Home Buying in New Haven>Question Details

Dan, Home Buyer in New Haven, CT

I want put an offer in on two abutting condos owned by the same person. Lets say they are both listed for

Asked by Dan, New Haven, CT Wed Apr 2, 2008

100,000. First I think 15% should be taken of the price due to current market conditions. Second, I think another 15% should be taken off that price for the fact that I am buying both condos- resulting in an offer of 144,500. Using 10% for both reductions would result in 162,000. Am I on the right track here? Maybe I should offer the average of 144,500 and 162,000? Also, would it be best to state these calculations in the offer letter in attempt to show the seller my rationale?

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I show calculations with my offer IF they make sense. Unfortunately, taking 15% off ASKING price does not make sense. What if its priced 200% over market value.. is 15% off still a good price? No. You should be looking at 15% off Market Value. Use recent unit sales in THAT complex for comparables.

70% off is a great price, and I wouldnt expect an unMotivated Seller to accept that discount. If you want a deal like that, you need to target Motivated Sellers or properties in need of lots of repair (few buyers).
0 votes Thank Flag Link Fri Dec 26, 2008
I imagine that you might then decide to remove a load bearing wall, without any permits or authorization from any association. AND seems that you may too do all the work yourself. Just guessing....
0 votes Thank Flag Link Mon Sep 1, 2008
Bay said, “The condos were probably priced according to the current market conditions. I'm not sure where you came up with 15%, but your calculations are not very reasonable. Most likely, your proposed offer probably won't pay off their mortgage.”

Wow. Where do I start? Because they’re priced at X price means that they’re priced according to current market conditions? What are you basing this on?

And please explain to me, in your capacity as a Realtor®, why I should be worried about paying off the previous owner’s mortgage? How does that enter into my purchase equation? And I’m asking that as someone who bought a condo wherein the seller had to come to the closing with a check…

Bay said, “…but not at 30% reduction in price. That could be insulting, and you probably won't get a counter.”

Jesh. Here we go again thinking that sellers are going to be insulted by your offer (and interest) in their house. These days, if you’re not “insulting” the sellers then you’re offering too much!

Bay said, “Not all sellers are desperate in this market and you don't want to insult their intelligence.”

The seller owns two adjacent condo units. The seller is most likely a failed flipper/speculator. Hasn’t the seller already shown that he/she is both desperate (selling two units simultaneously) and stupid?

“No one in this world has ever lost money by underestimating the intelligence of the great masses…”
0 votes Thank Flag Link Thu Jun 5, 2008
If you are working with a buyer's representative, that person should do a market analysis for you showing you what has sold in that complex in the last 3-6 months. Your offier should be based on what similar units have gone for. Depending on the owners motivation he may be willing to discount the properties if you purchase both units, but 15% is probably more than most sellers would go for. Your best rationale for your pricing would be other units in the complex that have sold for what you are offering.
0 votes Thank Flag Link Thu Jun 5, 2008
The first question is: What are the condos worth? As is suggested below, it's possible (in fact probable) that the listing price reflects current market conditions. I know of condos that, pre-bubble burst, sold for $300,000. Now they're listed at $145,000 because that's an accurate reflection of market conditions. So, determine their real value.

Now, I tend to agree with you that you can ask for a discount if you're buying both. Although Lori's correct that the transaction costs on the two units will be double that for one, you are offering the seller something of value: The opportunity to sell both condos at once, rather than selling one now and waiting 60 days, 90 days, or more for the possibility of another sale. As the saying goes, "A bird in the hand is worth two in the bush."

This is a situation where you really have to strategize with your Realtor. And you have to attempt to determine the seller's motivation, as well as how much equity he/she has in the property. As Bay observes, if you offer so little that it won't even pay off the mortgage, your offer won't be accepted.

However, don't worry about insulting the seller. Worry about making an offer that works for you.

As for the point that properties sell at, say, 95% of their listing price--don't worry about that, either. For instance, suppose the condo starts off priced at $100,000. After 30 days, it doesn't sell and the owner reduces the price to $95,000. After another 60 days it still hasn't sold so the owner reduces the price to $92,000. Then it sells for 95% of $92,000...or $87,400. But, notice, that's only 87% of the original listing price. And let's take this a step further. Suppose there was a 3% seller concession (to allow for a no-money down FHA loan) or a 3% contribution to Nehemiah. Seller concessions don't show up as a price reduction. Net to seller before any expenses and commissions would be $84,778...or 15% down from the original listing price. Yet the statistics would show a sale at 95% of the listing price.

So: Figure out what the condos are really worth in today's market. Factor in anything you know about the seller's motivation and/or the amount owed. Reduce that number a bit for negotiations and for the benefit you're offering by buying both at once.

I have no idea what that number might be. It might just be 5% off from the current asking price. Or it might be 20% or more. But that's not the point. The point is: Do the calculations. Make sure you know the values. Then make an offer that works for you.

Hope that helps.
0 votes Thank Flag Link Tue May 27, 2008
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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Dan, what are condos selling for in that developement? The condos were probably priced according to the current market conditions. I'm not sure where you came up with 15%, but your calculations are not very reasonable. Most likely, your proposed offer probably won't pay off their mortgage. How long have they been on the market? What is the recent sold data? The seller would most likely welcome a buyer interested in both condos, but not at 30% reduction in price. That could be insulting, and you probably won't get a counter. Then, no matter what you offer you could have blown the deal. Look at the sold and pending data, then arrive at a fair offer factoring in that you are offering to purchase both condos. Not all sellers are desperate in this market and you don't want to insult their intelligence.
0 votes Thank Flag Link Tue May 27, 2008
Why on earth do you think that you should get 15% off because you want to buy both sides? The seller will owe 4 commissions (buyer and seller on both) plus has payoff and conveyances taxes due on both properties. Where does the figure 15% come from? If you can't justify it, then you certainly can't expect it.
15% off due to market conditions? Don't you think market conditions were taken into account when the places were listed? Are both condos of the same value? Same condition? This seller has expectation of selling their condos for a total of $200,000. We see a list to sale ratio in the high 90's , usually 95% so to expect them to reduce to $144,500 or $162,000 would probably get you the response from the sellers to keep on looking. Are you using an agent? You should be so you have a snowballs chance in getting these places. Your rational is not correct and if you really want these condos, you will have to seriously reconsider
0 votes Thank Flag Link Tue May 27, 2008
You have an interesting scenario in play. I would suggest that you look at what comparable condos have recently closed at in the area and, more importantly (in this type of market) what is currently active and at what price point. The New Haven market has slowed down but 15% is aggressive and does not reflect the local market condition. If you have an agent, ask him/her to put together a market analysis -- that is part of a realtor's job description. If you don't have an agent, get one -- you need someone to represent you exclusively in such a transaction. Regarding, stating the rationale in the offer -- leave that to the negotiation process. Don't show your hand to the seller up front. Hope this is helpful

Tania Stetinin
Coldwell Banker (Madison CT)
0 votes Thank Flag Link Thu Apr 3, 2008
Dan,
Yes depending on your local market if it is slightly down you might get it. Although depending on financial situation of the seller if you go to low you may risk insulting the seller and then you are out , they may not even counter. Definitely use your calculations to back up your offer. Sometimes it does help to persuade the seller to your viewpoint. Also talk to your agent and ask their advice they might have some insight into the situation.

Larry Story
Coldwell Banker Triad
0 votes Thank Flag Link Wed Apr 2, 2008
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