Home buying question.. -=The Offer=-

[djheater]

I'm pre-approved for 170, the house is priced at that but HONESTLY it's only worth 157-160 I plan on offering 155 to start (is that to low? I want to offer 150 but don't know if that's insulting (part of me says who cares and the other part says "don't peeve the seller or negotiations could be tougher)).

Anyway the real reason I'm posting is to figure out if my approval amount is relevant. Should I get another approval letter showing 160? (I'm willing to go to $165 actually) or does it even matter? Are sellers privy to that information?

TIA

 

[optoman]

Bump for a good question. Also buying a house in the up coming months.

 

[tm37]

I was approved for 160 and paid 115. The seller is going to take the highest offer regardless if you are approved for more.

 

[djheater]

Originally posted by: tm37
I was approved for 160 and paid 115. The seller is going to take the highest offer regardless if you are approved for more.

I guess the point is that a seller is more likely to seriously consider an offer for 157 if he believes my max approval to be 160, whereas if he knows I can get 180 he might be more difficult to negotiate with.

~~edit

That is if the seller is even AWARE of the apporval amount, which I'm not sure if they are or not.

 

[AU Tiger]

When I bought my house it was listing for $159,500 and I offered $153,000. Ended up settling at $157,000. I think you should offer as low as you think reasonable for the house. If you think you wouldn't mind paying $162,000 for the house, offer $160,000 just to see what the owner's say.

 

[Yossarian]

Of course the seller doesn't know what you're approved for. It's none of their business.

 

[djheater]

Originally posted by: PipBoy
Of course the seller doesn't know what you're approved for. It's none of their business.

I just thought since the realtor is in essence working for the seller, they might either outright GIVE the info to the seller or suggest that I would be able to pay more...
It's not that I think my realtor woud do that, it just seems to be a mighty conflict of interest considering thier salary is determined by what i end up paying.

 

[AU Tiger]

Originally posted by: PipBoy
Of course the seller doesn't know what you're approved for. It's none of their business.

Exactly. At least I don't see why they would know, unless you were going through a builder who also processed your loan app.

 

[jaeger66]

It totally depends on the market. If it's a hot seller's market, you won't pay much less than the asking price. If you really love a house in that market, you might even offer a little more than the asking price. Also depends on how fast the seller needs to unload it, and how solid your financial situation is. I just bought a house listed at 151, I offered 140 becasue I knew he was desperate. Eventually we agreed on 144,900 and he paid most of the closing fees and had all the little work that needed to be done finished before I moved in.

 

[jaeger66]

Originally posted by: AU Tiger

Exactly. At least I don't see why they would know, unless you were going through a builder who also processed your loan app.

It is most certainly their business to know how much you're approved for and where it's coming from. Few sellers will bother dealing with someone whose financial backing is from Big Ed's Salad Bar and Mortgage.

 

[HappyPuppy]

It's none of the seller's, or the realtor's, business where your financing is coming from or how much you are pre approved for.

The first house I bought, many years ago, was listed at $32,000. I did some asking around in the neighborhood and found out that the people were going through a nasty divorce. I offered $18,000 and the realtor freaked, but by law they have to submit every offer. BTW, the house was worth $32,000. When the realtor came back she said the people would accept $23,000. I said OK, but only if they would leave all the new new kitchen appliances. Once again, the realtor freaked, but had to submit the counter proposal. She came back and the sellers accepted my counter offer.

Unless you just have to have that particular house, don't be shy about doing some investigation and taking every advantage you have at your disposal. Don't hesitate to lowball the seller. They will either say NO or else come back with a counter offer, at which point you make up another counter offer. It's a game.

 

[jw791]

Most folks appreciate honesty. Your RE agent and their RE agent have a commission interest in getting the price as high as possible.

Call 'em up - tell them you don't mean to insult them, but you think a fair value is x$. Worse they can say is "no".

I was fearful too of offering a low price for my house...costed me...could have prolly got it for 5K less, but doesn't matter now...went way up in value

 

[djheater]

Originally posted by: jaeger66
It totally depends on the market. If it's a hot seller's market, you won't pay much less than the asking price. If you really love a house in that market, you might even offer a little more than the asking price. Also depends on how fast the seller needs to unload it, and how solid your financial situation is. I just bought a house listed at 151, I offered 140 becasue I knew he was desperate. Eventually we agreed on 144,900 and he paid most of the closing fees and had all the little work that needed to be done finished before I moved in.

The market is semi-hot, homes are selling pretty fast but this one's been on the market because of some STUPID decisions made by the previous owner.

 

[kranky]

Your agent shouldn't know what you were approved for. Even if they do, the approval is based on your ability to pay - not on the house you might buy.

