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Need a little guidance on making an offer on a home, please.

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KCCutie

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We found a great house for us !

It''s a FSBO and the seller agreed to work with our buyers agent. The house is listed at 128.5K it''s a 3 bedroom/2 bath and from what we can tell the average for comps in that area is about 120K. However some have basements and attached garages and this one is on a crawl space and has one detached garage and one attached car port.

Our agent said things are going for about 90% of list price right now. So we think the seller should expect to sell at around 115K (I assume this is before any concessions and commissions). However we also need to ask for 3% in DPA and some help on closing costs.

Since we met the seller when we viewed the house we have a sense that they are ready to deal b/c they need to get their kids enrolled in the new area etc. So we thought about making the offer at 115K or 116K. Our agent thought that was pretty low saying after we ask for 3450 (3%) for her commission, DPA, and closing costs they would only net 104K. Which is over 20K under their sale price but only 10K under what we assume they expect (90%).

We did change our thinking a little and will probably ask for less help on closing as the GFE we got did not add up to 3% and we have a little to put towards it.

We will not go any higher than 123K so we want to have a little room for a counter offer. We''re pretty sure they will counter and not just walk b/c they didn''t seem to have shown the house that much and seemed eager to tell us just about anything.

Is 115K too low for a first offer?
 
I would put in your offer & see what happens. That is what counter offers are for, right? GL!
 
I agree with Vegas. They will most likely counter but hopefully you can meet in the middle.
 
Thanks!

I feel so weird asking for advise like this but I don''t have any homeowners who have actually done this before to ask right now....except our agent and she has a vested interest.

We may start a little higher so we don''t offend the seller, it is their home after all.
 
i think it is low given the 3% plus you''re asking for......

we''re in escrow now selling a very small home that was a rental. the first offer was much like yours and while we countered, we found out that the buyer couldn''t qualify for more $ and needed the 3% back to cover their closing costs. in effect, they couldn''t afford the house.... before we even had a chance to official reject their 2nd offer [we weren''t going to make another counter], another bid came in for $100 more than our asking price, $500 more for deposit, and a letter which guarantees the buyer''s qualifying loan. this all in 10 days of being on the market.......in our case, we own the house outright, aren''t in a hurry to sell, and aren''t living the place....as well as don''t need the $ for another home.

i applaud your efforts to get into a home now. all will depend on how desparate they are to get out. some may feel insulted by a lowball offer.....my husband was. as i explained to him, everyone is reading that the market is down and a buyer can get great deals. this is true in the higher end markets. the market we''re in with our house is first time home buyer and there isn''t as much competition....and we did a lot of work including a complete interior remodel. i convinced my husband that he shouldn''t be offended and that we should counter; however, the counter was still asking us to underwrite the buyers desire to buy a home which in effect they could not afford.

i only mention our experience at this time because you do take a chance of offending the seller [which hopefully they''ll be smart enough to overcome and counter] and/or losing out to another buyer while you''re negotiating. if they expect 90% and that''s what the market in your area is supporting, why would they settle for 10k under? make it tempting and up your offer by 5K.

movie zombie
 
Date: 6/16/2008 4:49:37 PM
Author: movie zombie
i think it is low given the 3% plus you''re asking for......


we''re in escrow now selling a very small home that was a rental. the first offer was much like yours and while we countered, we found out that the buyer couldn''t qualify for more $ and needed the 3% back to cover their closing costs. in effect, they couldn''t afford the house.... before we even had a chance to official reject their 2nd offer [we weren''t going to make another counter], another bid came in for $100 more than our asking price, $500 more for deposit, and a letter which guarantees the buyer''s qualifying loan. this all in 10 days of being on the market.......in our case, we own the house outright, aren''t in a hurry to sell, and aren''t living the place....as well as don''t need the $ for another home.


i applaud your efforts to get into a home now. all will depend on how desparate they are to get out. some may feel insulted by a lowball offer.....my husband was. as i explained to him, everyone is reading that the market is down and a buyer can get great deals. this is true in the higher end markets. the market we''re in with our house is first time home buyer and there isn''t as much competition....and we did a lot of work including a complete interior remodel. i convinced my husband that he shouldn''t be offended and that we should counter; however, the counter was still asking us to underwrite the buyers desire to buy a home which in effect they could not afford.


i only mention our experience at this time because you do take a chance of offending the seller [which hopefully they''ll be smart enough to overcome and counter] and/or losing out to another buyer while you''re negotiating. if they expect 90% and that''s what the market in your area is supporting, why would they settle for 10k under? make it tempting and up your offer by 5K.


movie zombie
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Thanks MZ!

