Buying or Selling a Home/Buying a home - negotiation
QUESTION: First, I read an article that mentioned offering a range for your initial offer so as not to offend the owner. Wouldn't they just take the top number if they were interested? Or would we still make the top number below what our top offer would be?
We have found two homes that we are interested in. One is a home that was bought to flip and has been on the market about 4 months. it was purchased for $299k and was originally listed at $475k, $104/sqft (says new appliances, new roof, new paint).
Other homes in the area were listed for $101sq/ft and went for much less ($86-$88/sqft).
They have similar acreage (5 acres), but the house we are looking at is about 1.5x the square footage, plus a large garage/warehouse.
There was another home sold close to the one we are looking at that was closer to the square footage and larger lot that sold for $91/sqft, but it was a short sale. However, it also was a much newer home with less we would have had to do to it.
This home that we are looking at would be one that we would eventually want to completely remodel the basement. It's currently built out, but it's really awkward.
Can you give any direction on how to proceed with negotiation?
ANSWER: Hi David,
Not sure what article you are referring to with offering a range of price to a seller...
the good part of the home you are looking at is the fact that it is a flip, for ever day they keep the property on the market they are loosing money in carrying costs... on the 'flip' side of that, if they own a lot of properties they may not care.
My suggestion is to make your offer... and see where the sellers are willing to close at... and bear in mind about what it took the seller to bring this home to a higher standard, not only did they have to have the vision, they had to have the MONEY... and LABOR to make it happen. That has a real value to it... especially if you like the product.
Additionally, you can not simply value off square footage, every lot and home is individual to what it brings, it is a start point not a finish point, have your broker truly look at the comparable figure out a start and stop point ... then make your offer and after one or two counter offers be prepared to submit your 'final and best' to the investor.. Remember they are not in the business of flipping a home to 'dump the price' and make nothing, it is how they make a living.... and they will have a bottom line be fore they decide to simply rent the property out... prices are on the increase and you stand to loose more if interest rates hike up..
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QUESTION: Thanks. We will keep all of that in mind. There are aspects of it we like, but not necessarily anything they would have done to it. It's more about the potential of what we would eventually have to do to it. They bought it for $299 and it's listed at $459. I know it's not their concern what we would have to do to it, but obviously we need to take that into consideration.
The link to the article is below. Thanks again for your insight.
I found it interesting the article starts with 'With the Real Estate Market in a Slump'... not in most areas, we have now been on the uptick for a few years, and gained considerable equity in the marketplace. So to think that sellers are desperate is not so in all areas....
You'd have to know exactly what they bought for 299, it could have a 155,000 rehab dump... again, they had the foresight to get the property to top value... I too flip properties and ready them for flip... I get the same comment ... 'but you bought it for X' ... true.... but you would have walked in and called it a 'Tear Down' I say not so... and put my money where my mouth is... so yes after months of hard work, and massive amounts of money to fix and carry the property, I too am looking for Top Dollar when I sell... I deliver value... so look at the home for what you need it to do... not what they bought it for.... don't be a player hater... not every one can or should flip... it is not for the faint at heart...
it is not being defensive of the what the seller paid, but I do think that many buyers if the shoes were on the other foot would do exactly as the seller is doing... again they flip to make money not break even or loose... now sometime they do loose... and that is a risk they take... what I said was figure out what you see the value as and make the offer with an end game for you and your family in mind... it has to be a win-win for both or there will be no sale...
Every market is different around the states... but most are no longer in a buyers market, it has been a sellers market for a lot of years now... a lot of buyers (a lot with all cash) and not enough homes for sale... and prices on the uptick...
again Good luck...