My offer I set the purchase price too high, now what?
San Francisco, CA · Member since 2017 · 74 posts · 64 votes
Hey BiggerPocket, it's a silly situation, it's my fault, I hope you don't laugh at me too much LOL
I made an offer on a house, they accepted it almost instantly, I realize the purchase price is too high, what should I do?
What I did wrong are (don't repeat my mistakes >O<):
1) I had offers rejected instantly or ignored the day before, I felt upset and got carried away
2) I listened to the agent way too much without doing lots research myself, the agent said the house will go up 8000k more on the asking price and will have many offers and I listened >O<.
3) I really didn't think I'll get accepted that quickly LOL
The asking price is 125k, my offer is 130k, zestimate is about 128k but i know it's debatable...
What do you do in this situation??? I think the house has potential if it's lower price, I shouldn't have put that high
First comment I have is directed @Felix Goldstein: unlike you, licensed Realtors have fiduciary and ethical responsibility to the clients that they represent. You saying ""agents/brokers lie ALL the time. it sounds like you relied on an agents lies when making your offer"" would be like me saying "investors lie ALL the time. They are nothing but slum lords who cheat everyone and pull the wool over peoples eyes with trashy/shoddy improvements" Your comment was offensive to all of us who work hard and fight daily on behalf of our clients.
@Chingju Hu: Read your contract closely. What state is the property located in? There are typically several areas that a contract will be contingent upon. For example, a buyer may be allowed a specific amount of time after signing a contract to review the home owner association documents. If something is revealed in those documents that is unacceptable to the buyer, they may ask for termination of the contract. (I recently had a buyer back out because they found out that sheds were not allowed per HOA CCR's)
If you reserved the right to have a survey conducted, you may be able to terminate the contract if something shows up on the survey that is not acceptable to the buyer (a drainage or utility easement that was unknown, a fence that is over the property line, etc.)
Deals can fall apart over financing, as well. Perhaps your verified funds for down payment are no longer available (you spent it or simply removed it from your bank account) or you have too high a debt-to-income ratio (you go out and buy a boat, financing the purchase)
Also, ask your agent to provide you with recent (past 6 months) comps for the area, using only homes of similar size/age/upgrades. Just because a seller accepts your offer quickly does not mean that you are over paying.
Finally, the alert that you received saying that it was a "new listing" was most likely auto-generated from the search that your agent set up for you on the local MLS. There are lots of ways for a property to be re-introduced as 'new', including price changes, new photos being added, being temporarily withdrawn then re-activated, etc.
Sorry for the long response, but I hope that it helps. Best of luck to you!
You're not alone, everyone makes mistakes. You can always negotiate to lower the price especially if you find issues during due diligence. Typically if you try to lower the price and the seller thinks they can get more, they will just reject your counter and you can move on from the deal and learn from your mistake.
You haven't paid too much for the house until you sign at closing. If you want out of the deal, try to do it sooner rather than later and apologize for wasting their time. If you have given earnest money, that's up to the contract whether you will get that back or not.
People understand that people make mistakes. Just be honest and up front about it.
-Zac
@Chingju Hu - So far, you're not under contract (I hope). Even if you are, there are options.
First: What are the comps in the area? Is the house above, below, or at market value for the area?
Second: What are your plans for the house?
Third: Have you done your inspection / due diligence yet?
You might be able to negotiate based on the inspection results or appraisal. If you can negotiate and still get a good deal, fantastic!
If you cannot turn the purchase into a good investment (don't skip out on maintenance or CapEx numbers to make a "good deal"), you can always try to wholesale the house (dependent on market value vs purchase price).
Worst case scenario for you is that you back out without having put any earnest money down. It doesn't feel good, but it's better than going through with a bad investment purchase.
Best of luck! Share some more details if you can so we can give better feedback
What do you do in this situation??? I think the house has potential if it's lower price, I shouldn't have put that high
A few options...
- Negotiate price down based on inspection results.
- Ask your non-bank non-CU local lender to sabotage the appraisal.
- Fulfill your contractual obligations.
- Walk.
