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Offer price vs Listing price... need some help!!!!!

I made an offer for a bay area condo and it is a regular sale. The listing price is 20% more than the avg. sales price in the same community. My offer price is very close to the current sales price. I wasn't surprised that my offer was not accepted since the listing is quite new. I was hoping that the seller would counter offer me; however, the broker said the offer price is way too low to even consider. There is one other offer for the same unit. The offer price that I made was the same as the sales price of the unit above this one which was sold less than a month ago. I found out that the seller bought the unit last year at a 75% of the current listing price and fixed up the unit for resale. I estimated the price of the fixed up that the seller made was less than $5K base on the pictures shown on the old listing. Can anyone give me some suggestions on the offering strategy? I like that unit but I think that the listing price is way over what it worth. I studied the sales history of the past 3 years and the value of condos at that community has decreased by 22% since 2008. The avg. sales price of the first 3 sales in 2011 was down by another 2% when comparing to the 2010 average. I know that the seller (as an investor) must want to make some money, but how much is enough? I am a first time home buyer and this is the first real estate offer ever made in my life. I am planning to put a new offer but I am not sure how much is considered to be "considerable" and "fair".

  • February 25 2011 - San Mateo
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Answers (8)

Best Answer

Yikes. Well, first let me congratulate you for doing an excellent bit of research. Nice Job! These investors often do this sort of thing. They list the house as high as they possibly can to try and make as much as they can. Over time, they end up dropping the price and taking what they can get.

So here you are. You know the average value and have made a good guestimate on the value of this particular condo. There is one other factor... desire. A buyers desire to own a specific property is played upon by the investor. There's the average value, plus or minus improvements (and that's subjective), then there's the "How bad do you want it" factor. This this have only been listed a short time, this seller is obviously trying to get top dollar and has likely made appealing improvements just to make that buyer want it enough to pay the asking price.

The bottom line here is that a property is worth whatever a person is willing to pay for it. Just remember that you have a choice to be that buyer or move on to the next one.

I really hope you are working with a buyer agent. Buyers agents usually cost nothing and they know these little tricks that listing agents and sellers like to play. If you're not, I can't recommend strongly enough that you get one, so that you have a professional on YOUR SIDE, just like the seller has one on his. Again, a buyers agent is paid for by the seller. If you don't use one and just go through the listing agent, that agent will make 2x the $ as he would if you had your own agent, AND the seller pays the same commission regardless.

If the listing agent didn't present your offer to the seller and just said "this is way too low", then he is not helping you. Lots of agents like to pull this BS, but the truth is, they are required to present all offers to the seller. The listing agent has no say on what is accepted.... only the seller does,

To give you a good solid recommendation, I'd need more info.... but the above should serve as general guidance. If you think you're getting the shaft, walk away. Condo's just aren't doing that well right now anyway.

Let me know if I can help further.

David Gowans
  • February 25 2011
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I am surprised... San Mateo is one of my territories, I don't know what is your price range, but since the beginning of the year we had over 30 new listing under 500K and that is not including,  BOM , TFT.

Also many sale in San Mateo as well. So I have say, market in San Mateo for condos in a good area is pretty active.

Usually from march on, there will be more new listings.

Your are correct. you shouldn't pay for a property that is over market value. Be patient.

  • February 25 2011
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Things always pick up in April every year. The condo is and have been slow here in San Mateo. There are tons on good ones out there, including some waterfront stuff on the east side over by Foster City.

I also did a Bank inspection on a few up in SSF. They are in a tower with an amazing bay view.... I think they were going for mid to low $300k's. There are also a ton in Foster City.
  • February 25 2011
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Profile picture for cutexa
Thank you so very much for everyone contribution! I was so scare about my way of thinking was not even logical.. I was afraid that everyone may think that I am crazy ( both buyer and seller agent)!! I can afford the listing price but I just hate to pay a lot more than it actually worth... I could have using that extra funds to do a lot of home improvements on my own. How badly I want it? I want it but I will also keep my eyes open on other available homes.

I have a buyer agent. My agent has been very helpful in many other ways; the only thing is by the time when I wanted to submit the offer, my agent recommended me to offer the listing price. That's the only thing makes me wonder if he is on my side since the agent should know better than I do in regards to the avg. sales price... and he pushed me to submit another offer ASAP as soon as we know the offer was not accepted...

Many of you have suggested that I should wait. I think I will submit another offer in about a week ( as the condo has listed on the market for about 2 weeks now). I am willing to pay a bit more which will allow the seller gain about 15%-16% profit (gross)... if the seller accepted the other offer or don't accept my offer, I probably will let this one go =) 

My only concern is seems like the condo market in San Mateo area is a little bit slow recently... very few listings were add since beginning of this year. Is it usual? Are there any time in the year which a lot of new listings will flood in?

=) Thanks so much for everyone contribution again. I think I need to trust my judgement a little more. 


   
  • February 25 2011
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It is obvious you have done your homework. But you need to realize, seller can list his property for any price he wants and if it is over price, it will not sell, unless a buyer walk in, love the place and is willing to pay for it cash, but if the buyer is financing, it will not get apprised for the listing price.

My suggestion is, just wait, if there is no other offers in few weeks, most likely if the seller is serious, he will reduce the price.

I am sure your agent is an experienced realtor, and he or she would be the right person to advise you on every single property you are interested in.

Getting too many people involved to advise you, it will just confuse you even more. Unless you do not trust your agent's judgment, then maybe you should look in to hire different one.

  • February 25 2011
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Frustrating isn't it? You're also dealing with an investor who at the end of the day is all about numbers with him.

Have you thought about the strategy of 'waiting' before resubmitting an offer? Perhaps you went in it too soon and with a less than desirable offer. Consider waiting a couple of weeks, give him time to think about his mistake of not countering you, he should have done that at the very least. Your risk in waiting of course is that another (better) offer may come in but what are the chances of that happening, 50/50?

A new listing's peaks out after the third week, if the investor doesn't see any offers during this time, heck he may even come back to you first. If you decide to wait 2-3 weeks before submitting an offer which is what I would do, then when you're ready, offer your best and highest offer within your affordable price range, I bet you he takes it! Don't ask for anything in return, closing cots etc., make it a very clean offer and give it your best if you really like this unit, it'll be worth it in the long run for you.

Best to you!
Chris and Maria
  • February 25 2011
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Since your offer was made on a reasonable basis and the seller is being unreasonable simply walk away. Perhaps in another 6 months or year offer an even lower amount. By then they could be very hungry.
  • February 25 2011
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Sounds like you're both tough poker players. The seller can ask anything he wants and you can offer anything you want. How low he will go and how high you will go is all a matter of negotiation.

The seller wants to realize a profit, after he pays commissions and taxes on the profit. But without seeing actual numbers, it's difficult to figure how much profit is involved.

You say he paid 75% of the current asking price and put $5,000 into it. If it is a $50,000 condo then he has a total of $42,500 into it, looking for a gross profit of $7,500. If it a $500,000 condo, then he has $380,000 into it and is trying to get a profit of $120k.

Allow the investor to make a realistic profit, but don't let him/her take advantage of you. Another problem is that it is a new listing. Perhaps the seller will come don more after it has been on the market for a while.

Best of luck to you & I hope you get the condo!
  • February 25 2011
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