Home Buying in California>Question Details

Fence Sitter, Home Buyer in Orange County, VT

Is 30% below list price in today's market to low an offer on a $2MM home in SoCal?

Asked by Fence Sitter, Orange County, VT Mon Aug 20, 2007

Can my Buyer agent refuse to put my low offer in? If so is that ethical grounds to replace them? No agreement is in place. Other agents are telling me that they are urging their sellers to review any offer.

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There may be items on a previous inspection report that are Disclosure Items, and you definitely want to have a look at it before your own inspection, but theres no good reason to use their inspection even if your agent knows the other inspector.

Since your property has sat for a long time and the seller hasn't used the systems a full battery of inspections is in order and should include the mechanical (heat and A/C), pool, roof and i'd add appliances in a high end house like the subject property. most inspectors won't go too deeply into the HVAC, roof, pool so be ready to call in a specialist on those. if there is a pool the current service is a good place to start.

The "seller has maintained..." phraseology that the agent uses makes me nervous from a brokers standpoint...she is making affirmative representations on a contract that she has no basis for making and the term handymans repairs is very nebulous. I'm not sure there's a legal definition for handyman.

thanks for keeping us current on this thread...it's nice to see the deals from start to finish.
0 votes Thank Flag Link Fri Sep 28, 2007
Missed these recent posts, great information and I really enjoyed the feedback so thank all of you that added comments.

I am not sure if I am a winner in some type of discount war, as that was not my motivation for my post. My human nature is to be a grinder and not rush a transaction especially on a 6,250 sq ft home as it really is a discretionary purchase. My cleaning people are going to freak out.

My post was really to see how agents might react to a low offer in a rapidly softening market, I really wanted to complete the transaction. Like in any business it is all about the transaction and holding onto inventory just cost money so I felt I had nothing to lose. Remember my tactics was to see who the real sellers were and focus on price per square foot initially. I will share my math on why I went in at a certain price and what I knew from other escrows that did not close. I have found out since getting my offer accepted that the house was actual listed at $2.95MM in 2006 which seems really overpriced but who is to say. The seller is the original owner and paid $1.2MM in 1992. I do know I am getting a custom, well built, extremely well maintained, and makes my wife happy (isn't that why we guys buy homes) house. The house came back extremely well from inspection and the seller has made some repairs already. I have removed all contingencies except Loan as I still need to get the true commitment letter as I am still Jumbo. The selling agent had to approve an extension from the 17 days contingency period as both lenders are slow to give final approval.

What has surprised me most is how the lending arena has really changed and underwriters are very stringent so I feel actually lucky that I have 790 FICO and large percentage down payment. I only had one lender tell me they could not get the rate I was seeking. This is definitely an area that agents can add a lot of value.

It does seem that the rules of the residential real estate game are changing and many agents are holding on to the old ideas, if you have buyers that are Fence Sitters please help them in get the best deal possible in the best buyer’s market in ten years. Remember the consumer is informed and wants to feel like they are getting value for their purchase.

Back to the house, plans are shaping up well as I have been having interior people through the house over the past week. New flooring, stain and paint will be order in a week or so. Hope to close in second week of November and be in by early December for the holidays.
4 votes Thank Flag Link Fri Oct 19, 2007
Update on offers. Good news we are having our counter accepted on a house. The house was originally priced over $3MM in 2006 went off the market (I think divorce) and have had a few price reductions where it sat for over 100 days at $2.695MM. My original offer was $1.925MM (30% below) and was countered over multiple times; the owner had done price reductions to $2.495MM to try to find other buyers but with no luck. I have heard multiple times through my agent that this was the lowest price at $2.5MM, $2.45MM and $2.4MM. This house supposedly had been in escrow at $2.65MM and $2.6MM but had dropped out twice due to financial issues with buyers (all hear say).

