San Diego Housing Bubble News and Analysis

Be Careful Not to Insult

"Many buyers attempting to lowball a bid can come off insulting and ridiculous. A home carries a lot of emotional attachment for some people. An unbelievably low offer can seem disrespectful. It can also make a seller give the cold shoulder to any negotiations."

The offer goes to the listing agent who doesn't have to present it if they feel it is "Frivolous" If it gets presented then it wasn't. Nobody comes to your birthday party to tell you what schmuck you are for low-balling their property. Low-balling works best when trying to get a deal, not a house that you are attached to, but the two aren't necessarily completely mutually exclusive.
Common sense should be the only limitation on the offer. If the owner owes more than the offer,and it is not a short sale, or if the neighborhood is "on fire" as far as sales go it isn't likely to work. Properties with market time,especially short sales and REO's should be easier candidates. So should fixers with lots of time on the market.I don't know what the rest of you think an extreme low-ball is but I don't think 20% is out of the question for something that meets some of the good candidate criteria,. Just don't expect to get the first one and there will probably be a counter offer if any response at all(hopefully). The odds of getting the entire low-ball are not always good but it is better than paying anywhere near list and nothing is binding on the counter. 1 page non-binding letter of intent is a good way to start. Some lenders require a "in house" proceedure for offering on Reo or Shortsales so it might be better just to make verbal offers to the listing agent and tell that person to talk to the lenders rep. If they won't it wasn't likely to be worth going through the procedure. Its like going fishing.
Disclaimer: It is probably better to wait until the market corrects more first.

Nor_LA-Temcu-SD-Guy

Unless you desperately need a home to live in (NOW), IMO you would be an idiot to offer more for a house than you think you could sell it for next year (or next month for that matter).

IMO It's like going to the store hungry, your not going to make the best choices for food purchases. You got to be willing to walk away if the price is not where you will be able to resell it and get you money back.

(this includes all other costs, so you will need at least a 10% - 15% cushion in most cases IMO).

Who cares if you hurt someones feelings? When I bought my place, I offered what I felt it was worth give or take 50k. You are not going to break bread with the sellers, toughen up! My offer represented a 150k drop from the asking price, and 700k form the original asking price. The counter was only 50k above my offer, so we split the difference and the deal went down.

Do you want to make friends, or get a good deal?

Home prices are still so far above what they should be (e.g. what someone with a normal income can afford with normal financing) that there's no point. I'd need to offer half the asking price for it to make sense to me. Sellers can do better than that because a few idiots are still out there buying in today's market.

Maybe in a few years.

This whole idea about "not insulting the sellers" is pure hogwash. Absolute drivel. WTF, nobody seems to care about whether sellers are insulting the buyers with their price-hyping mania and inflation-mongering greed.

Agents that advice their clients "not to insult the seller" really are saying "I think you should offer full list so that I can get my fat commission right now without doing any real work".

If a seller wants to be insulted by whatever, I personally do not care. What makes them so holy? I'm supposed to spend 100k more so that the seller can feel good? Dream on.

The take that anyone who is buying is an idiot just cracks me up. Someone who cannot even generate enough income to buy a 600k house is supposedly smarter than someone who has made millions due to their intelligence or skill in something ( inheritance aside ). There may be some exceptions to this, but in general I doubt very seriously that median income people have more intelligence than above median income folks do.

I will say this, I would rather be a millionaire and be an "idiot", than be a genuis and be poor.

Be Careful Not to Insult

Many buyers attempting to lowball a bid can come off insulting and ridiculous. A home carries a lot of emotional attachment for some people. An unbelievably low offer can seem disrespectful. It can also make a seller give the cold shoulder to any negotiations.
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I call Bullshit on this one!

These sellers... actually the entire real estate industry, have colluded together and used fraud, deception, even outright theft to illegally boost house prices up to insane highs.

Now they must find the next greater fools in order to keep their Ponzi scheme going. They have declared war on my family to achieve this. They want to destroy my family financially so they can escape the scam market with fat profits stolen off the backs of the average young working families.

And I am supposed to be afraid of insulting the seller?!

No, it's the exact opposite. They are already insulting me by trying to steal my money, and my entire financial future. I have no sympathy for every rat bastard seller who has their house priced above early 2003 levels.

