Home Buying in 02465>Question Details

Tanya, Home Buyer in 02460

For an asking price of 499,000 is a $350,000 offer too low?

Asked by Tanya, 02460 Thu May 22, 2008

Its been on the market 55 days, and hasnt decreased. It is in Newton a 3 bed 1.5 bath, under termite contract, is it worth putting in the offer?

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Tanya,
Just as a point of reference, over the last 3 months single family homes in Newton are selling like this:

$350,000-$399,999 136 average days on market and selling at an average of 91% of list price
$400,000-$449,999 50 average days on market and selling at an average of 94% of list price
$450,000-$499,999 91 average days on market and selling at an average of 98% of list price

So, your offer would definitely buck the trends. That's not to say this situation isn't unique and maybe the owner would be open to considering lower offers. You should just have a sense of what the recent history of sales transactions has been. And as a certified real estate appraiser, as well as a Realtor, I can't agree with the other answers more by stating that researching TRUE MARKET VALUE is the best one to formulate AND support whatever offer you make. Good luck!
0 votes Thank Flag Link Thu May 22, 2008
83% is the psychological threshold that seller would NOT think the buyers are making a joke, but it is NOT the average sold/list price ratio. If you take a look at the normal distribution, it is about 3 standard deviation from the mean (average).

So, it is an A+ buy from buyers' point of view, but very hard to get. e.g. I was the only A+ given at Abstract Algebra at UC Berkeley that year out of several hundreds students. They seldom give A+ to students.

So, if you are a seller, you need to list your home 17% more than what you want to start with and let the buyers to "chop" your price at lots of room and feel great about it and of course feel saving!!! Then, you will drop drop drop and eventually, it will sell at a ratio like 97%.

Go to an auto dealer tried to make an offer of 83% and do not be afraid that they will kick you out because they will sense immediately the A+ buyers show up. But, do not try to entertain offer lower than that, as a buyer ...

So, want to be A+ buyers in current market? Go out to see 3 to 5 houses each Sunday, and at the end of the day, make 3 offers to 3 best matched homes at 83%, and tell your realtor that you would buy the first one willing to sell you.

Continue doing so, you will be so excited to eventually HIT ONE you like at the price that thrill you ...
2 votes Thank Flag Link Thu May 29, 2008
Speaking of psychological issues, there I times when I just can't figure out the people on this site out. How did I possibly get a thumbs down for clarifying the fact that Dr. Yun is the Chief Economist for the NAR and not the National Chief Economist. The latter title sounded as if he was a government appointee, and I wanted to clear up that he works in the private sector. How could that be perceived as a bad thing? But, I will get thumbs down for this post also, so what can you do...
2 votes Thank Flag Link Wed May 28, 2008
"Based on Current MLS Data" Blah... Blah.. BLAH...
Write The Offer! Enough Already!Maybe Accompany it With A Handwritten Letter Introducing Yourself and Your Family To The Seller's,What You Like About The House,How Long You Plan To Stay There Etc.Some Times it is Not ALL About the Money.Thank You,
2 votes Thank Flag Link Wed May 28, 2008
Thanks everyone!
Peter, i wish everyone thought like you! I could say that we are first time homebuyers and have 2 kids, one of which we dont want to switch her school and the other who will be starting school soon, however, i do think it is all about money!

I think it's difficult in the Newton market, prices could range from 399,000 to over 1 million so i think to go by recent sales isnt easy!

My next question, does assesment matter at all?
1 vote Thank Flag Link Thu May 29, 2008
Peter,
Sorry, I seemed to have bored you (Blah... Blah... BLAH...) with those stats. Understanding you are an "exclusive sellers' agent" focused 100% on working strictly with sellers, I can see why you would encourage the buyer to just "write the offer". I was merely trying to provide Tanya with a perspective of what is actually happening in the current market in Newton. My background is in real estate appraisal. I have personally appraised over 1,500 single family homes in Massachusetts, so I tend to approach transactions from an analytical angle at first. Yes, I understand that sometimes it is NOT all about the money and handwritten notes and flattering soliloquies can sometimes make a difference. I just wanted to give Tanya a framework of what the last 400 or so single family properties have actually sold for in Newton. I think you'd agree that would be good information for buyers to have.

The_Bayou: I gave you a thumbs up for clarifying Dr. Yun's position. Important difference you pointed out.

