What to do when your offer gets rejected but the property is...

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What to do when your offer gets rejected but the property is...

Jinhee Park
Tucson, AZ · Member since 2017 · 8 posts · 0 votes

There is a 4-plex I want to buy that has a 3/2 unit renting out for $1100, and three 1/1 units among which two are renting out for $450 each and the other 1/1 unit is rented out as an AirBnB and brings in $1000 per month according to the seller.  The seller listed the property for $300,000.  According to my property manager, the fair market rents of the 3/2 unit is $1095-$1195, and each 1/1unit is $450-$495.  It's been recently upgraded and is in great condition.  Based on the fair market rents, I'm estimating the fair market value of the 4-plex to be about $256,250.  

This property came on the market 39days ago and immediately went under contract with someone else but it came back on the market about 10days ago.  

I want to do a house hack on this property with an FHA loan. My bank would only preapprove up to $250,000 for a purchase price. I submitted an offer at $250,000 asking for seller concession 10days ago. The seller ignored my offer.

I have been closely watching the property on the MLS. It's still available for sale. I submitted another offer at the same price and terms 2days ago, but the seller ignored my offer again. It's still on the market.

I want to buy the property, but based on the numbers, it would not make sense to submit an offer higher than what I offered.  

I'm wondering what would be the next course of action to get what I want at the price I want.  Any advice?

I'd appreciate any feedback from some seasoned investors.  

Thank you!

Jinhee Park

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Alex Price
Cleveland, OH · Member since 2018 · 133 posts · 59 votes
8y

@Jinhee Park The seller might not be motivated to sell and in that case will only sell for the price they want. When it comes to multi-family it's a sellers market so a lot of low ball offers are either rejected or ignored. If you want the property that much I'd figure out a way to come up with the money or move on to finding a new deal. Sometimes lingering on a deal can cause you to miss out on other great opportunities. Just my two cents. 

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  • Alex Price
    Cleveland, OH · Member since 2018 · 133 posts · 59 votes
    8y

    @Jinhee Park The seller might not be motivated to sell and in that case will only sell for the price they want. When it comes to multi-family it's a sellers market so a lot of low ball offers are either rejected or ignored. If you want the property that much I'd figure out a way to come up with the money or move on to finding a new deal. Sometimes lingering on a deal can cause you to miss out on other great opportunities. Just my two cents. 

    3Reply
  • Pandu Chimata
    Real Estate Professional · Glendora, CA · Member since 2016 · 203 posts · 17 votes
    8y

    @Jinhee Park,  Are you basing off your value based on 1% rule? Do you see a potential scope for rent increase in the next few years? or there any scope for force appreciation?

    0Reply
  • Phil G.
    Real Estate Broker · MA · Member since 2013 · 361 posts · 297 votes
    8y

    Move on.  The seller's silence says that they don't consider your offer a serious offer, worthy of countering and your offer is at the top of your budget.  They may be turning away better offers than yours.  So it would seem that unless the listing languishes and they are willing to drop the price substantially, you're done.  Your calculations are just noise.

    0Reply
  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 614 votes
    8y
    @Jinhee Park The time you spend analyzing deals can add up, If you've submitted two offers and got no responses it means you're nowhere near what the owner is looking to get for this property, let this one go since it's at the top of your number. Sometimes I see people make the mistake of submitting a low offer regardless of what the property is worth, keep in mind that some sellers use the strategy of starting with an undervalued listing price to generate more interest and competition, this owner may know this property is worth "X" dollars more than what it's listed at and experienced buyers are probably offering near or at it's actual value.
    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    How did you arrive at the value you did for the property?

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  • Jinhee Park
    OP
    Tucson, AZ · Member since 2017 · 8 posts · 0 votes
    8y

    @Russell Brazil: Based on the 1% rule and comparative market analysis of the rents.

    0Reply
  • Jinhee Park
    OP
    Tucson, AZ · Member since 2017 · 8 posts · 0 votes
    8y

    @Ray Johnson:  I think you misunderstood the situation.  This seller listed the price at an OVERVALUED number.   The listing price is more than it's actual fair market value.

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  • Daniel Y.
    Investor · Henderson, NV · Member since 2016 · 227 posts · 86 votes
    8y

    So I assume you are looking to househack in Riverside, CA, based on the info provided. Did you have sale comps pulled and what do they say? I'm asking because 1% rules doesn't really apply here in CA. Don't get me wrong, I understand there are sub-markets and OC is different than Riverside county. However, I do know Riverside felt the impact of high value increase from their OC and LA county neighbors. Unless you are deep rural area of Riverside, the seller may not be over asking, at least not by a lot. I will need more information to draw a better conclusion and for all of us to help you.

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  • Jinhee Park
    OP
    Tucson, AZ · Member since 2017 · 8 posts · 0 votes
    8y

    @Daniel Y.  No, it's not in California.  I'm moving out of state where the 1% rule can apply.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Jinhee Park:

    @Russell Brazil: Based on the 1% rule and comparative market analysis of the rents.

     And do properties in this location trade on the 1% rule? If not, then you have come up with a faulty way of valueing the property.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    You know what the property is worth to you. You have given the seller two opportunities to sell and since he did not move it is time for you to move on. 

    Watch th eproperty and make th esame offer in 6 months if it has not sold.

    0Reply
  • Jinhee Park
    OP
    Tucson, AZ · Member since 2017 · 8 posts · 0 votes
    8y

    @Thomas S. Thanks a lot!  Yes, that seems like the most reasonable thing to do.

    0Reply
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