Finally, the illegal market has caught up to these scammers. Now, there are more than enough foreclosures already on the market for me to ignore any individual sellers in the first place. So if you are insulted by my offer, then get your piece of shit house off the market. I will only be dealing with the most desperate of foreclosure homes sold by desperate banks going into bankruptcy. The number of those foreclosures will be increasing exponentially for the next several years. So once again, if the banks don't want to accept a Jan 2003 price then get the f@ck out of the market.

Insult the sellers? Ha! This is financial warfare now.

And remember... you MUST sell all those foreclosures, but I don't have to buy.

The take that anyone who is buying is an idiot just cracks me up. Someone who cannot even generate enough income to buy a 600k house is supposedly smarter than someone who has made millions due to their intelligence or skill in something ( inheritance aside ). There may be some exceptions to this, but in general I doubt very seriously that median income people have more intelligence than above median income folks do.

Probably people making more are smarter than average. Not as much as you'd like to believe. Nevertheless, MOST AREN'T BUYING NOW.

Most of the wealth created in the last 10 years in Southern California is from housing appreciation. Everyone I know who bought a decade ago is shocked at the current prices. That's called luck. Not exactly "intelligence or skill in something".

Personally I have always presented an offer to my sellers no matter how ridiculous they are. I don't really buy into the caviot that a realtor does not have to present a frivilous (pardonif I spelled it wrong) offer. Even if I simply make a phone call to the seller and give him the verbal details, I would much rather play it safe.

As far as being on the other when I represent buyers I also have no problem submitting an offer that my seller is comfortable with. If I feel that the sellers will not respond I do tell my client that, and I do let the buyers agent know verbally what the offer will be prior to sending it. In this market I don't buy that line about sellers being insulted any more. It is a buyers market and sellers need to deal with it and/or their agents need to prep them that it is going to be this way for awhile. There is never any intent to insult, there are just people who are looking to mitigate their risk moving forward when they do buy.

SD Realtor

I agree about sellers not being insulted. We just recently sold our house and after lowering our price by $20,000 we had an offer that was $15,000 below our newly lowered price. We told our realtor that we could not accept the offer so the buyers countered again and our realtor ended up paying the closing costs. It was a win/win for all of us. We weren't insulted with the original offer we just knew it was time for our realtor to work for her commission and make the deal happen and be within our price range.

On another note - We have bid on bank owned homes and apparently the rule with banks is if you bid within $30,000 of the current asking price then they will respond with a counteroffer and most will pick up some if not all closing costs. Any offer that is $30,000 or more lower than the current asking price the banks generally will not respond (at least not now).

I low-ball even if it's a seller's market.

The take that anyone who is buying is an idiot just cracks me up. Someone who cannot even generate enough income to buy a 600k house is supposedly smarter than someone who has made millions due to their intelligence or skill in something ( inheritance aside ). There may be some exceptions to this, but in general I doubt very seriously that median income people have more intelligence than above median income folks do. I will say this, I would rather be a millionaire and be an "idiot", than be a genuis and be poor.

Chris... maybe you can explain a few things to us...

You make it sound as if anyone "who can't even generate enough income to buy a 600k house", they are a brainless bottom feeding peon.  

There are plenty of highly educated and intelligent people out there who can't afford a $600k home.  In fact, the intelligent ones are buying with responsible loans and will eventually paid off their loans, the unintelligent ones are buying with toxic loans and are now likely in foreclosure.  Actually the real intelligent ones are renting right now, and watching home prices drop, as opposed to the so called smart upperclassmen who just purchased watch his equity dwindle.

They say you could not really tell who is a true millionaire, they usually don't promote themselves that way, but you can tell who is broke, they are the ones trying to look like a millionaire, I find it true very often.

Chris you left off with a shallow, materialistic quote, I shall leave you with a few quotes as well, take them as you may...

"Wealth after all is a relative thing since he that has little and wants less is richer than he that has much and wants more."

"The first wealth is health."

"We all need money, but there are degrees of desperation."

"Without a rich heart, wealth is an ugly beggar."

"It is sheer madness to live in want, in order to be wealthy when you die."

"You may have tangible wealth untold, caskets of jewels and coffers of gold. Richer than I you could never be; I know someone who told stories to me."

"A man's true wealth is the good he does in the world."

"What right have you to take the word wealth, which originally meant ''well-being,'' and degrade and narrow it by confining it to certain sorts of material objects measured by money."

"What difference does it make how much you have? What you do not have amounts to much more."

"Rich people without wisdom and learning are but sheep with golden fleeces."

