Profile picture for xarfox

Negotiation Issues

So I have an issue with a seller that is unwilling to negotiate any further. I came up $10,000 from my initial offer, and they came down $6,000. They will not budge on the last $1,000.

My concern with this is that I will be paying an inspector to come out, and they will likely find issues. When I ask the seller to remedy them, they are going to say no since they are so tight on price. I will be stuck paying for those issues as well, and this home is not worth more than what I offered (or I'll lose the inspection money and walk away). I know for a fact that there are some minor issues with electricity, and the place is very dirty, so for all I know they didn't maintain it well.

Did I handle this the right way? I risk losing the 8,000 tax credit because there is nothing else out there that suits me.

This person stands to lose more than I do, I'm only renting at 855/mo and do not need to move (and its in the same city). The seller was renting and now the tenants are moving out.

Any insight is appreciated.
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April 07 2010 - Norristown
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Answers (12)

Best Answer
It sounds as though you know what it is worth to YOU.
And the seller's price isn't there yet.

Well done.
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April 07 2010
Profile picture for xarfox
I think its worth $3,000 less than what I offered. So the advice here would be to walk away.

I know when it last sold, at what price, what the market has done since then (stayed flat), and how much money they put into it.

I also know what another unit sold for Q3 2009, which was identical, so I am very comfortable with my assessment of the value with these pieces of information.
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April 07 2010
Sounds like you have thought this out and have reached the best decision for you at this time. I agree that if the electrical problem was obvious but not disclosed, you should be concerned. As a landlord, he can plead ignorance! (or at least try to)

Keep looking. New homes come on the market every day.

Finally, don't put all of us agents in the same group. Some of us are very creative problem solvers and have been known to do some unexpected things! :)
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April 07 2010
>>  I will lose nothing, and I need to think this way. It is still a buyers market, isn't it? <<

It really sounds as though this really isn't the right property for you. 
Don't let the tax credit influence your decision to buy.
Don't let the seller's position influence your decision to buy. 
What is it worth to YOU?

Cindy's 4 way split of the $1,000 makes that a $250 difference that you are challenging. You have to take this process one step at a time. The cost of the inspection, and the results of the inspection, are a completely separate issue from the current step of mutual acceptance.   

What you are seeing in your walk through (electrical and what-not) is hearsay and speculation.  In real estate deals it has to be written. You won't "know" anything factual until you have the inspection done and a report is written. IF the inspector finds something the he/she recommends being addressed, then you start negotiating again.   If you find something substantial and the seller doesn't move, (and cover the cost themselves) then it is time to move on.  Not when the difference is $250!
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April 07 2010
Profile picture for xarfox
Splitting 4 ways is a very clever proposition. But again, the audience is making this into a $1000 negotiation. It is not.

After walking through the house twice, I know for a fact that there is an electrical issue, and who knows how expensive it is to fix. The fact that the seller did not disclose it makes me think he is hiding something.

What happens when there is another $1000 in repairs, and the seller still doesn't budge. Do we split that 4 ways to? I think not. The agents will not agree to this thinking.

I will just have to walk away from this, and if he comes to his senses before 4/30, then so be it. Otherwise he can be stuck paying the mortgage on an empty rental property.

He will lose a lot of money either way (recent purchase). One thousand dollars is not saving him.

I will lose nothing, and I need to think this way. It is still a buyers market, isn't it?
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April 07 2010
Just to play devil's advocate:

- While the seller's financial situation may not seem like your problem, essentially it is if he is trying to avoid a short sale which will cost both of you a lot of time and money.
- If indeed the seller can't come down anymore b/c of what he owes, then it won't matter when the $8k goes away. You may be able to get a better deal on the house as a short sale (if he decideds to go that route), but it needs to be more than $8k for it to make sense for you.
- There is always a risk to buying a home and negotiating inspections. Even if you move on to another house, there is no guarantee that the situation willl be any different. And by your own admission, this is the only home that suits your needs.