I think this was just the experienced type of advice I needed.

It''s hard when you''re doing something like this for the first time and I really appreciate your willingness to share your experiences with me! After some conversations with our agent and digging up all I could on line we''re on board with you. Upping the offer by just 5K will make it look much better and we pretty much expect it to end up in that range so why chance offending the seller. *fingers crossed*
 
Date: 6/16/2008 11:53:42 AM
Author:KCCutie
We found a great house for us !


It''s a FSBO and the seller agreed to work with our buyers agent. The house is listed at 128.5K it''s a 3 bedroom/2 bath and from what we can tell the average for comps in that area is about 120K. However some have basements and attached garages and this one is on a crawl space and has one detached garage and one attached car port.


Our agent said things are going for about 90% of list price right now. So we think the seller should expect to sell at around 115K (I assume this is before any concessions and commissions). However we also need to ask for 3% in DPA and some help on closing costs.


Since we met the seller when we viewed the house we have a sense that they are ready to deal b/c they need to get their kids enrolled in the new area etc. So we thought about making the offer at 115K or 116K. Our agent thought that was pretty low saying after we ask for 3450 (3%) for her commission, DPA, and closing costs they would only net 104K. Which is over 20K under their sale price but only 10K under what we assume they expect (90%).


We did change our thinking a little and will probably ask for less help on closing as the GFE we got did not add up to 3% and we have a little to put towards it.


We will not go any higher than 123K so we want to have a little room for a counter offer. We''re pretty sure they will counter and not just walk b/c they didn''t seem to have shown the house that much and seemed eager to tell us just about anything.


Is 115K too low for a first offer?
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I''m not sure if I understand the math; the deductions your agent mentioned (agent/broker fees, closing costs) would be present whether whether the sale price is 128K or 90% of 128K. Their net from the sale, even if they received a full-price offer, was never going to be 128K. For ease in math, one can assume that for an average sale 3% goes to the seller''s agent, 3% to the buyer''s agent, and let''s say the title insurance, attorney fees, city fees/taxes, etc. total about another 3% of the transaction. Thus, even if they received a full offer of 128K, they''d only net about $116,480 in a classic scenario or $119,040 in FSBO. If you offer 90% of sale, they''ll (approximately) still receive 94% of the sale price in a FSBO situation, i.e. if you offer 115K, they''ll net $108,100 FSBO-- so in the end, they''ll take away a little over 8K less, not 20K less, than if they had received a full price offer. The FSBO dynamic should only save them the 3% sellers'' broker fee, and the FSBO owner is (should be) aware of that.

As for what constitutes a fair offer in your area, that currently depends on the local market, situation of the sellers, mindset of both parties, etc. If it is well-known that "things are going for 90% of list price right now" and their home is offered for a higher price than the comps, there''s an argument to be made that they listed at 128 in hopes of getting a 90% offer at 115 which they would counter to 120.

How long has the house in question been on the market? What is the supply in your area?
 
I would start off lower-the worst they can do is counter higher, right? I don''t see why they would be offended-that''s just how the game is played and I''m sure they''re aware of that. Good luck-I''m thinking about buying a house so I''ll be following this thread to see how it goes!
 
good luck!

it really does depend on the market on where you''re at..... in our case, i''d been following the market for several years in that area and set the price accordingly to sell. had it been on the market even a year ago it would have gone for many thousands more.....but i''m aware of the drop. the idea was to fairly price the house which meant there wasn''t a lot of negotiation room. unfortuantely, the first offer had no idea of how much time and effort i''d put into making sure the offer price was fair. i will admit that not all sellers do this. however, i find that putting myself in the shoes of the buyer for the last three real estate transactions i''ve been involved in over the last 5 years or so has paid off for me as a seller.

congrats on doing more research! there is a lot to learn about the real estate market and process but a lot of its available online. i don''t think enough people ask enough questions or do enough research. i find that the golden rule still applies in real estate transactions. i don''t believe in leaving money on the table but i don''t believe in gouging either.

keep us posted, please.

movie zombie
 
I promised I would update you guys so here it is:

Last night at 10:30pm our agent called to say they had e-mailed her a counter offer.

Our offer was 120K with 3%DPA and 2500 in closing costs paid by the seller, to close Aug 4th.

Their counter was 128.5K
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They did agree to do the DPA program but said nothing about the closing costs so our agent is trying to confirm that. We also asked for the fridge (that matches the stove) and hot to be included just see if they''d go for it. They agreed to the fridge but not the hot tub and we''re ok with that. They also wanted to move the closing to July 25th.

