BEST ANSWER
Don Tepper,
Agent, Fairfax, VA
People in pressure situations are often in denial. They don't think foreclosure is really going to happen to them. They think they'll be able to sell. They think a relative will be able to lend them the money. They think they'll hit it big in the lottery. They think they'll get that new job that pays double what their current one does. In short: These people are not always thinking rationally.
Investors see this all the time. We get preforeclosure lists and approach the owners. "Oh, no, everything is OK." Or, "It's fine now. Everything is being worked out." Or "No problem. It'll be sold in a few weeks." Then, typically 7-14 days before the auction, the person calls the investor back up and asks (pleads, usually) whether the offer is still good, whether anything can be done. And the answer often is no.
The point is: Don't worry about people asking unrealistic amounts for their homes, especially in preforeclosure. If you're interested in one (or more) of those homes, make an offer based on what the house is actually worth, or below actual worth if there's some equity in the property. You're making a reasonable offer; that's all you can do.
Hope that helps.
Investors see this all the time. We get preforeclosure lists and approach the owners. "Oh, no, everything is OK." Or, "It's fine now. Everything is being worked out." Or "No problem. It'll be sold in a few weeks." Then, typically 7-14 days before the auction, the person calls the investor back up and asks (pleads, usually) whether the offer is still good, whether anything can be done. And the answer often is no.
The point is: Don't worry about people asking unrealistic amounts for their homes, especially in preforeclosure. If you're interested in one (or more) of those homes, make an offer based on what the house is actually worth, or below actual worth if there's some equity in the property. You're making a reasonable offer; that's all you can do.
Hope that helps.
Web Reference: http://www.WeBuyFairfaxHouses.com
Deborah Madey,
Agent, Red Bank, NJ
Hi Gizmo,
I answered a post yesterday that I will reference here......and I am editing and adding to the advice that I wrote yesterday. Here is yesterday's post:
http://www.trulia.com/voices/Home_Buying/Dealing_with_owner_…
Here is today's........expanding 1 point on yesterday's.
Step One: Determine fair market value based upon comps, abosrption rates, current inventory, market trends for your area. You did that and said it was 2M. For our discussion, we will assume that to be an accurate estimate of value.
Step Two: Evaluate seller motivation. You believe there should be sufficient motivation to sell for less since this seller is facing foreclosure.
Step Three: What is a realistic number that can clear the liens (either by complete payment or negotiated reduction)?
There are times when the only way to clear a title is a foreclosure. If the lienholders are many, and the liens far exceed the value.....it can be near impossible to get all lienholders in agreement for a reduced settlement. In those cases, foreclosure is sometimes the only answer.
You believe that 2M is the fair market value, and 1.7M will allow a breakeven. What the seller did w/ the 300K is moot. If he invested it in the home or not.....is the home worth 2M? If you buy it for 1.7M, is that a good deal?
Can you offer 1.7M? Sure? Might you get the property for that? Possibly. None of us can tell you what the seller will or will not do. You will only know if you make the offer. Who presents it might influence the outcome, so choose your representative accordingly.
Why do sellers stick w/ their numbers? A long list of reasons. Denial is one....but not the only one. Eternal hope, as JR indicated. Sometimes, it's anger. They believe their credit is already shot by a year of late pays. They feel victimized by the buyer who wants to find joy in their misery. Not all sellers facing foreclosure are scoundrels and deadbeats. I just saw a foreclosure on a home where the family invested heavily in a business, only to taken to the cleaners by their biz partner. While facing the loss of a biz, and their family home, they were approached by "know it all" investors bragging about how smart they were. I am not suggesting that you, Gizmo, are approaching distressed homeowners with this attitude. But, some of these homeonwers, who are stressed, are met at the door by the "investor" who wants to take advantage of the weak and vulnerable and are quite proud of themselves in doing so. I have seen a seller say they would rather let the bank take it than sell it to "x". Is it an emotional response? Sure. But, it gives you insight into the thinking that goes on. A good Realtor will do their best to detach from the emotion and guide clients to make the decision that is best for themselves.
Try your offer of 1.7 and choose carefully who represents you.
If I were the seller's agent, I would advise them to list for 1.7 and market it aggressively. Maybe there would be a buyer or two interested and the seller might find a buyer who would find a purchase price of 1.8 a great deal. If I were the buyer agent, ant it was listed for 2m, I would take in a 1.7M offer for my buyer (assuming that is what my buyer wanted.)
