Home Buying in Lafayette>Question Details

Susan, Home Buyer in San Francisco, CA

Property values officially going down in my neighborhood...is it time to make a reasonable offer?

Asked by Susan, San Francisco, CA Fri Nov 30, 2007

I heard it from the cats meow today. An appraisal in my neighborhood (Lamorinda/east bay area) was 300k lower today than 3 months ago. There are many houses for sale since July with minimal or no price reduction, just sitting around. I think with the official information...it is time to make offers for 300k less than asking or 20-30% under asking, which has been my plan for the past 6-8 months.

Are sellers ready to sell with these reduced offers or will they continue to hold out? How many months will they let their homes sit? 6 months? 1 year?

Your thoughts?

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Answers

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Dave Rivera and Sheila Small’s answer
Hi Susan,
The Lamorinda market has not cooled off that significantly. Year to date, as compared to last year, the average sales price in Lafayette is down 6%, Orinda down 7%, and Moraga is up 2%. Even if a particular property was appraised at $300k less than 3 months ago, that doesn't neccesarily reflect a drop of $300k in market value on that house, and it certainly doesn't mean that any/all other properties have dropped that much. I have never met a seller who would consider an offer that is 20-30% below asking, and here is one reason why: rather than take an offer that much under list, the seller is better off reducing the list price 10%-15% and possibly getting multiple offers. Yes, multiple offers are still happening here in Lamorinda!
2 votes Thank Flag Link Fri Nov 30, 2007
BEST ANSWER
Susan,

You never know until you try. Some sellers will just hold out, others may have the motivation to accept a lower offer.

I recently had a buyer who was "shopping." Made crazy offers on multiple homes. In two out of 3 of the offers, the sellers eventually came back (within 2 weeks) and accepted the offer.

On the other hand, I have a seller who refuses to reduce although his house is overpriced. His perspective "We haven't had any offers, not even low balls." This isn't the way it works, but hey, I'm just the realtor, what do I know.
1 vote Thank Flag Link Sat Dec 1, 2007
Hi Susan, we are seeing in our market a buyer here and there rewarded for making a low ball offer. I'm amazed as I agree with the comments below. I recently took out some buyers and they wanted to make low ball offers, I decide lets focus on properties where the seller has a lot of equity, it has been on the market for sometime and is not generating any cash or use. My buyer was able to get a home 20% under market.
Web Reference: http://www.MIchaelRicks.com
1 vote Thank Flag Link Sat Dec 1, 2007
Susan,

It really depends on each particular seller, individually. Some sellers, particularly ones who have no necessary NEED to sell, will be firm on price because they can simply wait until the market corrects. Others however, who are relocating, need to sell as soon as possible. I always advise my buyers to bring in very low offers in markets like this. With properties sitting on the market as long as they are these days, an offer 20-30% below asking price isn't a stretch. I'd have a local Real Estate Professional run recent comparable sales to any particular property you're interested in, and use those as leverege when deciding on purchase price, as well as negotiating with the seller. I'd be more than happy to help if you need assistance. Good luck!
1 vote Thank Flag Link Fri Nov 30, 2007
The age old question--What do Sellers want! (Isn’t that what Freud pondered?) If you're asking is 20-20% "reasonable" you might get some interesting feedback from some of those Sellers! I think I'd want more data than just one appraisal. We had the same thing happen in our office on a "short-sale" where the "shorted" price was some $200,000 less than what the Seller bought the home for a year ago. The appraisal concurred with the "shorted" price but when you look harder at the deal you see how the then "Buyer's overpaid for the property to get money back for loan fees, rebates, etc.
When I see a flood coming in at such reduced numbers then you know a "trend" is developing! But if we're talking price points of $1,000,000 then we can get into all sorts of funny business with purchases and sales. Make sure your Realtor does an exhaustive CMA (comparative market analysis) for you neighborhood by neighborhood. They can be dramatically different. But by all means, 'tis the season for lowballing
1 vote Thank Flag Link Fri Nov 30, 2007
Declining market values are caused by home owners agreeing to accept offers significantly lower than the last sold price of a similar home in the same area. Therefore, if Buyers are concerned about purchasing a home now with the chance of property values declining further, Buyers must be willing to pay a purchase price close to the Seller's asking price provided that this asking price is in alignment with the last recent sold price of the best like-kind comparable home.
In other words, real estate value appreciation and depreciation begin with transactions that consistently close above or below the last closed sale. Stability in a real estate market can only occur when Buyers finally agree to pay a price at the last sold price or higher if there is a limited supply of available homes for sale.
0 votes Thank Flag Link Wed Feb 23, 2011
Hi Susan,
Not all sellers have the same motivations. Those who really need to sell might welcome getting raked over the coals. Those who are downsizing but don't really need to sell to survive probably won't even respond to a hard ball negotiation. Determining who wants to play is key these days, so as not to waste your time or anyone else's. , and there are a number of sure fire ways to do the research in order to get the best deal possible. Feel free to call me at 415.999.2205 if you would like to discuss further. Although I have a San Fran # and office I have lived in Lafayette for the past five years and do quite a good deal of business on both sides of the Bay. Have a great evening and I look forward to discussing this more with you.

