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Answers (22)
- SoCal_Engr
- Contributions:5666
"That being said, you obviously like the home and would like to make an offer without offending the seller."
Really? How did you come to that conclusion, given that this is a hypothetical scenario. In other words, I made up the house, the estimates, everything.
The really scary part? I've gone to great lengths to stress that this is a made up scenario - and some REAs seem to have gone out of their way to provide ridiculous responses.
Let's just let this thread die, with the understanding that most consumers appear to only be interested in their specific circumstance - not some "what do you think" question.
Unless, of course, there are other REAs that would like to point out that the mythical CMA failed to take into account asbestos, mold, water damage, recent sales, etc. Or that I obviously like the house and don't want to offend the non-existant seller with a low-ball offer.
Really? How did you come to that conclusion, given that this is a hypothetical scenario. In other words, I made up the house, the estimates, everything.
The really scary part? I've gone to great lengths to stress that this is a made up scenario - and some REAs seem to have gone out of their way to provide ridiculous responses.
Let's just let this thread die, with the understanding that most consumers appear to only be interested in their specific circumstance - not some "what do you think" question.
Unless, of course, there are other REAs that would like to point out that the mythical CMA failed to take into account asbestos, mold, water damage, recent sales, etc. Or that I obviously like the house and don't want to offend the non-existant seller with a low-ball offer.
- Jeff Miller, "South Metro Realtor"
- Contributions:1
Regardless of FMV and listed price, a home is truly only worth what someone is willing to pay for it. That being said, you obviously like the home and would like to make an offer without offending the seller. I would recommend you talk with your local realtor about average discounts and concessions in the area. That will give you a good starting point.
Next I would look at the number of days the home has been on the market. The longer the home has been on the market, the more likely the seller will be to negotiate.
Sellers do tend to get offended by low offers. Any justification you can have for your offer based off of historical sales data, days on market, and local average concessions will help the negotiations go smoothly and increase your chances of getting the deal done.
Next I would look at the number of days the home has been on the market. The longer the home has been on the market, the more likely the seller will be to negotiate.
Sellers do tend to get offended by low offers. Any justification you can have for your offer based off of historical sales data, days on market, and local average concessions will help the negotiations go smoothly and increase your chances of getting the deal done.
- Dan, "the_country_hick"
- Contributions:4699
- House is listed at $225K
- Using CMAs, FMV is estimated at $235K
- Public records show the last sale at $200K
Selling costs will be about 8% (maybe more).
6% realtor fees add up to $13,500. Various other fees will add up also.
The seller had to replace the roof at $7,000.
The seller also had to replace the furnace at $4,500.
A fresh repaint inside and out added even more cost to the house.
At $225,000 the seller would about break even not make anything. Including the other closing costs the seller might lose money.
What if the house still needs some work done so a rehab loan could be needed? That takes away from the offer value for both inconvenience and mistakes in repair estimates.
What was paid for a house and what is spent on it by its owner can be different and unknown to a buyer.
As a buyer I do not care about any of the above. I only care about what I want to spend. I can either get a good deal or wait to buy. Had I bought this house in this scenario in 2008 I could still be $40,000 in the hole today by offering the $10,000 below FMV.
- Using CMAs, FMV is estimated at $235K
- Public records show the last sale at $200K
Selling costs will be about 8% (maybe more).
6% realtor fees add up to $13,500. Various other fees will add up also.
The seller had to replace the roof at $7,000.
The seller also had to replace the furnace at $4,500.
A fresh repaint inside and out added even more cost to the house.
At $225,000 the seller would about break even not make anything. Including the other closing costs the seller might lose money.
What if the house still needs some work done so a rehab loan could be needed? That takes away from the offer value for both inconvenience and mistakes in repair estimates.
What was paid for a house and what is spent on it by its owner can be different and unknown to a buyer.
As a buyer I do not care about any of the above. I only care about what I want to spend. I can either get a good deal or wait to buy. Had I bought this house in this scenario in 2008 I could still be $40,000 in the hole today by offering the $10,000 below FMV.
- Dunes....
- Contributions:3894
Wow!..This is a hard question
You need to hire a Realtor ;)
You need to hire a Realtor ;)
- ConnieK_Oklahoma
- Contributions:2899
offer $215 or a less...get best price possible- worst thing that can happen is say no. don't be stupid with your offer so that the seller won't negotiate with something like $195 or less.
of course...it depends on how unusual the property is and the likelihood of finding another with with same features. if this has a special shop, pool & tennis court, or stables with 220 elec out there or something else that's not t every house and is something you needed/wanted (before finding this one) and can't be added to another house for under $10k but other houses in this price range don't have these things, then it would be a shame to let $5000 or so be the reason someone else bought it instead of you (or seller just refused and didn't counter).
of course...it depends on how unusual the property is and the likelihood of finding another with with same features. if this has a special shop, pool & tennis court, or stables with 220 elec out there or something else that's not t every house and is something you needed/wanted (before finding this one) and can't be added to another house for under $10k but other houses in this price range don't have these things, then it would be a shame to let $5000 or so be the reason someone else bought it instead of you (or seller just refused and didn't counter).
