What is a safe criteria to follow when putting an offer? Is 25% below asking to start a bad idea? Should it based on DOM, repairs needed, etc.?

Asked by Arianna, Bergen County, NJ Tue Sep 21, 2010

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Tre Pryor’s answer
Tre Pryor, Agent, Louisville, KY
Tue Sep 21, 2010
The primary place to look at Comparables (Comps) to see what a similar home sold for in that area. Then you make adjustments both up and down to see where the true value lies. There is no definitive way to find the value of a property other than this because the Asking Price could be very high, a little high or spot on.

Find a great Realtor then trust their advice.

All the best!
-Tre Pryor
Web Reference:  http://www.TrePryor.com
1 vote
Mark Atteber…, Agent, Louisville, KY
Wed Oct 13, 2010
"What is SAFE criteria"? All that you said and more... Days on market, repairs needed, etc. I work with many investors and specialize in foreclosures and distress sales. The strategy with those deals is far different than a traditional "retail" deal. We look at marketability, competitive bidders, the ability to finance a property and the extent of the disrepair. I've had deals that were as much as 55% off the list price. When you deal with the banks there is NO emotion from the sellers side. It is all number crunching and their probability to find another qualified buyer in a short amount of time. If the house is in need of great repair, in a less-than-desirable neighborhood, with no activity in 40 days and multiple price reductions that didn't produce any traffic, it becomes the perfect storm where they lose and you win.

It doesn't happen every day. The banks get tighter and there is more competition. You need to know the value to get a good deal. You need to be totally emotionally detached, where you don't care whether you get it or don't, to get the BEST deal.

Deals are done everyday...Some are found and some are made.
0 votes
gabriel palo…, Agent, Pompano Beach, FL
Tue Sep 21, 2010
Arianna,
We all search for our own safety net. Your question is excellent. It is uniquely personal.
The uncertainty of a job and income is the bottom line. It pays to take an umbrella when it is cloudy.
It prepares you and protects you from getting wet. In most cases with that protection you avoid the rain and the sun usually shines.In purchasing a home the more money you have to reduce the debt works the same way. You need to be the judge as to what is the worst case scenario of the payments you can carry.
I hope my point is not out of line . Your safety and the concern for your family is what we call in our industry your due diligence.

Good Luck,
Gabe
0 votes
Anna M Brocco, Agent, Williston Park, NY
Tue Sep 21, 2010
When making offers there are no standards as to how much below list price to offer--one needs to be aware of comps--recently sold similar properties in the immdiate area--after reviewing the data and possibly factoring in extensive repairs, if needed, a determination as to a fair offer can be made--what is your agent suggesting--do keep in mind that if the property is priced on target for today's market or slightly below, multiple offers may occur.
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Tue Sep 21, 2010
Your offer should be based on the facts of the market, names comparable sales weighted by days on the market. Using an arbitrary % - say the 25% you suggest - is a formula for failure. If the property is priced right, then it is likely it will sell within a small margin of asking - say 1-5% off, perhaps even at ask. The only way to answer your question is the analyze the specifics of the property you are considering and its comparables. A well constructed pricing analysis can be done by an agent that has access to the data and the know how to put it to good use - the analysis will provide a price range that will guide your bid and negotiations. Use this rather than pulling an arbitrary % out of the sky - you will have a far better chance of success if you do.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Brett Kennedy, Agent, Louisville, KY
Tue Sep 21, 2010
Ditto Tre because it all depends. Some areas are appreciating and others are gasping for life. The biggest discounts I'm seeing around the metro area are about 10% but I've also noticed areas where asking prices are dropping and the sellers are taking discounted offers after lowering their prices with the net effect amounting to about 15% or more. Having said that, a good agent or consultant can tell you which market is which and which property is priced too high, about right, or if it's a big bargain.
0 votes
Fred White, , Louisville, KY
Tue Sep 21, 2010
Yes, I do think that that it is a bad idea to think that any house that you are looking at is 25% gravy to the seller. If that's your plan, then expect a lot of sales contracts to recieve some snickers.

Every seller's situation is different, and every buyer has different needs. The constant for a buyer is what their needs are, while the variables are how the prospective listings meet those needs. Just compare houses and make see what you think you can best get for your money. Bottomline is, if something is not worth it to YOU, then it is not a good deal.

Now, if you would like to make an aggressive offer, make sure that you are prepared to do to so. Have financing or an approval letter ready to submit with a contract and let them know that you are a ready for a speedy closing. All in all, a buyer benefits from the advice of a good realtor.

Fred White
Keller Williams Louisville
0 votes
Anne Mayhugh, Agent, Louisville, KY
Tue Sep 21, 2010
We have been fortunate in Louisville that we haven't seen the big drop in values that other areas have. That being said some clues as to how to make an offer are: the days on the market, have there been any price reductions, property condition, and will it meet FHA criteria. Then have a REALTOR knowledgeable about the area do a comparable market analysis as well as an area market review to help determine what the current market value is. While it is a buyer's market, there are areas here that are doing very well.
Web Reference:  http://www.annemayhugh.com
0 votes
Ryan Frey, Agent, Crestwood, KY
Tue Sep 21, 2010
There isn't a general 'standard' to follow when it comes to submitting a low offer because every property is different. You need to search for comparables and determine fair market value before deciding how much to offer. I always tell my clients not be afraid to make a low offer if you think it is justifiable (i.e. DOM, repairs needed, etc), but you need to consider the possibility that it could put the seller on the defensive and ultimately end up working against you during the negotiation process.
0 votes
John Howell, Agent, Louisville, KY
Tue Sep 21, 2010
It all depends on who the seller is. If it is a bank foreclosure, they may already have priced the property low to sell. On the other hand, no bank wants to be a property owner. If it is a short sale, you could try. Once again, if it is a bank they don’t to foreclose. So they may sell at a 25% cut in price. Just don’t depend on it. If it is a home owner; It all depends on how much the owe and what there motivation is to sell. A lot of home owners owe more than the property is worth. I have had home owners bring cash to close on there own property. There for, most home owners can’t afford to bring cash to close. Any diligent buyer and there agent would know if a property is a bargain, just by shopping an area, looking at comparable sales in the last 3 months. In conclusion, if you are going to cut the price by 25% go for a bank foreclosure or short sale.
John Howell
REMAX Assoc.
0 votes
Debbie Rood, , Louisville, KY
Tue Sep 21, 2010
The first step should be to determine what fair market value is. Additionally your realtor can research several different areas to help determine how motivated the seller is.
Have your realtor look at the big picture, what has concession been in that area, does the asking price jive with what the comps say, have the seller's already vacated etc. Your realtor can point you in the right direction. Good luck.
P.S. I have had sellers not respond to a low ball offer because they were insulted. I certainly don't encourage that, but it does happen.
0 votes
Gregg Mitche…, , Louisville, KY
Tue Sep 21, 2010
I agree with Tre, he has given you the best advice.
0 votes
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