Real estate: Pls help me fathom risk

[Amethyst]

I recently went on a "see what's out there" trip out of state, with a real estate agent. He knew that the chance of selling anything on that trip was minimal, but what do you know - he showed me The House. In a world of oversize, cookie-cutter houses with "safe," inoffensive interior finishes, this is an intelligent contemporary with high quality interior and an ideal floor plan.

In a market where houses reportedly are selling for 92% of the asking price, this one has a price tag that is 16% more than we can possibly pay. I did some research and found that the house went on the market in 2008 and has been listed with 3 agencies, with only one price decrease in all that time. The agent said the owners live out of state and still use this house when they visit the area. I asked him if he could find out anything from the listing agent about the owners' motivation to sell, but he demurred, saying it is unethical to share information about previous offers.

The agent thinks we should go ahead and make an 80% cash offer, just to see if the owners will come down and eventually get to the 85% of price we need. My husband (who also admires the house very much) says in the absence of any indication of seller motivation, we would be foolish to make the offer. Not only would it waste our time; if the sellers came down a little bit, that would be info our agent could use to sell the house to someone else.

What do you think about this?

Thanks,

Amethyst

 

[rackingguy]

If you're looking at a price you can afford, then the "worst" that happens is that you get the offer accepted. There's no other obligation. The seller can either accept, counteroffer, or reject your offer outright. So, really, the only waste of time from your point of view is in reviewing the offer and signing it, which can usually be done electronically.

 

[JOHNNIE36]

If it would be a great house for you, the heck with any motivational reasoning by the seller. Make the offer based on the price you and hubby can afford and let the chips fall where they may. Nothing wrong with telling your agent that the offer you make is at the top of your limit and will be the only offer you make.

 

[Amethyst]

This is what I thought, too, but Mr. A. explained it this way: We know we can't buy the house now, but maybe we can in 6 months (it's been on the market almost 5 years). Clearly, the owners do not need to sell. If we make an offer and the owners come down a little bit, we still don't have the house, but now my agent will have valuable insight for the next buyer: the owners are willing to come down a little bit. So then it sells, and we never get our second, 6 month chance.

Make any sense?

A.

If it would be a great house for you, the heck with any motivational reasoning by the seller. Make the offer based on the price you and hubby can afford and let the chips fall where they may. Nothing wrong with telling your agent that the offer you make is at the top of your limit and will be the only offer you make.

 

[JOHNNIE36]

Amethyst, I missed something in your OP. I thought you were ready to buy! Didn't know anything about "maybe in six months". How about a good offer with a decent earnest money deposit and closing in six months? Is that something that would work? If you couldn't make it work in six months you lose the deposit. Maybe the timing would be good for them as well. They have already waited since 2008.

 

[Amethyst]

We'd simply buy and hold, if the price was right. We would be using a HEL on our existing house for half the cash we'd use to buy. But the problem is, we can't get closer than 85% of the asking price, and the houses in that area are selling for 92% overall. It's strange, because other owners in same development are cutting their prices; then again, those owners need to move (motivation), and their houses aren't to our taste.

A.

Amethyst, I missed something in your OP. I thought you were ready to buy! Didn't know anything about "maybe in six months". How about a good offer with a decent earnest money deposit and closing in six months? Is that something that would work? If you couldn't make it work in six months you lose the deposit. Maybe the timing would be good for them as well. They have already waited since 2008.

 

[Moemg]

What do you think about this?

Thanks,

Amethyst

I think they are in no hurry to sell their house and they are probably of the but my house is worth more so we will wait mindset .I would wait until you are ready and then seriously shop for a home .You may find one that is more perfect.

 

[FIRE'd@51]

This is what I thought, too, but Mr. A. explained it this way: We know we can't buy the house now, but maybe we can in 6 months (it's been on the market almost 5 years). Clearly, the owners do not need to sell. If we make an offer and the owners come down a little bit, we still don't have the house, but now my agent will have valuable insight for the next buyer: the owners are willing to come down a little bit. So then it sells, and we never get our second, 6 month chance.

Make any sense?

By the same token, someone else could come in and make a low offer and the information would be out then. In fact, if the house has been listed for five years, someone has probably made an offer that was rejected/countered. If you really want the house, I would suggest you follow the agent's suggestion and make an 80% cash offer. After all, he may know something he's not directly telling you. If the sellers don't counter and flat out reject you, you can always come back in six months with a higher offer if the house is still available.

I think Mr. A may be overthinking this one. To a large extent, real estate transactions are emotional as opposed to strategic.

 

[kumquat]

The 92% of asking is not a stat I'd consider. After all, you can ask any amount you like. If you really want it offer 100% of what you're willing to pay. If you kinda like it, offer 85%. If it's sorta OK, offer 75%.

As buyer, you control what you pay. Don't think that agent you're dealing with is on your side.

 

[pb4uski]

Is there a reason that you couldn't buy it now and then move in in six months? Hard to tell without knowing what the six months is all about, but I don't want to pry.

Or perhaps offer then $x in exchange for a 6 month right of first refusal.

 

[Bestwifeever]

If the agent said "it is unethical to share information about previous offers," why would he share your asking price and the owner's counteroffer with future prospective buyers?

Maybe Mr. A just doesn't think the time is right yet to buy your next house and is using this as his rationale to you?

 

[Brat]

I would make an offer on your terms. The worst they can do is reject it outright. Odds are they expect the housing market to rise and are prepared to wait. On the other hand their circumstances may have changed so they could be willing to negotiate. A house on the market for a very long time can get a reputation with Realtors, they don't like to show it because the sellers are unrealistic or buyers think there must be a problem and don't look at it.

Consider buying another house where your only issue is updating or finishes, then remodel to your taste.

