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October 13, 2009
Offer Advice for 1st Timer
I'm about to make an offer on a condo and I'm not entirely sure how much to, er, offer. I know the current owners paid 430k four years ago and are asking 505k. They have done no improvements to the place - the kitchen needs a complete overhaul including appliances, and the bathroom at the least needs a new sink. I feel like I should be offering 450 and expecting 475 in the end. Does that seem right? I kind of feel like it should be less though since I have a friend who just bought in the same hood/same price and his place came with the renovations already done. What do you guys think? Please keep in mind that I'm a total noob at all this. Thanks for any advice you may have!
Comments
The better argument to put in a lower offer is the recent comp you mention, the renovated condo your friend purchased. I wouldn't use the seller's original purchase price as a reason for offering $450K. It doesn't really mean anything. But recent comps (sales of comparable properties) do mean something and are more persuasive to the seller and seller's broker.
Sellers can be annoyed at somebody using their purchase price as a reason for a lower offer. I know I would be, if we sold and somebody said, well five years ago you bought the place for such and such. My response would be, "so??" The price is what people are CURRENTLY willing to pay for my house or similar houses in my neighborhood.
Posted by: traditionalmod at October 12, 2009 4:00 PM
If you're getting a mortgage and the appraisal will be relevant to the size of the mortgage, you should be very concerned about comps.
Start very low, not within 10-15% of what you think it's worth and what your limit is.
Posted by: daveinbedstuy at October 12, 2009 4:18 PM
As the former poster said, you need to compare the price to other similar condos available NOW, and not what this condo sold for four years ago. (Would you pay more if the current owners had bought at the top of the market and were now selling at a loss? Didn't think so...) And, unless you absolutely have to have THIS apartment, you should really find another place you like equally well so you can keep this one in perspective, both pricewise and emotionally.
And another thing, everyone around here seems to think that sellers should list property at or close to the price it will likely sell for, and are constantly amazed that the listing price "is way more than its worth." That's not what ever happens; the list price is "as much as we could ever hope to sell it for" and not "what its actually worth." The owners expect you to make an lower offer (properties which draw a bidding war were underpriced to begin with) and then they will come back with a counteroffer, after which you will begin to know whether you two are playing in the same ballpark. I would say an offer 15% below list is very common, even in strong markets (well, maybe 10% in strong markets). So, for a property listed at 505, owners would be expecting offers of 450, and to eventually agree somewhere in the middle. The problem with getting the deal done comes when they list at 505 expecting a 450 offer, and you think the place is not even worth 400. Whatever you do, remember that there are LOTS of condos available, so make the owners squirm before you buy one.
Posted by: slopenick at October 12, 2009 4:24 PM
All good advice. Look at any at all even remotely comparable properties in a broad area around the neighborhood and bid ONLY when you've got a good sense of relative worth.
And also bid after the last scheduled open house ;-) Else you're just doing the seller a favor. Good luck! Stressful process but prices and mortgage rates decent so it'll work out well in long run.
Posted by: Johnny at October 12, 2009 4:49 PM
having another place I like just as well on the back burner is great advice - thank you! And it's good to be reminded that there's a ton of stuff out there.
Dave- as I said I'm a total noob... what are comps?
Posted by: tiny_kitten at October 12, 2009 4:52 PM
Comps = comparable sales.
Check PropertyShark for sales in the same building. The ideal would be if an apt with the same layout sold. It will be worth more or less than yours depending on the floor. Condition rarely figures into the equation, unless it is very extreme one way or the other.
Posted by: mopar at October 12, 2009 4:58 PM
thanks so much for all the info!!
There are other apts with the same layout - but they were sold at least 5 years ago. That's probably not going to be any help, right? Seems like I need current data to really figure it out... unless there's some way to factor for year sold??
Posted by: tiny_kitten at October 12, 2009 5:21 PM
This is all good advice, but in the end, I found what is also very important is how much I feel comfortable paying. Since you said you're a first timer, it sounds like you are buying for a place to live, not strictly as an investment property??
In that case, you should look at comps, but ultimately it comes down to how much value you think you will get out of the place. While I'm not advocating setting prices in a vacuum (obviously look at comps is important) in the end, if you are going to be living there, you have to decide how much you are willing to pay, irregardless of what is going on in the rest of the market.