However 128.5K puts us dangerously close to the top of our range we think this house is on a flood plain (not sure why there''s no river or stream near by) so we might need to pay more for flood insurance.

Is it unusual to counter the counter offer?

We would agree to 126K with the DPA and closing costs as in the original offer with a closing date of Aug 1st(b/c I only get paid once a month on the first). This would be our take it or leave it offer b/c we are prepared to walk away. Does that seem reasonable or would you counter at 124-125K which is more of a meeting in the middle? Is this basically our last chance or can this offer/counter offer go on for quite a while?
 
Isn''t 128.5k what it was listed at? If so, it sounds like they won''t budge on the price.
 
If you really are prepared to walk away then I say you should go for the counter offer... all they can say is no at which point you''re in no worse shape than you already are.

My real advice is to not stretch your budget too far as far as down payment and closing costs. Just make sure that you are totally comfortable with the price you are offering. My husband and I just closed on a house last month and although we had $ left over after closing it''s been a shock to watch our hard saved $ go out the window (ok.. so I know it''s an investment but it''s still hard). We bought a house that needed several cosmetic updates and we''ve been spending every spare minute (and all our spare $) working on it. We still have a lot to do and we have to move by the end of the month (YIKES!!!).

I think doing FSBO is tricky since sometimes the seller may not know all that they should about selling the house. Our house was FSBO and we didn''t use an agent... just negotiated directly with the sellers (who were the grandparents of a friend of ours). Pricewise it was great (they dropped the house from 135k to 125k when they found out we were interested... without our asking but we felt that we couldn''t ask them to drop it further or for help with closing costs) and we did encounter some issues as far as closing costs (title insurance) but in the end everything worked out. They are actually our neighbors now and have been stopping by to bring us treats and to lend us tools (I think they enjoy seeing the changes we''re making to the house).They''re great people and I think they sort of consider use extended family now.

Anyway I''m getting off topic.... my point is that their unwillingness to negotiate may be a sign that they don''t totally understand how this process works (it''s normal to ask for less than the asking price). All you can do is decide how far you''re willing to go and if they can''t accomodate your needs then you should walk away. I know how it is to be caught up in wanting a home but try to relax and keep the big picture in mind. We bought our house knowing that it needed updating but we were very niave about how much work it would actually be (or how much we would have to spend).
 
Yes we are completely prepared to walk away.

Although none of this will matter if they aren''t willing to pay for the portion of the closing costs like we asked. If they won''t agree to that then we can''t afford this house anyway.
 
The comps are 120K instead of 128.5, those comps have full basements and/or attached garages and this has neither, AND you''re not all that attached to this particular house?

Umm... why aren''t you looking at the comps and possibly making an offer on one of those?
 
I understand completly. I really think that it comes with the territory with FSBO... like I mentioned before, I think sometimes those sellers just don''t get what is typical. I also think that they''re sometimes more inclined to be the stingiest (I guess I think that because they''re most likely not using an agent because they don''t want to have to pay for one).

If this one doesn''t work out I know you''ll find one that will
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Don''t let this get you down... it seems like you''ve done your homework as far as comparing comps and that sort of thing and based on that ( I could be really off here) the house may be overpriced (not uncommon with FSBO). Maybe if they don''t accept your counter offer you''ll get another chance when they realize it''s not selling and have to drop the price.

Did they have the house appraised? If so do you know what that value was?
 
Sorry, I haven''t had a chance to read all the responses, but wanted to ask if you know how much the owners owe on the home? Your agent should find that out so you have a better idea of what would be a fair offer and make sure the sellers are NOT risking a short-sale.
 
Date: 6/19/2008 2:51:03 PM
Author: fleur-de-lis
The comps are 120K instead of 128.5, those comps have full basements and/or attached garages and this has neither, AND you''re not all that attached to this particular house?


Umm... why aren''t you looking at the comps and possibly making an offer on one of those?
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Sorry I guess I wasn''t very clear about the comps.

This is a very small area. All the comps were from several months ago to 2 years ago. Most of the houses in this specific area are 2 bed 1 bath Bungalows and right now those are listed at 90K to 110K. We looked into them but they are just too small and most need more work than we want to do.
 
Date: 6/19/2008 2:57:59 PM
Author: applequeen
I understand completly. I really think that it comes with the territory with FSBO... like I mentioned before, I think sometimes those sellers just don''t get what is typical. I also think that they''re sometimes more inclined to be the stingiest (I guess I think that because they''re most likely not using an agent because they don''t want to have to pay for one).


