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January 20, 2009
Aggressive Offer Rejected
My husband and I need advice on a house. We made an aggressive offer of $550k on a single family semi-detached house asking for $659k in Madison (really Sheepshead Bay), Brooklyn. I included a note to the seller explaining how we reached our number. The comps in the neighborhood are around $590k to $630k (much larger lot), house next door and nearly identical sold for $600k in 2006 and construction costs to update the house (i.e. kitchen, 2 1/2 bathrooms, etc.) is at least $50k. The seller said that the price difference was too big.
The seller has lowered her asking price a few times in the last several months. She started in the 700k's (way over priced). We thought that she was motivated to sell but now, we are not sure.
What should we do? Should we make another offer of maybe $585k? That is the max because we won't have enough money left to renovate.
Any advice would be much appreciated. Thank you.
Comments
my advice = chill. wait a bit and keep looking. if they have your info they can call you.
Posted by: werner at January 20, 2009 12:26 PM
I agree. If the seller didn't counter with a lower number then they are unrealistic and not really negotiating in good faith. Tell their agent that they must counter or you walk.
Posted by: daveinbedstuy at January 20, 2009 12:32 PM
Be patient. Don't cave in immediately.
Posted by: bk14 at January 20, 2009 1:27 PM
Hi,
I am not trying to be harsh, but maybe your offer was just not good enough?
I think they should have countered, but maybe they thought that you were stuck at your number because of your note.
When they said the price difference is too big- then you could have countered with a bigger offer.
And it is not the seller's responsiblity to take into account the construction upgrades that you want to make. They do not care that you want a $20K kitchen or whatever. Those are your choices, not theirs.
If you love the house make a better offer or hope that the seller eventually goes down in price.
Posted by: brooklynjennie at January 20, 2009 1:27 PM
If they didn't counter offer then obviously, from the seller's perspective, your offer was not even worth considering -- which means SHE thinks YOU are not negotiating in good faith. You have 2 choices: 1) wait it out and see if she softens and risk losing the house or 2) up your offer if you really want the house. Truthfully, if someone low balled my asking price by over 100K after I'd already lowered the price several times I wouldn't bother negotiating with them either. You even state that the comps in the area are over what your offer by 40 - 80K. Don't imagine all those other houses are in pristine condition either, most of them probably need some updates too.
Posted by: herkimermaid at January 20, 2009 1:32 PM
I completely agree with 1:32. I suggest you do offer $585,000, assuming you really like and want the house. If it is the right house, you won't regret having gone to the max for it. Otherwise, find a cheaper house.
Posted by: homey at January 20, 2009 2:02 PM
If you really want the house, you should counter with a final, higher offer, but do it politely and let the seller know that you'll honor that offer in the near future, should they decide to wait for something better. That might be the hook you need.
What you don't want to do is have them come back to you in 6 months, and you tell them that 550 is your new counter. No need to disturb the real estate gods.
Posted by: Bolder at January 20, 2009 2:25 PM
I agree with werner. You should wait a few months before raising your offer...and when you do, offer 565.
On a different note, I live in madison and love the area. Very quite and still not far from the city. with the new coney island being planned, you will be in the middle of everything.
..........best of luck
Posted by: troll at January 20, 2009 2:42 PM
Wait a little longer be patient. You call your offer aggreasive? That is not even angry. Trust me the market is going to go down by at least 50 percent. How fast this happens I don't know for sure.
Posted by: hannible at January 20, 2009 2:43 PM
Yes, SIB, trust hannible on this.
Posted by: daveinbedstuy at January 20, 2009 3:24 PM
I am on the sellers side here.
You offended them by offering the NEW lowest comp price by 7%!!
Cost of updating the house only matter if they are below the other comps. If their bathrooms and kitchen is on par with the comps then you really can't add the $50K factor you want to spend. If that is the case, to the seller you are just low balling them.
Posted by: crimsonson at January 20, 2009 3:29 PM
The first rule of buying real estate is that you don't negotiate with yourself. If your bid was not countered you need to move on.
Posted by: sam at January 20, 2009 3:36 PM
they don't have to sell at your price.
you don't have to buy at theirs.
and so the ruthlessly efficient housing market stumbles towards a new equilibrium.
fwiw, im on the sellers side. they will win this stare-down.
