Profile picture for Jorgeito

Is it really that hard to buy a property at market value or maybe I'm doing something wrong?

Hi everyone,

I'm getting frustrated trying to buy a home in the Los Angeles area. I've been looking properties and making offers for 5 weeks now.

So far, I have submitted two offers and in both cases they tried to rip me off.

First property, Townhome in West Hills, CA. Asking price 429,000, Offered the same and seller wanted to remove appraisal contingency, I said no. Seller accepted on condition that appraisal was carried out within a week. Appraisal came at 395,000, seller didn't want to Negotiate. End of Story. It's my opinion that the seller added a bunch of high-end upgrades thinking that they were going to live there for a long time, comparables are much lower, no body will pay him so much money.

Second property, Condo in Valencia, CA. Asking price 439,000, ZEstimate is 395,000. Seller wanted to remove appraisal contingency, I said no. Listing agent said if they don't get a good offer property will go on short-sale. In my mind these people bough during bubble and are underwater, now they can't pay so their only option is to rip off someone or get repossessed.

My question is, is it really that hard to buy at market value?

Am I doing something wrong? Is my agent doing something wrong?

For both offers I put a 25% down payment, maybe that is making them think that I can easily come up with the diffrence instead of them adjusting to market value?

I am really not so picky, I just want a condo / townhome in LA area, in an area with good schools / low crime gang which is big enogh (3-4 bedrooms) which I can buy at market value.

My agent is very responsive and has really tried to protect my interest, although he did send me very few listing and many of them were not applicable, I had to send him a lot of stuff I found in Zillow and other sites.

Please, any valuable advice is welcomed.

Thank you and good weekend!
  • October 11 2013 - US
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Answers (9)

Profile picture for wetdawgs
Yes, at the moment it is very hard in your area to buy a house at initial listing price.     Many are buying above appraised value (don't use the Zestimate to determine "appraised value" as Zillow does not offer appraisals).

  • October 11 2013
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First of all do not assume the zestimate is correct, it won't be - how could it be? Properties are all unique in some ways and a computer algorithm can't be accurate very often, if ever.
  • October 11 2013
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Profile picture for Jorgeito
I'm not assuming zestimate is correct... but only reason I see a seller refusing an offer with appraisal contingency is because they know they are significantly overpriced

I would like advice from people that have bought recently in the LA area ... did you pay above market value... how much more?

I find it really difficult to believe that that there are no properties selling at market value when I saw the comparable sales in my apraissal report, and also how is the people with 5% and 10% down payments doing it? If that were true, those people would never be able to buy
  • October 11 2013
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I am so sorry to hear of the trouble you are having.  Every market is different but I do know that in CA there are more cash buyers, and so perhaps these sellers are thinking a cash buyer will give them their price.  I think, however they will find that if someone has cash they are not going to overpay.  So hang in there.. Sounds like you have a good agent... the right house will come to you! 

Warmly,
Janice
  • October 11 2013
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Profile picture for B Mike West
In a seller's market sellers can ask and often get whatever they ask for a property. There is very little inventory available.  They know that they are asking for big bucks and they know the (bank's) appraiser is not going to appraise the property at the inflated price.  Thats why they want you to remove the accraisal contingency.

The end result is that if you don't meet their requirements they know that there will be someone else tomorrow that will. What they really like is to have two or more buyers bidding for their property, raising the price.
You have to decide if you like a particular property enough to pay the inflated price--IF you have the bucks to pay the difference between the asking price and the appraisal price. 

If you do decide to do that you should remember that prices are going back up fast and you should be able to make up the shortfall in value in short order.  If you decide not to play the game you might have to look elsewhere or just rent for a few more years.  However, it does not look like prices are going to come down in the next several years.

Good luck.
  • October 11 2013
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Profile picture for CallTheSisters
Your in an active market so competition is going to be tough.  I would never waive the appraisal contingency. 

Perhaps your agent would have some luck researching when the home sold last, how much and what financing before you make an offer.  We have public records on line so I can go there and check to see if they refinanced or are carrying any other debt as well.

That gives you a heads up in the case of the seller who over paid and has no place to go price wise.

As other posters stated don't use Zillow as the price point. Your agent should be able to help you based on local timely data.
  • October 11 2013
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The definition of "market value" is what a willing buyer and willing seller agree upon.

An appraiser's opinion of value isn't necessarily "market value," it is, however, the opinion of value that the lender is going to consider that their collateral is worth.

Basically, my advice to you is to have your agent show you more research on recent sales in your price range so that you can get a better idea of what "market value" actually is. Zillow is useless in this regard.

All the best,
  • October 11 2013
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I would keep an eye on that second property, if it goes to a short sale, you maybe able to get it cheaper. But as of now that market is tight, and yes, sometimes it will take more than over assessed value or perceived value, but then again, if you really want it, the value goes up slightly.
  • October 11 2013
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Profile picture for CallTheSisters
Jorgeito
Listing agent said if they don't get a good offer property will go on short-sale.
You gave two examples of sellers wanting the appraisal contingency removed.  The second one - the reasoning was clear based on your statement above.  The seller is underwater!

To avoid the same situation - research the mortgage currently on the property before you make the next offer.  see if the seller is in an equity position, break even or underwater.

  • October 13 2013
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