Do not tell your agent you're going to offer X but will go up to Y. Because if you do, sure as hell you'll be paying Y.

 

[T2T III]

Originally posted by: djheater

Originally posted by: tm37
I was approved for 160 and paid 115. The seller is going to take the highest offer regardless if you are approved for more.

I guess the point is that a seller is more likely to seriously consider an offer for 157 if he believes my max approval to be 160, whereas if he knows I can get 180 he might be more difficult to negotiate with.

~~edit

That is if the seller is even AWARE of the apporval amount, which I'm not sure if they are or not.

The seller has no right - or no business knowing what the purchaser is qualified for. That detail should be held closely between the purchaser and the agent driving the purchaser around ... and ... well the WHOLE Anandtech community at this point.

Don't get too hung up on trying to "low ball" the seller. Keep the following things in mind when making your offer:

1) Is the price realistic?
2) How does the price compare to the other "comps" in the area?
3) What have the homes in the neighborhood sold for in the past few months?

Our friends received an offer for $10K less on their house last Sunday evening. They had their house listed for about $335K. At about 10:30 P.M. when the offer came in, they quickly rejected it. The following day -- not even 24 hours later, they had a full-price contract in hand from another purchaser. Meanwhile, the folks who tried to save $10K are probably still out their looking for a house.

If they house is listed at a realistic price, you can try to get them down a few thousand dollars. Going $10K or more is really pushing it. Plus, if you like the place, you have to consider the fact that other purchasers might also like it and be quite willing to pay very near the asking price.

 

[djheater]

Originally posted by: Tiles2Tech

Originally posted by: djheater

Originally posted by: tm37
I was approved for 160 and paid 115. The seller is going to take the highest offer regardless if you are approved for more.

I guess the point is that a seller is more likely to seriously consider an offer for 157 if he believes my max approval to be 160, whereas if he knows I can get 180 he might be more difficult to negotiate with.

~~edit

That is if the seller is even AWARE of the apporval amount, which I'm not sure if they are or not.

If they house is listed at a realistic price, you can try to get them down a few thousand dollars. Going $10K or more is really pushing it. Plus, if you like the place, you have to consider the fact that other purchasers might also like it and be quite willing to pay very near the asking price.

See, the thing is it was just adjusted. It was originally listed at 177, they bought it two years ago for 108. It's true they did some updating, but I was able to procure the original listing and the updates they did are nowhere near 69k. They're still trying to get 169,9 which is way to much as well. The space has potential and it's the right price but I'll be working at it for the next 10 years probably, and I feel the seller owes me a price break for fixing his fvck-ups. It's been on the market twice as long as other house in the area. i think I have a good shot.

In the end it's like e-bay. i know what i'm wiling to pay for it, so I can't lose in a way.

:Q

 

[RKS]

We bought with the philosophy that 'if you don't insult the seller with your first offer then you have offered too high'. We got a pretty good deal on our humble abode.

 

[T2T III]

See, the thing is it was just adjusted. It was originally listed at 177, they bought it two years ago for 108. It's true they did some updating, but I was able to procure the original listing and the updates they did are nowhere near 69k. They're still trying to get 169,9 which is way to much as well. The space has potential and it's the right price but I'll be working at it for the next 10 years probably, and I feel the seller owes me a price break for fixing his fvck-ups. It's been on the market twice as long as other house in the area. i think I have a good shot.

In the end it's like e-bay. i know what i'm wiling to pay for it, so I can't lose in a way.

I guess it just depends on which area of the country you are from. My home value has jumped about 80% in the last 4 years. If they bought it at $108K and did some enhancements and they're trying to get $169.9K for it, it doesn't mean that the enhancements were worth $70K. Home values have gone up over the past few years. Hopefully, prices have appreciated in your area - and part of the $169.9K "asking" price reflects the appreciation in value that the house has made. If you want to buy the house at $155K (just as an example) do you really want it to be worth only $155K 10 years from now? No. Hopefully, the values have been going up over the past few years and will continue to do so.

 

[jaybert]

My mom is a realtor, so all that I say is hearsay from what I've seen. There is no way your realtor is going to tell the seller that you are willing to pay more for the commission. They, on average, get paid 3% of the total selling price. The difference of $5000 is $150. They would rather you get a good deal and refer then to your friends and make another $3-4grand instead of making that $150. Also, there is a chance that with the rise of price that the customer may not be willing to get the house, so thats losing out on another few grand trying to make a couple hundred. Ultimately, the realtor's job is to make their customer happy, since a good deal of business is repeat business and word of mouth referrals.

I have seen contracts fall through for like a $200,000 house because there was a $1000 price difference.