In all cases....what the seller did w/ the 300K doesn't really matter. Is it worth 2M? Will they take 1.7? Will that work for the bank and lienholders?
Good luck.
PS....In yesteday's post, I also offered a compliment to JR. I don't think she is a knucklehead. I think she was trying to explain that price paid does not reflect value....whether the price was overpaid or underpaid. Her example about inheritance is actually a good one. Different analogies work for different peopel. As a Realtor, I can tell you, there are a lot, a real lot, of buyers and sellers who concentrate on amount paid. Buyers dont' want to pay x, because they think the seller is making too much. Sellers think they are entitled to get y, or must get y, because of the amount they paid. As Realtors, we spend a lot of time explaining that amount paid does not equal value. JR was simply trying to use an analogy to make that point. She is direct, and succint. I agree w/ many of her posts..... I respect her views even when I don't share them. She offers much valuable content. I wish that you were not offended by her analogy. And, I was disappointed to hear name calling.
I answered a post yesterday that I will reference here......and I am editing and adding to the advice that I wrote yesterday. Here is yesterday's post:
http://www.trulia.com/voices/Home_Buying/Dealing_with_owner_…
Here is today's........expanding 1 point on yesterday's.
Step One: Determine fair market value based upon comps, abosrption rates, current inventory, market trends for your area. You did that and said it was 2M. For our discussion, we will assume that to be an accurate estimate of value.
Step Two: Evaluate seller motivation. You believe there should be sufficient motivation to sell for less since this seller is facing foreclosure.
Step Three: What is a realistic number that can clear the liens (either by complete payment or negotiated reduction)?
There are times when the only way to clear a title is a foreclosure. If the lienholders are many, and the liens far exceed the value.....it can be near impossible to get all lienholders in agreement for a reduced settlement. In those cases, foreclosure is sometimes the only answer.
You believe that 2M is the fair market value, and 1.7M will allow a breakeven. What the seller did w/ the 300K is moot. If he invested it in the home or not.....is the home worth 2M? If you buy it for 1.7M, is that a good deal?
Can you offer 1.7M? Sure? Might you get the property for that? Possibly. None of us can tell you what the seller will or will not do. You will only know if you make the offer. Who presents it might influence the outcome, so choose your representative accordingly.
Why do sellers stick w/ their numbers? A long list of reasons. Denial is one....but not the only one. Eternal hope, as JR indicated. Sometimes, it's anger. They believe their credit is already shot by a year of late pays. They feel victimized by the buyer who wants to find joy in their misery. Not all sellers facing foreclosure are scoundrels and deadbeats. I just saw a foreclosure on a home where the family invested heavily in a business, only to taken to the cleaners by their biz partner. While facing the loss of a biz, and their family home, they were approached by "know it all" investors bragging about how smart they were. I am not suggesting that you, Gizmo, are approaching distressed homeowners with this attitude. But, some of these homeonwers, who are stressed, are met at the door by the "investor" who wants to take advantage of the weak and vulnerable and are quite proud of themselves in doing so. I have seen a seller say they would rather let the bank take it than sell it to "x". Is it an emotional response? Sure. But, it gives you insight into the thinking that goes on. A good Realtor will do their best to detach from the emotion and guide clients to make the decision that is best for themselves.
Try your offer of 1.7 and choose carefully who represents you.
If I were the seller's agent, I would advise them to list for 1.7 and market it aggressively. Maybe there would be a buyer or two interested and the seller might find a buyer who would find a purchase price of 1.8 a great deal. If I were the buyer agent, ant it was listed for 2m, I would take in a 1.7M offer for my buyer (assuming that is what my buyer wanted.)
In all cases....what the seller did w/ the 300K doesn't really matter. Is it worth 2M? Will they take 1.7? Will that work for the bank and lienholders?
Good luck.
PS....In yesteday's post, I also offered a compliment to JR. I don't think she is a knucklehead. I think she was trying to explain that price paid does not reflect value....whether the price was overpaid or underpaid. Her example about inheritance is actually a good one. Different analogies work for different peopel. As a Realtor, I can tell you, there are a lot, a real lot, of buyers and sellers who concentrate on amount paid. Buyers dont' want to pay x, because they think the seller is making too much. Sellers think they are entitled to get y, or must get y, because of the amount they paid. As Realtors, we spend a lot of time explaining that amount paid does not equal value. JR was simply trying to use an analogy to make that point. She is direct, and succint. I agree w/ many of her posts..... I respect her views even when I don't share them. She offers much valuable content. I wish that you were not offended by her analogy. And, I was disappointed to hear name calling.