If this one doesn''t work out I know you''ll find one that will
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Don''t let this get you down... it seems like you''ve done your homework as far as comparing comps and that sort of thing and based on that ( I could be really off here) the house may be overpriced (not uncommon with FSBO). Maybe if they don''t accept your counter offer you''ll get another chance when they realize it''s not selling and have to drop the price.


Did they have the house appraised? If so do you know what that value was?
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I do not know if they had it appraised but most of the internet home value sites have it listed at 130K+. Besides if it doesn''t appraise high enough our loan won''t go through so no sale....

They still have not responded to our agents question about if the $2500 in closing costs is acceptable.
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Date: 6/19/2008 4:15:42 PM
Author: MC
Sorry, I haven''t had a chance to read all the responses, but wanted to ask if you know how much the owners owe on the home? Your agent should find that out so you have a better idea of what would be a fair offer and make sure the sellers are NOT risking a short-sale.
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Excellent question. Our agent was able to find out that they paid 108K for it back in Jan of 04. So I would think as long as they clear 100-105K they will be free and clear....I don''t begrudge them making some money on the sale.

With our last suggested counter the proceeds of the sale would be 115K which means they are making at least 10K...not bad in today''s market so if they want to be more greedy we won''t fell bad helping someone else make 10K off of us, and we''ll walk.
 
I asked about the appraisal because it turned out that the owners that we bought from had it appraised and it appraised at 125k.... when we found that out we were really worried that if our appraisal came in lower we''d have a problem since we were only doing a 5% downpayment (our appraisal ended up coming in at 126.5k so we were ok). Given what we''ve had to put in the house since we bought it I think we may have overpaid a little... but I do love the house and I know we''ve increased the value quite a bit with what we''ve already done.

I really wonder if, given the appraised value, they could have gotten the 135k they originally wanted... they did have a cash offer for 130k (but had already accepted our offer) so I guess anything is possible.

I hear ya about not wanting to do a lot of work to a house... we thought we could handle the work we''ve had to do (and for the most part we have)... but if we had to do it over again I''m not sure I''d do this (ask me again next week after we''ve moved in and I''ll probably say that we would have but right now I''m a little stressed).

Don''t budge on the closing costs... we paid all of ours with the exception of the portion of the title insurance the sellers were responsible for (around $900). They tried to get us to pay it and the deal almost fell through... with all that we were having to pay out I was frankly insulted that they would ask us to pay that. In the end everything worked out and they paid it. I think you''re in good shape since you have an agent to represent you (and can give you some guidance)... we probably should have used one.

Good luck
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Date: 6/19/2008 4:33:06 PM
Author: KCCutie

Excellent question. Our agent was able to find out that they paid 108K for it back in Jan of 04. So I would think as long as they clear 100-105K they will be free and clear....I don't begrudge them making some money on the sale.

With our last suggested counter the proceeds of the sale would be 115K which means they are making at least 10K...not bad in today's market so if they want to be more greedy we won't fell bad helping someone else make 10K off of us, and we'll walk.
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But, there are two other things you have to consider. First off, the sellers will have to pay taxes when they sell the home, and second off, they probably put money into the place right before putting it onto the market and that is money they'll want to recoop. They probably are not being greedy.
 
applequeen - very good points I will make a note to ask them about an appraisal before we move on to counter.

MC - I did not know about the taxes....see when this is your first home purchase there is a lot to learn. Alright if they need more money they need more money...maybe they aren''t being greedy....but if they need more than what we''re offering they''ll have to get it elsewhere.
 
Hope all works out for you! When I sold my first home, after everything, I was handed a check for $1,750. You have no idea what a bummer that was! It''s such a bad time to be selling, so they''re probably desperate for every dime they can get. Who wouldn''t be? And, you want to protect your money/finances, as well, so surely you''ll find your dream home for a better price in this buyers'' market.

Where are you looking for a home? The price you''re talking is unimaginable around here!

Oh, and I sold my second home FSBY and it was the best move I made as it gave me (and my husband, of course) quite a bit of profit! Luckily the market was great then. Sadly, my third home is on the market and it''s going to be a slim profit and that is why I''m kind of looking at the sellers'' viewpoint.
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The counter/counter thing can go on for a while, but usually is done after two shots, I''ve heard. It''s a tedious time!!
 
Well, after waiting for almost 24 hours for clarification the sellers responded that they would not be paying any of our closing costs.

