Making an offer if paying cash

7 Replies

Looking at buying a home to live in. Odd property in that was a commercial building made residential on the inside. Still looks very commercial from the street among conventional homes all around. 

Only been on the market a week and a half. Paying cash. Selling asking $235, offered $200. They said "no, will wait for the $235"

My agent says any other buyer will not be able to get certain kinds of loans for this place and it has a face only a mother could love. What should I do. Are they really saying nothing less than asking price or is it worth going back with another offer and what do you think is fair.

What's fair just depends on what's happening in terms of demand in your market right now. If you really want to be sure of getting the place I guess you'll have to offer more. Not necessarily as high as 235k, but more. You can always float a 210k (or something) offer and see if you get a counteroffer. But if you are willing to wait, and if your agent is correct, you may get a better deal. It would probably only take one 235K offer that was unable to obtain financing to make the seller reconsider.

The problem with those "odd" properties is that it is difficult to find good comps for pricing. You might try asking if the sellers have had any appraisals done (this is not likely, frankly). If it has already appraised at the 235 or higher then you are not likely to get them to go down in price very soon I'd guess. 

Jean Bolger

I would wait. Patience is really a virtue in this game, unless you have severely undervalued something. I have had sellers reject cash offers, only to come back to me later offering to sell me the same property for *less* than my original cash offer, once they realize either a) the property is overpriced, or b) no one can get financed for the property for whatever reason. And even if you miss out, there is always another property coming around the corner. Sometimes the best deals are the ones you don't make.

Paying cash, with no appraisal or financing contingency, is a powerful sales motivator and one of my most potent negotiating tactics. 

I would also wait. In a couple of weeks you could submit the same offer and test the waters again. You can also have your agent figure out what the sellers motivation for selling is. You may find that there is another issue other then price.

The only appraisal I am aware of is going off the current town assessment of 196K. If you figure this is 70% of appraised value that would make it $280 in the town's eyes. 

Not sure how this relates to the real world so if anyone can shed some light it would be appreciated.

Originally posted by @Digger Odell :

The only appraisal I am aware of is going off the current town assessment of 196K. If you figure this is 70% of appraised value that would make it $280 in the town's eyes. 

Not sure how this relates to the real world so if anyone can shed some light it would be appreciated.

 Can't shed any light for you. Different areas have different takes on appraised value for tax purposes. I have lived places where appraised value for tax purposes was markedly higher than what you could reasonably get on the open market. 

If you haven't grossly undervalued the property, you should have patience. If you really, really want something, then sometimes you have to pay more than you want to pay for it. If the seller really, really wants to sell, sometimes they have to take less than they want for it. Usually business is done somewhere in between. