Profile picture for michellell

What is a fair offer?

I am looking at a house that has been on the market for 2+ years.  The house is in good shape as we have looked at it 3 times.  It sits on a lot of land but can not be subdivided.  The owners have put a lot of maintenance into the back yard that requires a lot of upkeep.  I'm not sure I want to maintain a house with so much maintenance.  The bought the land for less than $100k and built the house themselves.  They are looking for close to $600 for the property but I think it is only worth 500k.  Any suggestions.  Can I come in with a low offer of 500k?  Even with all they put into the house at 500k they are walking away with a good profit.
  • December 01 2011 - Staten Island
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Answers (21)

Might be a tough property to find good comparables for, but get with your agent, and do your best to find some.  Offer what it appears to be worth.  Comparing recent solds and pendings to the subject property, as well as calculating price per square foot against other solds are good ways to put a value on a home. 

How much the seller owes, and what the property is listed for are not factors.  I could list my two bedroom condo for $2 million tomorrow, but really it's worth about $100,000.

Lastly, don't be afraid to submit a low offer if you can justify it with stats!  Good luck!
  • January 11 2012
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Profile picture for K.K. Yan
If I were you, I would:

1) find out how much to hire people to maintain the yard for says 5 years. this will be the amount deducted from your highest and best offer.

2) Figure out and submit your highest and best offer amount. If rejected, make another offer say a month later and so on and stick with it until the house is sold. (of cause, monitoring the market in the mean time)
  • January 11 2012
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If you don't want to maintain the house and land, offering less money won't change that. 
I am assuming by your description that you do not have an agent.  But you should!!  Buyers NEVER pay a commission so why not have one of us do the hard work for you?  Comparables would be done that would clearly tell you what the property is worth.  You can offer whatever you want, worst case the Seller is offended and refuses.  Best case he wants to sell and agrees to your terms.  But realize that if you ask for that kind of decrease in the sales price, chances are they will not be willing to help in closing costs.  Do you have the money to bring to closing?  
Good luck!!   

  • January 06 2012
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Consider how much you want the house and then make your offer accordingly. Try not to completely alienate the seller.
  • January 02 2012
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Profile picture for Thomas Trifon
You can certainly put in an offer of 500K, or 400K or any other number. Firstly, you don't know the sellers' situation  they may have to sell; they may just want to get out now and not wait anymore; they might have found a new place and need to sell. Your offer only needs to be fair to you.

What they paid for the land, building, etc., although useful, doesn't mean that yoiu have to cover their expenses and give them a profit too. You said that the backyard requires a lot of upkeep - well, the sellers did that because they liked it. If you were to buy the house, and then you decide that you would rip it up, the value of that backyard is not an asset to you, but will take money out of your pocket.

Just remember there is nothing written that says that when anyone sells a house, they have to make a profit, and sometimes people break even, and sometimes they take a loss. You shouldn't fell any obligation to provide the sellers with a profit (unless they are close relatives whom you like and you have unlimited funds).  

Good luck with your purchase.
  • January 02 2012
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Homes is an Investment:
With any investment, cover your basics, and use Math. The Math Index is a easy tool to figure if you are making the right deal. Rents will always go up, where prices fluctuate. So if you aim for 10% of more on a purchase you are pretty safe.
Example:
38,000 for a 1 bed condo in Las Vegas, w/$100m HOA
$650 rent- $100 HOA = $550x12months= $6600
$6600/38000= 17.4% minus vacancy and repairs/maintence you are always a profit.
  • December 27 2011
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The only way to know a 'fair' offer is to review what the market conditions are in your area.  Your agent will do a great market analysis for you as well as take you inside the homes for sale in this area so you may compare them to the one you wish to make an offer on. Also, a home has to appraise out so if it is priced too high for current market conditions it may not appraise out.  Always give an offer that is fair based on the market. You will also do a home inspection.  There may be issues you want the seller to take care of.  Many buyer's forget about this when wanting to make a low offer.  Both seller and buyer want to feel they are getting a fair deal.  Best of luck! 
  • December 22 2011
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I'm glad somebody still considers fairness in the equation, even though it is tough to achieve.
  • December 06 2011
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Profile picture for blue screen exile
"Even with all they put into the house at 500k they are walking away with a good profit" -

How would you know?  If they built it themselves, you have absolutely no idea how much it cost them.  Even at day laborer rates, they could have put in $750k.