- John MacArthur, "jmac"
- Contributions:13
You certainly have gathered a lot of information. Often clients get to focused on what the owner owes and how much the owner may or may not realize from the sale.
It is an exercise that leads you down a path riddled with mistakes.
The question is not why the house is listed at $10,000 below FMK. The question should never be how the final sale will impact the seller. If your goal is to buy the home, you should focus on your motivation.
The terms "buyers market" and "sellers market" are just general terms tossed about by the media and often obfuscate the fact that each sale involves two sides that may not possess the general motivating factors that seem apparent in the media.
What the seller may or may not owe on the property is the sellers problem. On the surface, the asking price indicates that the individual pricing the home understands the value of being below the "market value". Homes priced aggressively tend to sell more quickly than homes that are priced higher.
One of the better negotiating tools used is to offer full price and request up to 6% in closing help. The sellers ego is assuaged by the full price offer and the buyer is in line to purchase the home for a figure that nets out less than the asking price.
One other factor that is overlooked here is that the buyer should also make the sale contingent on the home appraising for the asking price or more. If it fails to appraise, the sale would then hinge upon the seller reducing the price or the buyer making up the difference in cash. If a meeting of the minds can not take place, the offer is void.
It is an exercise that leads you down a path riddled with mistakes.
The question is not why the house is listed at $10,000 below FMK. The question should never be how the final sale will impact the seller. If your goal is to buy the home, you should focus on your motivation.
The terms "buyers market" and "sellers market" are just general terms tossed about by the media and often obfuscate the fact that each sale involves two sides that may not possess the general motivating factors that seem apparent in the media.
What the seller may or may not owe on the property is the sellers problem. On the surface, the asking price indicates that the individual pricing the home understands the value of being below the "market value". Homes priced aggressively tend to sell more quickly than homes that are priced higher.
One of the better negotiating tools used is to offer full price and request up to 6% in closing help. The sellers ego is assuaged by the full price offer and the buyer is in line to purchase the home for a figure that nets out less than the asking price.
One other factor that is overlooked here is that the buyer should also make the sale contingent on the home appraising for the asking price or more. If it fails to appraise, the sale would then hinge upon the seller reducing the price or the buyer making up the difference in cash. If a meeting of the minds can not take place, the offer is void.
- SoCal_Engr
- Contributions:5666
Just for the record...
9 different responders, 7 from REAs and 2 non-pros,
Consensus of the non-pros...
"Get the best price possible, let the seller worry about their own problems."
9 different responders, 7 from REAs and 2 non-pros,
Consensus of the non-pros...
"Get the best price possible, let the seller worry about their own problems."
- SoCal_Engr
- Contributions:5666
@ RFU...
Thank you, thank you, thank you. Is it really that hard not to overcomplicate a simple numbers question?
Scariest part of the responses so far (for me)...
The number of REAs who, after many REAs have touted the "hands on" advantage of CMAs over AVMs, seem to miss/overlook the point that a CMA should account for the local/specific conditions they are bringing up (unless, of course, they are used to generating CMAs without actually seeing the house in person).
Thank you, thank you, thank you. Is it really that hard not to overcomplicate a simple numbers question?
Scariest part of the responses so far (for me)...
The number of REAs who, after many REAs have touted the "hands on" advantage of CMAs over AVMs, seem to miss/overlook the point that a CMA should account for the local/specific conditions they are bringing up (unless, of course, they are used to generating CMAs without actually seeing the house in person).
- Reallyfedup
- Contributions:815
Again, it's hypothetical, but lets play along. If the house had a FMV (fair market value) of $235,000, asbestos, mold, water etc. should/would have been factored in to that number. Otherwise the FMV would be different.
I believe the point the poster is trying to make is, as a buyer, if a house was listed below market value, where would you make your offer. Would you go even lower than the listed price, or would you offer closer to the listed price knowing that it is already 10K below FMV.
I believe the point the poster is trying to make is, as a buyer, if a house was listed below market value, where would you make your offer. Would you go even lower than the listed price, or would you offer closer to the listed price knowing that it is already 10K below FMV.