Posted by: bkn4life at January 20, 2009 3:41 PM
oh pfff, "offended them". Give me a break.
Posted by: dittoburg at January 20, 2009 3:48 PM
if they were willing to consider $585k, they would have countered with a price in that vicinity (maybe $600-610k). unless this is your dream home, you should probably move on.
Posted by: z at January 20, 2009 3:50 PM
"they will win this stare-down"
Really? Why on earth would they be selling now unless they had too. If they're selling now they've probably got a reason to sell.
Stick to your $550.
Posted by: dittoburg at January 20, 2009 3:50 PM
Thank you everyone for your feedback. We are trying to buy our first home so we are still learning.
Our offer was low and it didn't help that the asking price was $60k above comps. I keep hearing about over inflated housing prices and the beginning of a housing price correction, but I don't know if and when it would apply in this case. We will probably look for less expensive houses in other neighborhoods in the meantime.
Posted by: SIB at January 20, 2009 3:51 PM
dittoburg:
or the sellers are baselining to assess current value. they could be willing to sell at the $659k.
its quite a stretch to imply that anyone selling now is hurting.
Posted by: bkn4life at January 20, 2009 4:07 PM
Find out what is motivating the seller does help.
If a remaining mortgage, plus commission (5%), plus transfer tax (whatever it is) adds up close to their ask, you have no shot and need to walk unless they are willing to pay cash out of pocket just to sell. I never bothered with these.
If they are completely underwater and owe more than it's worth, propose a short sale. Takes longer, but they could walk away without getting hurt and you get what you want. Only probelm there is time and bank has say in everything.
If they have a big equity position and are trying to maximize profit you could stand firm assuming no one else bids higher. It's a risk you take.
Some of these answers can be had on property shark, like how much they paid for it, when they bought it, and even what was mortgaged. Not sure what the Brokers are and are not allowed to say, but a little background information doesn't hurt.
Bottom line, if you want it, do some research. Alot is available and much is free. Start with Propertyshark.com. Then NYC.GOV. Use the DOF and DOB links. ACRIS is a nice thing, but also check on violations too. Realtor.com has a link where you can get comps and narrow them down to SQF, Type, area, etc. If it doesn't work for you, walk away. Don't let emotion get in the way. Don't trust the sellers, the brokers, the agents, there not there to do you any favors. Once you do your homework, it's interesting how your perspective changes. Been there, done that, pissed off a few people, got what I wanted.
Posted by: ou812 at January 20, 2009 4:15 PM
SIB,
Sounds like you did alright with your offer. I agree with those who said you should stick. You valued the house at 550K and that is what it is worth to you. When the seller finds someone who shares the same value as they do, the transaction will happen. That's how a market economy works. You even did a little work for them, in explaining your bid. The fact they didn't counter signals they are unsure of their selling point, or they are not familiar with rules of negotiation. First rule: sellers ask too high, and buyers bid too low.
As for the post who called your bid an insult, I think you can disregard that. They clearly didn't pay attention to your reasoning.
dittoburg: all my realtor friends think it is definitely a buyer's market. From my own stand point, looking for an apartent in Manhattan for a year, it seems this is the case. That said, would you mind explaining why its a stretch to imply a seller in this market is motivated?
Thanks in advance.
Posted by: stoep2conquer at January 20, 2009 4:20 PM
I don't believe it to be a stretch at all, let alone "quite a stretch", I believe it to be a high probability.
And I wouldn't call those "assessing current value" sellers.
Posted by: dittoburg at January 20, 2009 4:21 PM
I don't get why the seller thinks they should be able to get more for the house than a similar house sold for in 2006. Absent other offers.
ou812, wouldn't a short sale hurt the seller's credit and prevent them from getting another mortgage in the future?
Posted by: mopar at January 20, 2009 4:27 PM
I belive the purpose of a short sale is to prevent the seller from getting their credit hurt and the bank gets to write off the difference which is why they get the final say in everything. Whether or not that is totally accurate, I am not proposing any one method over another other than what works for you. My main point is to find out as much information as you can and today much of it is available. Once you are armed with how much they paid, when they bought it, what they owe, plus or minus improvements, add in the last 6 months of like sales in the area, your perspective of what the property is worth changes even if you have the cash to pay the full asking price.
