Does anyone have any problem offering full price straight off for a place, if you think/know its a good deal and know it financially makes sense? Or do you hesitate because you give up any negotiation potential and all leverage as a buyer.
You have to know your market and recognize a deal when you see one. I have paid more than full price for properties many times when I knew that was what it would take to get them. (Based on competition from other buyers). If I feel like I'm the only buyer for the property, for whatever reason, I try and get it as cheap as I can even if it is a good deal to begin with.
Hmm.. well lets say that you saw a pretty good deal, but they won't be presenting offers to the seller until after an open house. Would you offer a few k$ below asking or asking? Have you heard of people offering say $5-10k over without getting information as to if any other offers have been made? I would think that''s pretty uncommon.
I am cheap! That being said I lost an AMAZING house because I didn't offer list even thought it was a STEAL. It was a divorce situation. The wife wouldn't take anything but list. Once I came up to list, it sat for another 3 weeks and than they took it off the market and sold it to a friend. Had we paid list from the very beginning I would be in a different house right now.
That being said things happen for a reason. We paid list for our first house and I am too this day happy with our decision. I think the key is to know your market. If you think the house will be gone in open house. I would over X over NOW, with the cavout that they do not do the open house. If the baulk than resind your offer and see what happens.
I have never placed a bid before the open house. There is no advantage in that.
As a seller I refuse to view any offers until 3 days after the open house. How would I know if what I think and what my agent thinks is a good price is actually correct? Only the market can tell, right? So why not let the market decide? My agent is also instructed not to take any offers before the day of the open house.
With that said, you can give him an offer but I am not going to look at any of them until the set date (3 days after the open house). Forcing me to rush is the best way to loose: "If you call now we are going to sell you this crap for half the price. But wait, that is not all we are even going to give you another crap that you dont need. This offer expires in 30 minutes. Operators are standing by."
If you place a bid before the open house and I get my asking price, I would think my initial price is too low. Even if I get $50k above the asking price I would still think this is unreal and I would wait for the bids after the open house. Maybe the buyer knows something I don't: e.g. dollar is going down to zero, a huge gas/gold reserve is discovered underneath my property, etc.
Wow.. that is the polar opposite viewpoint/strategy from Elizabeth. My agent was going to have a talk with the listing agent tomorrow, but she said she wasn't going to talk about price much.
I guess everyone tackles this differently. The only thing though, I think if a seller gets three offers all at asking and they are somehow all equal strength, I would think the sellers would choose the first offer, thats the most logical and sensible way to proceed.
Well, here and in most places, when a listing hits the MLS that constitutes an offer to sell, an offer to buy could be an hour later and that offer must be presented in a timely manner, that means 24 hours here. An open house has nothing to do with presenting an offer. A seller doesn't have to accept an offer immediately they can wait for other offers, but if it's a full price offer, from a willing and able buyer, the seller must act to accept or deny and if denied the seller is in breach of contract of the listing, the commission is due. Local custom rules and state law. There was a tactic of listing agents/sellers of listing at a low price in a seller's market to run up the price with higher offers, high offer won, that has stopped around here for several reasons, one it's a gable to get more offers.
When you list a property at a price, that is an offer to sell, if you reneg action could be taken against you. Can't really force a sale, most often, but you can make them wish they sold.
As to paying the highest price or list, anyone who wins at an auction did just that, even if the price is distressed or a "good deal".
I have paid more than asking price when I knew the seller was completely off base with the asking price selling themselves. Nice little 2bdr in a good area, they asked $25K, I believe we went to 35K, no repairs needed. Probably worth 55K, sold later at 72.5K.
Why pay more? Seller had accepted a quit claim from a little old lady for the agreement for her care a few days before. Seller wanted cash now (in fact, they thought a buyer could just give them a check and take a deed like a car title that afternoon and leave town with the old lady). What we had was a totally unsophisticated seller with a little old lady involved who had other relatives. While that would be a dream buy to many here at 25K, prudence is necessary in RE. Yes, relatives found out within the month after closing, yes they sued, yes they claimed the old lady didn't know what she was doing. Why did the sale stand up? Because the asking price had been 25K, we paid 35K, a fair price, the relatives were seen as having received enough that they had no unreasonable loss.
I've paid full price, listing price on others as well, it depends on the property, the market and my use for the place. Sometimes listing agents aren't as good as they think they are.
List price has nothing to do with market value.
As to giving up negotiation potential and leverage as a buyer, what does that mean? I had a big BBQ rib dinner out last night, I didn't negotiate the price of the meal or the tip, which together means I paid more than the menu price. In the past, after wasting my time, I've paid the asking price for vehicles. Seems "investors" on here can't get the concept of value, if a buyer perceives the value of something, anything, anything at all, of being higher to them than what is required to be paid, that is a deal, might not be a killer deal, but a deal nonetheless. Amateurs or the poor I suppose think they have to negotiate any price on an investment to make it valuable to them, try buying a round lot (100 shares) of United Tech or O'Reilly Auto or 3M stock and see how your negotiation goes. Negotiation can't always be done, nor is it always necessary.
If I have to try to beat someone down to a point where I think I have a good or decent deal, I've got the wrong property, that isn't necessary really. Yes, there is an art of negotiation and that is good when appropriate, but there isn't any leverage per se, they are either motivated or they aren't.
Sure you look for deals, motivated sellers, your "leverage" is their problem, most sellers don't have a great problem, they are just wanting to sell, less motivated, you may not have any "leverage".
