Initial Offer vs Lowball

[Ben K.]

Obviously nobody wants to overpay for a property. I once heard that the least important number for a property is the asking price, it makes sense because it comes down to how the numbers pencil out. Most people aren't going to pay full asking price just like most people don't pay full sticker price at car dealerships. The offer is always going to be lower than asking price, sometimes considerably lower, but you also don't want to be insulting and throw out a super lowball offer. So my question is where's that line between a genuine initial offer and an insulting lowball offer?

[Dan H.]

Quote from @Ben K.:

@Jules Aton negotiating and haggling is definitely not something I want to do either. I just also don't want to be that guy a year after I buy it realizing that I'm  underwater and trying to unload a property to mimimize the loss.

Here's an overly simplified example scenario I keep coming across with the properties I look at - using county property tax records too (years & prices are just random numbers for the purpose of the example):

2020 - county valued property at $700,000; sold for $750,000

2021 - county valued property at $750,000; sold for $800,000

2023 - county valued property at $800,000; sold for $1,000,000

2024 - county valued property at $850,000; sold for $1,250,000

2025 - county values property at $900,000; on the market asking $1,500,000

The spreadsheet I made up when I put in income, expenses, etc with a feedback loop on est value gives me a dollar amount close to that property tax value. Am I way off or are they asking way too much?

Moral of the story is they seem to be being bought and sold very quickly at prices way more than what their value is being assessed at. Are people buying them at more than they're worth, losing money, and then trying to sell them? I sure don't want to take on someone else's loss.

 Different jurisdictions determine the assessed value differently but no jurisdiction I am aware of does an appraisal to set the assessed value.

I have a property worth ~$1m that is assessed below $300k.  The assessed value in many jurisdictions has little relationship to market value.  

Run your own comps to determine market value.   Use Pennymac value estimator because it can is easier to use than most other free options.   

Good luck