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I need a neutral opinion: am I being (un)reasonable?
So, we've started house hunting for a place to buy. Ben's parents LOVE house hunting, and since it's always a good idea to get a neutral opinion on a place, we've invited them to view a couple of places with us. And it's been good - his mom has pointed out things (good and bad) that we might not have noticed on our own.
Here's the problem:she's started shifting into trying to tell us how to house hunt. We've set an upper limit of what we're willing to view, a bit higher than our max purchase price (this is what we did last time, and it worked out well in both terms of what we bought and what we spent). His parents both think we should look at houses much more expensive and then, "Make an offer! You never know! The seller might be desperate and will take it! You have nothing to lose!"
To me, this is crazy talk. Yes, the market here has dropped, but not THAT badly. I'd say most houses sell for about $15k under asking price - interest rates are low right now, so most owners are hanging onto their houses and only selling if they really need to, which means that prices are fairly reasonable and not ridiculously optimistic on the seller's part. Houses are very seldom selling for way lower than asking price.
We both work full time and go to school. I don't want to waste my time - and an agent's time - looking at houses that are significantly (we're talking $50k [ETA: I should have added that this is a fairly LCOL area, and we're only wanting to pay around
$285k - so $50k represents a fairly large percentage of a purchase
price]) out of our price range in the hopes that MAYBE a seller is desperate enough to take our very very low offer on their house (which would still be the upper limit of what we can afford).
Yes I know we can just tell his parents to knock it off - and we have, politely, although it doesn't seem to work. But that's not my real question, which is: I feel like their idea is a very strange house hunting strategy (and as far as I know, they have never successfully bought a house this way). But I'm curious to know: is this something that everyone normally does in a buyer's market, and I'm just being unreasonable in not being willing to do it? (I.e., am I not playing the game properly?) How far above your max price did you look when you bought a house?
Re: I need a neutral opinion: am I being (un)reasonable?
I don't think looking at a house $50K over your desired upper limit is SIGNIFICANTLY higher than your budget. I don't think that is unreasonable at all, actually.
I think it helps you understand the market because you can see what is overpriced and what is not. You get a sense of what is out there and what more money will buy you and can use that in your decision-making.
Keep in mind that houses that might start out $50K higher than your budget might come down in price. Or they may be overpriced and sit on the market for a long time, making the seller more willing to accept a lower offer or negotiate. It doesn't hurt to look at *some* of them.
DH was in charge of pairing down what houses he showed me on the computer, then we'd make a list of what we wanted to see. We usually went to Sunday open houses our own, then asked our agent to take us to houses that didn't have open houses, or on Saturdays.
We often looked at houses that were $50K or more over our desired upper limit. I don't think we looked at houses that were more than $100K over. A few houses, I felt like, why are we here? We can't afford this! But then DH would tell me later... Remember that house? Price dropped, it's in our ballpark now.
That said... We did end up paying $40K over what we had wanted to pay, but we knew the market so well that we knew we had found a rare house that fit everything we wanted. We locked in at great interest rates, so our monthly mortgage is fine. We got the house $10K under listing, $20K under appraisal and $150K under what friends of ours in a comparable house just down the street paid just 3 years ago (they were pissed! but happy to have us as neighbors!).
Anyway... HTH. I think it's important to stick to your guns on price, but it doesn't hurt to slightly expand your search. So maybe look up to $50K more but not higher than that? Also, I don't know how squishy your budget number is... Ours was our "ideal" number, but it was squishy, as you can see.
Good luck!!!!! :-)
Malia & Dave & Alexa
Happily married since 2-17-08! Three since 9-9-09!
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In the grand scheme of things, I don't think 50k is that much. At first, I thought you were going to say more like 100k over budget... that would be too much.
Every market is different. For houses that have sat on the market for a little while, I've seen them drop prices by 50k and then people still offering less than the asking price. Keep in mind that the original asking price for some of these places were way too high to begin with. So as the house stayed on the market longer, the sellers bring down the price. Again though, every market is different. That's just what I see around here.
If you do look at places above your upper limit, maybe only check out places that fit more of what you're looking for?
You do make some good points! Maybe we should expand our search...
I guess the reason I think $50k is significant is because real estate is fairly low priced here (advantage of rural living, although it also means that wages are pretty low, too). We're only looking at spending up to $300k, and wanting to pay around $285k - so $50k represents a fairly large percentage of a purchase price.
Most houses here are on the market for about 3-6 months, and sell for about $15k under asking - drops are usually about $10k (I've been tracking the market for about 6 months and have seldom seen a more dramatic drop than that).
We haven't bought a house yet, so I'm not sure what's normal. Maybe your MIL is right and there's nothing to lose, except that you might offend them, or they might laugh at you. That's no big deal.
What you may need to worry about, is your idea of what you want in a house. If you start looking $50K above your limit, will the homes in your price range lose their charm? What happens if you fall in love with a place that's $50K more, and they won't accept a lower offer?