 

[clifp]

I am inclined to agree with Mr A. if you think you'll be in a position to pay more than 85% of list in 6 months and that is when you want to move then I'd wait.

If you are really concerned about losing a house that has been on the market for 5 years, then ask your agent to keep track of the house and notify you immediately if there is a change in status. You'll want to leave your agent with an undated purchase agreement which he can submit quickly.

So for instance if the seller drops the price by 5%, that may create interest and you might be able to buy it within your price point.

The worse case is if somebody else puts in an offer in the next 6 months. Even that can be overcome is you act quickly because there is generally a day or two between when offers are submitted and accept during that time the house is listed as contingent on MLS. In that case you make your best offer and while you'll be competing with another buyer at least you have a shot.

The most likely case is the house is still in the market in the next 6 months. Because either your dream house is overpriced, or the features and unconventional design that appeal to you don't appeal to others. In 6 months the buyers will be slightly more motivated to sell.

 

[Amethyst]

Thanks for the thoughtful responses. You've been very helpful as I mull over options.

If the agent said "it is unethical to share information about previous offers," why would he share your asking price and the owner's counteroffer with future prospective buyers?

Bestwifeever, the agent said that when I asked if he could find anything out from the listing agent (who works for the same agency). The implication was that the listing agent wouldn't tell him, although frankly, I find that hard to believe. But anything he finds out for himself, he'd be free to share with other buyers. For example, he shared with me that another seller was known to be highly motivated. I considered that house, which was well within our spending range, but in the end, it just didn't stack up compared to The House.

Maybe Mr. A just doesn't think the time is right yet to buy your next house and is using this as his rationale to you?

No; he'd tell me flat out if that were the case. (Neither of us expected to find something so suited to our tastes. Previous house-shopping trips haven't been very fruitful, because the houses in areas that interest us have either been too old, too huge, set on crummy lots, peculiar, or cookie-cutter). Nope, this is all about strategy.

A.

 

[Brat]

You are in the DC area, right? If memory serves me you have a little housing boom right after the elections. Have you factored that in?

 

[haha]

My approach is that if you are my agent, I want all you can tell me. Blather about ethics from a real estate agent is truly funny.

Get me what I need to know. Otherwise, I will try to find out myself and if I buy I will certainly not use you as the agent. I have been able to find out a huge amount from casual conversations with people in the neighborhood, etc, etc.

I have also turned off a few RE agents, more's the pity, no?

Ha

 

[Nords]

This is what I thought, too, but Mr. A. explained it this way: We know we can't buy the house now, but maybe we can in 6 months (it's been on the market almost 5 years). Clearly, the owners do not need to sell. If we make an offer and the owners come down a little bit, we still don't have the house, but now my agent will have valuable insight for the next buyer: the owners are willing to come down a little bit. So then it sells, and we never get our second, 6 month chance.
Make any sense?

It sounds like you're taking risks either way.

Why not do both? Make the lowball offer now. If it's rejected, tell the seller that you're going to keep looking but might make another offer in six months. That gives everyone plenty of contact information and plenty of time to think about what they want to do.

I think the worst thing to do is to say nothing for fear of the realtor mis-using your information. If that's truly a concern then you need another realtor.

 

[MooreBonds]

As others have said, the "homes are selling, on average, for 92% of the listing price" stat is not too useful - some homes were originally listed for 30% more and had price cuts to the "final listing price" before final settlement, while other homes may have been listed at the same price and simply sat for 6 months before finding a buyer.

What would be more useful is to develop the metrics to compare this house you like with other houses: total lot size, $/sq ft of finished house space, ranch vs 2 story, last time the house was updated, overall quality of the house, # bedrooms/bathrooms, etc. Also, look up the public real estate tax records to see what different info you can get on the house (square footage of the house, quality grade of construction, etc.).

Even though real estate agents are paid a HUGE commission for what they do, often they do didley squat for their pay (compared to the average workload that other people do in their professions for several thousands of dollars in fees). Do your own comparisons and calculations to see what other comparable homes sold for recently, rather than leaving it up to your agent.

 

[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.

All of which would probably form the basis for a fascinating novel, but doesn't seems to have any bearing on questions of importance to us.

The fact that the owners still use the house is the "killer," as far as I'm concerned (and is the one thing I did find out from the agent, after I asked). I'm actually fairly bummed about it, although I realize that's pretty silly of me.

Amethyst

As others have said, the "homes are selling, on average, for 92% of the listing price" stat is not too useful - some homes were originally listed for 30% more and had price cuts to the "final listing price" before final settlement, while other homes may have been listed at the same price and simply sat for 6 months before finding a buyer.

What would be more useful is to develop the metrics to compare this house you like with other houses: total lot size, $/sq ft of finished house space, ranch vs 2 story, last time the house was updated, overall quality of the house, # bedrooms/bathrooms, etc. Also, look up the public real estate tax records to see what different info you can get on the house (square footage of the house, quality grade of construction, etc.).

Even though real estate agents are paid a HUGE commission for what they do, often they do didley squat for their pay (compared to the average workload that other people do in their professions for several thousands of dollars in fees). Do your own comparisons and calculations to see what other comparable homes sold for recently, rather than leaving it up to your agent.

 

[Brat]

What I hear the Realtor saying is that s/he doesn't think that the lister isn't serious about selling the house and in all likelihood the listing agent isn't excited about accepting that listing again after it expires (it takes time and money to work a listing, including renting the lock box and scheduling viewings). Evidently the previous listing agents came to that conclusion.

I suspect that your agent isn't excited about going to the work of presenting an offer that, given the home owner's previous behavior, will be rejected.

Were I you I would make an offer at the time and in the amount you are prepared to pay, expecting to walk away. Keep in mind that the seller could reject even a full price offer just 'because'.

Keep looking.

 

[MooreBonds]

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

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?