I'm not saying you should go through w/this, but I am encouraging you to think things over before you engage in a power struggle. Have you approached all the parties about splitting the $1000 four ways?? (your agent, you, the buyer and the listing agent) That has saved many deals in the past. Also, please remember, there is no such thing as a perfect house, so saying that you will only accept the home if there is nothing to fix, isn't realistic. Your agent should be providing insight as to your choices and the consequences.

Ultimately, you want to buy and the seller wants to sell; you have the same goal! If this is the property for you, it may take some creative problem-solving by ALL parties to accomplish it. Good luck!
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April 07 2010
Profile picture for xarfox
The seller is clearly influenced by emotion, which is why I am cautious entering this deal. I don't stand to lose anything, I can just keep saving and waiting.

I plan to be here at least 5-10 years.

Yes I will throw away the tax credit if I have to. But I'm not throwing it away for $1000, I'm throwing it away for $1000 + unforeseen inspection results.

Tax bracket 28%. Why does this matter?

Don't understand the last question.
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April 07 2010
Profile picture for SoCal_Engr
You're $1K apart, and are worried about "overpaying"? I don't know what the asking/offer prices are, but I'm willing to bet there is no one who can price a house within $1K. I'd even be willing to bet that anything +/-5% would be considered pretty close.

As for the inspection costs, that's just part of the game. You can always walk, but to be within $1K and toss the deal seems to be a move that is being influenced by emotion.
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April 07 2010
Definately not your fault that someone is going to lose money when they sell their home to you.  Their gain or lose shouldn't even be part of the thought process for you.

I'm just going to thow some ideas out; I understand that it is not easy to purchase a home.

The value of the home is what you are willing to pay for it.  It really doesn't have much to do with the government stimulus.  This month you will get a government subsidy and next month the seller will give you a subsidy, if they want to sell the home.   In either case you should only pay (net) what you think the home is worth to YOU. 

What is your investment time frame?  Are you planning on being in the home for 5-10 years?  Are you saying that you might overpay $1,000 and miss an $8,000 tax credit?  What is your tax bracket?  How much do you have to earn in order to save that much in tax?
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April 07 2010
Profile picture for xarfox
I feel like its a no-win situation. Either I overpay for the property and fix any possible repairs or toss $500 out the window for no good reason. This guy is upsidedown on the house because he bought it recently. That's not my fault.

The only thing holding the value of this house up is this stupid tax credit. I wish it would just go away so we could all be on even ground.

I will only pay his price if there are no repairs required.

Would it be possible to have him pay for the inspection? I would rather give the risk to him, since he is the one owning the house.
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April 07 2010
Profile picture for sunnyview
Tough choice. The $1000 is not really a deal breaker, but the inspection issues might be. The good thing is that their realtor and your realtor both will want to close so unless the inspection turns up a bunch of stuff, their agent will likely encourage them to pay for some of the repairs if at all possible. 

Your attitude should be there are other houses out there that you could buy and prices are likely to drop a bit more after the credit expires so the seller needs to seriously consider your offer. In the end, you have to decide what the house is worth to you and stick there. An inspection will cost you $300-500. Is it worth that to you to see if there is an issue and would you pay another $500-1000 in repairs out of pocket for this house to close? You have to see how much is this house worth to you.
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April 07 2010
$1,000 is not enough to quibble about before you have mutual acceptance.
You've just described lots of reasons why you may terminate the agreement once you get an inspection done. 
I'd suggest taking the offer to the inspection phase (come up the next $1,000) and then make your decision on whether or not to buy based on ALL of the facts.  Right now the inspection is all hearsay and conjecture.
Whe you have the facts about the inspection lay out the pros and cons again.  Decide what it is worth to you then.
At this point you will be under contract for the tax credit.  There isn't anything that says you can't continue looking and try to set up a back-up property for yourself.  Just don't make another offer until you terminate the first one.
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April 07 2010
 
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