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How LOW is a "lowball" offer in Temecula???User Forum Topic
Submitted by 23109VC on March 30, 2007 - 11:27am
I currently rent a 1900 sq ft home in Temecula. It's in a development called Harveston. It's a very cute, nice little area with a man-made lake in the center.... my family likes the area. we take walks in the evening around the lake, it's quiet. lots of families. the house we are in is walking distance to the clubhouse, pool, and lake, and it has a very nice location - private backyard with no rear neightbors. the landlord who I rent from worked for the builder. Lennar. so i know she got some kind of discount. the house has all sorts of upgrades, i'm sure she paid for none of them. it has the granite, the nicer cupboards, extensive tile flooring, $$ shutters throughout, fans..plus the backyard is fully landscaped - and nicely. per the property records the house sold for $430 in 2005. She tried to flip it for $525-550 immediately..and it never sold..big suprise. now she wants to sell to me. i basically said i wasn't interested...and cited things like the stuff we all talk about here...i told her i liked the house...but i figured in a year or two it will be worth even less...and it's cheaper to rent. so i planed to rent. her exact words were something like "well, i own several houses...i don't want it...just make me a lowball offer and see if we can agree on something". to rent a comparable house i would expect to pay somewhere between $1600-1800. it's very upgraded, nice area, nice location...but by "temecula" standards, it's small at only 1900 sq ft, 3 BD/2 BA. up here in Temecula...you find 3000-3500 sq ft homes all over the place...and you can rent those for $2000-2200.... I was thinking of offering her $300k. she'll probably say no..b/c i'm sure she thinks she can get high 300s to 400k...even in this market...but if she truly wants to just dump it, unload it, and avoid agents, hassles... maybe it would be wroth it at that price. i know temecula is probably an area slated to really take a hard fall...but if by some chance..this woman is "loaded" lke she acts..and really dont' give a $hit about getting top dollar and just wants out fast...maybe she'd eat it on the house and ther emight actually be some price where she woudl let it go for and I would truly have it at a price that is too good to pass up - even with where the market is going. i don't know. what do you all think? 1900 sq ft. harveston. lennar house. sold for $430 in 2005. closest comp sold for $430k a few months ago. if i just walk away, don't buy it, i'll pay roughly $1800-2000/month to rent something comparable for the next year. if i buy it at $300....my mortgage (100%) would be fairly high...but might wash out close to my rental costs... buying at 300k might give me 2500/month in carrying costs...minus my tax break..and i'm close to what i'd pay in rent... which would make buying somewhat make sense.. but back to my main point - if this person/owner really would take a "low low low" offer....what is low enough that it woudl make sense to buy?
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Offer 300K. She won't go for it, so what would you have to loose. Don't offer anymore than 300K, because prices are going to come down anyways. If you like the property and can afford the 300k, it's sounds like a win/win situation. If she does go for it, list it immediately for $430K, if it sells pocket the money and rent for another couple of years and buy again for $300k or less.
Find out how much her mortgage is. It's unlikely she'll take anything less than that.
Selling for 300k means getting 300k - selling costs = ~270k (approximately). She bought it for 430k. Unless she put at least 150k down at the time of purchase, she owes more than 270k.
If she is "loaded", that is:
1. She owes the lender less than 270k, or
2. She owes more than 270k but has equity from another house. She can sell one house for a loss & another for a profit and use the profit to cover the loss.
If either of the above is true, she may sell it to you. IMO, the chance that either of the above is true is slim, for 2 reasons:
- She fits the profile of a speculator. Speculators typically do not buy with large down payments. Even when speculators have equities (due to appreciation), they would tap on the equities to buy additional houses.
- When she said: "just make me a lowball offer ..." It sounded as if she is desperate (maybe having cash flow problem).
I think there is a way to find out how much is owed on the house. That'll give you an idea of her situation.
BTW, if she owes more than 270k, selling at 300k will require a "short sale approval" from the lender.
It would seem that in a neighborhood like Temecula, homes were overvalued by at least 50% at the peak. So maybe you can figure out how much it would be worth now at normal appreciation rates.
I agree that more than a "loaded investor," this landlady sounds like a "desperate speculator" who has negative cash flow.
Hey, if she stops making payments you may get to live in the house rent-free for several months, wait for it to be foreclosed, then buy it from the bank for a really low price.
She has got her tit caught in the ringer, she's overloaded, typical bloated speculator .....She is not the person you want to negotiate with...the BANK is who you negotiate with after they foreclose on it, THEN they will be willing to entertain some SERIOUS low ball offers.....
Whats the hurry ? Its only going to get better.
Apologies...I just saw the previous post from Diego Mamani....We think alike ! which confirms your superior astuteness...(LOL)
She is probably thinking ~410K or something like that, especially if recent comps justify it. Remember that you are renting from her and you probably should not piss her off by what she might think is "insulting".
23109VC -
I think that you may be getting to caught up with how much should my lowball offer be, verses, what can I afford and still be able to sleep at night. Ya know what I mean? It concerns me that you would be financing 100% of this purchase with a loan vehicle that may be somewhat risky, at least down the road.
My personal answer to your question is, the correct price to offer is what is suitable for your personal budget. Even if you find a mortgage that equals the rent you pay, don't forget that you could be buying a depreciating asset, thus if you get stuck in a job layoff or something, you are in a much tighter bind then if you are renting. I am not trying to talk you out of the purchase, I am just saying don't be concerned with offending this owner or something like that.