Back to the original question: personally, it would make me uncomfortable to put in a really low offer without a good reason. I just seems rude. "Oh, hello, do you mind if I kick you because I think you might be down?"
I don't think you should start ONLY looking at houses that are significantly higher than you are comfortable with, however it doesn't hurt to expand it a little. Like others said, a home may end up dropping in price and other reasons. But it's also nice to see a broad range of places. In our area it became quite obvious that even 25k price difference resulted in HUGE difference in what you get so it would be nice to see what all is out there.
Now, I don't think you should just start dropping low ball offers left and right, but it doesn't hurt to look while still looking at other places in your preferred price range
yeah, our agent (who we absolutely LOVED - MH has continued to use her for his personal representative cases that involve homes) says that is something to consider - although it shouldn't make you refrain from submitting what you consider a fair offer.... She said that many home owners have a ton of emotions regarding their home - regardless of why they are selling and easily get their feelings hurt and are then less likely to really want to negotiate - so unless they are really in a bind it doesn't help at all.
That said our home was originally listed for 75k over what we ended up buying it for. She had 2 price drops prior to us buying it, even still our accepted offer was still significantly lower than the asking price. But I don't feel like was got a "deal" - it was just over valued in the beginning b/c the seller had crazy ideas like using the back .35 acre to build a rental duplex and she also overspent on the renovations of our house. She was in inexperienced "house flipper." So I guess we got a deal b/c the home was completely renovated w/ high end products - but she priced herself out of the area/like properties and no body would have paid more than us in my opinion.
I think you have to consider $50K relative to what you were hoping to spend. If $285K is your max, $50K is about 18% over your price range. In Hawaii, that'd be equivalent to having an $800K max, and shopping in the $950K range! Yikes!
Yes, you can negotiate, but that leaves you A LOT of room to go down. And if you expect to get, say a $335K home for $285K, you'd probably have to put in an offer well under that in order to get your compromise... and, like pp said, that might be too ridiculous for most sellers. IF the prices on those pricier homes later drop, THEN you can include them in your search.
I am also of the mindset that, just because you CAN afford something, doesn't mean you SHOULD buy it and blow your entire budget. So just because there's the slight possibility that you could get that $335K home within your budget, that doesn't mean you should commit everything you have to it, when something slightly more modest would suffice... and might even offer a better value.
My ILs are closing on a new home, and we've helped them search for the ideal spot for about a year. They had a wide range of homes that they looked at, and a wide price range, and at the end of the day, it wasn't primarily about price, it was about VALUE. What one property offers for one price can be very different than what another offers for the same amount -- so, IMO, the best thing you can do is be patient, check out everything in your price range, and use that research to help you figure out what you and Ben can get and what you *really* want in a home.
For my ILs, they settled on a great upgrade, nicely-sized, with a killer view and a prime location. They could have afforded more, but after all our searching, we all KNEW that this was the best value for their needs... they could comfortably afford it and would be very happy there. To me, that's what really matters.
I think these two things are what's worrying me. In my area, a $350k home is going to be WAY nicer than a $290k one. It will be larger, newer, and have much nicer features. I know a lot of people say to see what you're missing, but I'm not sure I WANT to know, if that makes sense. We absolutely will not spend more than $300k. It just won't happen - end of story. So I feel like looking at $350k houses is just taunting myself with a nice steak when all I can afford to eat is hamburger.
And since most homes are only selling for about $15k less than asking price, the odds of us actually being able to afford that $350k home are fairly slim - it would likely sell for around $335k.
Since Australia doesn't have buyer's agents (it's a concept that's only just coming into vogue here, but there are still very few and only in large cities), we deal directly with the seller's agent. This means that if we routinely make extremely low offers for no reason other than that's all we can afford, we're likely to annoy the agent and make them less willing to work with us or convince the seller to take our offer. I worked in real estate offices for 5 years and am pretty familiar with the way the agents think lol.
The other concern I have is one that lola mentioned: looking at the more expensive homes doesn't give us much negotiating power. We would have to offer the absolute max of our price range for our offer to be considered. I would rather shop in a lower range and be able to offer less than our max, then negotiate up if needed.
Ugh. I don't know. You ladies have all made great points - thank you!
I'm late in responding, but it sounds like you've gotten a lot of good viewpoints.
i'm with lola on this one - 50k on a 300k budget is a huge difference! and if you know prices don't drop by more than 15k, then it's not worth it. i'd rather wait until the price dropped enough to where it was maybe 15k above my range, then look at it.
that being said, when we go to buy another house some day, i'm sure we will be looking at homes within a pretty wide range of prices. home prices have fluctuated a lot more here, and 50k is a smaller percentage of the overall cost
- so there's more room to negotiate.
if i were you, given how much research you've done and how well you know the market, i'd stick with only looking at things that are in budget - *maybe* 5-15k over.