Mike
1 vote Thank Flag Link Wed May 28, 2008
Yes, you are correct! I was mult tasking and didn't re-read! Here is a link from the presentation which I attended recently in Andover. Dr. Yun was a tremendous speaker! Hope you find it interesting! http://www.massnear.com/flyers/YunPresentation.pdf
1 vote Thank Flag Link Wed May 28, 2008
Well Tanya, some towns command the price, and the demand remains so the prices remain. Recent indicators by the National Cheif Economist, Dr. Yun, state that within a couple more months, that the market will begin to improve - steadily and by the beginning of next year more swiftly. As a Realtor, I am optimistic now and encouraged by the recent surge of buyers trying to get in the door of the great prices before the turn takes place. He stated that Massachusetts is going to lead the way on this turn of the market. So when you are listening to the news, or reading the print - - focus on what is actually happening in MA, and specifically your area with trends - - and not so much the nation. Good luck with your search!
Web Reference: http://www.VanessaR.net
1 vote Thank Flag Link Wed May 28, 2008
Thanks for all the help! "The Bayou", you are right!! I have lived in Newton all my life, and the asking prices are crazy! Hopefully, with this market, they will come down!
1 vote Thank Flag Link Wed May 28, 2008
Tanya,

Newton is a tough market. You will see homes that you believe are not worth close to the asking price, but they sell within 10%, often within 5%. People line up for the opportunity to buy into that school system at a low price. You will see extended families cramp into a three bedroom cape so that all the kids can use the schools. Never underestimate the value of a good school system.
1 vote Thank Flag Link Tue May 27, 2008
The best way to decide on an offer is to have your agent pull up the most recent sales in that area and closest comparables and base your offer on that information.
M.Molos
Century 21 Tenace Realty
1 vote Thank Flag Link Sat May 24, 2008
Sure, it's worth putting in an offer. Now, if it's priced "properly," you're only offering 70% of its approximate value. But investors do that all the time. Most of the time, we get turned down. But some people will accept. And, as Myke says, the asking price may or may not be close to the property's value. It could be lower, or even higher (as in the example he gives). So, before you think that $350,000 is an absolute bargain, you really need to know what it's worth, and therefore what price--if you could get it--would represent a bargain.

Being on the market for 55 days doesn't mean too much one way or the other. Houses are taking longer to sell, and 55 days in most markets is less than average. Even if the days on market were much longer--say 200 DOM--that could mean a number of things. On the one hand, maybe the sellers would really be motivated to sell. On the other hand, maybe they're stubborn and holding out for "their" price.

I do disagree with Myke on the termite contract. In some cases, people simply have termite contracts, whether or not they have termites. And even if the property did have termites, termite damage is repairable. Sometimes it's expensive, sometimes it's not. Depends on the extent of the damage. Obviously, have a home inspection done. And have pest inspection, too. But that alone wouldn't stop me from making an offer. (In fact, anything that scares off other buyers that's fixable--up to and including structural problems--is great. Just so long as I know how much it'll cost to fix, I can factor than into my offer.)

So, determine the property's real value. That's your ceiling price. Make an offer somewhere below that.

Good luck.
1 vote Thank Flag Link Thu May 22, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
also - in trying to figure out "how low is too low" - the asking price isn't the best place to start.

Sellers do not nessicarily base thier asking price on the home's actual market value. They base it on - "how much do i still owe the bank? can i get enough money out of this to pay off my car loan too? can i push it enough to get the money for a bigger down payment on my next house..."

Instead of looking at the asking price - you first have to determine whether or not the asking price is even reasonable given your specific market. You need to look up similar homes in the immediate area that have recently sold - look at what they sold for, how long they were on the market, etc - and try to place this home in comparison to those. Typically - this is what an agent would help you with.

Also - "too low" - is a completely subjective term. Some homeowners will be offended at anything other then the full asking price. Some people will say "this house was paid off 10 years ago, and anything's profit - i just want to be done with this". Who knows. Your best strategy is to price the home for the market you're in, and be able to have the data and the confidence to back the offer up if/when it's countered.
1 vote Thank Flag Link Thu May 22, 2008
It is not too low, it is INSULTING!
0 votes Thank Flag Link Fri Mar 29, 2013
Cheng,

If you come across some properties that has a potential of selling at 83% of list price, I would be very much interested in buying such a discounted property.
0 votes Thank Flag Link Fri Jun 13, 2008
Cheng:

Just curious--not criticizing--where does the 83% come from? I'm interested in the negotiating aspect (I highly recommend Roger Dawson for those interested in negotiating techniques)--can you provide more information on 83%?

