Offering below asking price

Member since 2023 · 59 posts · 17 votes

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

Quote from @Katherine Roberts:

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

If they bought it at $305 and sold it to you at $340 they're not making a profit. Their RE commission alone is going to be $20k. If it's not their primary there will be a capital gains tax as well, and perhaps depreciation recapture if it's a rental. That also doesn't account for the fact that $305k in 2021 dollars is $340k in 2023 dollars using 6% annual inflation as a figure.

Irrespective of all of that, if you figure out what a property can be profitable to you at, that's going to be your offer. I would say that the market might not be able to support your idea of "a good deal" and you might just either have to settle for an "OK deal" or wait it out.

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Dustin Allen
Real Estate Agent · South Lake Tahoe, CA · Member since 2016 · 680 posts · 644 votes
3y
@Katherine Roberts
What they bought it at is irrelevant to your thought process. You need to evaluate the property on its merits and figure out what makes sense from your purchase perspective. Not everything will make sense if you are coming from a purely investment perspective. That doesn't mean that the home won't sell for their asking price or more. There may be someone else that has different goals and objectives who will be happy to pay their price. That's ok, make the offer that makes sense for your strategy. If there is no way to bridge the gap, then you move on and find other properties to offer on.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

If they bought it at $305 and sold it to you at $340 they're not making a profit. Their RE commission alone is going to be $20k. If it's not their primary there will be a capital gains tax as well, and perhaps depreciation recapture if it's a rental. That also doesn't account for the fact that $305k in 2021 dollars is $340k in 2023 dollars using 6% annual inflation as a figure.
Irrespective of all of that, if you figure out what a property can be profitable to you at, that's going to be your offer. I would say that the market might not be able to support your idea of "a good deal" and you might just either have to settle for an "OK deal" or wait it out.
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
3y
3 thoughts. What they laid doesn’t matter. First. What if they paid $400k 2 years ago, would you offer $450k? Second. Making the offer, assuming you have the cash and/or credit to close, doesn’t cost anything. Make the offer expecting a no but be prepared in case it’s yes. Third, it doesn’t matter to the seller what it’s worth to you or me, on,y to the person that will pay the most.
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Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @Dustin Allen:

@Katherine Roberts
What they bought it at is irrelevant to your thought process. You need to evaluate the property on its merits and figure out what makes sense from your purchase perspective. Not everything will make sense if you are coming from a purely investment perspective. That doesn't mean that the home won't sell for their asking price or more. There may be someone else that has different goals and objectives who will be happy to pay their price. That's ok, make the offer that makes sense for your strategy. If there is no way to bridge the gap, then you move on and find other properties to offer on.

Thank you! This is very helpful.
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Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @JD Martin:

Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

If they bought it at $305 and sold it to you at $340 they're not making a profit. Their RE commission alone is going to be $20k. If it's not their primary there will be a capital gains tax as well, and perhaps depreciation recapture if it's a rental. That also doesn't account for the fact that $305k in 2021 dollars is $340k in 2023 dollars using 6% annual inflation as a figure.
Irrespective of all of that, if you figure out what a property can be profitable to you at, that's going to be your offer. I would say that the market might not be able to support your idea of "a good deal" and you might just either have to settle for an "OK deal" or wait it out.

Thank you that helps me to put things into perspective. I didn’t consider inflation or anything. I spoke to a bank about a loan and they said at the asking price, the margins are too thin. I’ll have to speak to more lenders and see what they think as well. My underwriting was conservative, and there’s not a ton of room for increasing the cash flow right now. It’s a duplex with 46 storage units. The storage units are priced slightly under market value but by only about $5. That’d give me a $230 increase in cash flow a month but I guess I’m still trying to figure out what a deal is that’s worthy of my time.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
3y
Are the sellers expectations out of line with the market and reality? Or are your expectations out of line with the market or reality?
Someone needs to readjust their expectations, but we obviously do not have the information to tell you who.
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Chad Shultz
Real Estate Agent · East Central Florida · Member since 2021 · 121 posts · 94 votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

Katherine: Welcome to the real estate investment game. Yes, I said, "game." Basically, it is one large game of "cat and mouse" that we all play on a daily basis. Sellers want a certain amount and buyers want to pay less. Each enters into a type of dance until a price is agreed on and the sale concludes. However, as an investor, you should not get involved in this dance or game with sellers. You should pay what you think the property is worth, not worrying about what the seller paid or what they may or may not make. Stick to your formulas and your comfort zone and make offers. Put the choice in the seller's hands. After all, every offer you DON'T make will certainly not be accepted. At least if you make the offer, you put the choice in the seller's hands. Every seller will get to a point of motivation. Whether that is price, timing or some other reason, they will all hit that point. You want your offer sitting there and waiting for when they get to that point. A you may write a lot of offers, but eventually, your timing will be right with the right seller and you will be successful. Your job, as an investor, is to purchase properties at a price that is right for you and nobody else.
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Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @Bill B.:

3 thoughts. What they laid doesn’t matter. First. What if they paid $400k 2 years ago, would you offer $450k? Second. Making the offer, assuming you have the cash and/or credit to close, doesn’t cost anything. Make the offer expecting a no but be prepared in case it’s yes. Third, it doesn’t matter to the seller what it’s worth to you or me, on,y to the person that will pay the most.