To make a long story short. We will be going under contract at $2.35MM and I was able to negotiate most furnishings in the price probably values over $100k as the house was empty and I do not have enough furniture to fill the house. I am coming in around $375/sq foot which is very good for the area (average listed is $465 and sold is $457) for a custom home with pool on a good lot. I still think with time I could do better but the house is really well maintained and fits our family very well and in a good market definitely is worth over $3MM with a little updating.
Thanks again for all the feedback. My realtor was able to perform through the whole ordeal, I am sure she was embarrassed at times but her commission will still be over $80k gross which is 30% more than she would have thought when she started the process. I think she is amazed that we got the seller to accept the offer but I need to give credit to sellers’ agent as she went to bat numerous times to the seller and spent 6 hours this week cataloging the furniture. We are at 11 counters. I will reply back as requested as now I need to negotiate some financing. If we can get closed the house is a home run as it needs little work.
3 votes Thank Flag Link Thu Sep 27, 2007
Thanks for the honest responses and laugh if you want but I think I will come out ahead no matter what price I pay. It is really hard to time the market but one thing I do know that all the houses we are considering have doubled or tripled in price since 2002. Is it really a low ball offer or a pricing issue? Like most markets, supply and demand will dictate price and now the demand is very low and supply (14 months of inventory at our price range) is very high. If a seller has made a decent profit since acquiring the home why would they not consider an offer if they feel that their equity maybe at risk. I am waiting until after the summer when the market will crawl to a halt and the media will continue to paint a bleak picture. Remember the additional issue is people need to get financed on these homes and the cost of money has gone up for most people or they have a contingency. I am sure all agents are having a hard time closing their deals. All I know is the price reductions are coming fast and only 2 homes out of 48 properties are in escrow. By renting since June 1st, I think I am gaining $25k a month in purchasing power. Keep tuned, as Fence Sitter will become luxury home owner and still afford my kids education.
3 votes Thank Flag Link Tue Aug 21, 2007
Isn't that the truth, Patrick. Just wait for the inspection:

"This is the CAR. Drop the pen and step away from the standardized inspection demand form!"

"Stay back Realtors, or the deal gets it!"

"Let's be reasonable here. If you sign that addendum, you know we have to take you down."

"Don't be a hero copper, er, I mean Realtor. One false move from the home inspector, and I'll burn this whole transaction down!"

"What do you want?"

"A helicopter, a full tank of gas, and these 374 repair items."

"You know that's not going to happen."

"Make it happen. How about a cheese pizza while I wait?"
2 votes Thank Flag Link Thu Sep 27, 2007
Thanks all for the great feedback, I am loving the banter. Offers that have come back are still off what I am willing to pay but at least I now know which sellers are interested. I plan to make additional offers in the next week in another area that we are interested in.
From my analysis and experience in the market there are three types of sellers out there;
1. Will not sell unless they get their price usually higher than thier neighbor,
2. Will sell if they get a price within 95% of the highest price to buy something else
3. Must sell for a multitude of reasons.

I find it hard to believe that a seller who has made 50% or more on their house (our most recent house appreciate 30% a year since 2001) and needs to sell for whatever reason (divorce, empty nester, life change, relocations) will see that the run is over and may take their gains. Like the stock market, there will be great bull runs and bear runs but listing agents are still at the sellers whim in setting pricing so homes sell. I think we are in a real estate bear run with supply way over demand and/or affordability. In the end I think time is on my side in finding a home that will allow for future appreciation rather than continue to decline.
2 votes Thank Flag Link Sat Sep 15, 2007
Fence Sitter:
You said, "Is it really a low ball offer or a pricing issue?" and "the price reductions are coming fast and only 2 homes out of 48 properties are in escrow. " And to answer Jim's question, yes the home sold for 30% below its most recent listed price and I don't think the home was necessarily "overpriced" at the asking price. Then you say, "Next step will be to start feeding market information to listing agent to show how market is steadily declining and to support my counters."

I think the only market data that you can feed the listing agent to support your 30% below offer is the Oak Park, IL Frank Lloyd Wright home. Most of the market data says that nationally prices are only declining by about 3% not 30%. If only two homes sell and they sell for about 95% of asking price, you are not going to have much of a case for a rapidly declining market. I think Melody made the best point by asking, "Are comparable homes selling for 30% below list price?" The decline should already be reflected in the listing price. If the house has been on the market for two years without a price reductions, that's another story. You need to find the motivated seller that priced his home 10% below market value because he is motivated and then offer 20% below that. Or you need to look at auctions where the starting bid is 30% below market value.

Don't fool yourself Fence Sitter, you are making low ball offers. I think you will "come out ahead". But it is no different than the joke about the guy going to the bar and asking a girl to go home with him and getting slapped in the face. After this happens several times, a friend asks why he keeps being so rude as to get his face slapped. His response is, "If you ask enough girls, eventually one will say yes and go home with you."

My original listing price was $925,000. Would you like to move to Oak Park, IL? Make me an offer, I won't slap you in the face.
Ruth
Web Reference: http://www.oak-park-il.com
2 votes Thank Flag Link Sat Sep 15, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
Hello Fence Sitter:

Congrats on your purchase - close escrow by now, I am sure. I do admire your persistence and determination, and we also appreciate your popping in and give us updates.

I have a NorCal buyer who thinks the same way as you did. Thought you might be able to consult her - she wonders if only Realtors are on Trulia.