Deborah Madey,
Agent, Red Bank, NJ
When a seller says, "I have to get......." or "I need x in order to sell".....it indicates that the seller needs help in understanding the market.
Don Tepper,
Agent, Fairfax, VA
We just have to clarify a few definitions here. First, "fair market value" means what a willing buyer will pay to a willing seller. So, even if construction costs were higher and has some great elements, if people aren't willing to buy it for $2.4 million, then its fair market value is under $2.4 million. You were 100% correct when you wrote: "it would only be a fair market value if someone wants it for that price."
It's difficult to say how much under $2.4 million it's worth. You may be correct that it's worth $2 million. It's possible, for instance, that had the owner listed it at $2.1 million (not $2.4 million), he might have gotten an offer at $1.9 million, more or less. And with a bit of negotiation, it could have ended up right around $2 million. But that illustrates one of the risks when owners overprice their homes: They often don't get offers in the "reasonable" range because buyers are scared off by the higher number.
OK, back to your question of whether $1.4 million is the better number, or $1.7 million. That's difficult to say because the cost of construction--$1.4 million, in this case--doesn't always reflect the value of the property. Here are two examples: In one neighborhood in Virginia (Falls Church, for those who know the area), it's possible to buy a tear-down 1950s rambler for around $300,000. You tear it down, and construct a nice, new 3,500 square foot colonial for an additional $325,000. The finished house, even in today's environment, is worth more than $625,000. Probably around $800,000. So, in that case, the house is worth more than the money sunk into it. On the other hand, I've also seen properties that people decided, probably for zoning reasons, to build on, while keeping the original footprint. I've seen several like that, and all of them turned out bad. They bought the houses for a bit more than the tear-down example--around $400,000--sunk about $450,000 into rehabbing them, then tried to sell them for about $1 million. As far as I know, they're now all rentals, after substantial price reductions failed to move them.
Addressing your question as to whether the additional $300,000 was used to make improvements to the house or to pay the mortgage (my guess is that it'd be the latter) and how that would affect the value--it doesn't. Even if he used it for upgrades, like gold-plated faucets in the bathrooms, marble bathroom floors, and so on, the value is what you and the market at large think it is.
Addressing your specific question regarding $1.4 million (construction costs) versus $1.7 million (all the mortgages) versus $2.0 million (estimated fair market value), from a pure supply-and-demand perspective, then $2.0 million is the right number. That is, we're assuming that if it were on the market for $2.0 million, it would bring $2.0 million.
However, unlike the stock market or the commodities market, real estate is not the perfect example of supply and demand. Two shares of IBM are identical; if one sells for $x, the next one should sell for $x. Two barrels of oil are identical (assuming same qualities, ie, sweet crude). If one sells for $102 a barrel, the next one will sell for $102 a barrel. Prices will rise and fall based on supply and demand, but the two items--the two shares of stock, or the two barrels of oil--are equivalent.
Not so with houses. Often, they're not equivalent. And even if they are--say two townhouses, same model, in the same development, or two condos, same model, same floor, same building--the conditions may be different, the upgrades may be different, and--most important--the sellers and their motivations may be different. And this gets back to your original question about motivation, and my original explanation for why they aren't facing reality.
So, what's the right number: $1.4 million, $1.7 million, or $2.0 million? It's $2.0 million in a purely supply-and-demand situation. But, factoring in negotiations, seller motivation, etc., it can be a lot less. As a practical matter, I'd say your scenario of $1.7 million is good. It lets the owner walk away from a bad situation, preserving his credit (no foreclosure, no bankruptcy). It doesn't require third-party approval, since it's not a short sale. It's just over-and-done. He can sleep again at night. And you--if your calculations are correct--have just picked up $300,000 in instant equity.
The figure of $1.4 million as an offer poses a couple of problems. First, as noted earlier, $1.4 million in construction costs doesn't equate to $1.4 million in value. It could very well be worth $2 million. So you're not necessarily overpaying if you pay more than $1.4 million. The second problem is that an offer of $1.4 million, even if accepted by the seller, probably would result in a short sale, with lender approval required. Now, many short sales are successful. But others aren't. And the process can be long, convoluted, and the outcome uncertain.