As @Zachary H. said you can change your mind quickly, try to save EMD, apologize and get out.
As an alternative point of view, is the market you're in super hot? Maybe $130k is not a bad price to pay for the house.
Forget Zillow. Please. Zillow lets you know if you are in a 200k neighborhood or a $400k neighborhood if you were blind folded and dropped from a moving car without knowing where you are. Zillow is below garbage; I don't rely on them to be within $50k let alone the $2k you are worried about.
An agent in my office listed a condo for $99k recently and it sold for $109k with offers up to $117k. Maybe you are in a similar situation.
I'm not under contract yet, I haven't paid anything yet. The house was asking for $129900 and dropped to $125000, it's been in the market for 3 months, but when agent showed me it said new listing so I didn't notice this. Totally my bad...
More details:
1) This house is 1970 built, 3 bed/1.5 bath, 1129 sqft, 1 car garage, rent is around $1200 if no upgrade. If upgrade kitchen and bathroom, maybe it can rent higher.
2) I think older home in that area are not hot. My other offers are for newer and more expensive home, they go quickly.
3) My goal is for rental cash flow.
questions:
1) If I walk away, the agent can be mad and not work with me anymore, I can find another agent to work with me, right?
2) How do you think about I negotiate a lower price after inspection? Is it good to do that?? Can I find lots reasons to reduce the price??? If so, how much should I reduce to make it ethical??
/_\ I really feel bad now...
Thanks!
i wouldn't feel bad. sellers and agents/brokers lie ALL the time. it sounds like you relied on an agents lies when making your offer, so i would say its not all your fault. the agent that told you about the supposed appreciation of the property was not ethical! and you are worried about being ethical?!?!
yes, for the most part you can find another agent to work with. i have had agents want me to sign an exclusive representation contract. so i would not be able to work with another agent. I never sign those. I don't know the agent that well. what if they are a bad agent. then i would be stuck with them. agents are a dime a dozen.
even if the seller can sue you for something, sometimes its not worth it to sue because the damages that the plaintiff would win is small and not worth going to court. CONSULTING AN ATTORNEY MIGHT BE A GOOD IDEA. I'M NOT AN ATTORNEY. just speaking from experience
I'm not under contract yet, I haven't paid anything yet. The house was asking for $129900 and dropped to $125000, it's been in the market for 3 months, but when agent showed me it said new listing so I didn't notice this. Totally my bad...
More details:
1) This house is 1970 built, 3 bed/1.5 bath, 1129 sqft, 1 car garage, rent is around $1200 if no upgrade. If upgrade kitchen and bathroom, maybe it can rent higher.
2) I think older home in that area are not hot. My other offers are for newer and more expensive home, they go quickly.
3) My goal is for rental cash flow.
questions:
1) If I walk away, the agent can be mad and not work with me anymore, I can find another agent to work with me, right?
2) How do you think about I negotiate a lower price after inspection? Is it good to do that?? Can I find lots reasons to reduce the price??? If so, how much should I reduce to make it ethical??
/_\ I really feel bad now...
Thanks!
what are your cashflow prospects on a 130k house with 1200 in rent (seems low)? Purchase price/appreciation should not be the only thing you are being mindful of... Your realtor is only thinking about appreciation and you should be doing your own projected cashflow calculations on each house prior to making an offer. You should also set criteria for cashflow for yourself ahead of time and skip any properties that don't meet that minimum cashflow figure, making it easy to move along when one doesnt meet that criteria. Try using the BP calculator and share the results with us... try slowing things down and practicing calculating your numbers on each deal you consider, ignore the realtor for guidance as they dont always undertand buy and hold investing, just flipping...
The agent said the offer price will go up 8000K? is there gold buried in there :p
Just giving you a hard time. But like others have said, just negotiate down during inspections.
Also if your agent really did say it was a new listing when it clearly wasn't, you should buck up and tell them to screw off. They obviously just want to cashout on you.