If she bought it for 430k I am skeptical that she would sell if for 300k. So what the heck, offer her 250k! Just make sure that whatever you offer, it is a mortgage that you can afford and that you are okay with. Right now the denial factor is still running high among homeowners. Sign a one year lease with her and then hit her again next year. It will be interesting to see what happens then.
SD Realtor
SD R
I thought you were on vacation?
I've looked at some of those 1900 sf Harveston rentals as well. I really like them but, as far as buying one, the property taxes and HOA's there are VERY high. When I do the math, I figure that it wouldn't make sense for me to pay anything over the mid 200's for one of those. I think they were selling for 280K when the first phase came out in 2003 so that tells you something. My gut feeling is that the market will over-correct big time and you will be able to pick one up (fully upgraded) in the low 200's if you're patient. If gas prices keep jumping up no one will want to buy or rent in Temecula anyway since most people would have to commute very far to work - that would support the downside over-correction even more.
There are a lot of "investors" that are renting out the houses in Harvestion and every one of them is renting at a huge loss. How long can that go on? It's not even that easy to find a renter. My friend called about one of the rentals that was $1800/month and the lady pretty much said she'd take $1600/month two minutes into the conversation.
If it were me, I'd just keep renting and wait it out. I wouldn't insult the owner with a low-ball (but sensible) offer just yet.
There's another reason to wait. If the foreclosure situation gets really bad the character of the neighborhood might change and you might not want to live there anymore. The people that buy at the bottom may not be people you want to live next door to. I'm going to wait it out at least 3 more years before doing anything. I can picture the Inland Empire having a lot of Section 8 rentals once prices get low enough.
A. Taxes and HOA are really high there.
B. I wouldn't pay more than 350k for that little house. I know it is nice and upgraded, but don't get all emotional. There are already homes in Temecula that are listed in the mid 300k.
C. There is no way in HELL she is gonna take $300k.
D. Save up for a down payment, by the time you have some cash, you will find better deals than $300k.
E. You have posted this proposition before, I don't care what you do, but if you are smart, you will forget about buying this Harveston house on a small lot, and RENT, then in at least 2-3 years, you will consider buying a home again. Homes will be much cheaper in 2010 than in 2007.
F. How bad would you feel buying a home with 0% down, only to have it loose value in the coming years?
sdr - Technically I still am but tomorrow we fly back... Plus as you know you never are fully on vacation... Got the cell phone and laptop with me and have been supporting some current escrows and other stuff.
SD Realtor
my lease expires in a few months, and the owner claims she will NOT re-lease it...but either will sell to me, or will ask me to leave to list it. fine.
i may offer 300k.... might even go to 325...but that's about it. my gut is that the owner actually paid about 400k.... which is about what she will get on the current market IF someone bought it at current prices/values...
then the owner will lose another 6% in commissions..almost 25k more.... so i realistically think the owner WILL sell happily for 375k..... b/c that's all she will get IF she waits for me to leave and lists it...
so honestly.... she might even let it go for 350... 325 would probably be too low...
then again, maybe she's nuts and to her "lowball" is 410.. :) i won't know till i make an offer. can't hurt to offer low..i'll see where she really stands after i make the low offer....
there is SO MUCH INVENTORY up here....it is such a buyer's market.... i'm so glad i'm not a seller right now....
Just tell her that you cannot afford anything more than 300k and you don't want to insult her with an offer that low, she can't take offense to that. The other posters are correct in their assumption that she probably can't sell it for that because she owes more, has cash flow troubles and will be letting some of her rentals go back to the banks. If she is in the new home industry she is losing money on her rentals and isn't making much at work to cover it, she acts loaded because she used to be. You can also ask her if you can stay after the lease runs out until it sells. Ask for a 40% reduction in rent and agree to hire a cleaning lady to keep it nice for showings. Since you won't have the comfort of a lease and you will have to deal with showings it isn't worth full rent. She will want you to pay full price but that isn't fair to you and her cost to have it empty will be astronomical and won't be able to get a new renter, so you are her only chance at any cash flow. I've noticed some crazy bargains in rental houses because they are also for sale.
i've thought of making my lowball offer...then if/when it is rejected, suggesting I stay on as a tenant until it sells - for LESS rent - but only if that's what the landlord will want.
landlord may want to show it empty...but personally, I've always believed a house shows better furnished....unless it's furnished/decorated very badly.... i think the house looks better with our stuff vs. empty... but i'm also not thrilled about people coming to show the house with my family home...we went through that when we sold our last home.. major PITA... i loved how realtors would ignore the please call two hours ahead or whatever your requested and would say, "we're here in your driveway, can I show the house"...as you are eating breakfast in your pajamas or something.... jerks...
we like the house we are renting - but it's not the "perfect" hosue. it is 1900 sq ft, and with three kids, we really would rather have asomething a tiny bit larger iwth a 4th bedroom.... the hosue is very nice, and we like the area/location... we just would like more space. for the right price, howeve3r, we'd take it...it woud only be perfect if it ws for a steal of aprice. and in this market, they would have to sell it dirt cheap so we would be protected against the future price drops.
my guess is we will continue to rent for another year, and think more seriously about buying at the end of 07, early 08..depending no how the market is going.
23109VC -
Take a look at your lease. As a tenant you have alot of rights and you may have an argument that she CANNOT show your home to potential suitors while you are still in there. Don't be afraid to play a little hard ball with her.
SD Realtor
Just for some perspective, prior to this upleg you could buy houses in these size ranges in that area for less than $170,000. Compared to SD County or OC County, this area will take the bigger hit. I don't think it's beyond the realm of possibility that the neighborhood you're in could settle in at $225,000 by the time its all over.