Back to Results
I've been lurking for a while and I have read all the pro's and con's of this market but, for family reasons will be buying a house. I have read somewhere that a normal appreciation should be 3% over long term. In your opinion do you feel that is a reasonable strategy to propose an offer to a seller? Example house sold in 1989(new) for $300K.....19 years @ 3% = $171K in appreciation....offer or value of home $470K.
Your thoughts are appreciated on this.
Please enter a valid email address.
Stating a discriminatory preference in an advertisement for housing is illegal. If you think this content is discriminatory or otherwise inappropriate and feel it should be removed from Zillow, please let us know by completing the information above.
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.
"I have read somewhere that a normal appreciation should be 3% over long term."
There won't be anything "normal" happening in the market for a long time to come.
I say use every source available. If that formula works out and happens to be right on with the neighborhood prices and you can swing that deal. Do it! We check the comps and see how well the homes are selling in the areas we are looking. If we see a house that fits our needs we'll check it out. From there, if the seller is looking to sell AS IS, then we go for a more of discounted approach on our offer. If the house is move in ready and needs some minor updating then we offer appropriate to that as well. It just depends on the case by case situation. In the end have no regrets and think through every possible house. We looked at one that we thought "could work". But we stopped short of thinking anymore when we started making excuses for the house. It was a nice house, just not for us.
That is with the assumption of the starting price that you take is at a correct price. Is the price one of the 1930? 1980? 2000? 2005? Since all these times had other significant factors influencing them, I don't think I could accurately find a 'price' using that method.
Over the history of the US houses have appreciated at roughly inflation + real GDP growth. A percent or two more on the coasts, a percent or two less in the worst hit areas of the rust belt.
That growth has been cyclical, though, causing long periods when people think housing appreciates at 5%, 10% or more per year, and long periods where people thing housing returns 0% or less per year, net of inflation.
When looking to purchase, the best thing to do is find the area you want to live in, and look at as many houses possible before deciding to purchase any of them, the more houses you look at, the better deal you will most likely find, you will get the feel of what a house should cost, when comparing them, then lowball them when making an offer.
Here's a crazy thought. Why don't you research the neighborhood, find out what houses are selling for, and put in a reasonable offer? Unless, of course, you and/or your agent like to practice writing offers.
The more offers you write, the better deal you will get.
What about the fact that so many of real estate deals these days have cash back at closing? This makes the sales prices look higher than what was actually transacted. Do real estate agents have access to how much was given in cash back?
akka, it depends on if the listing agent puts the credits in the MLS.
Basing a purchase price on 1989 plus 3% is a formula for failure...
I have to presume that your goal is to be able to actually PURCHASE the house... and the sellers will not be using the same valuation system. That's not to say that they're wrong and you're right, or you're wrong and they're right. Simply that they're not likely to be prepared to sell for that amount.
They're going to be looking to get what comparable homes in the area have been receiving, regardless of what percentage of apprecite that represents. 1989 + 3% may give you a "goal" as far as what you're interested in paying, but don't fool yourself into thinking that's what the sellers are prepared to accept.
acolemankelly, I say go for it. I don't think neighborhood comps are acurate. I think good deals are made outside the system and real estate agents don't always enter the true or whole transaction into the system. I know that when we sold our house it did not get into the system because we never even put our house on MLS to sell it. The more justification you can show for a low offer the more likely the sellers will take it and I think normal inflation is a great way to calculate what you think it is worth. Remeber you should not pay more than what something is worth to you not the seller. Also look at the rent the property would bring in at the current time and calculate how long to break even on the transaction.This is actually the best way to caculate the true market value of a property. There are lots of websites that will do this for you. The worst thing that can happen is they counter offer.
Corollary: many sellers are not serious about selling their houses in this market.
Buyers at the peak in 05 who weren't willing to overbid and stretch for the moon weren't serious about buying. Isn't that how it went? Actually, I don't disagree. Unless a buyer in 2005 had their head in the sand, they weren't seriously engaging in a transaction if they weren't willing to bid the stars.
Sellers in the decline, 08-? who aren't willing to slash their prices aren't serious about selling. That's how it goes now. Lots of listings aren't really on the market. They're more akin to the "Make Me Move" fiction on Zillow. Those houses aren't for sale. They're just coins in the fountain.