Posted by: brooklynstyle at October 12, 2009 5:26 PM
yes, I'm buying a place to live in :)
Posted by: tiny_kitten at October 12, 2009 7:02 PM
Slopenick, I disagree, respectfully. I sold a house last year. When I first put it on the market, I put on a price at about 15% over the minimum I was planning to get. I figured, people would offer less and then we'll negotiate. No luck. I then reduced price by 10% and within 2 weeks I had much more foot traffic resulting in 2 offers for 95% of the new asking price and a minor bidding war (I got what I origially wanted). Apparently, there are enough buyers out there who are afraid to "insult" the sellers. On the other hand, after the price reduction I rejected a few lowball offers from people who seemed to be automatically offering 15-20% less than asking no matter what. So, bottom line, need to look at comps.
Posted by: kensingtonka at October 13, 2009 9:59 AM
First-time buyer dropping $475k on a place. That's what's wrong with the property market...
Posted by: the chicken at October 13, 2009 10:32 AM
honest question here chicken, is $475k a lot or a little for a first time place? seems fairly reasonable and that is less than the average 1BR goes for, so seems fair for 1 person or couple to expect to spend that much on a starter apt.
Posted by: CG_ups at October 13, 2009 11:00 AM
if 1st time, you must be in love with (it/him/her) and be able respect yourself in the morning.
Posted by: Petebklyn at October 13, 2009 11:02 AM
not just a 1 night stand.. or 1 year. Expect to live with (it/him/her) at least 10 years.
Posted by: Petebklyn at October 13, 2009 11:03 AM
"First-time buyer dropping $475k on a place. That's what's wrong with the property market..."
Why are you surprised? You are in the land of renters and six figure salary.
Posted by: crimsonson at October 13, 2009 11:04 AM
Kensington, as you yourself say, you got lots of different responses, from no interest, to low ballers, to people who liked the price well enough to make a bid on it. As I said, you listed your place for about 15% over what you thought you'd get, and expected a lower offer. Maybe the fact that interest perked up after you reduced the price and offers came in close to list shows that you priced it well to begin with, but for some reason the really interested buyers just hadn't come along yet. As you say, comparable sales are the key.
Chicken: what's wrong with the property market? Nothing. Apartments cost what they cost, whether you are a first time buyer or not. If you want one, then you have to pay it. Pretty simple...
Posted by: slopenick at October 13, 2009 11:21 AM
I know that is what starter apartments cost. My point is that you have to be making 6-figures to be able to afford it.
Posted by: the chicken at October 13, 2009 11:37 AM
you may need 6 figures for that 'starter' apt in certain areas of NYC - but hardly the majority of it. Most apts don't cost that - whether starter or finisher. But if want to start in more expensive areas then that is the price.
Take a look at big map or NYC - color in the blocks you'd consider. I bet not much of city gets colored in.
Posted by: Petebklyn at October 13, 2009 11:53 AM
Bid half off peak comps.
***Bill Thompson for Mayor***
Posted by: Brownstones Half Off at October 13, 2009 12:21 PM
When I made on offer on my condo, I used Property Shark and Zillow to see recent sales prices in the immediate area, then I figured out an average price range per square foot. If the condition is really bad, you might feel that your unit belongs in the lower part of this range. Then, offer a little less to give yourself room to negotiate. You can always increase your offer if its rejected.
You don't want to pay too much !!! Even if you enjoy throwing your money away, the bank will not approve your mortgage if the condo appraises for less than the sales price.
Posted by: FalulahBaker at October 13, 2009 8:05 PM
Good advice from Falulah. You can also kind of get a sense of by what percentage prices are declining in a given period, and adjust accordingly. Keep in mind it can take five months to close on a coop.
Posted by: mopar at October 13, 2009 10:09 PM
I am sure the seller will make all sorts of concessions for somebody with id "tiny kitten" :)
Posted by: bobjohn at October 13, 2009 11:43 PM
When you make an offer, make sure it is backed up by a sincere desire to buy.
It is OK to haggle, and it is to your best interest to ask for what you believe it is worth and in accordance to what your budget is.
http://www.hardwaretoolsonsale.com/
Posted by: 1wiseshopper at October 14, 2009 7:56 AM
Wellll, I lowballed and they balked but now we're going back and forth, so we'll see what happens.
I've been looking since August, which seems like a long time to me, but maybe it isn't?? The only other apt I've liked was 100k less but a 5th floor walk up. Which is why I didn't go for it. There was another nice one but it was in a neighborhood I'd be afraid to walk home in after dark. And almost all the less expensive condos I've seen seem slap-dash and cheaply done (despite the stainless steel appliances).
Also, I don't make 6 figures. I wish!
Posted by: tiny_kitten at October 15, 2009 10:05 PM
I think the term "starter apartment" is more to mean a buyers first place. And looking since August isn't bad. I've been looking since last summer to buy my first place and it's been hard. I'm also afraid over making an offer and overpaying.
Posted by: NYGuy7 at October 16, 2009 1:50 PM
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