I am currently pursing a house that was listed for 8 months and did not sell. Just for some background, I live in a very active market and its not uncommon for houses to sell before they are listed or the day of, so usually if a house sits for any amount of time there is something out of place. In this case it was priced well over what it was worth; given that it didn't get any offers it seems like the market agreed. The current owners have been trying to lease the house and again have it overpriced and have been unsuccessful in leasing it. Its a great house that has great potential but needs some work, probably to the tune of 20k-50k.
I really like the house, and I would be buying this to house hack for a year or two and then convert to rentals. I always strive to work out win-win prices but on this deal we are about 75k-100k apart from each other. I can pay fair market value in its current condition but it doesn't appear that the sellers have a realistic idea of what that value is.
Does anybody have any advice for purchasing off market deals, particularly when it comes to pricing?
If the house was previously listed they have already been told what it will sell for. They are simply greedy and in no hurry to sell. They are not the type of seller to target.
You throw out your price, tell them to call if they change their mind, and walk away.
If you are attached to a property you will always over pay.
Joey I agree with Thomas. Ideally you’ll have 90 percent of your offers scoffed at. If not you may be offering too much! Especially when they accept it without a counter.
This house sounds like owners are not motivated to sell. If there’s no motivation then they will sit on it. I’ll send you another PM with a strategy you may try. Worth a shot, to get that win -win.
Stop thinking emotionally and move into critical thinking. This house has no potential if the price doesn't make sense. I'd toss out a offer (and probably on the low side) and move on looking for a actual deal.
Great advice so far thanks for the feedback. One thing i'm seeing is to throw out an offer and if it works great and if not keep moving and that is really good advice if I were buying this purely as an investment property and not as a house hack. Something that might help shine some new light on this issue is we received an unsolicited offer to sell our personal residence at a metric that was very motivating. It has a short fuse and they want to close quick, to me this is a great opportunity to move into a house with some built in rental potential. This particular house has a large guest house that with some minor work could spit out some serious cash. So its a little more complicated than just throwing an offer and moving on if it doesn't stick. Now this house doesn't have to be the house we buy and I wouldn't overpay for it but it is a good option if I could buy it for current market value.
Going back to the original question, if you were to really want to engage in true negotiation, who has some experience working with people and getting them to a move off an unrealistic value to a true market value?
When a house is no longer on the market it's a beautiful thing... because you have zero competition. I've done it before and I'll do it again!
Make them an offer based on your calculations. It's easy to get the owner's name (go to city hall) and with their name you will likely find their contact information/a social media page online.
I did this when I bought my first multi-family and after speaking with the seller on the telephone we negotiated and agreed on a price (when you do this illustrate the money they save by not having to pay any RA agents).
And don't fret if you can't agree on a price. My latest purchase (which was actively on the MLS)... I low-balled and they gave an adamant NO (according to the selling agent).
I called the selling agent over a month later and said my offer still stands... he spoke with the seller and I received another NO.
I told the selling agent to call if they wanted to sell at my price.
Well, I got a call a month later from the selling agent stating they'd sell to me at the price I had offered.
I later learned from the upstairs tenant that around that time (of getting the phone call of them agreeing to sell to me) there was a roof leak that caused water to gush into the top floor closet. This repair very well could have caused the seller to become disgusted and sell.
Offer what makes sense for you. Sometimes you have to wait. And sometimes when you wait, you get a very good deal.
With the listing being overpriced, and the lease payment also too high, my first thought was how much do they owe? And is the monthly PITI causing the lease over pricing? I would need to rule that out first, do you know?
If the listing expired months ago, they should be beyond their sales agreement with the listing agent. You could take into consideration that they would then be doing a direct sale to you and would not have to pay real estate commissions. Offer to pay for the cost of a FSBO transaction. That might help your case.
@Joey H. Make your offer and move on. If someone doesn’t want to sell for less than ____ there could be any number of reasons. It doesn’t mean you can’t come back in 30 days and rekindle the discussion. From what I’m inferring, you disagree with the owner on the value of the house and the owner lacks urgency/motivation. So (educated guess) you want to buy more than they want to sell. Doesn’t bode well for you in the negotiation process :)
Sometimes it really is a game of chicken and being positioned perfectly. You want the house but you can't chase them leaving the impression that it may be worth what they want when it's not. At least that's what the market is saying. See if you can get yourself invited to a sit down over a cup of coffee and come right out and ask why they think the house is worth more then the market is telling them. Find out why their selling. Depending on their answers you may just have to wait till they catch up to reality and hopefully your still at the front of the line with an offer. The only time I "chase"a seller is if the upside is much more than the total investment because the highest and best use is not being considered by the seller or they are not aware of it. Which means I have a buyer already or I can get it to the highest and best use with buyers waiting for it.
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