Offer what _you_ believe the house is worth, without regard to what the sellers think they want. Markets work both ways, up and down. You'll find a reasonable, serious seller if you are patient and keep looking. You just might have trouble finding as patient a real estate agent.
Read this thread before trusting any comparables research, as quoted by the 99.8% of realtors out there.
I don't know, Randy, I'm willing to write as many lowballs as my clients want... I just like them to keep a realistic idea about the liklihood that the seller will accept their offer in mind.
I find that if they're preppe for what the reality is, they're less likely to be angry and emotional when they don't get the house, and willing to move on to the next. Those rejected offers can be just as emotionally abusive on the attempted buyer as the dejected seller.
(and yes, I realize there are plenty of agents who won't stick with a "lowballer... but there are an adequate supply who will... when there's a true and open communication between buyer and agent.)
"Offer what _you_ believe the house is worth, without regard to what the sellers think they want. Markets work both ways, up and down. You'll find a reasonable, serious seller if you are patient and keep looking. You just might have trouble finding as patient a real estate agent."
I agree, however, since I'm in one of the areas (Southern California) that experienced the biggest bubble in prices, what I think the house is worth is so far below the asking price, I'm not even wasting my time making offers. Depending on where you are, it may be more a question of being willing to pay more than the house is worth because you've decided to buy now or waiting a few years with the expectation that prices will decrease to more realistic levels.
"...I'm willing to write as many lowballs as my clients want... "
Seriously, are you? Even if they are more interested in making a statement than buying a home?
Randy, that's why I said look at what they are selling for - not what they are listed for.
I'm not sure what that means. I've never run into a buyer/client who was interested in writing contract simply for the fun of it... they've always "intended" to try to purchase the home.
I would base an offer based on comparable houses. Since so few houses are selling, I would use the asking prices of comparable houses, not the sold price. Also, comps can be decieving because you do not know what the interiors of the comparable sold houses look like. They could be completely renovated, while the house I am buying may need a new kitchen. The WORST way to base an asking price is what the seller paid for their house. I like to look at what people paid for their houses for fun, but I would not base an offer on it.
Elvis: Have you ever had a client who only made offers that had no chances of being accepted in today market?
no... as I said in my previous post... I've never had a buyer who wasn't truly interested in actually GETTING the house... they weren't there just to write offers, and inform sellers that they were idiots. Most of the clients I've had in my career have been people who respond to my advice.
Oh, so you had clients who intended to buy a house, not just "intended" :-)
Sorry... either I'm being a bit too dense or you're being a bit oblique. Care to explain what you're saying?
Sorry... either I'm being a bit too dense or you're being a bit oblique.
The latter is probably the case :-) Anyway, I understand a statement like this:
...they've always "intended" to try to purchase the home.
they said they intended to buy a house but really did not.
brtlmj, don't try to be clever.... you're not.
If Elv!s meant the latter, he would have said it that way.
Let me provide a little more information....
The home is in Richmond, VA. and its located in a smaller subdivision of a large neighborhood with club house, and pool etc. There was recently a sale in the subdivision with the home we are intrested in for 136.75 per sq foot. However, all of the comps in the other subdivisions within the neighborhood are in the $150-160 per sq. foot range. The orginal asking price of the home we are looing at was $525 and has come down to $486. The home has new roof, just painted outside, kitchen upgrades, new master bath, new HVAC including air handler and furnace. If we bought at 470 that would be right at $140sq foot but only sale was at $136. Its hard finding a true value. The sellers want to sell but also have enough cash to carry the property for as long as it takes.
Keep the comments comming.
I simply explained how I understand words that are put into quotes. No need for personal attacks, mina.
sorry... my faux pas ... i merely put the word in quotations for emphasis, because I forget that Zillow now allows us to use itals and bolds.
"If we bought at 470 that would be right at $140sq foot but only sale was at $136. Its hard finding a true value. The sellers want to sell but also have enough cash to carry the property for as long as it takes."
Wow, at $140 sf ft my house would be about 50K less than I paid in early 1998. I think I need to move out of southern California. How's the weather in Richmond?
Please enter text in the "Enter the text to display" field.
Please enter text in the "Enter URL" field.
Please enter a valid URL.
Please insert a video embed only
By starting a discussion, you can expect more of an interactive, back-and-forth experience where the conversation can go in many different directions.
Zillow® Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy