making offers in this market?

Asked by Susan, San Francisco, CA Wed Nov 28, 2007

I am getting ready to start making offers on homes. In my area, I am noticing many homes purchased in '03-'06 are adding an average of 100-150k per year to their listing price. Many of these homes have been sitting around for a minimum of 30 days and upwards of 6 months. This seems excessive to me since rents and salaries have not seen the same amount of growth. Some homes have modest price reductions, but still not enough to make reasonable offers. I recognize some people may have remodeled the kitchen or whatever, but my belief is those improvements just make the house livable, which should be market value and not a huge profit.

My strategy is to offer 2004 prices which I feel is fair in this market since pricing after that seems caused by the bubble. Do you think this will offend sellers or are they really serious about selling their homes, or should I simply stay away from homes purchased in this time frame?

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Marvin EMarv…, Agent,
Wed Nov 28, 2007
BEST ANSWER
Go ahead and bottom fish and be proud! (Can you tell I'm a bottom fisher.) The key is to get the most bang for your buck. Do not worry about offending sellers since oftentimes (especially now) they will be glad they even received an offer. As your 35-year-in-the-biz agent friend mentioned, don't be disappointed if you lose out on the house of your dreams. (Which it looks like you're not worried about.) If you do find one that you fall in love with, then make a reasonable offer (but slightly below what you're willing to pay) and negotiate.

Much Success and have a great holiday!
Web Reference:  http://www.eMarv.com
1 vote
Mike Kelly A…, Agent, Santa Rosa, CA
Wed Nov 28, 2007
Susan, We had a very long and interesting "thread" on the whole subject of bottom fishing from a buyer down in southern california. He basically took your same tack but not with the same rationalization. He had some difficulty finding an agent to present his offers but finally got a pretty good deal at I belive 20-30% off. He was in the $1.2mil price point. If you're looking in Danville I suspect the same type of pricing?
I've always been amazed at some of the offers folks will take. However, your wanting to just concentrate on properties purchased in '03-'06 is limiting. Those folks who got in at that time might have NO Equities to come down on! I'd just find the homes that are available and go from there. Folks with more equity and proper motivation might be a better bet. Good luck!
1 vote
Cindy Maves, Agent, Fort Myers, FL
Wed Nov 28, 2007
You didn't say how long you plan on staying in the home that you are planning to buy. Real Estate should realistically be a long term investment, at least five years. Buyers that purchased in the ladt three years and then expected to sell a year later, are now the sellers that are have difficulties selling.
You may have more luck with what you are trying to do by looking for a home that a seller as owned for quite some time. They may be more receptive to a lower offer.
Web Reference:  http://www.northropteam.com
1 vote
J R, , New York, NY
Wed Nov 28, 2007
Rather than basing your offer on what profit you think a person should be making, you will be more successful basing it on what similar homes have sold for. At least you will have some concrete facts to back up your offer. "My offer is x based on recent sales of xyz". Not "I'm offering x because I don't think you should be making a profit". You don't know what condition the house was in when it was originally purchased or if it was purchased from a family member or below market value back then.
1 vote
ian cockburn, Agent, New Orleans, LA
Wed Nov 28, 2007
Are you an investor, or a home buyer? Are you Bottom fishing for a deal, or serious about buying? These are the questions to ask yourself. Then find the home that best fits your criteria for your lifestyle, long and short term, then make an offer.

This will save you alot of time and effort, for you do not want to make a life changing decision on price point or X$ per sf alone. Overall price and unit price should be a guide towards what you can afford/spend as you maneouver through the bay of buying, not how you feel about what someone paid "back in the day", since they may have paid at a higher interest rate, among a multitude of other reasons.
Web Reference:  http://www.iansellsnola.com
1 vote
Jackie Blank…, , North County, SD
Wed Nov 28, 2007
Congratulations on your pregnancy and congratulations also for not letting pregnancy hormones dictate your real estate buying strategy. My experience working with expectant mothers is sometimes they get emotionally attached to a particular house. I'm a mother of two, so I do understand. Am I getting off the subject? Sorry!

I say submit your offer, don't worry about offending them. Those you offend won't sell you their house and that'll be the end of that. This is time for people with thick skin. Don't get discouraged if you get turned down more than once. However, you might find a seller with the 'right' circumstances who may take your offer. Give the sellers the opportunity to say yes. Good luck!
0 votes
Marvin EMarv…, Agent,
Wed Nov 28, 2007
Susan asked: "Does anyone know how much it costs to add onto a house?"

This is a whole different animal. There as so many different things this encompasses. I have provided a resource to give you some idea of what you have to consider.

In general and under normal circumstances, you really don't want to go through a home addition project unless you can move out of the house while contractors remodel it. You should get at least 3 (if not 5) estimates and get 3 or more solid references from each. References that you can speak with in person and that can show you the work they did on the house.
0 votes
Susan, Home Buyer, San Francisco, CA
Wed Nov 28, 2007
Thanks for all the great answers. I guess I shouldnt care what the seller paid, but I think if they bought in the past few years, they are probably less likely to negotiate. Im sure it is a case by case situation.

My plan on the homes I have picked out is to offer between 15-30% below listing depending on the house, amenities, size etc.

We do plan to stay in the home awhile...longer if we get a 4 bdrm...if we decide to have a 2nd baby. Many homes are only 3 bdrms, that look nice, but may not be practical at this point. I dont want to live in a
McMansion either (big house, small lot like many 4bdrm homes in Danville) since my husband likes to play drums and I am an artist. We like our privacy.

Does anyone know how much it costs to add onto a house? Many homes seem to be on fairly large lots but only 2000sqft. so it would be feasible to add a room, but with a new baby that could also be a nightmare. I really want to move into a house that is ready to go so I can focus on taking care of the baby.
0 votes
Kathy Flood, , Woodland Park, CO
Wed Nov 28, 2007
Dear Susan: I believed this is the result of 1) market was at it's peak then and many homes are worth less than what they paid; 2) 100% financing at low credit. These Sellers are now upside down by the time they pay their 1st, 2nd (either or both of which may have a prepayment penalty) and Realtor/Attorney fees. They have no equity and may have to come to the table with cash. The only way to work through this is with a licensed, experienced Realtor that can determine what the house is really worth, how much is owed, and if necessary, they are experienced enough to work out a short payoff with the bank if that is the only alternative. Offending the seller? I tell my sellers this is a tough tough market and they need to put emotions aside and look at the bottom line. Good luck.
Web Reference:  http://www.kathyflood.com
0 votes
Susan, Home Buyer, San Francisco, CA
Wed Nov 28, 2007
No. I am a serious buyer who saved enough money to put 20% down with reserves and good credit looking for a place to live to raise my future family (I am pregnant) , not a short term investment. I just dont want to lose my down payment in a year or 2 because prices keep going down. It would bankrupt us since most of our money is going toward the house, and that is no way to start off raising a family. So if you consider a buying strategy to protect our assets, bottom fishing, then that is what we are doing I suppose.

Even an agent who has been in the business for 35 years recommended this to us as a buying strategy. He just said be prepared for disappointment if you dont get the "house of your dreams". I am not really worried because at the moment there are at least 30 homes of similar quality sitting around in the neighborhoods I am interested in that could work for us.
0 votes
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