Here's the link http://www.trulia.com/voices/Home_Buying/I_am_interested_in_…

Sylvia
1 vote Thank Flag Link Tue Nov 6, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
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Well, Sitter,

A premature congratulations. You did well, and you now sound more experienced than that golly-gee-whiz sort of question of yours that started this whole thing off.

I agree; I think lenders are bone-headed these days. They beat up good customers and boot-lick the ones in trouble. No wonder they're in such a mess.
1 vote Thank Flag Link Thu Nov 1, 2007
This is my policy -

If my clients wants to make an offer at 30% below asking and would not go up. I will look at the history of the property and consult my client. I will also ask my client how they will feel if they lose the house because they insulted the sellers. If they are fine with that, we will go with the lower offer. Either way, if my clients are really serious, I might chat with the listing agent jut to get a feel of the situation - how motivated the sellers.

I never refuse to make an offer as long as my buyers know the possible consequences.

If I am the listing agent, I always consult my sellers to look at all offers; don't get personally involved and counter them.

A business transaction is a business transaction. Just like fence sitter did, he wanted to offer 30% but ended up getting the house for more than 30% off and he is relatively happy - at least from what I can see; and also, by knowing Fence Sitter, if he does not think this is a decent deal, he would not go with the price.

I had a deal where my seller refused to counter; two months later, we dug up the contract, extended the expiration date, countered back to close to my seller's asking price, hardly gave in to request for repairs and sold the property. My seller was happy after all was said and done. If they never made the offer (at the price the buyers were willing to offer at the time), and if my seller did not counter, there would be no contract.

When the house is sold, both sides can be considered as successful in this transaction.

Sylvia
1 vote Thank Flag Link Sun Oct 14, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
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Jim:
I don't think Fence Sitter ever planned on buying a home at 30% off, just using it as the start of negotiations. You sound as though you are trying to say, "I told you so." When in fact, Fence Sitter is the winner the the "I told you so" competition.

My friend is very upset with his agent because she has repeatedly persuaded him not to make low offers. The homes were not worth more to him, so several offers were never made. He has seen a couple of those homes SELL for what he wanted to OFFER and has finally succeeded in getting a contract for a price she said they would be INSULTED if she presented that. The sellers immediately countered back with a huge discount and then negotiations continued.

As a seller who has dropped my price by 25% in only 4.5 months, I'd be curious to find out if any interested buyers were discouraged from making a low offers (as the Broker-in-charge at one of the largest agencies in town said was customary). My friend's sellers and the seller of Fence Sitter's home all tried unsuccessfully to sell back in 2006. I thought right along with the saying, "a home is only worth what someone is willing to pay for it" goes right along with "just make an offer".

Fence Sitter:
Thank you for bringing this to everyones attention!

Ruth
1 vote Thank Flag Link Sun Oct 14, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
If you don't care about math skip this post:
This is just to revise the percentage calculations I ciphered previously to support my contention that while Fence is a shrewd negotiator, he does not appear to winning the house at a 30% discount to the list price :

He offered $1,925,000 on the house when it was listed at $2,695,000 . that translates to offering 28,6% below list. He is now in escrow at $2,350,000; he gets a $2,000 inspection credit and furnishings he values at $100,000 Altogether the price, furniture and inspection concessions are percented at 16.6% of the sellers list price when Fence Sitter made his offer.

It turns out (in hindsight anyway) that Fence's original agent was foolish to not drop the original lowball offer out there. I continue to maintain that the agent's refusal to do so was not an ethical mistake, merely a business decsion.

The fact that the house went into contract twice when it was listed at $2,695,000 might seem to support that as a market value, but that is very soft support. We don't know what the contract price for the failed escrows were, and, well, they failed to close. But I vote that we be giddy about it and assume that Fence is getting $447K in price and other concessions resulting in a 16.6% discount --- As great as it is, it is not Thirty Percent.

So I return to the original question: is 30% too low to lowball? The answer is still not an unequivocal YES! -
Yes, because it was okay to get the negotiations started, The seller wasn't insulted enough to stop dealing with Fence. Everything will work out great in the end,
No, because it didn't succeed in obtaining a 28.6% discount from list price.

