if you get the house you want for the price that YOU can pay, then what the sellers make isn't your concern. You'll know it as soon as you get your new TILA-RESPA Integrated Loan Disclosure. Trust me. If you want to undercut the competition, look for short sales and be prepared to go through a pretty painful process with the bank because that is literally how it goes.

 

[cannman]

I want to thank everyone for their insight and in helping me put into perspective what is going on and how I SHOULD be focusing on the situation. I love this community for all of it's resources and I'm amazed how something like beer can bring us all together, in one way or another.
I will keep you posted of our progress!

 

[Rhumbline]

I wish you the best of luck. Let us know how it goes.

Remember, life isn't a zero-sum game!