Out of space...
Hope that helps.
It's difficult to say how much under $2.4 million it's worth. You may be correct that it's worth $2 million. It's possible, for instance, that had the owner listed it at $2.1 million (not $2.4 million), he might have gotten an offer at $1.9 million, more or less. And with a bit of negotiation, it could have ended up right around $2 million. But that illustrates one of the risks when owners overprice their homes: They often don't get offers in the "reasonable" range because buyers are scared off by the higher number.
OK, back to your question of whether $1.4 million is the better number, or $1.7 million. That's difficult to say because the cost of construction--$1.4 million, in this case--doesn't always reflect the value of the property. Here are two examples: In one neighborhood in Virginia (Falls Church, for those who know the area), it's possible to buy a tear-down 1950s rambler for around $300,000. You tear it down, and construct a nice, new 3,500 square foot colonial for an additional $325,000. The finished house, even in today's environment, is worth more than $625,000. Probably around $800,000. So, in that case, the house is worth more than the money sunk into it. On the other hand, I've also seen properties that people decided, probably for zoning reasons, to build on, while keeping the original footprint. I've seen several like that, and all of them turned out bad. They bought the houses for a bit more than the tear-down example--around $400,000--sunk about $450,000 into rehabbing them, then tried to sell them for about $1 million. As far as I know, they're now all rentals, after substantial price reductions failed to move them.
Addressing your question as to whether the additional $300,000 was used to make improvements to the house or to pay the mortgage (my guess is that it'd be the latter) and how that would affect the value--it doesn't. Even if he used it for upgrades, like gold-plated faucets in the bathrooms, marble bathroom floors, and so on, the value is what you and the market at large think it is.
Addressing your specific question regarding $1.4 million (construction costs) versus $1.7 million (all the mortgages) versus $2.0 million (estimated fair market value), from a pure supply-and-demand perspective, then $2.0 million is the right number. That is, we're assuming that if it were on the market for $2.0 million, it would bring $2.0 million.
However, unlike the stock market or the commodities market, real estate is not the perfect example of supply and demand. Two shares of IBM are identical; if one sells for $x, the next one should sell for $x. Two barrels of oil are identical (assuming same qualities, ie, sweet crude). If one sells for $102 a barrel, the next one will sell for $102 a barrel. Prices will rise and fall based on supply and demand, but the two items--the two shares of stock, or the two barrels of oil--are equivalent.
Not so with houses. Often, they're not equivalent. And even if they are--say two townhouses, same model, in the same development, or two condos, same model, same floor, same building--the conditions may be different, the upgrades may be different, and--most important--the sellers and their motivations may be different. And this gets back to your original question about motivation, and my original explanation for why they aren't facing reality.
So, what's the right number: $1.4 million, $1.7 million, or $2.0 million? It's $2.0 million in a purely supply-and-demand situation. But, factoring in negotiations, seller motivation, etc., it can be a lot less. As a practical matter, I'd say your scenario of $1.7 million is good. It lets the owner walk away from a bad situation, preserving his credit (no foreclosure, no bankruptcy). It doesn't require third-party approval, since it's not a short sale. It's just over-and-done. He can sleep again at night. And you--if your calculations are correct--have just picked up $300,000 in instant equity.
The figure of $1.4 million as an offer poses a couple of problems. First, as noted earlier, $1.4 million in construction costs doesn't equate to $1.4 million in value. It could very well be worth $2 million. So you're not necessarily overpaying if you pay more than $1.4 million. The second problem is that an offer of $1.4 million, even if accepted by the seller, probably would result in a short sale, with lender approval required. Now, many short sales are successful. But others aren't. And the process can be long, convoluted, and the outcome uncertain.
Out of space...
Hope that helps.
Sandy Shores -Melbourne FL Broker-Associate,
Broker, Melbourne, FL
Hi Gizmo,
We seem to be seeing the same thing happening here in Florida, too.
It seems that some owners are still hoping they can catch the tail end of the feeding frenzy we faced in 2005, when homes were selling for much more than they were every really worth. In my opinion the people that sold at the peak of the market got fortunate. But, the people that bought at the peak of the market got stuck!
It reminds me of the Tech Stock Market Bubble. Overinflated numbers on a sheet of paper! Those houses that sold at those over inflated prices were never truly worth what they sold for!