Best,

Jack Burrows
0 votes Thank Flag Link Tue May 4, 2010
Steve, you did note that this was over 2 years old, didn't you? I see you are brand new to this. Always check the date asked first. good luck.
0 votes Thank Flag Link Sat Feb 6, 2010
Good Luck. I liv in LAfayette. Want good answers, introduce yoiurself.
0 votes Thank Flag Link Sat Feb 6, 2010
Susan, just reading through old messages. Not sure if you have purchased a home, yet, but if you find a home that you really like, then put down an offer that you can afford based on what you think the house is worth today. The worst that could happen is they say "no". Who knows, maybe someone who has been listed for >200 days will say OK. After all, the true value of a house is what someone is willing to pay for it! Best of luck.

Dr. Cheng, although you have good points, do you think it is good psychologic threshold for the buyer if a seller who has bought a 1700 sq ft home in late 2006 for $750K to redo a kitchen and put in Pergo floors, and tries to sell the house today for $1.4 M? I doubt the house has doubled in value in a year. These people will be lucky if they even get 70% of their asking price.
0 votes Thank Flag Link Sat Jan 12, 2008
Dear Susan,

You NEVER want to make an offer lower than 83% that's phycalogical threshold, buying house or car, that is the price you won't get and hurt EVERYONE.

If you ask any downside expert like myself, or go back to 90's to find out all the sold price and listing price ratio, there is hardly any ratio lower than that. Why?

Because, even good borrow pay down only about 20%, and mortgage pay 80%, so once YOU wipe out the downpayment of the seller, the bank would NOT let you to wipe out their money, so you got huge barrier right there.

If you were trick by listing agent telling you that the house was listing something like $2.4 million and now dropped to $1.789 millions and you can get it at $1.3 million like I am buying a house at Warren NJ, you may or may not be lucky like myself to uncover the township appraised the house worth only $1.1. million. So, you can slash the price, but that may be just or old man trick...

In San Francisco, many Chinese paid CASH to buy their property, so they are holding a house like holding a land, they could let it sit there forever, like I got a land at Atlantic City that already went up 1700% and I still let it sit, and so many realtors send me letter, threatening me real estate will collapsed, but I also read the news that there will be 4 big new casino built in Atlantic City, so I really do NOT mind to hold on to it.

If I happened be a owner of property in San Francisco, I would just go to place ads in Beijing or Shanghai to sell to them at the price I want, NOT sell it to local people. This is the same thing I advise Manhattan condo owners, and went to European to bring investors over.

But, if I were buyer like you, trying to get a great deal, I would go out to make 80% offer on all the properties I like, and soon or later, you will hit one or two willing to sell you at about 83%. Otherwise, they may just lower the listing price, so your buying price eventually still above 83%. I mean sold and list price ratio...
0 votes Thank Flag Link Sun Dec 23, 2007
Susan-
It is a great time to make low offers and you may get lucky. Make sure to push for those seller credits also as the dollars given there are worth so much more than a lower price. The other area to probe is to find out if the seller will do some seller financing-- that can make some homes affordable to you that otherwise would not be. Last comment-- watch rates as they decline because that is also more critical than the price of the house- 25-50 basis points on a 30 year mortgage is huge.

so, go make an offer-- good luck.
Web Reference: http://www.apr.com/dougm
0 votes Thank Flag Link Tue Dec 11, 2007
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