It is pure speculation from admitted ignorance for me to speculate that Fence might have acheived the same discount that he has now (or even better!) If he had lowballed the price by just 20% instead of 28.6% - In this case it makes no difference whether I am right or wrong.
1 vote Thank Flag Link Sat Oct 13, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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Jim he had 11 counter offers. The Realtors in this deal must have also been trained in Hostage Negotiations.
It had to have been all Haggling.
1 vote Thank Flag Link Thu Sep 27, 2007
Mr.P, Other/Just Looking in Arizona
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Congratulations. Way to step out in a Buyers market. If I did my numbers correctly you purchased the home at 13.3% less than offer, including the furniture at an estimated value of 100K that would be 16.5% less than offer.
Of course the appraisal will tell a different number.
Good luck with the rest of the process, again way to take advantage of a buyer market.
1 vote Thank Flag Link Thu Sep 27, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
Fence sitter,

It's ironic that I came across this question today, as I just wrote a blog yesterday about the notion of a "standard" percentage of list price to offer. I'll post the link in the web reference if you are interested in a rant. There is no such thing as a standard percentage that is reasonable for all properties across the board. Every property is unique. Every seller is unique. Every list price is unique. By looking for what is considered "normal," all of that gets forgotten. Some prices are tremendous values at list price, and will not be ripe for much negotiation. Others are so grossly overpriced that 30% off might not even be enough to offset it. As a buyer, the object should be to secure the best value, not merely the most money off of list price. Study the comps and the market trends, and make your offer accordingly - on a home by home basis. The percentages are great for academics who study the overall market, but won't mean a hill of beans to the ONE seller with whom you are trying to negotiate. Therefore, you should take with a huge grain of salt any outside advice from someone other than your agent (with no specific knowledge of the property in question) pertaining to a reasonable amount to offer. All of this being said, 30% off of list does sound hopelessly farfetched.
1 vote Thank Flag Link Sat Sep 15, 2007
Hello Fence Sitter (with due respect to your identity - you owe me one, here):

Sorry I missed your question from before. Hey, as a buyer's agent, we are obligated to present everything our buyer wants to offer, sounds like somebody did.

So, you told us about the 7 offers, two no response, two no counter, and what happened to the three responses? Just want to get as much background information as possible.

Strategy for information to feed to selling agent? Believe me, if a house is sitting on market for months, is grossly overpriced, and has no interest at all, I am sure that listing agent is doing everything to let his /her owners know they need to reduce price.

If you still wonder, come up with your own comps and show that to the L.A. - just make sure you don't offend the L.A. (not even seller yet because you are only try to teach L.A a lesson about the market, right?).

There are tons of data out there and if you think the 30% below is fitting to the particular property you are interested in and you won't buy that house unless you get that 30% reduction, then by all means show it to the L.A.

Just remember that L.A. is not the seller and if the seller's motivation is not there, they really won't reduce the price. I know people who basically withdrew from the market because they want to wait for the market to come back up.

But then again, I think you might know much better than what you let on.

Sylvia
1 vote Thank Flag Link Sat Sep 15, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
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Update, made 7 offers this week at 30% -35% off latest list price. Had three responses, two homes did not respond as they are agents and not motivated, two homes did not counter (assume as it was too low). Homes have reduced substantially, with one over $1MM on an original $2.8MM. I did see two price reductions by same listing agents above who are representing homes above.
Next step will be to start feeding market information to listing agent to show how market is steadily declining and to support my counters. I see deal happening in November with hopefully a before year-end close. Any suggestions on information to feed selling agent in order for them to make their sellers understand the market pressures?
1 vote Thank Flag Link Sat Sep 15, 2007
Your offer might not be worth the ink and paper or the time it takes to write it.

It is just as ridiculous to write an offer at 30% below VALUE as it is to take a listing at 30% above value.
Although the expense in writing frivolous offers is miniscule in comparison to the cost of frivolous listings, it rarely makes any sense.

I am not calling Fence Sitter out as any thing other than shrewd. He wants to make a shrewd deal. He might think he will have the last laugh on that old urban legend joke, where an exwife sells the house at a ridiculous price, just to shiv it to the ex-husband. Maybe there is a basis for that urban legend.

Or maybe Fence Sitter has some awareness that the seller is senile, mentally ill, or in dire financial stratis? and thus ripe for advantage taking?

From the agents point of view, if the home is listed by another agent, in the MLS, it is very unlikely to be so far overvalued that a 1.4 million offer would make any sense. It is entriely ethical for him to refuse to represent you if all you want to do is make (what that agent perceives to be) a frivolous offer.

The agent has a reputation, he does not want to damage it by becoming know as the silly guy who writes frivolous offers.