It's funny...we see it everyday...people will lose money in the stock market, they will gamble their money away at horse races, lottery and Vegas, they will waste money on credit card interest, however they absolutely refuse to lose money on their primary residence. Fortunately, this is what keeps our real estate values at a somewhat stable level over a long period of time.
But, often times they will try to hold out for that extra money they think they could have made on their home. Often times, by the time they get around to reducing their price, they are still too high, because the market has continued downward. They can never really get their price where they need it to be, thus they fall into foreclosure. It's sad.
When you figure it out, you let me know...
Best wishes to you,
Sandy Shores, Realtor
M & M Real Estate
Residential & Investment
Brevard County
Florida's Space Coast
We seem to be seeing the same thing happening here in Florida, too.
It seems that some owners are still hoping they can catch the tail end of the feeding frenzy we faced in 2005, when homes were selling for much more than they were every really worth. In my opinion the people that sold at the peak of the market got fortunate. But, the people that bought at the peak of the market got stuck!
It reminds me of the Tech Stock Market Bubble. Overinflated numbers on a sheet of paper! Those houses that sold at those over inflated prices were never truly worth what they sold for!
It's funny...we see it everyday...people will lose money in the stock market, they will gamble their money away at horse races, lottery and Vegas, they will waste money on credit card interest, however they absolutely refuse to lose money on their primary residence. Fortunately, this is what keeps our real estate values at a somewhat stable level over a long period of time.
But, often times they will try to hold out for that extra money they think they could have made on their home. Often times, by the time they get around to reducing their price, they are still too high, because the market has continued downward. They can never really get their price where they need it to be, thus they fall into foreclosure. It's sad.
When you figure it out, you let me know...
Best wishes to you,
Sandy Shores, Realtor
M & M Real Estate
Residential & Investment
Brevard County
Florida's Space Coast
J R,
Agent, New York, NY
Gizmo:Don Tepper and Deborah, thank you so much for your responses. Your responses were very helpful. Honestly, I would offer $2 million if I could afford that easily but that would be really stretching it for me, which is why I think $1.85 is perhaps the best price.
JR: Gizmo, what you can afford is just as irrelevant to fair market value as what the seller "needs" or "has to get".
Gizmo: As for JR, my frustration is with him not reading posts carefully... I have seen him do this in other posts where he fires off some one-sentence wise a$$ comment while misunderstanding the poster.
JR: On another thread I responded without reading the other posts, was in error and apologized. I do not fire off wase a@@ comments, I don't have time to write a book every time I post, so I am succinct.
Gizmo: But even so, that is fine, but he did touch a nerve here by questioning why I wouldn't pay a fair market value as if I were a predatory investor.
JR: Hey that's your take on it. You must feel like you're being a predatory investor to even bring that up. I never implied or used those words. You must realize how thin your case is: you think you are "helping" this person, and maybe you are, but just from the fact that you used the words "predatory investor" and say in this same post that you are uncomfortable letting him know he's facing foreclosure tells me that you realize you're coming off as a --- you got it....predatory buyer.
Gizmo: And my point merely is that of course in a normal real estate transaction, offering a fair market value makes sense, but my point in this case was that this was not a normal real estate transaction because of the preforeclosure issue.
JR: Fair market value has nothing to do with foreclosure.
Gizmo: And I don't know why he even brought up the inheritance issue when I explained clearly that this house was in preforeclosure.
JR: I did not bring up the "inheritance issue"-- I said, and I repeat -- fair market value has nothing to do with what you can afford, what HE OWES, WHAT HE PAID FOR THE PROPERTY (for EXAMPLE, IF he inherited it) or if it is being foreclosed on, for that matter.
Gizmo: JR, it would just be more helpful to people if you can address the actual problems in these questions as Deborah and Don have done. Of course, you are free to give out any advice you like and free advice should be appreciated... but you may want to be sensitive to what you're saying sometimes.
JR: Gizmo, I always tell the truth. Sometimes the truth hurts, like apparantly now. I don't give advice. I give my opinion. Here is my opinion on buyer's lowball offers: A buyer makes a ridiculous lowball offer because 1. that's all they can afford, 2. they think that's all the house is worth or 3. they want to get a steal. You've told us that's all you can afford. So go for it and see what happens.
JR: Gizmo, what you can afford is just as irrelevant to fair market value as what the seller "needs" or "has to get".