No, the numbers wouldn’t make any sense whatsoever. And okay, I guess I’m nervous that I’ll offend someone (which I know is a silly thing to be nervous about and doesn’t make sense in buisness). We’re headed to look at the property today and then I’ll determine if I want to make an offer! Thank you for the advice.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
As far as an offer price, it doesn't matter what they bought it for, what numbers you need to make it a good deal or what you can afford-what is fair market value for the home?
Are there recent comps in the area that would justify that low of an offer?
Not all houses work as a rental and sometimes you have to adjust your expectations or be flexible in what you are looking for...or more patient and wait for the right home. The last one is the hardest.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

No, they wouldn't make a profit. And such thinking is something you need to be corrected on. Take into account fees(6%) and any other stuff to get the house ready(assume at least 1, if not 2% of sales price). So tell me now does $330k make sense?
With that said, it's not a bad idea, but this is all market related. Where is that market, and that exact area(zip code, street, etc.) going for sale to list? If it's going high 90% and you're offering 15-18% below list you're going to get agents upset with you. Then, on the follow ups, good luck with them wanting to work with you. Word gets around with agents. They'll let future sellers/buyers know about so & so.
Everyone's going to tell you to do that, and their thoughts shouldn't play into your thinking but you got to remember the psychology of the deal is to get all parties to agree. If you're in a competitive market, there are agents that'll blackball you for getting cute. If you're in a market where prices are coming down, sale to list is 80%, for sure. ****, shoot lower.
1 Reply
Amir Khan
Investor · Coppell, TX · Member since 2018 · 311 posts · 166 votes
3y
@Katherine Roberts great answers above to consider. Another thing is if you are confident about your analysis/underwriting, then put in your offer. There is a direct relationship between how many offers you put and how many deals you end up closing. The process alone will help you get better.

In your offer, briefly explain why you are offering that price to the broker. Sometimes, there might be additional details and/or market data that the broker may be able to provide that may change your analysis.

Finally, you never know whether the seller is willing consider your offer until you try. You don't know their situation (I once bought a property at well below market price and found out that the seller was going through bankruptcy process and court had required him to consider all offers).
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

A property is worth what a willing seller accepts from a willing buyer. No two appraisals are the same. The condition of the property is different than it was two years ago. The world of risk and taxes have changed. Who said they paid a "fair" price two years ago? It's all numbers and today's numbers for what you want to do are different than two years ago numbers for what they wanted to do.
Offer 80% of asking aand see what they say. They may counter & sell for 90% of asking. Who'd to know. Don't pre-suppose you understand their needs and wants and what they will do.
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Jerryll Noorden
Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes
3y
The issue here is simply this.

You need to attract the right audience for your business.

If Nike is trying to push out their latest running shoe design, but their ads only show up infront of people that are paralyzed from the waist down, you can argue and bicker all you want to try to convince them that this shoe has the latest in running technology. They are the wrong audience.

And this is the biggest mistake I see everyone make.

You need to find motivated sellers.

Now before you go further, you need to first define what a motivated seller is.

Consider this. Katherine, go on and find me a Gafilheimer. Go on. Get up off your chair and go get me a Gafilheimer, now. Right now.

You can't can you!

Why!?

Well for one, you have no stinking clue what a Gafilheimer is, let alone what it looks like so you can snag one. How are you possibly going to target motivated sellers, when you have no idea what they look like, smell like, state of mind is, where they hang out at, or what their wants, desires, and needs are?

So let's run a Quiz, and everyone can participate:

True or False:

1. A motivated seller is anyone that wants to sell their house.
- True
- False
2. A motivated seller is anyone that needs to sell their house.
- True
- False
3. A motivated seller is anyone that has to sell their house fast, for cash NOW!
- True
- False
4. A motivated seller is anyone that falls on their knees, begging you to please please PUHLEEEZE “buy my house right now fast for cash now, otherwise I will explode into a million pieces and die the most horrible death with stinky breath”!
- True
- False
Believe it or not... the answer to every single one of these questions is False.

Allow me to give you the right answer:

A motivated seller is anyone willing to accept an offer below market value regardless of the reasons why.