If the seller is mentally disabled and would actually take an offer that is 30% below value, then the agent may not want to become part of an ethics controversy.

there could be an exception such as the one Ruth pointed out. A Frank Lloyd Wright house that sold for a 57% discount from OLP. (Was it also at least a 30% discount from last list price?) And if the house is 41 to 42% over priced then a 30% discount puts it right back at value. { I did the math }.
1 vote Thank Flag Link Tue Aug 21, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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I would say it depends on a number of things: how motivated the sellers are, how long the listing has been on the market (active) and what the comparable homes are selling for. Are comparable homes selling for 30% below list price? The worst that can happen is that the sellers are insulted and will totally ignore your offer (instead of counteroffering you). Good luck.
1 vote Thank Flag Link Tue Aug 21, 2007
It seems excessively low but your agent is required to present your offer. You might want to read through this post:
http://www.trulia.com/voices/Home_Buying/Can_I_offer_or_belo…

A Frank Lloyd Wright home in Oak Park sold in January after being on the market for a year and a half. The sales price was $3.3 million or 57% of the original asking price.
Good Luck,
Ruth
Web Reference: http://www.oak-park-il.com
1 vote Thank Flag Link Mon Aug 20, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
That's great. Congratulations. I have more faith in actual real estate than in appraisers. I'm so glad it came out over asking price. Will we be hearing from you again, or will it be 5 to 7 years before you enter the fray of our Q&A?
Ruth
0 votes Thank Flag Link Thu Nov 1, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
Update, signing docs tomorrow. Will close next week. Had to work the lenders as all of So Cal is considered a declining market but house appraised for above asking. Glad the lenders are less busy as we had to be persistent to get the rate we wanted. Have about $60k of updates to do which will start the day after closing. The house will be happy to have occupants as it has been on the market for 230 days.
Keeping the faith in real estate.
0 votes Thank Flag Link Thu Nov 1, 2007
My negotiations professor liked to quote a study that showed that in house transactions, the most common outcome of price was the average of the latest asking price and the offer.

So if the asking price is 1M, and the offer was 900k, the average result would be 950k....

They liked to use that study to justify the idea that you'd make the absolute lowest offer you possibly could justify and get them to even tell you the time of day afterwards.
0 votes Thank Flag Link Mon Oct 29, 2007
Hi Fence, it's possible your agent knows that deal isn't going to fly based on what the other agent has told him/her. But in all honestly, if you insist, he should write it up and present it. Now, if he/she refuses, you should contact the manager to discuss the issue because if you go to another agent, you will cause a commission problem and that can jeapordize your integrity with the other agent. Good luck.
0 votes Thank Flag Link Sat Oct 20, 2007
"Fence Sitter is the winner of the "I told you so" competition". - Ruth

Yes, but his agent was not unethical.

Ruth - I am glad you saw through my weak disclaimer of admitted ignorance when I was really making the "I told you so" case.

"As a seller who has dropped my price by 25% in only 4.5 months, I'd be curious to find out if any interested buyers were discouraged from making a low offer" -

Well, yeah, Ruth, If I am showing houses to a buyer, I will always encourage them to make appropriate offers on correctly priced houses in preference to making appropriately low offers on over priced listings.

Remember we only get paid for successful transactions.

Here is my logic spelled out mathematically as I usually do:

If :::

there is a 10% chance that a transaction will result from offering 30% below the list of a house that is 30% overpriced.
and
there is an 70% chance that a transaction will result from my buyer offering on a house that is priced at market value.

and
there is a 50% chance that my buyer will tire of his relationship with me if I don't put him into a successful transaction within the first 3 offers

then

there is a less than 50% chance that I will ever earn a commission by just low balling overpriced properties,

but there is 98% chance that I will earn a commission with the buyer by concentrating on correctly priced properties -

***

If I want to maximize my income while at the same time providing superior fiduciary care to my client I will present and promote correctly priced properties in front of overpriced properties every day until the sun burns out.
-I must be careful however that my presentation and promotion of the preferable properties is not misconstrued by the buyer as a refusal or even a reluctance to make lowball offers upon his insistence.

The idea for me is to keep me in the employ of the client and complete a transaction.
I can't make a dime unless I succeed to do both.
0 votes Thank Flag Link Sun Oct 14, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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Is 30% too high would be the better question. I have seen many a home in that range with pricing based on agent or seller opinion of value (Fantasy land) rather than true and factual data (Reality). 30% below list price is an arbitrary number just like the listed price on many a home in the 2mm + price range. If the listed price is reality based then it would be a bargain. If you could attract buyers based only on promises of buying at 30% under list, I would start pricing all of my clients properties at 50% over market, come down by 30% and have a VERY happy seller. Is 30% too low? ?? Based on what.
0 votes Thank Flag Link Sun Oct 14, 2007
Sounds like you have pretty good luck so far, Keep going! Show us the Thanksgiving picture in your new home later!