Gizmo: As for JR, my frustration is with him not reading posts carefully... I have seen him do this in other posts where he fires off some one-sentence wise a$$ comment while misunderstanding the poster.
JR: On another thread I responded without reading the other posts, was in error and apologized. I do not fire off wase a@@ comments, I don't have time to write a book every time I post, so I am succinct.
Gizmo: But even so, that is fine, but he did touch a nerve here by questioning why I wouldn't pay a fair market value as if I were a predatory investor.
JR: Hey that's your take on it. You must feel like you're being a predatory investor to even bring that up. I never implied or used those words. You must realize how thin your case is: you think you are "helping" this person, and maybe you are, but just from the fact that you used the words "predatory investor" and say in this same post that you are uncomfortable letting him know he's facing foreclosure tells me that you realize you're coming off as a --- you got it....predatory buyer.
Gizmo: And my point merely is that of course in a normal real estate transaction, offering a fair market value makes sense, but my point in this case was that this was not a normal real estate transaction because of the preforeclosure issue.
JR: Fair market value has nothing to do with foreclosure.
Gizmo: And I don't know why he even brought up the inheritance issue when I explained clearly that this house was in preforeclosure.
JR: I did not bring up the "inheritance issue"-- I said, and I repeat -- fair market value has nothing to do with what you can afford, what HE OWES, WHAT HE PAID FOR THE PROPERTY (for EXAMPLE, IF he inherited it) or if it is being foreclosed on, for that matter.
Gizmo: JR, it would just be more helpful to people if you can address the actual problems in these questions as Deborah and Don have done. Of course, you are free to give out any advice you like and free advice should be appreciated... but you may want to be sensitive to what you're saying sometimes.
JR: Gizmo, I always tell the truth. Sometimes the truth hurts, like apparantly now. I don't give advice. I give my opinion. Here is my opinion on buyer's lowball offers: A buyer makes a ridiculous lowball offer because 1. that's all they can afford, 2. they think that's all the house is worth or 3. they want to get a steal. You've told us that's all you can afford. So go for it and see what happens.
Gizmo,
**..Wow, there really are some knuckleheads on this site..** .. except for a few, yes ..l.o.l...
Now you know why .. the average consumer on this board drops a question at 8am gets 22 agent answers by 8pm .. then scratches his head and never comes back to Trulia.
;^)
**..Wow, there really are some knuckleheads on this site..** .. except for a few, yes ..l.o.l...
Now you know why .. the average consumer on this board drops a question at 8am gets 22 agent answers by 8pm .. then scratches his head and never comes back to Trulia.
;^)
J R,
Agent, New York, NY
JR, i know that. In my scenario below... I said the guy owes $1.7 but I said the fair market value was $2 million.
~~~~~~~~~~~~~~~~
The fair market value is 2M and you want to make an offer based on what he owes? What if he got the house for free last week in an inheritance? Would you offer him $100,000? What he owes or paid has no bearing on fair market value. When the market was going up, I was frequently told by buyers "they paid 380,000 for it last year, why should I give them 480,000?" Apparently they were angry that this person had made a good investment. I asked them the same question: what if they inherited the house?
~~~~~~~~~~~~~~~~
The fair market value is 2M and you want to make an offer based on what he owes? What if he got the house for free last week in an inheritance? Would you offer him $100,000? What he owes or paid has no bearing on fair market value. When the market was going up, I was frequently told by buyers "they paid 380,000 for it last year, why should I give them 480,000?" Apparently they were angry that this person had made a good investment. I asked them the same question: what if they inherited the house?
Mikem,
Agent, 01803
So, as per your words, the fair market value is 2mil, and you are wondering if you should offer 1.4mil or 1.7mil. And after your offer gets rejected yu would ask why is the seller in denial and not accepting your "good" offer?
Offering 1.4mil on a house with fair market value of 2mil is just as bad as the seller trying to sell it for 2.4mil. Determine a fair market value factor in days on market and a few other things to adjust your price, then make a offer for around that much. Making an offer of 1.4mil, which is 33% less than the list price (no matter how overpriced it is) and 30% below what you yourself think is fair market value almost guarantees that you won't get that house no matter what.
Offering 1.4mil on a house with fair market value of 2mil is just as bad as the seller trying to sell it for 2.4mil. Determine a fair market value factor in days on market and a few other things to adjust your price, then make a offer for around that much. Making an offer of 1.4mil, which is 33% less than the list price (no matter how overpriced it is) and 30% below what you yourself think is fair market value almost guarantees that you won't get that house no matter what.