- Michael Liew, "MichaelLiew"
- Contributions:33
Why does it matter? The hypothetical scenario states that the estimated FMV is $235, and that this value was arrived at via a CMA. If the CMA was done properly, then it should have taken into account things like condition, location, recent sales, etc. Maybe the owner needs to sell quick. Maybe the owner is hoping to start a bidding war. Maybe, maybe, maybe.
Of course it matters, if you said the house is 10k under market value because there it is not updated vs because of asbestos, mold issue, water issue. That is a big difference.
Of course it matters, if you said the house is 10k under market value because there it is not updated vs because of asbestos, mold issue, water issue. That is a big difference.
- Reallyfedup
- Contributions:815
Funny, I thought the only thing that mattered is what the Zestimate said.
- Dan, "the_country_hick"
- Contributions:4699
In my state we have several one horse towns whose horse died. Most were due to international competition fostered by bad government policies. This has happened all over the country.
A house could have been sold for well over $100k a couple of years ago and now not be able to get a $30k offer. Just because a house had a certain amount offered on it a couple of years ago does not mean it has anywhere near that value today.
If someone in Detroit MI paid $150k for a house 5 years ago does anyone think it is worth anything close to that amount today?
There is a reason for saying this. Just because a house today is thought to be worth $235k does not mean its value will hold up for long. If it is reasonable to think that house could fall to $150k based on historic pricing it would be foolish to offer more than that amount today.
Also, if the job environment in an area is at all shaky the future could turn your area into something looking like Detroit in a relatively short time. The big picture needs to be looked at when making an offer and what the seller paid is NOT part of the big picture. #3 applies here.
A house could have been sold for well over $100k a couple of years ago and now not be able to get a $30k offer. Just because a house had a certain amount offered on it a couple of years ago does not mean it has anywhere near that value today.
If someone in Detroit MI paid $150k for a house 5 years ago does anyone think it is worth anything close to that amount today?
There is a reason for saying this. Just because a house today is thought to be worth $235k does not mean its value will hold up for long. If it is reasonable to think that house could fall to $150k based on historic pricing it would be foolish to offer more than that amount today.
Also, if the job environment in an area is at all shaky the future could turn your area into something looking like Detroit in a relatively short time. The big picture needs to be looked at when making an offer and what the seller paid is NOT part of the big picture. #3 applies here.
- Dan, "the_country_hick"
- Contributions:4699
IF...
The owner paid $200k in 2006. It is now worth $156k. What they paid does not matter.
The owner paid $4k in 1965 it is now worth $250k the purchase price does not matter.
The owner paid $200k in 2003 and it is now worth $235k we see bubble pricing still in effect here. Knowing prices will go back to the historic mean it is still overpriced even at $10k under current value.
CMA's are often far to high so that can not be a complete accurate valuation method. Just look at the threads complaining about appraisals being to low and the CMA should be right.
I will make an offer I like. If the seller makes, loses, or gains no money I do not care. Why should I worry about a used house depreciating when I do not feel I should offer as much or more for a used car as it was bought for a few years ago when new? Both are depreciating assets by long term investment views until the last few decades.
The owner paid $200k in 2006. It is now worth $156k. What they paid does not matter.
The owner paid $4k in 1965 it is now worth $250k the purchase price does not matter.
The owner paid $200k in 2003 and it is now worth $235k we see bubble pricing still in effect here. Knowing prices will go back to the historic mean it is still overpriced even at $10k under current value.
CMA's are often far to high so that can not be a complete accurate valuation method. Just look at the threads complaining about appraisals being to low and the CMA should be right.
I will make an offer I like. If the seller makes, loses, or gains no money I do not care. Why should I worry about a used house depreciating when I do not feel I should offer as much or more for a used car as it was bought for a few years ago when new? Both are depreciating assets by long term investment views until the last few decades.
- shasta_steve
- Contributions:448
The sellers problems are not mine. I am going to try and get the very best deal I can. Period.
Now I am going to use all the information availible to me to try and figure out just where that bottom line most likely is. I may pay more for a property than I think I should if there is something about it that is valuable to "me". It may not make complete since economically but quality of life is important too
.
It is also important to note that just because the market sucks for sellers it does not always mean there is not lots of competition for houses. Around my house, properties priced right will get many offers. That is something I need to factor in when I submit my offer too.
Now I am going to use all the information availible to me to try and figure out just where that bottom line most likely is. I may pay more for a property than I think I should if there is something about it that is valuable to "me". It may not make complete since economically but quality of life is important too
.
It is also important to note that just because the market sucks for sellers it does not always mean there is not lots of competition for houses. Around my house, properties priced right will get many offers. That is something I need to factor in when I submit my offer too.