Sylvia
0 votes Thank Flag Link Sat Oct 13, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
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Update, inspection done. Have been offered $2,000 credit for A/C and Heating inspection and owner will fix a few things (trash compactor, exterior garage lights,...). Roof is still a little worrisome as it is a red clay tile roof, very sturdy looking but costly to repair and replace. These roofs typically last for the life of the house. One contractor said $500 to repair broken tiles and fix any areas other contractor said $4,000 for the same work but included 200 cracked tiles. I was only able to count 25 or so cracked or broken tiles. Seems like they had attempted to fix in the past due to the house had been in Escrow twice in the past seven months. No real noticable leaks but how often does it really rain in So Cal. There were a few vents that I could see have had water come in but that would be expected.

Waiting for final letter from lender for approval to lift contingencies. Any other words of wisdom.. Hope to close midNovember. House checked out really well with no deferred maintenance. Need to update flooring and a little interior painting. Have designer assisting us on a few things. Wish us luck.
0 votes Thank Flag Link Sat Oct 13, 2007
Fence Sitter, It has been really interesting to see the process you have gone through. Please keep us posted! I'm anxious to see how your inspection comes out. Although the seller says they won't pay for any repairs- don't hesitate to ask if there are any big ticket items. After all, would they rather go through with a "sure thing"- or wait indefinately for a new buyer?

I hope the rest of the transaction goes well for you!

Patti Phillips
800-680-9133
0 votes Thank Flag Link Sat Sep 29, 2007
I would check on permits to be sure nothing was done to the property that was not permitted... especially the pool. As it was built in 1992 you may want to be sure the furnace is not on the recall list..

We are not seeing price adjustments on closing costs. If you want the seller to pay some of these items they should be addressed in the original contract.
0 votes Thank Flag Link Sat Sep 29, 2007
Kaye Thomas, Real Estate Pro in Manhattan Beach, CA
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Thanks I agreed with you inspection is necessary not sure why agent would have wanted to wait. Could it be she thinks I am cheap ;) Inspection is set for tomorrow $875 will get in a few days. I am also getting the previous inspection report. Any thoughts on items that would be unusual to keep an eye out for and would require me to discuss with seller. Site is flat with pool and home is from 1992 so some mechicals may need attention. Mike Ford had a great response below so thanks.

Is anyone finding price adjustments on closing costs due to a slow cycle? Agents have picked title and escrow, what should I look out for as it has been a few years since I went through the buying process. Anyone find better pricing on remodeling services; flooring, painting.. I am sure alot of agents are telling their sellers to spiff up their house before putting on the market.
0 votes Thank Flag Link Sat Sep 29, 2007
You should always obtain your own report.. it may seem silly but often something missed by one inspector will be picked up by another. There is also a question of liability. You can ask for the reports.. however the reports are not valid for anyone other then the person who paid for the report.. in CA the report is not transferable.. so if something was missed the inspector is not liable nor is he liable for anything in his report..
I would never allow a client to use an old inspection report ..if necessary I will pay for a new inspection that is how serious I am about having a new report.
0 votes Thank Flag Link Fri Sep 28, 2007
Kaye Thomas, Real Estate Pro in Manhattan Beach, CA
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Yes, they can refuse BUT you can also refuse to use them since there is no agreement on place. The professional Realtor understands the only real way to begin negotiations is with a written offer. I would submit the offer and start the process. The worst that could happen is the seller saying no.
0 votes Thank Flag Link Fri Sep 28, 2007
A property is valued as what somone is willing to pay for it, depending on the motivation of the seller you just never know in this market.
Web Reference: http://www.MichaelRicks.com
0 votes Thank Flag Link Fri Sep 28, 2007
Fence Sitter:

Depending on how old the inspection report is, if the house has sat on the market for years, the inspection report can be outdated. The other advantage of having another inspection report is you can get a second opinion, and you can be present and ask the inspector about the findings, which is always better than reading two years old report.

No, I won't expect the listing agent to work with you on getting things fixed, I would expect the listing agent to be on the sellers side to negotiate on the sellers behalf; especially since they already went through 11 counter offers with you.

By the way, the agents won't tell you things that are not true - referring to you comments about the L.A. said that there were a couple previous offers - they could be sued if they misrepresent the information - since this could have material impact on you - whether you will pay that much money or not.

Sometimes enough if enough. You have a great deal and you know it. Haggling over a few repair items (which you know from your posting below) may push them over the edge, especially with divorce, emotion may already run high. But I am not the one who has been negotiating, so I won't speculate. Just make sure you heed to your agent's advise and you are fine with losing the house over small things.

Sylvia
0 votes Thank Flag Link Thu Sep 27, 2007
Sylvia Barry,…, Real Estate Pro in Marin, CA
MVP'08
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Absolutely not.