First comment I have is directed @Felix Goldstein: unlike you, licensed Realtors have fiduciary and ethical responsibility to the clients that they represent. You saying ""agents/brokers lie ALL the time. it sounds like you relied on an agents lies when making your offer"" would be like me saying "investors lie ALL the time. They are nothing but slum lords who cheat everyone and pull the wool over peoples eyes with trashy/shoddy improvements" Your comment was offensive to all of us who work hard and fight daily on behalf of our clients.
@Chingju Hu: Read your contract closely. What state is the property located in? There are typically several areas that a contract will be contingent upon. For example, a buyer may be allowed a specific amount of time after signing a contract to review the home owner association documents. If something is revealed in those documents that is unacceptable to the buyer, they may ask for termination of the contract. (I recently had a buyer back out because they found out that sheds were not allowed per HOA CCR's)
If you reserved the right to have a survey conducted, you may be able to terminate the contract if something shows up on the survey that is not acceptable to the buyer (a drainage or utility easement that was unknown, a fence that is over the property line, etc.)
Deals can fall apart over financing, as well. Perhaps your verified funds for down payment are no longer available (you spent it or simply removed it from your bank account) or you have too high a debt-to-income ratio (you go out and buy a boat, financing the purchase)
Also, ask your agent to provide you with recent (past 6 months) comps for the area, using only homes of similar size/age/upgrades. Just because a seller accepts your offer quickly does not mean that you are over paying.
Finally, the alert that you received saying that it was a "new listing" was most likely auto-generated from the search that your agent set up for you on the local MLS. There are lots of ways for a property to be re-introduced as 'new', including price changes, new photos being added, being temporarily withdrawn then re-activated, etc.
Sorry for the long response, but I hope that it helps. Best of luck to you!
@Sandy Thomas I apologize for offending you. I'm defiantly not here to offend people. what got my gears grinding is @Chingju Hu saying that the agent told her the "house will go up 8000k!" That's crazy. Now that i think about it that was silly of me. I'm not the one that made an offer and am now looking for a way to back out. I just looked at a property. over the phone the seller told me the property is in good condition. I look at it, there was missing drywall, etc, etc. far from being in good condition. I tell sellers/their agents, i don't care how old or new the stuff is, i just look at the repairs that i would need to make to make it livable. For the most part I think Realtors are alright. Another example that happened a month or so ago, is the agent never relayed my offer to the seller. no wonder she has been trying to sell the property for YEARS!. it could be because my offer was contingent on me buying the house next door which happened to also be for sale on the mls. A week or so after i make my offers on the land that i want to develop and the house next door, i send an email to the sellers agent for the land on the corner that i want to develop and she also happened to be my agent for the house next door. I asked her to be my agent when i called her about her land on the corner listing. She said she would forward my offers to the seller. she never forwarded over my offer, the first time i submitted it! That didn't bother me too much really. I don't have time to make offers on all the properties that i want to. there are just too many of them. That didn't make me hate ALL realtors, i just move on to the next property. I am working with a great realtor here locally right now. there are good ones out there. Sounds like you, Sandy, are the exception.
Chingju, is the agent the sellers agent or your agent? if they are the sellers agent their fiduciary duty lies with the seller not you. still its unethical what the agent did. I would recommend you get an agent that represents you, and ask him or her to show you comps. I do not rely on zillow. for example, pull up the area close to east 105 and St Clair in Cleveland. the Glenville area. some of those houses zillow says are worth 80k. that is the worst part of Cleveland. if the house is in decent shape with all mechanicals there it would be worth around 10k or so maybe 20k. Although 20k would be a stretch. if its been stripped, its hard to even give it away! I ran across a two for one deal there once! :) I called on this craigslist ad a long time ago on a house in that area. the owner says "i'll tell you what i'll give you this house, if you buy my other house that i have close buy. that is the only BOGO deal i came across. The good news about that neigborhood is you can get 25%+ CAP rates. When i was sitting in my car waiting for the seller to come, I had people that were walking by stare at me because I don't fit in.@
Hey BiggerPocket, it's a silly situation, it's my fault, I hope you don't laugh at me too much LOL
I made an offer on a house, they accepted it almost instantly, I realize the purchase price is too high, what should I do?