Posted by: ou812 at January 20, 2009 4:46 PM
People are right saying if the sellers would actually take $565-585K they'd have countered at that. They're just not ready to sell for that range. You have to wait it out until a time the seller may be more ready to negotiate in another month or two. We did that on our house and sure enough the sellers lowered the price. If it's really true this house is priced too high then there shouldn't be any worry the house would sell to somebody else while you're waiting and watching.
Posted by: traditionalmod at January 20, 2009 5:12 PM
I disagree with a few of the comments, but that's what makes a market.
do not follow an offer with a higher offer without receiving a counter offer. it's a dangerous practice any time, but now especially. a seller who is serious about selling will always counter - that doesn't mean the counter would be anywhere close to your number - it could be a nudge down from their asking price. but a counter is a counter, and tells the prospective buyer the seller is serious. a good small counter will bring up the first offer and tell the seller if they are going to get anywhere close to their real number.
It's not about taking sides with the buyer or the seller - every story has at least three sides.
sooner or later the seller will sell....to somebody. sooner or later you will probably buy.....something.
without making any predictions, because we all know one of the definitions of prediction is 'to claim to know the future and be wrong in every way', in the current market environment there is no rush for you to do anything. in the course of time one or more of following things will happen:
1) the seller will reduce their price, at which time it might be worth making a slightly higher offer
2) you will find another house that's just as good, or better, that you can get for a price you can afford
3) the seller will take the house off the market
4) someone else will pay more than you are willing to pay, or more that you should pay for the house
as for your offer being offensive - sorry - there is no such thing. it's a market. and a market is made of bids and asks and eventually they meet, producing a transaction, or they don't, producing nothing. but to personalize the process is a dangerous thing.
there is every likelihood you will have more time than you imagine to find a house you can afford. those expecting a big tankeroo from here may be disappointed just as those expecting the market to simply recover quickly are ignoring history as well as the magnitude and cause of the current market.
about twenty years ago, I made an offer on a house that was priced somewhat high in a sick market. the offer was rejected and I moved on. I then found another house, which was much better than the first, at a similar price, and negotiated a workable price. over a year later, the first house was sold - at a price that was significantly below my offer. not only did the seller lose money, but time, but that was out of my control. if you are not willing to be patient, especially now, you will wind up bidding against yourself, as some here are encouraging you to do, and that is a most expensive pastime.
Posted by: raphael9 at January 20, 2009 6:54 PM
for any meaningful negotiation to take place, one party has to be willing to walk away...
Posted by: Legion at January 20, 2009 7:44 PM
Sib, Sweetheart, just move on. You two don't need to get wrapped up in a house costing nearly $600,000 in that neighborhood. You'll find something else. Try to step back and take a breather. Are you desperate to buy? If not, take a load off and start looking again in the spring. If you're rent is not outrageous, you're probably better off simply waiting. Don't worry that "every month we're paying rent is another month we could be building equity". The only time that really would matter is if you're rent is very high...of course, when you've bought a house and then continue to rent for ages while renovations drag on...that can be painful. With that in mind, make sure you look at places that do not need new baths and kitchen which might force you to stay in your apt. while the house is ripped apart.
You'll be fine.
Ms. BG
Posted by: BrooklynGreene at January 20, 2009 8:16 PM
I really appreciate everyone's comments. It's given me a better perspective on the whole buying process. I have faith that we will eventually find a house that is right for us.
Posted by: SIB at January 20, 2009 9:40 PM
Wait 3 weeks then offer $525K. Include a note that due to the state of the economy and the fact that by closing day you yourself will be upside down, then if they do accept withdraw your offer and say we've reconsidered and go find something else. Seriously, who is giving $600K for a $300K (and that's being generous) house. What is the bricks and mortar cost to rebuild? $150K? Sellers are in for the rudest of rude awakenings. Sit back, chill, and let the market come to you. And offended? Seriously. Like raphael said, there is no such thing as an offensive offer. It's a free market. Only pretentious people get offended. What did they pay for it themselves? $200K? Probably.