Point of my rant is knowing and recognizing VALUE, not price! Real investors don't work off of price, they work off of value, the value given, value added and value received, you then convert those value into dollars and you may call it a price, but what you're really after is value. It doesn't always have to be negotiated through hours of brain damage, it's either a deal or it's not. :)
Originally posted by @Andrey Yusupov
I guess everyone tackles this differently....... I would think the sellers would choose the first offer, thats the most logical and sensible way to proceed.
The offer to accept is the best offer, that is not always the highest price!
Yes, we are back to value again.
You get an off of 120,000 with an FHA loan, 5% down being obtained, another is 116 with 20% down, conventional financing, 3rd offer is 110 at cash. Which is the best offer?
Your asking price was 118,900.
What is your problem to be solved? You in a hurry, if so I'd suggest not going FHA as it takes time and you may end up having repairs to make to make it work.
Not in a big hurry? Takes 30 days to close, going conventional I get 6K more, are they a strong buyer, 80% LTV.
I'd need to invest that cash offer at 65% APR to get 6K in 30 days, what king of risk would that take?
I'm not so hard up that cash waved in my face is impressive, my best offer is the 116K with conventional financing.
That has the highest value to me! :)
Originally posted by @Bobby Narinov :
I have never placed a bid before the open house. There is no advantage in that.
Really? We've bought properties minutes/hours after, and frequently before, the listing gets propagated and an open house scheduled.
If the deal works at the ask price, I see no problem paying the vendor what they want.
As with most responders here, I'd pay full price if it's the right price. In fact I did this spring. I bought a townhouse for $85k with a full price cash offer within an hour after I looked at it. When the agent accepted my offer she also said, "Boy the phone is ringing off the hook with agents making cash offers! I hope I didn't underprice this..." and I thought, "Well, duh."
It appraised at $125k and I wouldn't have gotten it if I was any lower or slower.
More often than not, in my market I have to pay over list price to even get a property. A house might be listed for $40k and my analysis puts my offer right at $40k, but knowing that 30 other offers are going to come in and the fact that I've already made at least 100 offers on other properties I offer $42k hoping that I have a slim chance of getting it.
Then some knucklehead comes along and offers over $50k for it and I'm back hitting the pavement.
The point is, that I offer more than list price all the time. If my analysis supports it.
I've paid list price 4 times so far.
Once was a 3 bedroom single family listed at $23,000. There was no reason not to pay list price on that one. I get $875/month rent on it and have had only $2,000 repairs since I bought it 2 years ago. (Which were deferred repairs the prior owner had not done.)
The second was a 4 bedroom single family for $24,000.
The third time was for a 2 bedroom single family for $21,000. It rents for $750/month. The price was the lowest the bank would go for the short sale.
The fourth time was a 3 bedroom single family for $39,900 and the houses nearby have sold for $90k - $110k.
I've paid list. Under list & Over list. Just a matter of getting a good deal or not.
At this point I don't think you'll get them to call off the open house. Based on that I wouldn't offer before the open house. (I don't want my offer shopped around). If I'm in your position I would probably go to the open house near the end of it and try and gauge what kind of action they had. If I couldn't get much of a read but I felt it would go for at least listing I would probably offer 1 or 2 thousand over asking or maybe even more depending on value and how often this type of property comes up and how many you want to acquire in what time period.
If you don't get it, find out what it went for even if you have to look it up on zillow or another site after it closes. A majority of properties I've offered on I haven't gotten, but I try to learn something. See if you can find out how many offers they got. (This would be even more helpful if you find out before you put yours in). Then after you gather as much information as you can, think about what you might do differently next time to improve your chances. Most of the time properties I don't get have gone for more than I am willing to pay and I don't have regrets about letting someone else have them for that price. There was one a couple of months ago that went for a cash offer lower than my cash offer and I had my agent call to see what had happened. My offer hadn't been the highest either but the winning buyer made contact with the seller, even though offers were supposed to be subject to inspection, and convinced the buyer to take their offer. This buyer talked about all the repairs needed and said any higher offer would just back out once they did their inspections. (Kind of a strong arm tactic, but I guess it worked in this case or the listing agent was just full of crap)!
The short answer is that an investor determines what the value of the property is. You do this by looking at the comps....recent sales in the general neighborhood. I like to also look at active listing to see where people are hoping to sell, and expired listings to see where people didn't sell. And btw, on those comps, I'd drive around and look at it from the outside, pull up the old listing sheet. By the time you do this you'll have a good idea of value. From there, what you're going to do with the property is going to dictate what kind of offer you make. But in my case, I buy at a discount to the value I arrived at. This is the only way to make a profit. If that happens to be the listing price, great. As an investor though, there's no way I'm just trying to get any old property. I'm trying to make a deal. If I can't do that, I move on to the next deal.
One other comment though. If the seller is holding an open house, and so other people are looking, the chances of you getting a "deal" are pretty small, again depending on what youre doing with the property and what you define as a deal. This really doesn't sound like a "motivated seller". Dealing with motivated sellers is the only way you're going to get a real deal. Now, let's say that after the open house, no one is interested. And lets say the seller sits with this with no further interest. Now it may be that their motivation level grows.
Thanks for the sound advice. They ended up with 16 offers, many over list, only 2 cash offers (1 cash at list, other cash was my offer, well above list).
Unfotunately, once I knew the seller wanted a cash offer for a quicker close, any attempts as negotiation didn't work too well. I really don't like when my agent pushes to just close because "the price is good based on comps". Not an investor mentality, clearly.
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