Buying A Home
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Need advise on opening offer.
I guess a little background is in order before my questions. I found a guide on the internet and so far I have everything in order.
1) Know Your Budget
$160,000.00 is the max I want to put out.
2) Know What You Can Borrow And It's Cost
I was pre-approved for $140,000.00 and have around $35,000.00 cash for closing/down.
3) Get The Funding In Place
Done. Pre-approved at $140,000.00 at 4% with 5% down (putting more than 5%)
4) Get 3 solicitors quotes and decide which one you will use in preparation
Done.
5) Make Yourself Known To The Agents
Done.
6) Finding The Property
I found the house I want. It?s been on the market for 80 days now with a price drop from $179,900.00 to $169,900.00 about a week ago. It?s not the highest price house on the black but it?s near the top.
7) Pre Offer Information
The house was purchased is 2004 by the seller and her belated husband (died recently and she wants to get out of the house because of all the memories) for $155,000.00 and they put 20% down from what my agent said. To date the only changes done to the house was they covered the rear deck and replace a small propane room heater with a potbelly coal stove. I was lucky enough to find the realtor who sold the house in 2004 to the seller. He gave me a lot of background on the house. All the flooring is 8 to 9 years old and needs replacing. While the house seems in great shape it is a little dated and since nothing has been done to the house I am taking that into account.
8) Submitting The Offer
This is where I need help. I have purchased 2 houses in the past and negotiated a price on another till inspection killed that deal. I?ve done a good job in the past but to be honest I?m not sure where to start negotiating to get to my price. I know the seller paid $155,000.00 for the house and no one wants to take a loss but she got it at the height of the housing market and since then houses just aren?t worth as much. I have a feeling this might play a part of negotiating. Why the seller thought $179,900.00 was a good price for a house she only paid $155,000.00 for and did no upgrades I?m not sure.
9) Know Your Limit
My limits are clear and I have walked away from houses before because I hit my limits.
Now my question(s). If $160,000.00 is my max (this includes closing costs and all fees) and the seller is asking $169,900.00, where should my starting bid be? I was thinking $140,000.00 but that seems like a bit of an insult. I would be happy with $160,000.00 and seller pays all closing costs. With $32,000.00 down I could hit my 20% down and avoid PMI.
Well that?s about all the information I have, any advise?
Re: Need advise on opening offer.
I have an agent but he's not an "exclusive buyer agent" so I take what he says when it comes to money with a grain of salt. The comps in the area are a little bit of everywhere. There is a house up the street for $119,000.00 with a smaller lot that has been on the market for nearly a year now. The most resent sales has been in about the same sqft and lot size were $150,000.00 and $220,000.00. The $220,000.00 is crazy over priced. No house except brand new ones are even close to that price in the area.
Even though you think that $220 is overpriced, someone sold their house for that value. Meaning the value of the house you want to buy goes up (if it's a true comparible.) I would be inclinded to go with the $150 since one was sold recently at that price.
If he is representing both parties, then get your own realtor. This does not come out of your pocket, but rather the seller's. There is no way I would purchase a home without representation solely on our behalf. That said, what ever price you purchase the house for will need to meet the appraisal by your mortgage lender, unless you are willing to bring cash above what the loan amount which will be in addition to your down payment. This is why comps are very important. Can you figure out the price per sq ft on those two homes that did sell? That is a better way to estimate the value than simply by sales price.
For instance, homes in our area and budget are mostly $95 to $115 per sq foot. Any offer we make is in the midst of that range, pending the condition, location, lot size and upgrades of the property.
Say the house you are interested in is 1700 sq ft, @ $179,000 = $105/SF.
The house down the street, similar sold for $150,000 @1700 sqft= $88/SF
I would offer maybe $153k (about $90 per SF, assuming this house is a bit nicer) and ask for $3k-$4k or a percentage in closing assistance to bring it more in line with the other sale. Negotiate from there. This of course is just an example. You need to find out the area price per sq foot sales price.
Is he acting as a dual agent or does he in his normal practice represent both sellers and buyers but here is only representing you? If the latter, then I'm sure he has a handle on pricing. I don't buy the whole "buyers only" agents are better than agents who handle both in their overall business. I don't like dual agencies though.
Your comps seem to be $150K and $220K. I agree with PP that even though you don't think the 220K is a good price, it is reflective of the market. I doubt very much that you will get it for less than 150K, and I really doubt you will get it for less than the seller paid. The seller doesn't sound extremely motivated-yes she wants to get away from the memories, but it doesn't seem like she HAS to sell for any reason. So she can hold out a bit. Thank being said, I would maybe start at 150K and she what she says. Gauge her level of motivation to sell.
I agree with the person who suggested calculating price per square foot for the comps.
The $220,000 house is throwing me off a bit. You say it was really overpriced, but if someone paid that much, it couldn't have been too overpriced. Ask your realtor to do a little more research on why that house sold for that price. Was it totally updated with all high-end finishes?
In any case, if you disregard the $220,000 sale, then maybe an initial offer of $150,000 makes sense ... more in line with the comp that recently sold for $155,000. You can negotiate up to $160,000 if you want to.
I know $150,000 is less than the seller paid, but her purchase price doesn't really matter. You should pay what the house is worth now, regardless of what she paid in 2004. If the seller not willing to take the $160,000 or less that you're willing to pay, she doesn't have to. You also don't have to overpay because her house hasn't gained a lot of value in the last 8 years, that's not your problem.
Also, I had to chuckle about the seller's "belated" husband. Sorry.
Mr. Sammy Dog