As for what a reasonable price to offer is, its just like bargaining for cars. You give them a pretty damn low price at first, your first price isnt the most you're willing to bid. Buying a house is bargaining game, it'll go back and forth. If your first offer gets rejected, you just put in another offer. YOu might as well try to get the house as cheap as possible. But as well for this, ultimately how low they go depends on how badly they want to sell the house and how badly you want the house. if you want the house and you know this is the one, and there is already a contract pending, offer them full price. But if this house is just a nice house and there are others you are interested in, play it that way and give em a low offer accordingly.

 

[T2T III]

Buying a house is bargaining game, it'll go back and forth. If your first offer gets rejected, you just put in another offer.

It all depends on the market. When we purchased our first home (in 1987) we had about 2 hours to decide. We submitted our offer at full price because the market was very hot in the D.C. area at the time. Clearly, if I had played a pricing game, the property would have been quickly sold to another individual. Again, if the market is hot and you waste too much time on "low ball" prices, another offer could come in from another individual and a bidding war could get started. This would not be a good situation. Again, it all depends on the market. What one uses as a negotiation skill today may not be the best skill next week.

 

[Mill]

Don't hesitate to offer under the market value. My parent's house is listed for 375 right now and they have had offers as low as 305. They are pretty desperate to sell and this past week they have considered accepting a bid of 325. The people who made the bid want to lease-buy the house and will lease for one year. The neigbors are dying to sell as well, but so far they are trying to get at least 380.If you get into a market where the seller HAS to or REALLY wants to sell... it only benefits you.

If you think it is only worth 157-160 then offer 150. Unless the market is really hot(as some have mentioned) they will give you counter offer. I wouldn't worry about being insulting unless you offered something like 125. One couple came and a had computer print out of what they thought it was worth. They gave an offer of 250. My parents never made a counter.

 

[jaeger66]

Originally posted by: kranky
Your agent shouldn't know what you were approved for. Even if they do, the approval is based on your ability to pay - not on the house you might buy.

Do not tell your agent you're going to offer X but will go up to Y. Because if you do, sure as hell you'll be paying Y.

If you're using the seller's agent to buy-you're an idiot. Use a buyer's agent who is legally obligated to negotiate in your best interest. Of course there are plenty of sleazy agents, so that's why you need to find one by asking other people who've bought recently.

And as far as the seller knowing that you're preapproved-if I get two offers that are the same but one comes with a letter from the bank and one doesn't, guess which one I'm going to accept? Few sellers outside the truly desperate are going to go through the protracted hassle of escrow companies, title companies, inspection companies, etc. without knowing the financing is solid.

 

[kranky]

It doesn't matter if you have an agent different from the seller's. If you have not agreed up front that the agent you deal with is representing you as a "buyer's agent", I stand behind my statement.

From about.com:

Does your real estate agent work for you, or for the seller?
In the past, buyers often assumed their real estate agent worked in their behalf. After all, the agent showed them lots of properties, called regularly to tell them about new listings, wrote the offer to purchase, and answered questions about mortgages and other issues related to the sale. Buyers felt free to give confidential information to an agent, unaware that it was the agent's duty to pass the information on to the seller.

Today, many states have enacted laws to help protect and educate buyers. In those states, real estate agents are required to disclose who they work for. The disclosure may take place at your first face-to-face meeting, during a phone call, or by e-mail, but should always be made before a real estate agent asks for specific information about your needs.

 

[jaeger66]

Originally posted by: kranky
It doesn't matter if you have an agent different from the seller's. If you have not agreed up front that the agent you deal with is representing you as a "buyer's agent", I stand behind my statement.

I said:

Use a buyer's agent who is legally obligated to negotiate in your best interest.

So I'm not sure where your argument is.

 

[Farmall]

Originally posted by: djheater
I'm pre-approved for 170, the house is priced at that but HONESTLY it's only worth 157-160 I plan on offering 155 to start (is that to low? I want to offer 150 but don't know if that's insulting (part of me says who cares and the other part says "don't peeve the seller or negotiations could be tougher)).

Anyway the real reason I'm posting is to figure out if my approval amount is relevant. Should I get another approval letter showing 160? (I'm willing to go to $165 actually) or does it even matter? Are sellers privy to that information?

TIA

you got to remember its you who has to pay for it once the negotiations are done, who cares about "insulting" the seller - look at it this way, they are insulting your intelligence by placing the amount they want so high. If you think they could realistically sell for 157, no way I would offer 155. Chances are they will want to split the difference and you will end up paying 160+. Go for a lot lower offer and work up to what you actually are willing to pay for it. IMHO no house is worth paying to much for.

Precisely what I did and it worked great. Good luck on the potential purchase!