I'm sure that $35 million would be a "fair" offer.  But what in life is "fair", and how do you measure it?

Offer them $300.00 and then  walk away, as it is clear that you don't appreciate the work they put in the property and you would much rather have something else.
  • December 06 2011
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Profile picture for sryan1980
Assuming a home is appropriately priced, a fair offer is generally considered to be anything within 2-3% of the asking price.
  • December 06 2011
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You need to have comparables in order to be able to justify your offer.
  • December 06 2011
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Hi Michelle. I would definitely have comps pulled on it so you can get a sense of what the value in that area truly is. But even if the comps come in a little higher than the price you want to offer, I would still go for it. It is a first offer price and you have to start somewhere. The fact that it's been on the market for over two years can help explain why your offer price is what it is. Good luck!
  • December 06 2011
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the value is subjective to what someone is willing to pay and what someone is willing to sell ...not just the comps...especially when it comes to custom homes
  • December 03 2011
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When deciding what to offer, run comps.. The numbers never lie.  Go from there.  IF you want the house then make a well informed sensible offer, your Realtor can help you with that. Good luck! 
  • December 03 2011
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when a property has been on the market for two years may be an indication that other offers haven't been accepted...my advice make your offer...it is their prerogative if they wish to truly sell it at your offered price...not everyone needs or even wants to sell even though it's listed...some are listing at a price they would be willing to sell at...

then again...if you don't want to maintain it...why are you even considering it?
  • December 03 2011
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You've gotten several good answers already, but I will just chime in again.  What the sellers paid is irrelevant.   A fair price is what a buyer is willing to pay and a seller is willing to accept.  That is what will bring it to contract. 

The fact that they have been on the market for 2+ years may work in your favor.  I don't know the specifics, but they may have started the listing much higher and have slowly been lowering it.  They may even have had a couple of offers they are sorry they didn't accept.  In this scenario, it's a great time for you to make an offer.  On the other hand, there are those sellers who still think they're sitting on a pot of gold, even in this market.  These sellers are extremely difficult to negotiate and deal with.  They will still be sitting in another year or two. If you are working with an agent, they can run a history on the house.

When you make an offer, as others before me have stated, have your agent detail why you came in at this price.  Let them send comps to support your offer.

Good luck!
  • December 03 2011
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Profile picture for sryan1980
depends on the asking price, but on a correctly priced home a fair offer is withing $10,000 of the asking price. most buyers are ignoring this unwritten rule at the moment because of poor economic conditions and a terrible real estate market.
  • December 03 2011
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One of the things to realize is that it is irrelevant what a seller paid for a property. The market value is what a buyer is willing to pay for it. This being said, every seller has emotional connections with a property, especially one where they have built the home themselves. Any offer you make needs to be supported with evidence of why you are making this offer in light of other homes that are available that are similar. If you are using a local real estate agent they should be able to prepare a list of comparable homes to give you something to work from when preparing your offer. Price is also not always the only deciding factor for a seller, there are many other terms in an offer from financing, to settlement date, inspections etc, sometimes a lower price can be offset by finding out what else is important to the seller in light of these other terms. Good luck.
  • December 01 2011
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Profile picture for sunnyview
If the house has been on the market for 2+ years, I would make your offer, tell them that you really like the house, but the yard is not a draw for you and explain your rationale for the amount. If you are using an agent, they can help you pull comps that have sold recently, if not just write a nice note to accompany the offer and see what happens.

You never know. After 2 years sitting unsold, the marketplace has told them their price is too high so they may be ready to consider an offer.
  • December 01 2011
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On what basis have you computed the $500,000 offer?  You need to put those reasons in a cover letter to the Sellers, so they understand your logic.  Otherwise, they may be offended by such a low offer & refuse to negotiate with you further. 

  • December 01 2011
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Profile picture for lilasimpson
If you are working with a buyer's agent they should be able to pull comparable homes in the area that have recently sold to help you determine 'fair market value' - meaning what other buyers in your market have been willing to pay for a similar property and what other sellers have been willing to sell for. And also keep in mind that every property is different because every seller has different needs - some sellers are super motivated to sell and are willing to offer more concessions and negotiate more; and other sellers may not be in a hurry nor have a dire need to sell. That all being said, you should only offer what you feel comfortable paying. Good luck to you!
  • December 01 2011
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