How do you decide on how low an offer you can make without it being insulting when looking at a house to buy? Me and my wife aren't really actively looking, but found a house we like and they have already dropped the price three times in less than a month, starting at $214,900 and now at $199,900. How low of an offer would you make? Thanks

Dwjdvm said:

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How do you decide on how low an offer you can make without it being insulting when looking at a house to buy? Me and my wife aren't really actively looking, but found a house we like and they have already dropped the price three times in less than a month, starting at $214,900 and now at $199,900. How low of an offer would you make? Thanks

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Just some thoughts my wife and I shared before offering on a house:

How much do you think the house is worth? What are its selling points? What do you like about it that you can't get elsewhere? What do you like about it that you can get elsewhere? How hot is the market? Is the neighborhood changing for the better or worse? Was 215 in line with the neighborhood or is 200 more in line? If you're going to live in it, are you okay with your surroundings. If its a rental does the math work out for rents? Is there something that needs expensive repair with the property?

A distressed sale can make people have knee jerk reactions. If 215 list would had a tire kicker offer of 200 they would've jumped all over it.

Also if you're buying, you need to work with Jamie with Red Pear Realty. My wife and I used him and I can't recommend him enough. He's awesome and the 4k he's going to save you on closing costs are going to go a long way to getting ahead on your mortgage. His title company recommendation saved us a ton of money as well.

Years ago we lived out of state and wanted to move back to TX. We weren't in a hurry however. We listed our home near a price point that gave about 4% negotiating room so that we could not lose money.

The first offer was 20% below asking. It was so far off we weren't anywhere near a middle ground to negotiate to that was acceptable. Since we weren't in a hurry to leave our counter was "GTFO".

The buyer and their realtor were offended. My realtor told them "I told you they aren't in a hurry, make a real offer or as they said, GTFO".

We were under contract w/a good price from the same buyer 3 days later. We were insulted by their first offer, but their money was still good when it came back as a reasonable offer.

We had a potential buyer offer $25000 less than we were asking after three days on the market. It was ridiculous. We didn't counter, just said no.

A month later, they made a new, more reasonable offer at the same time another offer came in. We accepted the other offer with a contingency over theirs because they wasted a month of our time when they could have started with the better offer.

Our realtor said it was their realtor's fault and every time she has dealt with her, she convinces her clients to do the insulting low-ball offer. I wonder how it's working for her overall.

Dwjdvm said:

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How do you decide on how low an offer you can make without it being insulting when looking at a house to buy? Me and my wife aren't really actively looking, but found a house we like and they have already dropped the price three times in less than a month, starting at $214,900 and now at $199,900. How low of an offer would you make? Thanks

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A lot of people have searches set up at an arbitrary $200K level, and this home will start showing up now. I'm guessing it won't go much lower. Since you apparently don't want a realtor to help, just subtract a few thousand from your offer.

As a realtor i have had a couple buyers insist on low balling even after I provided detailed comps. They were more interested in getting a great deal than a great house. Neither worked out for them. They gave in and paid fair prices but wasted a bunch of time. Real estate is not a game. Luckily this is rare.

Dr. Alister MacKenzie said:

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Pull their Deed of Trust from the land records, figure out their amortization schedule, assume what they currently owe on their mortgage + X% for closing costs. See if that's anywhere close to $199. Then offer a dollar above.

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This is the actual way. But there's some more factors to consider like home value appreciation, money they've lost while owning them home (taxes, insurance, maintenance, renovations, HOA fees, etc), and timing in the market. Compare all of the above with the comparable sales and you can usually find the motivation for the list price. It will also help your Realtor to explain the offer when they present it.

But I wouldn't personally low ball. I would offer what you are willing to buy the house and a number that you wouldn't be pissed about if you got beat out. Why screw around? If you like the house and the comps support the price, make an enticing offer. Very few are stupid enough to price a house 20k above market. You're not going to get a steal. This isn't eBay. The ones who are, either don't know the value of their home or have ignored competent information and will likely be too stubborn to accept a low offer anyway.

Don't screw around.

Dwjdvm said:

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How do you decide on how low an offer you can make without it being insulting when looking at a house to buy? Me and my wife aren't really actively looking, but found a house we like and they have already dropped the price three times in less than a month, starting at $214,900 and now at $199,900. How low of an offer would you make? Thanks

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Assuming the price is based on good comps, I think anything below 90% is seen as a low ball.

-Don't use a realtor and set up a showing with theirs, or go to an open house. Ask questions about the sellers to get a feel about where they are.
-Be truthful about your intentions - not actively looking, but noticed the sellers may be motivated. "Do you think they would accept $175k?" That will allow the realtor to soften the blow for the buyers and basically let them know a lower offer may be coming.
-Ask if the seller's realtor would be willing to cut her commission to 3% and you wouldn't be represented (same cash to realtor and buyer). This essentially cuts their asking price to $193k and your offer is now 91% asking.
-Use TREC form to make offer. Make it clean. No home warranty. No cash back at closing. Get preapproval letter. Maybe even send a personal note to the sellers saying where you are in the buying process, how much you like their house and hope they consider your offer.

Dr. Alister MacKenzie said:

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Pull their Deed of Trust from the land records, figure out their amortization schedule, assume what they currently owe on their mortgage + X% for closing costs. See if that's anywhere close to $199. Then offer a dollar above.

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Explain to me how the Deed of Trust reveals how much a homeowner currently owes on their house?

