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Highest and Best

I have been looking for a house for 1 1/2 years. I have visited about 50 houses, and put in offers on 13 houses-all were outbid. I have excellent credit. 

I have found the perfect home in a great neighborhood and location.

Asking was $120k, I offered $131k and its gone to highest and best. I don't want to lose another house-this one will haunt me. Any advice on how to take this house without getting taken to the cleaners? What's the magic number?
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December 06 2012 - US
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If you are working with a Realtor, ask for comps on what similar homes in the area sold for. It will give you a good number to offer. Write a letter to the sellers telling them why you love their home wouldn't hurt either. Make sure the sellers know you are flexible on the settlement date and are willing to work with them to accomplish the transaction. DON'T be so gung ho that you offer more than the house is worth or agree to repairs that are expensive or that you can't legally do yourself. No matter how much you love the home, if you are constantly doing repairs, the novelty will wear off and you'll be unhappy in your purchase. Let your Realtor be your guide.  Good luck to you!

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December 06 2012
Are you using an agent for all these bids? What does he or she say? Honestly, every market is different, and there is no magic number. One can only try to offer the top of what a home is worth to them, and hope that the appraiser agrees. Be sure your agent includes an appraisal contingency saying that you can get out of the deal with your earnest money if the bid is higher than the appraisal. Good luck. 
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December 06 2012
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I am working with an agent and we have an appraisal contingency, I just need additional opinions.

I should have mentioned that it is a foreclosure/bank owned-otherwise, I would love to tell the owners just how much I love the house. It is in great shape for any age house, it is rock solid construction (4 side brick built in 1967), and it is evident that it was well cared for.

This is the thing-the comps seem low to me for the neighborhood compared to surrounding areas. This neighborhood is tree-lined, quiet, all brick and well maintained, but older homes. Other comparably sized houses in cookie cutter neighborhoods with vinyl siding and not a tree in sight are going for more. Maybe its just a matter of taste.  

What typically happens if the appraisal is well below my offer if it is institutionally owned? 
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December 06 2012
Well, ideally if you bid high and the appraisal comes back lower, then the bank would lower the price to match the appraisal. However, many of the banks are catching on to bidders bidding high to get the deal and counting on the appraisal to save them in the end (this is the banks perception, not necessarily reality). So, many of them are asking the highest bidder to sign an addendum saying they will not renegotiate if the appraisal is lower than the offer price. 

I had this happen on the purchase of my own residence, and they refused to lower the price. The difference was something I was able to do (I had the cash...since the lender won't finance more than the appraisal minus needed down payment). 
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December 06 2012

Keep the terms of your offer simple.  Don't ask for the kitchen table, seller to pay closing, rooms to be repainted, long closing periods, and so on.  Those long laundry lists of extras are sometimes a bigger point of contention than a clean simple offer.  I have seen sellers go with the lower of two offers because it wasn't messy.    You do likely want to make it contingent upon the appraised value matching your offer so that you can back out if you choose to and the appraisal is low. 

When an appraisal is low the lender isn't going to loan above the appraised value which means if you want the house and still want it at that price you make up the difference or if the contract included language to void the contract when appraisal isn't met then you renegotiate or withdraw. 

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December 06 2012
It is never the magic number but rather the magic package.  A cash offer without any contingencies will always win!
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December 06 2012
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Agreed and understood about a cash offer taking it-I know this is toast if a an investor swoops it. Complicating this is that we are doing and FHA loan. Other than that, I am keeping it as clean as possible-no repairs necessary, we pay closing. 
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December 06 2012
Unfortunately this is happening so often, particularly in the $200k/less price range.  Some people are getting out-bid by cash buyers.  Others are FHA and really have to consider the appraised value and hence can only go so high.  It is a struggle right now in SW Fl with such low inventory.  If we had more supply, this would be much less of an issue.  It really comes down to Supply and Demand.

Wish I had a more positive, magic answer for you.

Hope this helps.  And good luck.  Shayla Twit, Sarasota FL Realtor
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December 07 2012
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Shayla, thanks, it does help. Last night I was told I would have to waive the appraisal contingency to be considered. I might be considered crazy, but I'm going for it. I know I'm paying more than appraised value, but I'm paying what the house is worth to me. I really love this house, and it will kill me if we lose it. 
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December 07 2012
 
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