Thanks.
0 votes Thank Flag Link Thu May 29, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Cheng,
Based on current MLS data, there have been 388 single family sales in all of Newton over the last 6 months. The average sales price to most recent list price ratio is 97%. Not sure where you're getting your 83% "psychological threshold" figure from, but it doesn't seem to be applicable to the current Newton market. Even sales price to ORIGINAL list price ratio is only 93%...Considering very few, if any, buyers are paying OVER list price, I would venture to guess that with an average 97% sales price/list price ratio, NO ONE in Newton paid 83% of list price in the last six months.

Are you suggesting that of the 388 parties that bought in Newton over the last six months, NO ONE got a good deal?!?!? I'd have to vehemently disagree.
0 votes Thank Flag Link Wed May 28, 2008
Cheng,

That is very interesting, and good to know. I was doing a similar analysis on my local market, but on a much smaller scale. I was looking at homes sold within the last 2 years in specific neighborhoods. What I found was that most homes sold for about 97% of the ending list price. But, many of these homes had been through several rounds of price reductions from the original list price. It was as if there was some type of psychological value to receiving an offer of at least 97% of what you were asking for, even if they had to reduce their price to get that offer.
0 votes Thank Flag Link Wed May 28, 2008
Use the 83% psychological theshold. that is you need to ask if $350k is above 83% of $499k? If not, you are not going anywhere ...

I have studied hundreds of thousands of sold info, and 83% of listing price is about what a buyer can obtain the best price. Otherwise, you just need to wait.

This is also true for buy a car from dealer. If you ever bought a new car at auto dealer around 83%, you are an A+ buyer.
0 votes Thank Flag Link Wed May 28, 2008
Don't forget that Dr. Yun is paid by the NAR and is hardly objective. For more objective views of the economy and home prices, check out http://www.patrick.net articles and discussion - and, look around you at gas prices, food prices, travel, home price trends, etc..
0 votes Thank Flag Link Wed May 28, 2008
Recent indicators by the National Cheif Economist, Dr. Yun, state that within a couple more months, that the market will begin to improve - steadily and by the beginning of next year more swiftly.
-----
To clarify, I believe Dr. Yun is the chief economist for the National Association of Realtors, not the National Chief Economist.
0 votes Thank Flag Link Wed May 28, 2008
Hi Tanya,
sorry to be the bearer of bad news, but if this is the house on Mosman St., you should know that MLS shows it has had an accepted offer since 5/13. The buyers are likely in the post-inspection / pre-P&S stage at this point. The property in MLS is denoted as Active-"flagged", meaning that it can still be shown 'for backup offers' in case the first deal falls through ... usually this status will change to "Under Agreement" if/when the P&S is signed.

Good luck with your search!

George Politis
Prudential Howe & Doherty
0 votes Thank Flag Link Thu May 22, 2008
Assuming you are working with a Buyer Agent, he or she has a fiduciary responsibility to you. Part of that responsibility is to do a comparative market analysis on the property in question, which would give you a reasonable range of value. If you are just giving a $350,000 offer a shot - - then go for it, but if you don't totally love the property, why bother. If the $350K gets rejected, or countered, are you willing to work that number to get the house you want? If you are looking at $500K homes, and you can only afford $350K then you are likely wasting your time, and your Realtors time. Bottom line is, I think it would be wise to ask your Agent what the fair market value is, and be prepared to negotiate. Good luck! We'd all love to hear if your $350K offer gets accepted on this $500K house! Oh, and the termites aren't an end all! Years back an inspector told me that there are 2 kinds of homes in New England, the ones that have or had termites or carpenter ants, and the homes that don't have them YET! Treatment plans are good, just be sure that any damage that may have been caused was repaired.
0 votes Thank Flag Link Thu May 22, 2008
I asked this before of someone else - but why would you want to buy a house that has known termite problems, at any price ?
0 votes Thank Flag Link Thu May 22, 2008
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