- SoCal_Engr
- Contributions:5666
Kind of amusing, but please allow me to reset the thread...
#1 This question is attempting to elicit responses from buyers.
#2 The question is simply about numbers/negotiation.
To paraphrase the original question posed to buyers...
#1 Do you take what seems to be a decent deal, and leave some meat-on-the-bone for the seller?
#2 Do you attempt to push the deal to where you know the buyer will lose money on the deal and may push back?
#3 Do you just say, "Seller's tough luck that the market sucks" and negotiate for the lowest price possible, irrespective of estimated FMV or seller's potential loss?
#1 This question is attempting to elicit responses from buyers.
#2 The question is simply about numbers/negotiation.
To paraphrase the original question posed to buyers...
#1 Do you take what seems to be a decent deal, and leave some meat-on-the-bone for the seller?
#2 Do you attempt to push the deal to where you know the buyer will lose money on the deal and may push back?
#3 Do you just say, "Seller's tough luck that the market sucks" and negotiate for the lowest price possible, irrespective of estimated FMV or seller's potential loss?
- SoCal_Engr
- Contributions:5666
LOL...it's a "hypothetical" scenario...for buyers. However...
"Why is the house 10k below market value?"
Why does it matter? The hypothetical scenario states that the estimated FMV is $235, and that this value was arrived at via a CMA. If the CMA was done properly, then it should have taken into account things like condition, location, recent sales, etc. Maybe the owner needs to sell quick. Maybe the owner is hoping to start a bidding war. Maybe, maybe, maybe.
The bottom line is this information is just included as background for the question posed to buyers, to establish that the asking may already be $10K below FMV (as estimated via CMA).
"If the last sale was for $200k then obviously prices are falling. Obviously condition of the house needs to be investigated in order to come up with an offer price that makes sense."
Should probably clarify. "Last sale" is for the house in question, and is simply included in the hypothetical scenario to provide an indication of how much the current owner may be invested in the property.
As for "condition" and "offer price", that is why an estimated FMV and CMA are included in the scenario.
"When was the last public sale recorded"
Again, either "should not matter" or "should have been accounted for in the CMA". Take your pick.
"Why is the house 10k below market value?"
Why does it matter? The hypothetical scenario states that the estimated FMV is $235, and that this value was arrived at via a CMA. If the CMA was done properly, then it should have taken into account things like condition, location, recent sales, etc. Maybe the owner needs to sell quick. Maybe the owner is hoping to start a bidding war. Maybe, maybe, maybe.
The bottom line is this information is just included as background for the question posed to buyers, to establish that the asking may already be $10K below FMV (as estimated via CMA).
"If the last sale was for $200k then obviously prices are falling. Obviously condition of the house needs to be investigated in order to come up with an offer price that makes sense."
Should probably clarify. "Last sale" is for the house in question, and is simply included in the hypothetical scenario to provide an indication of how much the current owner may be invested in the property.
As for "condition" and "offer price", that is why an estimated FMV and CMA are included in the scenario.
"When was the last public sale recorded"
Again, either "should not matter" or "should have been accounted for in the CMA". Take your pick.
- Bob Brandt, "BobBrandtRealtor"
- Contributions:1019
A buyer should offer whatever they think it is worth, depending on much they want that particular house. That way the true market value will be found.
- David Cooper-Las Vegas, "LasVegasRents"
- Contributions:281
When was the last public sale recorded. .How did you determine FMV, from completed sales> I also check competing listings, they might be a whole lot lower than sales from 3 months ago
David Cooper
David Cooper
- Michael Emery, "MikeEmery"
- Contributions:7298
@ Dan
What if the last recorded sale was 1950?
What if the last recorded sale was 1950?
- Joan Braunschweiger, "Morris County NJ"
- Contributions:1543
SoCal, you have to know that this is not nearly enough information to determine a fair offer price.
Obviously condition of the house needs to be investigated in order to come up with an offer price that makes sense.
- Dan, "the_country_hick"
- Contributions:4699
If the last sale was for $200k then obviously prices are falling. That means you should offer a bit less as the trend is your friend.
- Michael Liew, "MichaelLiew"
- Contributions:33
Why is the house 10k below market value? Is it falling apart, leaking, asbestos, mold? Without more information, there is no way to ascertain.
Question for Buyers - How hard to negotiate?
- House is listed at $225K
- Using CMAs, FMV is estimated at $235K
- Public records show the last sale at $200K
Do you...
- Offer $225K, knowing this is about $10K below FMV and the seller may realize about $11K?
- Offer $215K-or-less, based on assumption that seller can "break even" at that price?
- Offer less, since it's a buyer's market and the seller's issues are not your concern?
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