Low-ball Offers

[an]

I’m a first time home buyer and I have to disagree with you Raybyrnes. Maybe it’s just me but I see if I invest 6 months worth of time into getting one accepted low ball at 10-20% off a $500k house, that’s a saving of $50-$100k tax free. That’s not considering that $50-100k in saving on the principle would mean $100-200k saving if you include the interests you don’t have to pay over 30 years. Most people would be happy making that much after tax in their regular job. I’m already clipping coupons, saving as much as I can and getting ready to make my move. I’m also working hard to improve my career. But that does not mean I don’t have spare time. Being on here shows we both have spare time to kill and that spare time can end up making me $50-100k+. A penny saved is a penny earned. That’s my motto.

I’d be happy with a relatively low price with high interest.

[Critter]

I’m with AN. You also save on prop taxes with a lower price to start with.

Good point on how we spend our spare time too!

[Raybyrnes]

asianautica

You can keep trying. I’ll put my odds on the fact that the place you buy will not be a low ball or a REO or forclosure. It will be a place that fits your budget, has good school systems and will probably be well priced relative to comps on the market. You will offer about 5 to 10% below their asking price (because the asking price is well set to begin with or else you wouldn’t have looked) and you will negotiate from there. Time will tell. You will probably take advantage of a redfin, or buyside rebate service to get money back and you will be happy with your purchase.

[Raybyrnes]

Here’s a quesiton for the board. If low ball offers make sense to you. How do you respond when a rookie sales person is told to present some outragously high offer to guage your temperature.

Mr. so and so. You have steady job history and an 800 Fico score. You ahve 20% for your down payments. Lets go ahead and pre approve you at a competitive rate of %11. Let the negotiations begin.

Cmon folks. Let’s get with the program. If you do a good job looking around, have an idea as to what you can afford then you will find a place that does not require BS tactics. Just my opinion.

[NotCranky]

I hear what you are saying and agree it applies to most people. Single people have an advantage in bargain hunting on a primary residence because there is only one set of emotions to deal with. As I have said before it helps if you are willing to use to your advantage, offering on what what other people don’t want. Yes it is more or less a side job that someone needs to be glad to take upon themselves. Sounds like AN and Critter would do that, at least to a degree.
Depending on what kind of “bargain” someone is looking for as much time can be spent in building and zoning as looking at properties.If you want a fixer or something with add on potential it requires feasability studies and investigations of many “red flag” issues. This takes time during normal working hours.

In any case it is currently very reasonable to offer at least 10% less than comps for most houses that have a reasonably accurate list price, without doing anything else unusual with regards to shopping, except perhaps being a little more patient.

[PadreBrian]

In order to submit an offer, you have to have a pre-approval from you bank anyway. So I have no clue what you are talking about.

With bank owned reo’s be sure to keep at them. Their computer won’t let them take your low-ball offer too early. BUT, when the comps start rolling in with around the same PPSF, then the bank will take it. It also helps to run comps yourself (or your broker), do a 5 mile radius and only include sales in the last month. THEN submit that with your offer. The great thing is that will pick up the short sales, and that will get bank motivated.

GL

[NotCranky]

Ray.What on earth are you meaning by “BS tactics”? it is not like you go looking for some old lady who doesn’t know the value of her property. Believe me I have had that one handed to me on a silver platter. I educated the woman and sold her house at full market value,almost double what she asked for. There is nothing wrong with going after a listed property, car or whatever at the price you want to pay.

[an]

Raybyrnes, I guess you know me better than I know myself.

“You can keep trying.”

I will. Thank goodness I now have your permission.

[Raybyrnes]

Rustico

The BS tactic is going into the buying process and thinking that you are going to look at homes you are interested in and think that you are going to get somewhere offering 50% of what the person is listing at.

Seems to me that this low ball logic is a close cousin to mortgage brokers providing higher than par rate loans. What is wrong with that. They could have done their diligence. They could have continued to shop around.

To me if the market is not where I can comfortably afford to buy I’ll simply wait it out or move elsewhere. I’m not going to go out putting offers together at 50 % the value of the house.

[NotCranky]

Thankfully most people here refer to 50% off jokingly or in reference to a fall they are hopeful of, peak to trough. A reduction off a list price 10%-20% is really the goal and that takes a lot of work and sacrifice. For those of us that are not in love with clocking in and clocking out somewhere to give the seller a 10-20% bonus that is pretty valuable.

“To me if the market is not where I can comfortably afford to buy I’ll simply wait it out or move elsewhere.”

If it came down to leaving or using BS tactics like offering 20% below list I’d give the BS tactics a try first.

It really is a matter of personalities. I know for instance that my inlaws are too polite to offer anything less than what the realtor says, which as you know, won’t usually be very assertive.

[Raybyrnes]

The way I see it, the minute you pick up your property at a 20% discount I can then comp simliar homes and they will come down to the level I am looking at. The person who thought he was buying at a discount really didn’t get that big a discount at all.

How many low ball offers are working? None. I don’t see any homes standing out as dropping 20 % relative to otehr homes bought before or afterwards.

What does work. If you are extremely skillful and can buy a good piece of dirt witha crap house on it and with your swaet and labor can bring that house back to life. That guy can get a 20 % discount because he his going to invest his time bringing that property back to life. How many people can do that. Not me. I tip my hat to those who can.

[johnnyre]

the way i see it is, that its like buying a brand new car, driving off the lot and losing 10% right off the bat…kinda like RE now….lol

[Anonymous]

Huh, the responses here are not what I would have expected. We bought a house in May after watching the market for many months. We looked at 35-45 houses and made five offers between October 2006 and May 2007. All of our offers were between 10% and 20% less than the lowest asking price.

Why? Very simple – we knew what we could afford and we offered that amount over and over on houses we liked until someone said yes. We have a good house in the neighborhood we want to live in with a fixed rate conventional loan and are spending a hair over 25% of take home pay on PITI.

Our agent had no qualms about offering lowballs, though he always reminded us we were likely to be rejected and not to take it personally. All of the sellers’ agents responded civilly, though none were happy with the offers. The last seller was an estate sale with out-of-town heirs who wanted to get out from under the property, which had sat a long time without a single offer. From their perspective, it was all free money, so no need to hold out. A bit of luck on our part, but not an unheard of situation.

Long story short – it’s a declining market, buy only if you really want to, know what you can afford (not what you can leverage), and stick to your offer. I suspect as time goes by, you won’t need the luck of an out-of-town seller, either.

– fergus

[an]

Raybyrnes, with your logic, houses will be free eventually.

[NotCranky]

The way I see it Ray. If you don’t have the need or desire to get the 10%-20% discount and I come in and get it the day after you politely pay full price you are 10%-20% upside down and I politely smile at you when I see you.BTW comps don’t actually adjust directly to a low- ball.

You are correct to assume that if a federal case were made up it would be hard to prove a discount was actually obtained. I think I know when I,or my clients,get a break.

Sweat equity is a separate issue Imho,but again it would be hard to prove what percentage of equity came from the low-ball, improvements or the market.I say, why take chances? Since I value the deal more than the particular house I might as well go for as many factors on my side as I can get. As you say it takes a different skill set than most have (and a favorable market) to really garner sweat equity but anyone,with some patience, could go after a bigger than average reduction on the list price. Tt doesn’t make the discount less real just because only one in ten sellers is amenable to the idea, especially in a market like this.”Must buy” buyers could be looking for the seller who is ready to capitulate. Better than buying from the one that isn’t.

[Author]

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