Posted by: williamsburgguy at January 20, 2009 9:40 PM
Let the home speak to you. It is not you that will find you but the home which will find you.
Posted by: hannible at January 20, 2009 11:56 PM
"We made an aggressive offer of $550k on a single family semi-detached house asking for $659k..."
Not aggresive at all. Why should YOU pay more than what the home will likely be worth (half off peak) when the "correction" is over and bottom prices stay flat for years.
"my advice = chill. wait a bit and keep looking. if they have your info they can call you."
Very good advice. I bet they call you first if you let them.
"negotiating in good faith"
No such thing. There are no rules.
"Tell their agent that they must counter or you walk."
Very bad advice. Discipline over emotion. Threats like this could turn off the broker and/or seller and cut you out of the running if you have competition. Your inaction to their inaction is very powerful if you have any chance in getting that house. This is a chess match.
"You even state that the comps in the area are over what your offer by 40 - 80K."
SIB said "much larger lot" which makes the offer somewhat equivalent to these comps.
"If it is the right house, you won't regret having gone to the max for it."
Yes you will. This is the biggest boom/bust you will likely see in your lifetime and you are considering a purchase very close to the top of the market for a house that you don't really HAVE to have. Trust me, you will find one that you like better (YOU know how it goes).
"What you don't want to do is have them come back to you in 6 months, and you tell them that 550 is your new counter."
Why not? Sellers did a similar thing during the run-up (bidding wars). It now works in reverse. If comps drop to that level (and they probably will and then much lower) then that will be the new reality. We'll all have to follow the market down. Offer no conditions, just your bid (your original one or less if you're wise).
"Trust me the market is going to go down by at least 50 percent."
I'm not alone. That HAS to have your attention, SIB.
"You offended them by offering the NEW lowest comp price by 7%!!"
So what! Your objective is not to make them feel good. Your objective is to go into contract for a home at a stable price that you can afford. Stay focused. RE is cut throat to you. Be cut throat to it.
"The first rule of buying real estate is that you don't negotiate with yourself. If your bid was not countered you need to move on."
Simply the best comment in the thread. Take heed.
"Our offer was low..."
Not low enough IMHO. Bid half off peak comps or rent, save and wait (good things come to those who do). Be wise. Put more money down on a cheaper house (factors out interest rate hikes and maximizes your equity). The plummet to the bottom of the market [retroactively called no later than a year (damn good for SLOW-moving RE) when the month-to-month change from last year of the NYC Case-Shiller Index changes sign from negative to positive] is a process, not an event. Wait as long as it takes unless you have significant reserves and don't mind a loss in equity (sounds like neither). Two years, five years, doesn't matter. The market will eventually correct.
"We will probably look for less expensive houses in other neighborhoods in the meantime."
No, no, no, no, no! They will decline too. There is no escape from this "correction". No 'hood is immune. You don't have to buy. If you have dependants and can't find a big enough rental, temporarily move out of the area. Long Island and Queens is probably full of single family homes (or larger/cheaper apartments) that are underwater (have principals larger than appraisals) and going rental. You could always move back.
"its quite a stretch to imply that anyone selling now is hurting."
Not more than 'they will win this stare-down'.
"Find out what is motivating the seller does help."
Absolutely. I second propertyshark.com. Also, simply ask the broker, "Why are they selling?". I do it all the time. You'll be amazed in the forthcoming of the responses. It's only not your business if they say so. You won't know until they do.
"Only probelm there is time and bank has say in everything."
No, the courts do. NYC is sympathetic to foreclosees (similar to tenants). Process takes much longer than in other cities.
"one of the definitions of prediction is 'to claim to know the future and be wrong in every way'"
Failure to scientifically predict and make an informed decision is a certain way to be wrong. In fact, when we buy property, we at least subconsciously predict future value anyway.
"for any meaningful negotiation to take place, one party has to be willing to walk away..."
Yup. And there's no better way to demonstrate your willingness than to NOT respond to a non-response.
"If you're rent is not outrageous, you're probably better off simply waiting."
Ah ha! Rents are falling too (unsold condos converted to rentals to absorb carnevorous carrying costs). Maybe it's time to rent somewhere else. There are threads on this topic that were posted within the last couple of weeks. Browse.
