Real estate: Pls help me fathom risk

[MooreBonds]

Quote:

Originally Posted by Amethyst Well, it is hard to find serious comps for a house whose appeal is that it is different from others in the area... I've looked at the tax records, which told me little I didn't know from the MLS; and Zillow, which is where I found out that the house has been listed on-and-off several times with 3 different agencies since 2008; and Google, where I learned that a) the home was designed and built for one local prominent businessman who sold it 2 years later and b) the current owner had also been a prominent local businessman, who resigned the same year the house went on the market, and who now owns multiple properties in Florida.

Well, given that they purchased in 2008, it's likely dropped in value. Are you able to determine that their listing price hasn't budged at all since? Also, the fact that they have 'multiple properties in Florida' could actually be a good thing - they might be looking to unload at least one of them. Perhaps no one has really given a serious offer? As you said, it's apparently somewhat different in its style - and many people can't get past something too different from their taste - so perhaps no one has actually made an offer?

Also, what do you think the 'fair market value' of the house is, based on other homes ($/sq ft, lot size, etc.)? Do you think they're asking fair value? If the house is overpriced, and you present these stats to them which shows it should be 10%-20% lower, they might realize that it's not a realistic number, and they might reconsider things.

I normally wouldn't suggest making an offer with a proposed 6 month closing timeline (most sellers don't want to sit around for that long). You could make an offer with a 6 month closing, and also allow another buyer that submits a higher price to "kick you out" if the seller wants to go with their higher offer...but you could end up sitting there for 5 months before having someone else come along and kick you out, and in the meantime, lose out on possibly another property that comes on the market.

I would make the offer today for what you're willing to pay, make it a cash offer, and see if they take it. If not, they at least know you're interested in the property, and if they rethink their willingness to sell and want to reopen negotiations with you down the road, they know how to find you.

[Amethyst]

They bought in 2006 at top of market. Tried to sell in 2008 for considerably more. Dropped price by 10% after 2 years (but still barely below what they paid for it) and have kept the same price ever since. (Funny thing, one of the "selling points" is "fully equipped theater room," but who wants 2006-era home theater equipt?)

As for the agent, he's already drafted an offer and e-mailed it to me for signature. So he is not at all averse to making the offer. It's Mr. A. who's suspicious...I dunno. Guess I'll just use this as a test case for finding out about sales procedures, insurance, etc., in the state where the house is located.

[nwsteve]

Suggest you ask your realtor to provide comps for the neighborhood and actual sales values. This information will give you and the realtor real time data--price/sq ft is one metric you can use. Once you have some real time data, provide these comps to the seller and demonstrate to them what the true fmv is based on actual comps.
BTW, this is what an appraiser will do and you will want to understand any risks to getting an appraisal that will be approved by any bank for financing.
Nwsteve

[lynxville]

My feeling is what you can afford and the appraised value of the house are two different things. Never and I mean never talk freely with a realestate agent. As an example I would not make a low ball offer and then tell the agent if they didn't accept it I would come back in 6 months and make another offer. Buying property is similar to playing poker, keep that poker face. I would make my offer on the value and selling prices of homes in the area not listing prices. The offer can be contingent on the home appraising at or above the offering price. Are you concerned that if you buy this house it may take a long time to sell your existing home?

[Amethyst]

I do believe it will take a long time to sell our house, but I don't see the two items as being linked.

We were simply hoping we could get a house we liked, for cash, during a down market, and hang onto it until my retirement. We can afford to pay cash up to 84% of the asking price - not a dollar more - and Mr. A. suspects the real estate agent could be encouraging us to make an 80% offer so the agent, himself, can find out whether the sellers might come down some. Not necessarily down to what we can afford, but maybe to what another buyer could afford. I myself do not have a Machiavellian turn of mind, so it would never occur to me that a real estate agent might be thinking along those lines. At any rate, we have not made the offer yet, and the agent hasn't asked us about it.

Amethyst

Quote:

Originally Posted by lynxville My feeling is what you can afford and the appraised value of the house are two different things. Never and I mean never talk freely with a realestate agent. As an example I would not make a low ball offer and then tell the agent if they didn't accept it I would come back in 6 months and make another offer. Buying property is similar to playing poker, keep that poker face. I would make my offer on the value and selling prices of homes in the area not listing prices. The offer can be contingent on the home appraising at or above the offering price. Are you concerned that if you buy this house it may take a long time to sell your existing home?

[sheehs1]

Amethyst...I think I will chip in here although some have already said what I might say.
Sounds like the sellers are not particularly motivated. Hard to imagine a house on the market for 5 years with 3 agencies and no price decrease.
Like others I suggest doing your homework...even more perhaps than you have done. It's important to understand how assessments are done in the area you are looking in. Have you called the tax assessors' office to determine the history of assessments going back to when the house first sold? Have you been able to determine what the house sold for in previous transactions.? How frequently are their assessments performed. So many listings say "10% below current assessment"...without telling you the city or the county has not done an assessment since 2007.

For ex: I have been looking for property on and off the last 2 springs and summer. Just recently had a conversation with an assessor's office who told me true physical assessments had not been done since 2005, that they are currently in the middle of one and that come Jan 1, 2013 property assessments will come down another 20% to 30%. Hence we are waiting until after Jan 1, 2013. Assessor's offices will frequently tell you what the real estate agent will not.!

You should be able to ask the assessor's office for a list of sales in that area for the last 6 months or 12 months. You can also ask your agent to provide you with that information. Ask your agent to run a comp report for you....things like this.

Second, do you have any idea if the property will appraise any near the asking price? Agents and sellers love a cash deal as it by passes the banks regulations and appraisal process. If nothing else, make sure you put an independent appraisal contingency into any "cash" deal. I'm sure you have already thought of this.

My experience last summer: We found a house and after going thru it realized it needed a lot of work. Seller was stubborn as all get out. Both our agent and I worked diligently to get the supporting documentation that justified a much reduced price. Contractor report for fixes, moisture study, sewage study, pest reports, a reported structural issue....etc...did not lead to a further reduction in price from the seller. We walked away from the deal. Months later the seller and his agent used all of our paid for reports that we had shared with them....to sell the house to another buyer at the much reduced price that we had been asking for all along. $166,000 off the original list price! so yes...what you do can be used by others in the process to help another buyer. So be it.