We just can''t be 100% sure we''ll have enough money to cover all the closing costs at this point. So we have to walk away. We''re a little sad b/c this is one of very few 3 bed 2 bath houses in the small area we like that''s even on the market right now but we''ll just keep looking. If we''re still looking in a few weeks and they get desperate to sell maybe we''ll hear from these sellers again, that is if we don''t find a better house first.

MC- We''re in KC MO. Looking just north of downtown. There are lots of areas in town where this house would sell for 150K+ but we like being close to downtown....we''re not really big on living in "the burbs."

Saw an REO new on the market that could be promising. Hopefully we''ll see that this weekend. It has some red carpet that would have to go but it''s priced really low so new carpet wouldn''t be too much of a problem.
 
We just ripped out red carpet (shag.... lovely) from our new house... we had a red master bath to go with it (red toilet seat, red vanity and sink).... people love their red :)

Good luck with the house hunt... I know it''s stressful but when you find the right one things will fall into place. And look at it this way... the more time you spend looking the more $ you''ll have for closing (and moving, and decorating, and new carpet, etc.)

Have you been preapproved for a mortgage yet? (you may have already answered that)... anyway if you haven''t then go ahead and get started on it (I think the approval is good for 3 months or something) at least then you can feel your making progress towards becoming homeowners.
 
Date: 6/20/2008 10:06:17 AM
Author: applequeen
We just ripped out red carpet (shag.... lovely) from our new house... we had a red master bath to go with it (red toilet seat, red vanity and sink).... people love their red :)


Good luck with the house hunt... I know it''s stressful but when you find the right one things will fall into place. And look at it this way... the more time you spend looking the more $ you''ll have for closing (and moving, and decorating, and new carpet, etc.)


Have you been preapproved for a mortgage yet? (you may have already answered that)... anyway if you haven''t then go ahead and get started on it (I think the approval is good for 3 months or something) at least then you can feel your making progress towards becoming homeowners.
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LOL! Oh there aren''t pictures of the bathrooms of this house now I''m afraid to look! Just kidding. Yeah 2 rooms have bright red carpet one had beige carpet and one seems to have tile...maybe that''s the living room or dining room....then the kitchen and one other room have wood. So here''s hoping there''s wood under that horrible red.
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It also has Rec counter tops in the kitchen
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that would have to go eventually too. Hopefully we''ll get to see it this weekend.

Yes we are pre-approved. We got our pre-approval so we would look good when making this offer. We''re glad we have it now so if we want to make an offer on another place we''re set to go.
 
We''ve already gutted the red bathroom and will be replacing it with nice, boring, white fixtures. We''ve got yellow countertops in the kitchen
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Our house was built in the 70s and was never updated (obviously we''ll be remodeling the kitchen). On one hand it was sort of a clean slate but on the other hand it''s been A LOT of work. My husband and I have worked non stop (nights and weekends) for a month now and have to start moving in the next few days. Our floors (installing hardwood to replace the red shag) are only half in (hope the flooring guy is there now) and there are so many little things to finish. The houses''s location is perfect for us and the yard is fantastic so we were willing to take on some work... ugly can be changed, location can''t

We know we''re increasing the value quite a bit with all our changes (and will probably be one of these "greedy" FSBO''s in a few years
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) but it''s been HARD work... and very expensive. It''s also really rewarding though to see it come together and know that we did it... in a cheesy way it''s like we are literally "building" our life together.

I know you''re going to find a great house. We looked at several last summer right after we got married and none of them worked out. This one (70s decor and all) just felt like home from the beginning and everything went so smoothly... I''m glad we waited although it was tough. It some ways I just don''t think we were ready last summer (although we desperatly wanted to be)... this summer was the right time for us and we found our house immediatly (without really looking... just sort of fell in our laps).
 
applequeen you ROCK! You just make me smile!

OMG so check this out! That REO with the red carpet is listed at 85K and I just checked the address on Zillow and the bank owns it for $80,282....the best part is..... hold on to your hats...it''s estimated to be worth like 147K!
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It''s on a big corner lot and has a killer yard. We''re going to see this one ASAP!
 
Thanks
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Glad I made you smile

That house sounds like a steal!!!! I can''t wait to hear how it is in person. At a price like that you could do so much to it (and at that estimated value hopefully you wouldn''t have to) I''m so excited for you.

Are you planning to see it this weekend?

Hopefully we''ll get to start moving into ours on Sunday.... yey!!! But before that can happen I need to make (yet another) trip to Home Depot.

Have a great weekend!
 
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