J.D.,
Agent, Orange Park, FL
There was a movie a few years ago where the devil (played by Al Pacino) said his favorite sin was "Greed".
We saw greed everywhere during the RE explosion. Around here the market went flat Sept and Oct '05 then began the decline. It took almost a year for the media to start reporting the bad numbers because everything they were doing was comparing what ever this current month is, to the same month a year previous. The first negative report arrived exactly 1 yr after I first saw this. The expired listings went throught the roof!
A couple bought a house across the street from one of my investment properties. They paid about $200,000 which was too much. They never made payment 1! They had placed it for sale at $250,000 without an agent....GREED, the deveils favorite sin.
JD “Dan” Weisenburger, GRI
Broker-Associate REALTOR®
Vanguard Realty, Inc. GMAC Real Estate
We saw greed everywhere during the RE explosion. Around here the market went flat Sept and Oct '05 then began the decline. It took almost a year for the media to start reporting the bad numbers because everything they were doing was comparing what ever this current month is, to the same month a year previous. The first negative report arrived exactly 1 yr after I first saw this. The expired listings went throught the roof!
A couple bought a house across the street from one of my investment properties. They paid about $200,000 which was too much. They never made payment 1! They had placed it for sale at $250,000 without an agent....GREED, the deveils favorite sin.
JD “Dan” Weisenburger, GRI
Broker-Associate REALTOR®
Vanguard Realty, Inc. GMAC Real Estate
Web Reference: http://www.neflahomes.com
they are in denial
be patient
wait
soon you can just deal with the bank
and they are not emotionally attached
its just a house they need to get rid of
anyways
good luck
be patient
wait
soon you can just deal with the bank
and they are not emotionally attached
its just a house they need to get rid of
anyways
good luck
Gizmo,
Home Buyer, Westchester County, NY
Don Tepper and Deborah, thank you so much for your responses. Your responses were very helpful. Honestly, I would offer $2 million if I could afford that easily but that would be really stretching it for me, which is why I think $1.85 is perhaps the best price. This way, I can pick up the outstanding mortgage, the seller gets compensated for the closing costs and make perhaps a little more, and then he can walk away without any debt. I have been thinking about this because it is hard for me to even broach the owner about this because I feel uncomfortable even letting him know that I know he is facing disclosure. I'm sure it is a sensitive topic and I feel really really bad for him. At the same time, I know it would be a great house for me (this would be my very first house and I love it), a great investment as well in the long run, and I feel like I am giving him an opportunity to at least cut his losses. But I think you put things in perspective when you said they are angry or in denial and they would rather a bank take it than a predatory investor (although I don't consider myself one since I have never even invested in anything before and love this home). I was just confused as to whether there were any other reason for them wanting to face foreclosure instead or whether it was just an emotional, kneejerk reaction.
As for JR, my frustration is with him not reading posts carefully... I have seen him do this in other posts where he fires off some one-sentence wise a$$ comment while misunderstanding the poster. But even so, that is fine, but he did touch a nerve here by questioning why I wouldn't pay a fair market value as if I were a predatory investor. And my point merely is that of course in a normal real estate transaction, offering a fair market value makes sense, but my point in this case was that this was not a normal real estate transaction because of the preforeclosure issue. And I don't know why he even brought up the inheritance issue when I explained clearly that this house was in preforeclosure. JR, it would just be more helpful to people if you can address the actual problems in these questions as Deborah and Don have done. Of course, you are free to give out any advice you like and free advice should be appreciated... but you may want to be sensitive to what you're saying sometimes.
As for JR, my frustration is with him not reading posts carefully... I have seen him do this in other posts where he fires off some one-sentence wise a$$ comment while misunderstanding the poster. But even so, that is fine, but he did touch a nerve here by questioning why I wouldn't pay a fair market value as if I were a predatory investor. And my point merely is that of course in a normal real estate transaction, offering a fair market value makes sense, but my point in this case was that this was not a normal real estate transaction because of the preforeclosure issue. And I don't know why he even brought up the inheritance issue when I explained clearly that this house was in preforeclosure. JR, it would just be more helpful to people if you can address the actual problems in these questions as Deborah and Don have done. Of course, you are free to give out any advice you like and free advice should be appreciated... but you may want to be sensitive to what you're saying sometimes.
