Premium to buy a house that's not for sale?

Question

Looking to buy a house that's not for sale. What would a typical premium you would offer? 10%? 20%? I know the correct answer is 'whatever gets the deal done and what you're comfortable offering' but I just am trying to get a feeler of where to begin.

The house is worth approx $300k and the seller is at least willing to listen to me. Just wanted some opinions. Thanks BP!

The house is worth approx $300k and the seller is at least willing to listen to me.   Just wanted some opinions.  Thanks BP!

Brandon Nappi · Answer

@Russell Brazil you nailed it - while I know this site is dedicated to REI, this is a house for my family.  A house that that we love.  In a location that can't be duplicated.  So, it's not like I can just go down the street and find the same property.   Therefore, we are willing to pay a premium and over market value, if need be (which kills me to do, as a REI).

Account Closed · Answer

Not sure what you mean by premium.  I only buy houses that aren't for sale and I've never paid a premium.  The seller is already netting an additional 6%+ for no sales commissions. You can make you offer so you pay all costs, no repairs, etc. Why would you offer a premium?

Micki M. · Answer

@k.marie (sorry I can't @ you) you got it, it's not about offering a "bonus" or using those terms with the seller (I hope!).  And I definitely wasn't encouraging paying over value.  As usual @Bill S. sums it up correctly.  There's a price at which the numbers work for the buyer and a price where they work for the seller and if they don't match then no deal.  Don't just offer more to win the bid.

Micki M. · Answer

It depends on your market.  In a market like Denver where you're getting an advantage buying off market when the house would do well as a retail sale then you could definitely offer more as a premium for avoiding a bidding war.  In a slower market, or a scenario where the property will face challenges in the retail market (needs too much work, price is too high for rehabbers, etc) then follow what K. Marie says above and use convenience rather than price to make your offer strong.

Account Closed · Answer

Maybe I'm having trouble with the term premium.  In hot markets you offer a price and terms that are favorable to the seller (cash, fast close, pay all closing costs, totally as-is, 60 days to move, etc.). You offer what the buyer will accept.  You don't add anything on top of that. The seller has a desired net.....that's what you want to hit.  I would never use the word premium in a buying or selling negotiation.

Account Closed · Answer

I was assuming it was a retail purchase.  Does "pay a premium" just mean pay over value or over asking?  If so, then I get it.

Russell Brazil · Answer

What is your place for the property @Brandon Nappi? This could be part of the disconnect in the advice we are all giving you. @K. Marie P. is probably thinking about the property strictly as an investment....while I am interpreting as a retail purchase of something you may want to live in.  Ive purchased off market properties for clients, because they simply loved the house and had to have it...thus they paid a premium to purchase.  In our case it was a property worth about $600k, and I think we paid $650k, and they paid the realtor (Me) to facilitate the deal. So the sellers not only saved the commission, but got that premium for selling.

So that is sort of the scenario I envisioned when you asked how much of a premium should you pay.

Bill S. · Answer

@Brandon Nappi I can't really see why someone would buy above market (at a premium). That said, sometimes people just have to have something so while I don't understand it I know it happens.

Right now you are negotiating with yourself and as @K. Marie P. said you won't likely get the property. Tell them "Give me your make me move number" and if that works you buy otherwise it's a waste of time and energy.

Account Closed · Answer

So, it's just a negotiating term then?  Property worth $300K, you offer a $30K premium.  Instead of $330K?

I'd be careful about wasting your time. Unmotivated sellers LOVE offers. They think they are getting a free valuation.  Makes them happy that they have the goods.  They never sell.

Brandon Nappi · Answer

When the seller doesn't really want to sell, telling them they will save the realtor commission fees does nothing for them.   You typically will have to offer something additional as an incentive (premium) to get them to really think about your offer.  Quick close, closing costs, etc typically does not get them motivated.

Premium to buy a house that's not for sale?

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