Start to see where your mistake is? Wrong audience. To most of you, a motivated seller is:

is anyone that falls on their knees, begging you to please please PUHLEEEZE “buy my house right now fast for cash now, otherwise I will explode into a million pieces and die the most horrible death with stinky breath”!

So you try to find those... but consider this...

Isn't a person in foreclosure in dire need to sell. Heck, they HAVE to sell, heck, if they don't sell, bad things will happen.

But... are they willing to sell below market value? No! They rather pour concrete down the drain than sell to you even at market value, let alone at a discount.

The simple answer here is. You are targeting the wrong audience.

Look what happens when you target the right audience:

I am not just spewing out "theories". I am extremely big on data, and data is like your typical woman. They are always right. You may not like what they are saying but if you don't accept it as gospel, bad things will happen.

All hail MSOOTKAUG.
3 Reply
Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @Russell Brazil:

Are the sellers expectations out of line with the market and reality? Or are your expectations out of line with the market or reality?
Someone needs to readjust their expectations, but we obviously do not have the information to tell you who.

That’s fair! I think that’s where I’m struggling. I’m not sure if I have unrealistic expectations or if the numbers would work for someone else at their asking price. I guess that doesn’t matter because they don’t work for me at the asking price!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
3y
Quote from @Katherine Roberts:

Quote from @Russell Brazil:

Are the sellers expectations out of line with the market and reality? Or are your expectations out of line with the market or reality?
Someone needs to readjust their expectations, but we obviously do not have the information to tell you who.

That’s fair! I think that’s where I’m struggling. I’m not sure if I have unrealistic expectations or if the numbers would work for someone else at their asking price. I guess that doesn’t matter because they don’t work for me at the asking price!

It does matter though. If youre expectations are unrealistic...you will never get in the game. Year after year goes by that people with unrealistic expectations dont buy. They keep waiting for some mythological deal to come fall in their laps that never happens.
The prevailing cap rate in an area, or the price to rent ratio is going to be surprisingly consistent. If youre looking for something different than what the market offers....it will never materialize.
Determine what it is that the target market offers, then adjust your expectations to meet the market.
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Marci Stein
Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
3y
Look at a ton of properties , throw out numbers that work for you , and see if any stick.
0 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
This has already been said, but it bears repeating....it does not matter one bit what the previous owner paid for a property. You have no idea what they are really into it overall...or how much cash they have in it, Or what they were expecting from appreciation. Or, or, or....
I currently have a property on the market that I paid $170k for....I'm asking $475k.
So in your thinking, I'm making a killing and should sell it to you for $250k and be happy?
You gotta lose this thinking, it will not serve you at all in the RE game.....
2 Reply
Terrell Garren
Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
3y

Please don't drive right now my friend.
1 Reply
Sebastian MarroquinPro Member
Real Estate Agent · Pasadena, CA · Member since 2015 · 476 posts · 263 votes
3y
Ok… ok… we get it… who cares about the history of the property right…?
It does not matter but it will give you insight as to weather they can reduce their price or not… Now, they may be in a bind and maybe they are not… They are not making much profit on the sale and they are selling pretty fast after buying it? Why? Maybe they didn’t like the home or the area… or maybe something personal happened… again… who cares, right?
But maybe it is important, only depending on your goals: if you want to live there for 10 years and then keep it as a rental for 20 more years.. then maybe understanding the area, the home, the financials of the city are all important.
Where to go next ? Right
1. Number one, you need a great Realtor and Lender that can guide you through the needs analysis and can talk to you about all of this!
Someone that can show you the comps and show you that the seller is unrealistic or maybe not, and the property is well priced.
If it is well priced, it is time to walk away (unless it sits for 40 or 60 days and you love the home) then you can revisit and make a lower offer. Which by the way, $30k less won’t mean much for you when it comes to your monthly payment, and something your lender can show you…
2. You can check for properties in the area that have been sitting, are fixers or both: and make a CASH OFFER.
Well, sebastian I don’t have cash…. Well, that’s ok! I have a lender that provides all cash anywhere in the US and then puts you into a 5% down payment loan program at regular rates.
Why is that important : bc it sounds to me like you want a good deal. So say you find a slight fixer for $350k and you offer $280k cash : you may get it and now you just got a great deal. Cash is king with sellers. Fast close, no loan and appraisal contingency etc
3. Look at off market homes: how ? Work with a Realtor that knows how.
4. And this should have been #1: assess your situation and ask yourself: what type of home do I want to buy? Why? How big? What price? What payment per month? How long will I live in it? Will this be a rental in the future or sell it and trade it for something different ? And why? These will help with financing later and with strategy!
If you haven’t had this conversation with your Realtor, ask them to. You don’t have to judge them or be aggressive and if they do not know how to guide you, let me know! I have relationships with Realtors all over the US. Let me know if you need a lender also. Good luck
1 Reply
Jon KellyPro Member
Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
3y
@Katherine Roberts don't be afraid to offer below asking. What's the worst they can say? No?
If they say no then you move on to the next property.
Someone once said if you aren't embarrassed by your offer then it's not low enough.
Of course, it's a more competitive market so lowball offers are becoming less common. But, if a property has been sitting don't be afraid to submit a low offer.
1 Reply
Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @Sebastian Marroquin:

Ok… ok… we get it… who cares about the history of the property right…?
It does not matter but it will give you insight as to weather they can reduce their price or not… Now, they may be in a bind and maybe they are not… They are not making much profit on the sale and they are selling pretty fast after buying it? Why? Maybe they didn’t like the home or the area… or maybe something personal happened… again… who cares, right?
But maybe it is important, only depending on your goals: if you want to live there for 10 years and then keep it as a rental for 20 more years.. then maybe understanding the area, the home, the financials of the city are all important.
Where to go next ? Right
1. Number one, you need a great Realtor and Lender that can guide you through the needs analysis and can talk to you about all of this!
Someone that can show you the comps and show you that the seller is unrealistic or maybe not, and the property is well priced.
If it is well priced, it is time to walk away (unless it sits for 40 or 60 days and you love the home) then you can revisit and make a lower offer. Which by the way, $30k less won’t mean much for you when it comes to your monthly payment, and something your lender can show you…
2. You can check for properties in the area that have been sitting, are fixers or both: and make a CASH OFFER.
Well, sebastian I don’t have cash…. Well, that’s ok! I have a lender that provides all cash anywhere in the US and then puts you into a 5% down payment loan program at regular rates.
Why is that important : bc it sounds to me like you want a good deal. So say you find a slight fixer for $350k and you offer $280k cash : you may get it and now you just got a great deal. Cash is king with sellers. Fast close, no loan and appraisal contingency etc
3. Look at off market homes: how ? Work with a Realtor that knows how.
4. And this should have been #1: assess your situation and ask yourself: what type of home do I want to buy? Why? How big? What price? What payment per month? How long will I live in it? Will this be a rental in the future or sell it and trade it for something different ? And why? These will help with financing later and with strategy!
If you haven’t had this conversation with your Realtor, ask them to. You don’t have to judge them or be aggressive and if they do not know how to guide you, let me know! I have relationships with Realtors all over the US. Let me know if you need a lender also. Good luck

This is a duplex with 46 storage units! I should have included that information. Thank you for your advice! If we got it around 330k we’d be making $700 in cash flow. If we bought it closer to asking price, it’d be like $150 in cash flow which wouldn’t be worth it in my opinion!
0 Reply
Katherine Roberts
OP
Member since 2023 · 59 posts · 17 votes
3y
Quote from @Jon Kelly:

@Katherine Roberts don't be afraid to offer below asking. What's the worst they can say? No?
If they say no then you move on to the next property.
Someone once said if you aren't embarrassed by your offer then it's not low enough.
Of course, it's a more competitive market so lowball offers are becoming less common. But, if a property has been sitting don't be afraid to submit a low offer.

It has been sitting for awhile. We just went by the property and I think we’ll make the low offer. Thank you for your advice!
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

offering below asking price is fine but you have to research:
1. zip code
2. condition
3. supply and demand
4. and most important DOM

I am still succesful bidding house below asking due to condition, but if it's A class property with solid condition in highest rated school , the seller would not even look at my purchase offer if it just match with asking price.

Real Estate market is strange indeed , maybe house that you consider 380k as too expensive, next year would be half mil.
0 Reply
Jeffrey McKeePro Member
Real Estate Agent · Plano, TX · Member since 2013 · 477 posts · 88 votes
3y
Quote from @Katherine Roberts:

I’m new to real estate and haven’t made an offer yet. I keep finding properties that don't make sense at the asking price, which I’m sure is common. For example, I found a pretty decent property but they’re asking way too much. They’re asking $385k but the only way I’d get a good deal is around $330-345k. Do I offer that or do I just walk away?

They bought it 2 years ago at $305k, so they’d still make a profit.

Any advice?

The advice I give my buyer clients is that we should find properties that have been on the market for over 18 days and make offers on all of those. Make the offers low enough that they counter but not so low they are insulted. Once under contract then negotiate them down. Put as little money in the option as possible.
0 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
Pretty good responses especially from @Russell Brazil.
I'll weigh in.
If you want deeper discounts look off market.
More distress and higher risk.
Potentially more value add.
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