Good luck! (1:41 AM - the hell's wrong with me?)
***Bid half off peak comps***
Posted by: Brownstones Half Off at January 21, 2009 1:42 AM
Never negotiate against yourself, especially in a falling market. You should assume comps will fall at least another 20% in the next few years. Price accordingly. Any seller that just says no to an offer needs to be walked away from in this climate. If you cry uncle right away and come up with a higher bid you will be in a position of weakness through the rest of the process. If someone else gets this property, that's fine. You will be able to get something comparable for less soon. All of the rules of the game are different in a falling market.
I agree with the poster who pointed out you need to find out whether an underwater mortgage is a factor.
Posted by: lechacal at January 21, 2009 7:42 AM
Seems like everyone is making a lot of assumptions when no one has seen the house or the comps. Seller may be right or wrong about what the market will bear but has no obligation to get back to buyer if they think the offer does not afford a basis for negotiation. Seller probably looked at the midpoint between ask and offer, didn't like it and declined to negotiate. Seller will be back if s/he needs to sell and received no better offers. You can guess all you want as to whether that will happen, but no one knows.
I am more concerned about your view that you can't go over a certain price because of anticipated renovation costs. Have you built in a 50% cushion on those costs? Do you have good estimates? Don't use the inspector's guess. If you must renovate to live in/enjoy the home, don't leave yourself without any room to handle cost overruns, change orders etc. Even at your "aggressive" price, this house may be too expensive.
Posted by: slopefarm at January 21, 2009 9:55 AM
I meant too expensive for you. I am not commenting on the price compared to market.
Posted by: slopefarm at January 21, 2009 10:01 AM
Maybe they owe more than what you are offered and they can't/won't go below that price.
Posted by: Adam Dahill at January 21, 2009 10:21 AM
BHO - a lot of posturing.
Posted by: crimsonson at January 21, 2009 10:47 AM
No one wants to read a note telling them why they should accept your offer that is so far below ask. Personally, I'd refrain from doing that in the future.
Posted by: Carol Gardens at January 21, 2009 11:20 AM
Maybe they lost your telephone number.
Posted by: mopar at January 21, 2009 2:41 PM
"BHO - a lot of posturing."
What exactly do you mean by that, crim? And stop stuttering!
I agree with CG at January 21, 2009 11:20 AM. Keep it concise and only submit your bid. Explanation available upon request. Mopar @ 2:41Pm makes a good point. Email the broker your phone number and bid one last time. As a matter of fact, all bids should be placed over email. Establish a dialogue and history that can be easily referred back to.
***Bid half off peak comps***
Posted by: Brownstones Half Off at January 21, 2009 3:03 PM
Stuttering? That does not even make any sense.
"So what! Your objective is not to make them feel good."
You are posturing this robotic "cut throat" persona in dealing with a house purchase. The reality is, people buying a house to live (instead of investment) ALWAYS have a certain level of emotional factor built in - selling or buying. You can disagree the way it should but the reality is quite the opposite. I suspect your tips are based on lack of experience with actually selling/buying of primary residence RE.
Walking away and not bidding what you think the proper value are a fine advice but the rest of your tips is more appropriate for buying and selling stocks. If you think there is no difference between that and primary residence RE - then there is not much I can do.
Posted by: crimsonson at January 21, 2009 3:43 PM
Where is Madison? Aren't there others houses for sale there now? Is there something specific about this house that you like? There are a lot of semi detached houses in Sheepshead Bay, why not look there?
Posted by: gab at January 21, 2009 11:03 PM
"Stuttering? That does not even make any sense."
crimson[1]son[2]. Makes perfect sense.
"The reality is, people buying a house to live (instead of investment)"
Cop-out. Deep down inside, it's always an investment.
"your tips are based on lack of experience"
Talk about making no sense. Yeah, I have a lack of experience buying/selling RE but how can my tips be based on that? They're in fact based on the buying/selling experience of others whom I read about and my own negotiation skills honed in other areas of business.
***Bid half off peak comps***
Posted by: Brownstones Half Off at January 22, 2009 11:05 PM
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