Factors that would bring the price down are as simple as demand. The only way 193 Myrtle will stay on the market and drop to the mid $400K range is if the buyer demand is not there at its current asking price. A drop to the mid $400k range would be a 15% discount, steep compared to the average in Ashland. In the last year 117 single families have sold with an average sale price of $396,160. This is about a 9% drop in average single family prices compared to last year but the sale activity is still relatively high.
The single family absorption rate for Ashland is 10 (10 properties selling/ month). At the moment there are 46 single families on the market for sale which means there is 5 months worth of inventory on the market - pretty low considering the RE market in general (this means the market is fairly active in Ashland considering). At this same time last year (4/12/2007-4/12/2008) 130 single families sold with an average sale price of 433,900.
Downside to making an ultra low offer is simply that they will reject the offer and not negotiate. Other than that no real downside. The upside is that you will gauge where they stand.
As a real estate professional AND as a home owner myself, I am completely sympathetic to your situation!!!! In fact, your rationale is the same rationale that is keeping many of us from making our move in this time of low home prices AND low mortgage rates. And if you are a first time homebuyer....you may be eligible for the $8,000 tax credit. The fact of the matter is, we are in the middle of The PERFECT STORM OF REAL ESTATE.
Based on the scenario you have described, it is apparent that you are responsible and don't want to put yourself into a precarious situation. I commend you for that!!!
The best advice I can give you is this: if your employment situation is uncertain (and might I mention that we are ALL in that boat), you might indeed wait for a time when your situation is more stable and you can confidently move forward with a home purchase. Of course, you do risk losing "THE ONE" (and that feeling does not come around often).
It's really a tough call...but I want to assure you that you are not alone! If money was no object, we would all be in the house of our dreams!
Good luck in your contemplations! I am sure you will do the right thing for you!
Thanks, excellent answers. Little more info:
Not that I want an extra-ordinary price and pat myself. I absolutely agree that I should be just paying the market price. This is the only house that i liked in more than a year of search and looked doable within my budget. I would simply buy it today for 10-20k below the list price ONLY IF it was well within my budget and the economy/job market was not as bad as it is.
The reason i am targeting in 4Q is because i don't want to be in a situation where i buy a house, then lose the job, can't find another and run out of emrgency funds. Buying above my budget means depleting my emrgency reserves which would last even shorter with the higher monthly payments, it's like playng with fire. waiting 4-5 months boosts my reserves and also reduces chances of being unemployed for a long time (assuming the deep recession does not turn into depression). I hope for the best but want to prepare for the worst.
Agian thanks for your answers.
To truly plan a negotiating strategy, you need to find fair market value of the subject property. I have posted a link below to an article you might find useful. As far as putting in an offer, its a start for negotiations. You won't know until you try. If you wait 4 or 5 months the property may not be available. Even in this market, sellers of good houses are not giving up 10 or 20% of fair market value. If you can get a home for 5-10% below fair market you are doing well.
If the home is truly worth $500,000 and they put in on for 450k they would be flooded with buyers and offers. It would stand out in the $450,000 price range.
Like many buyers I meet, you are really focusing on public record information, and worrying about what the seller can, or can not, afford. Let me make it SUPER simple for you.
You should pay what the house is worth to you.
There, that was easy!! So, let's look a little deeper.
A) You don't mind if you don't get the house, but you want a "deal"
B) You want the house and will pay a fair price for it. You can always find another.
C) This is really the house for you.
There really is no (D). If you want a deal, you need to offer a below market price, and be prepared to lose. If a home is the game, and a fair price isn't a problem, then get it! If you've been looking for two years, and this house is the first one you've found that works, then what are you waiting for?
OK. So, the next question is: What is fair market value?
Well, if you have looked at 100 houses in Ashland, it should be very simple to look at the comparable, and determine a price. Haven't done the homework? That's what agents are for. How do we know what a house is worth? Well, we look at 100's of houses a year, and we know what buyers will buy, and what they will not, at each price range. Our experience means going in, you know what "market value" is, +/- 5K. The rest of it, who paid what, what they want to make, what their motivations are, etc. It's all NOISE. Trust me on this. But I can tell you, every seller I've ever worked for wants "the most". Nobody sells a property in Metrowest and says I don't care if I sell it 50K below market!!! Everybody cares!
If you really want my best guess at your questions:
1) About 20%. Average market time in ashland is about 150 days.
2) There is no downside for the seller if you make a low offer. They can use your offer to "push" other offers up, even if your is low. The down side for you is A) You may make them angry and B) you may not get the house.
3) The seller wants to make the most money, like every seller does (or should!! It's America!)
4) There are too many to list here: But here's one most people don't think of: A lousy floor plan. An unpopular floor plan can take 25% off a house.
You raise good points. Unfortunately, none of your questions have definitive answers. The long of the short of it: If you like the house, make an offer!
What you can determine based on public records: The current owner paid $430,000 this year. You can safely assume that is the minimum the seller will accept...PLUS his closing costs. When he sells this time, he will have to pay additional closing costs including transfer taxes equal to $4.56 per thousand of his sale price.
Whether the house will still be available in the last quarter of the year...there is no way to tell. Basically, if you like the house, make an offer.
Another way to look at it: comparable house "185 Myrtle st" was originally listed for $610k in june 2008, price was lowered every few weeks by 10-20k, until somebody hit it at $500k in Feb. "11 james rd" is a bit smaller, unfinished basement but NEW is listed for $437k althogh not a great neighborhood.
I am told that the owner is an investor, so obviously looking for some profit. What would have been the true cost for the owner based on 430k sale price (i mean cosnidering fees, taxes, interest on investment etc)?