Gizmo,
Home Buyer, Westchester County, NY
Mikem and JR, what are you not getting? If no one else wants the house and the guy is about to lose his house any minute because of foreclosure, and I am willing to pay him $1.7 to just walk away without having a debt and a bad credit history (and he is losing nothing since he owned no equity in the first place), what is so wrong about that? And why should this guy reap the rewards of his investment when he didn't even have any investment/equity in the first place? It seems rather careless to me that someone would even try to buy a place without paying a solid deposit at all; so I think I am doing this guy a big favor if I offer him $1.7 to walk away since no one else is even coming close to his asking price.
Why do you think people even invest in preforeclosure properties in the first place - because you get a good deal. Are you getting this at all or do you still not get it? JR, I noticed that you usually ramble on some nonsense without reading other people's posts. If you want to give a solid advice, try to read their posts. The guy did not get it as an inheritance. He is facing foreclosure. Get it, now?
without When you say fair market value, it would only be a fair market value if someone wants it for that price, correct? Well, what if no one does and I'm the only one who thinks it is worth $2 million? The question is f someone is facing foreclosure
Why do you think people even invest in preforeclosure properties in the first place - because you get a good deal. Are you getting this at all or do you still not get it? JR, I noticed that you usually ramble on some nonsense without reading other people's posts. If you want to give a solid advice, try to read their posts. The guy did not get it as an inheritance. He is facing foreclosure. Get it, now?
without When you say fair market value, it would only be a fair market value if someone wants it for that price, correct? Well, what if no one does and I'm the only one who thinks it is worth $2 million? The question is f someone is facing foreclosure
Gizmo,
Home Buyer, Westchester County, NY
Don Tepper, I have a question. This one house - the owner took out a mortgage for $1.4 million to build the house. He has almost zero equity in the house. Then he took out 3 other loans on the house from other banks (probably to make the mortgage payment on the original mortage or to make improvements on the house) totaling $300,000. He is listing this house for sale at $2.4 million and is even marketing for rental. (Don't worry - I would never rent a house in preforeclosure and I am perfectly aware of dangers of liens from the other 3 banks for $300,000.) But putting that aside, if I were to make an offer on this house, would the reasonable amount be $1.4 (the amount of the original mortgage and the cost to build); or would it be $1.7 (amount of the original mortgage plus the $300,000) or the market price (let's just say it is $2 million)?
What is confusing is this $300,000 he borrowed after the original $1.4 million mortgage -- how would I know if he just borrowed against the house and used it for other purpose or whether he used it to make improvements on the house? Thank you.
What is confusing is this $300,000 he borrowed after the original $1.4 million mortgage -- how would I know if he just borrowed against the house and used it for other purpose or whether he used it to make improvements on the house? Thank you.
Gizmo,
Home Buyer, Westchester County, NY
And now, we the responsible tax payers have to pick up the tab for the wall street bank greed and these reckless, gambling, greedy home-seekers. And here I am, having worked hard my entire life to save up to make a 45% down payment on a house in order to be responsible. And they won't sell to me despite my more than generous offer because they want to maximize their profit despite facing foreclosure. Really sucks, doesn't it?
Gizmo,
Home Buyer, Westchester County, NY
Yes these home sellers know because they get a notice of default by the bank. Also, should it matter how much other similar houses are selling when they have 2-3 months to pay up on their mortage backpayments or face foreclosure. It doesn't seem to me to me that they have the luxury of trying to make a profit; rather I would think they should just try to walk about without a loss and without a bad credit history (which they can if they would sell to an eager buyer willing to pay the amount that is owed to the bank - which is the same as the amount they invested since they didn't make much of a down payment).
Mikem,
Agent, 01803
Are those people aware they are facing foreclosure soon? I guess, the question to ask would be, how much have houses similar to theirs sold in the past 3-6months? If similar houses have recently sold for 4mil+ then it's one things. If, however they've sold at 2mil, or perhaps even below, then how can these sellers expect to get twice as much?
Gizmo,
Home Buyer, Westchester County, NY
Just to explain what I mean - these three house owners paid only about 1% down (crazy, I know) and mortaged 99% (about $2 million dollars from their respective banks to either buy or build a house). Now, I see those houses on the MLS listed at $4 million. These reckless home sellers are trying to double the house price even while facing foreclosure. I just don't get it - am I missing something here or are they just plain greedy and reckless?