Houses are sitting, feeakin forever, and if you don't ask... you don't get.

You run across a Realtor that is unwilling to make that offer for you... thank them for their time and adapt the all inclusive and IMPORTANT word... "NEXT!?!"

The world is your oyster right now. I have gone in $200K low on $700K homes and I am making deals happen.

There are so many homes for sale. Seller's that do not have to sell HAVE to compete with those that DO.

Take advantage of it now! With the mortgage industry changing the way it is, we don't know how long this opportunity might last.

Go For It!
0 votes Thank Flag Link Thu Sep 27, 2007
"A helicopter, a full tank of gas, and these 374 repair items."
That`s funny.

"seller shall make no handyman's repair before closing escrow"
Fence you`ve come along way, don`t blow it by asking for a cheap repair.
Also Get your own inspector, $700. is nothing on a 2 million dollar home.
Think of it as insurance

Dog day afternoon.
0 votes Thank Flag Link Thu Sep 27, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
Paul nice barb quite funny. I do have a question in your same vein: In our last counter offer which I have accepted. The listing agent wrote "Seller has maintained this property very well all along and seller shall make no handyman's repair before closing escrow"
I have asked my agent to see if the current listing agent will give us the inspection report from the previous 2 escrows. I do agree witht he statement above that the house is very well maintained as the landscaping and indoor plants are in great condition. The current owner is quite well off and has numerous homes but this one has not been lived in for probably close to a year. If my agent knows the inspector who wrote the inspection report should I accept that report or pay the $700 to get my own inspection? In order to be fair should I expect the listing agent to work with me on getting items fixed or just let them go? I think the house will stand up well to inspection. Anything to worry about for a house that has sat for awhile?

On pricing, I do agree the house was priced high at +$3MM but I have seen stuff that needs a lot work sell for more so in a good market when inventory is scare. I think when the owner put the house back on the market at $2.695MM that was still a little high but 2 people had it put under contract. I think at $2.35MM with 95% of furnishings including TV, audio, and outside furniture make for a good price.

I'll be happy to share with people more insight as I go through the process.
0 votes Thank Flag Link Thu Sep 27, 2007
If you like the house, drop an offer. Know that you may hear no, be willing to negotiate and perhaps you'll meet somewhere in the middle.
0 votes Thank Flag Link Thu Sep 27, 2007
Another way of looking at the percentage discount that Fence Sitter is knocking down is to divide his per square foot of $375 versus the average sold per square footage price of $457 psf. Dividing the former by the latter, I figure that his discount to recent "market" at about 18%. based solely on square footage.
Contract price to original price $2.35M div by $3.00 M = 78% (a 22% discount from OLP )

I justify my earlier posts with this mathematical muse: At 3M the seller was 20% overpriced {assuming market value was the final LP of $2,495,000}. Over time the seller had to reduce the list price down by 17% from OLP to $2,495,000.

Through tenacious negotiations, Fence Sitter chipped of another $145,000 (plus $100K in furniture) to nail down an additional 5% in price concession from market and 4% in personal property for a total of 9% concession.

My negotiating question is: Did starting 30% below the original asking price benefit Mr. Sitter more than If he had offerred 25% of OLP to begin with? { $2.25M } Or did it just result in more time haggling, more counters written ?
0 votes Thank Flag Link Thu Sep 27, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Sorry, correction for below.

an urgent need, or the house is older*
0 votes Thank Flag Link Thu Sep 27, 2007
Sitter,

If the house has been on the market a while (or off and on), or if the seller has an irgent need, or is older, they may be interested. What you need to know is the house's selling history. Many prices, especially at that level, have value only on paper. The actual gains at a sale could be pretty good from a seller's point of view if the price you offer covers their needs.

The most likely thing is a counter from them. The game out here is to make a "good offer," then include contingencies, like home inspection, to bring the price down in negotiation. Sometimes sellers list a high price to cover themselves for this eventuality. If you offer what you think the house is really worth without contingencies, and point that out, you may do better. Bargains at this level go fast and furiously.

BTW, Sitter, I let the bear into your front door, so go ahead and skin it. lol
0 votes Thank Flag Link Thu Sep 27, 2007
Hey, can we interview you for press releases on the National Open House on Nov 4th? We'll have to keep all of your information confidential since you are still under contract. Please contact me privately via my profile.
Thank you,
Ruth
0 votes Thank Flag Link Thu Sep 27, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
Congratulations. Good luck on financing.

I just did a $100,000 price reduction. That puts me at about 25% below original list price. It brought some people back that were afraid to make a low offer.

