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…
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.
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.
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.
“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***
Let the home speak to you. It is not you that will find you but the home which will find you.
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.
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.
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
for any meaningful negotiation to take place, one party has to be willing to walk away…
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.