Do what my buyers always did when I sold.
Make a reasonable offer, then use inspection to get repairs done and deduction in price. Then make sure to get a lowball appraisal to ask for more money off the price.

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How do you decide on how low an offer you can make without it being insulting when looking at a house to buy? Me and my wife aren't really actively looking, but found a house we like and they have already dropped the price three times in less than a month, starting at $214,900 and now at $199,900. How low of an offer would you make? Thanks

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If you are seriously looking for yourself, I'd tell you to look at the comps, and make an offer with some negotiation room to get you close to fair market value while trying to be below that. Just because they started at $215,000 doesn't mean its not actually worth $150,000. When there's a disconnect between what is being asked and what is being offered, I always submit offers along with the comps to show the seller where we are coming from.

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Also if you're buying, you need to work with Jamie with Red Pear Realty. My wife and I used him and I can't recommend him enough. He's awesome and the 4k he's going to save you on closing costs are going to go a long way to getting ahead on your mortgage. His title company recommendation saved us a ton of money as well.

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Thanks for the recommendation man! I'm not going to post details, but your purchase was actually a pretty good example of what I described in the original question/answer above. You got a great deal on a good house and played the process excellently. In my opinion, you paid less than market value for a house with a lot much larger than typical for your neighborhood.

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Real estate is not a game

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It's the most fun game there is! Ha, but I agree with your point.

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Explain to me how the Deed of Trust reveals how much a homeowner currently owes on their house?

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If the buyer is taking out a mortgage on the property, there will be a promissory note, and the deed should make reference to the note and the initial loan balance. ~90% of home loans are 30 year fixed, so you can guess with 90% certainty what the mortgage balance is today. But again, mortgage balance and market value are different things.

Thanks for all of the replies. My thought was that we are not in a hurry, but if we could get something nice for cheap we would take it. We went to an open house for this property and decided it was not even worth making a low offer for. Too much we would want changed to make it what we want. We will just keep waiting patiently at this time.

Red Pear Realty said:

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In my opinion, you paid less than market value for a house with a lot much larger than typical for your neighborhood.

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The county appraisal district agrees and found my protest to have no merit.

This goes for anyone, if they would like to hear more details about my great interactions with Jamie, and specifically review how we saved money and navigated the negotiation process please feel free to PM me.

When I wanted to tell the seller and their agent how I really felt about some of their chicanery, Jamie did a great job of getting our points across professionally.

Check the tax appraisor site then Google the owners. You might find info that indicates they might be willing to sell fast and low.

For example, we saw a home where the couple was clearly separated. Mailing address out of state was the husband's, and the wife's myspace page showed her already slooting it up in Vegas.

We didn't offer but followed it. The home sold cheap

We made a *significantly* lower offer on a house. We decided not to use a realtor and were going to use a real estate lawyer for closing. I hired a local appraiser to do a formal appraisal on the house. To all of our surprise, it came back far lower than expected and we were concerned with getting the loan. We offered right in the middle of the appraised value, which was ~14% lower than asking, and it understandably upset the sellers. However, their counter was ~9% lower than asking. The realtor (with interest in the home) wasn't going to rebate any commission for closing, so it seemed like a decent deal. We ended up walking for other reasons and all ended up with a fairly bad taste in our mouths, no real fault of the sellers. I believe the seller ended up selling the house for more than our offer, and we're going to use a realtor next time around. Seems like a lot of mess could have been avoided. I dunno.

coleasterling said:

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We made a *significantly* lower offer on a house. We decided not to use a realtor and were going to use a real estate lawyer for closing. I hired a local appraiser to do a formal appraisal on the house. To all of our surprise, it came back far lower than expected and we were concerned with getting the loan. We offered right in the middle of the appraised value, which was ~14% lower than asking, and it understandably upset the sellers. However, their counter was ~9% lower than asking. The realtor (with interested in the home) wasn't going to rebate any commission for closing, so it seemed like a decent deal. We ended up walking for other reasons and all ended up with a fairly bad taste in our mouths, no real fault of the sellers. I believe the seller ended up selling the house for more than our offer, and we're going to use a realtor next time around. Seems like a lot of mess could have been avoided. I dunno.

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Majority of Realtors won't rebate the buyer's 3%. It does happen, but it's rare. Best to just get the buyers agent and use someone like Red Pear who rebates you 2%.

When we were browsing more, I had fairly good luck with approaching listing agents about rebating a portion. No one would do 2%, but 0.5-1% was definitely on the table. I agree. Now that I know about places like Red Pear, it doesn't make sense to go about it alone.

First house I ever made an offer on was 1% under list. They countered full and I walked and it sold for list shortly after.
First house I ever sold the first offer was 35% under the asking price. I countered with 10% above asking.

Lowest I have offered is 12% under. They countered with 9% but I knew the situation from doing some DD from the internet and neighbors. If it's a sellers market then there is pretty good chance you won't get the house if you lowball and it is priced to recent comps. Length of time and time of year plays a big part as well.

In the end if you really like the house is it worth not getting it over $20 -$40 a month because you tried to be cheap ?

mgreen said:

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As a realtor i have had a couple buyers insist on low balling even after I provided detailed comps. They were more interested in getting a great deal than a great house. Neither worked out for them. They gave in and paid fair prices but wasted a bunch of time. Real estate is not a game. Luckily this is rare.

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Apparently, you don't do much business in Fort Bend County.