I think the price reduction to find other buyers is a real situation with the market. I think that is the lesson for many agents who say, it will sell for the right price. There just aren't buyers out there. So either the seller should take their home off the market or they need to negotiate with people like you looking for a bargain.

How many homes did you put offers on before this one?
Ruth
Web Reference: http://www.oak-park-il.com
0 votes Thank Flag Link Thu Sep 27, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
If your agent refuses to submit an offer I would get another agent. He can disagree, but it's not the agent's place to decide what you're willing to pay for a home and he's too "embarrased" to place the offer then he needs to grow up.
0 votes Thank Flag Link Wed Sep 26, 2007
Sitter- In many areas in CA a 30% offer under list price will be automatically rejected but that said your agent should present any offer that you write.. However whether or not your offer receives a response is another question. Sounds as if you are not interested in a particular home but rather are looking for a price range.
I believe you are correct in your assessment of the three types of sellers in our Southern Ca market. While there is a perception that prices in SoCal are going to crash so far we are not seeing that happen other then in marginal areas.

As an example while prices are beginning to soften in most SoCal Beach Cities they are not anywhere near the numbers you would like to see.. so your offer might not be taken seriously and you probably wouldn't receive a counter.. however Long Beach is having some real problems and you would likely receive a good counter if you offered on a home there. The same is true for areas in Westlake and Thousand Oaks .. where homes are seeing some serious price reductions.

In SoCal ...real estate really is local and values can differ drastically from one location to another.. even in the same city.
0 votes Thank Flag Link Mon Sep 17, 2007
Kaye Thomas, Real Estate Pro in Manhattan Beach, CA
MVP'08
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Hi Fence, It is really gratifying to see a consumer coming back to read the answers to his question. Sometimes I wonder if many of the questioners do return to read the answers. -- So, - Thank you, Mr Sitter!


Some times I get laughs even when my post has a serious point. - My position was that it is ok for you to make low offers, and it was also OK for an agent to decline your business. You are not wrong, your refusenik agent was not wrong. Mike Ford is very wrong. The agent had no legal obligation to write what he thought was a frivolous offer.

Fence, I find your way of thinking refreshing, and thought provoking.

While it is statistically unlikely that a particular individual in Southern California would sell a home for a 30% discount from actual current value, it is not impossible. Because of the large of pool of sellers down there, it is statistically very probable that somewhere in So Cal someone, somewhere will sell a home to someone else at a 30% discount between now and November. It might as well be you that is the lucky buyer in that game of chance.

Since you say you are only asking for a 30% discount from list price, I say your chances of acceptance are higher on properties that have lots of "bargaining room" built in to their list prices. For example a property priced at 140% of its current market value could sell for a 30% discount to its list price it would be a fair deal for both buyer and seller. (You would wind up with a true 2% discount from market value)

You make a good point about the seller whose property has doubled in value, agreeing to get out while they still have a gain. The seller with a two million dollar house that he bought for one million, sells it for 1.4. Seller takes a $400,000 profit and leaves you with $600,000 in instant equity. -- Since the seller is agreeing to split their past six years of capital gains with you, would you like to offer to split the next six years of your capital gains with the seller? - I'm just throwing out an idea.

In order for your origianal 30% discount strategy to have the best chance of succeeding while still being of benefit to you, you would need to look at and offer on the homes that are overpriced over the market by about 25% to 35%. That way you increase your chances of a 30% discount from list price offer being accepted, yet you still end up getting a property at a true 5 to 12 % discount from actual market value.

I seriously think that this is a workable strategy. Now that I have worked it out on paper, it makes sense to me. I would try it for a client of mine who insisted on it, just for the sake of experimentation. It is worth a try.
0 votes Thank Flag Link Sun Sep 16, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Hi Ruth,

Yes I am laughing hysterically. I often make analogies of dating to selling property, so I particularly liked your bar pick up lines. My analogies are not nearly as entertaining as yours. I speak about sellers pricing to get buyer to want to approach the property and the value of being attractive instead of needy. I compare that to a seller chasing a buyer by reducing in small increments too late, much akin to a desperate single chasing for a date or attention. Yours was so much more entertaining, so thanks for the LOL hysterically.

Deborah
0 votes Thank Flag Link Sun Sep 16, 2007
Deborah Madey, Real Estate Pro in Brick, NJ
MVP'08
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your agent quit when he refused to present your offer. he is legally obliged to perform as your faithful servant.

find someone who understands the nature of an agency relationship.

the market being what it is you have no way of knowing what any given seller will take on any given day.
0 votes Thank Flag Link Sun Sep 16, 2007
I haven't heard Deborah laughing hysterically yet.
Ruth
0 votes Thank Flag Link Sat Sep 15, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
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