"He that is proud of riches is a fool. For if he is exalted above his neighbors because he has more gold, how much inferior is he to a gold mine."

"Superfluous wealth can buy superfluities only. Money is not required to buy one necessary of the soul."

"The Lord commonly gives riches to foolish people, to whom he gives nothing else."

"Intellect annuls fate. So far as a man thinks, he is free."

If you really would rather be a rich idiot than a poor genius, then I do feel bad for you. 

Neither scared, nor shy, just not in a hurry.

Josh

I grew up in a poor neighborhood. Lots of people on welfare, participants in free cheese programs and so forth. I'll even admit I was on food stamps in high school. When I went to the office, at 16 years old to apply, I was appalled then even.

Babies in name brand jeans, people with pagers (pagers were cool then) and name brand clothes, gold jewelry, etc. etc.

Everyone at my school had designer clothes, but they treated them like gold. Every day you came to class with your clothes ironed, and looking nice. You didn't wash your jeans all the time because that makes them age, you didn't dry much of your clothes. Then we would drive to the suburbs and see the kids looking scruffy with wrinkled holy jeans and wonder what the hell are they doing.

I'm just applying that rule, that people without money try their damndest <-is that a word?> to look like they do.

Rustico,

Excellant post. I don't think it could have been expressed more eloquently.

Thanks Bob,
Nice of you to say that.

I don't offer because what I consider homes to be worth and where the general market is, is too far apart. It would waste my time, the sellers time, and our agents time.

Also, should one accept my offer in the current market, I'd be instantly concerned that I don't know something that they know about the property.

As for insulting offers, well, yes, you are insulting them to point. If the home is at or near market and the seller isn't distressed needing a quick sale, an offer that is 30% below FMV, is an insult that says "I think you're stupid and lazy". IMHO. A home listed at 10% below FMV will move.

Of course, FMV has absolutely nothing to do with what 90% of the homes on MLS have for an asking price. FMV is the price that the homes that have sold are going for given their condition, location and tangibles.

totally agreed with the statement....

They expect buyer to pay $100k more for the house they paid $150k less 2 years ago..dream on...

insulting the seller..i could careless if the seller is hurt...is my money afterall..i am the one that making payment...If the seller hurts? ..haha..move on..find someone else that will sell

I think it is absolutely reasonable, considering the current market dynamics, to offer a price equal to mean value before the onset of bubble. So, take 1999 or 2000 base price and add a 5% yearly inflation and make an offer if you like the house. If the seller rejects it, you can walk away completely guilt free. Alternately, look up the most recent pre-bubble sale price on zillow and add a 5% p.a. rise.

I think it is absolutely reasonable, considering the current market dynamics, to offer a price equal to mean value before the onset of bubble. So, take 1999 or 2000 base price and add a 5% yearly inflation and make an offer if you like the house. If the seller rejects it, you can walk away completely guilt free. Alternately, look up the most recent pre-bubble sale price on zillow and add a 5% p.a. rise.

I think this strategy is absolutely a waste of time. 5% per annum inflation since the 1990-2000 time frame? That may be a reasonable price once this bubble is done deflating, but today sellers can do much better. They may be having trouble selling because they think it's still 2005, which it isn't. It sure isn't 1999 plus 5% per year inflation either. Not yet.

What is FMV in the following case?

A lot of homes released by a developer that sold from 500K to 600K in 92129 and 92127 zip code in around 2002 and 2003 are now on market for sale. Currently, sellers are asking between low 800K to 1M.

Could you advise me what could be a FMV for those. I just want to know a ball park figure.

In 4 to 5 years later, they gained 300K to 400K on paper, but is it truly so? If I offer mid 600K to low 700K to a seller, am I simply stupid? If I go 4S Ranch or even Del Sur, I could buy a nice band new home from high 600K to mid 700K.

I really do not understand why so many million dollar houses (based on their asking price) are around my neighbor, but they do not look like worth even 600K at all.

I would hesitate even offering 500K for the homes built during the last 5 years. The builders were so keen on producing that they did quite a shoddy job in many cases and hired anyone with a pulse. Whatever may be your offer, get a really good building inspector first. You may not want a money pit even at fire sale prices.

See this sad story

http://www.geocities.com/myllamas/CCFL/p...

Really sad what Pulte did to this woman I guess it's buyer beware. Pulte is a just another "CUT and PASTE" builder.