What I did wrong are (don't repeat my mistakes >O<):
1) I had offers rejected instantly or ignored the day before, I felt upset and got carried away
2) I listened to the agent way too much without doing lots research myself, the agent said the house will go up 8000k more on the asking price and will have many offers and I listened >O<.
3) I really didn't think I'll get accepted that quickly LOL
The asking price is 125k, my offer is 130k, zestimate is about 128k but i know it's debatable...
What do you do in this situation??? I think the house has potential if it's lower price, I shouldn't have put that high
You get an unbiased realtor to help get accurate comps (if you feel you need help with it). If the value of a property barely grazes $100,000, it doesn't mean you have to pay $100,000 waiting on appreciation. If you were fed bad information by your realtor and consequently made a bad decision on that bad information, you typically don't get arrested for renegotiating with seller.
@Felix Goldstein, I appreciate your apology...we can be friends again. :-)
First comment I have is directed @Felix Goldstein: unlike you, licensed Realtors have fiduciary and ethical responsibility to the clients that they represent. You saying ""agents/brokers lie ALL the time. it sounds like you relied on an agents lies when making your offer"
Actually I think this is a valid issue. All realtors probably aren't all dishonest but there are quite a few of them. I have dealt with quite a few and sometimes some have a way of elevating their interest of earning a commission above the clients best interest. Sure not every realtor does this but there are enough of them doing it to be an issue -- and regardless of what their duty to the client is supposed to be.
Hi, thank you all for all the replies!
There's typo on my original post about the '8000k' increase. The agent said that the area is very competitive that the final purchase price will be $8k~$15k more than the asking price, so it's $125k -> $133k and therefore my offer is $130k. In reality the property is in the market for 3 month now, it already drops the price from $129k to $125k, so it's not competitive at all... (again, my mistake for not verifying it myself)
"is the agent the sellers agent or your agent"? I think this is a buyer's agent (How to verify???) How do I get an realtor on my side or unbiased? I will not work with her anymore. I think agents all get paid if I close the property, whether it's seller pay or i pay, so I feel they are always pushing for close.
On a side note: I withdraw the offer yesterday midnight because I don't feel comfortable in this situation and want to slow down. It's not under contract yet, I haven't paid anything yet and luckily they are nice about it. Today I started to talk to many other agents and hope to get exposure on other deals. And I will slow down my process in making offer, do more research on my own, be more professional in the process and I don't want any rejected offer affect my emotion....
You pick an agent you trust and feel comfortable with after interviewing them. They are ideally not the listing agent for the house you are buying since they already represent the seller and their interests. See below BP article. Good luck!
The Epic Guide to Finding an Investor-Friendly Real Estate Agent
@Chingju Hu Everyone says "you make your money when you buy" and that is true. The posts above have lots of good suggestions so I will throw out a different idea. Have you done the math on what an extra 5K will do to your cashflow? It will probably decrease your cashflow about $25 a month. 5K on any one deal is within the margin of error if you are trying to build a portfolio in my opinion.
@Chingju Hu Everyone says "you make your money when you buy" and that is true. The posts above have lots of good suggestions so I will throw out a different idea. Have you done the math on what an extra 5K will do to your cashflow? It will probably decrease your cashflow about $25 a month. 5K on any one deal is within the margin of error if you are trying to build a portfolio in my opinion.
Yes that makes sense, In my calculation, i know that $25 a month doesn't change anything. My main concern is that I'm not comfortable with the agent and with the situation anymore, and also I want to correct my mistake to start over on another property.
I always do my proforma and due diligence before even talking to agents about making a deal on a property. It lets me be in charge of the numbers in a way that I am comfortable with. If the agent doesn't think the deal will go through, I will still request to submit the offer with a number I am comfortable with. Worst case scenario, the seller doesn't accept (who cares) or the seller counters. Or best case scenario, the seller accepts (jackpot!). I never offer above listing unless I know the numbers work and I really want the property. Don't get attached to the properties unless it will be your primary home. You don't need all your offers to get accepted, you just need one.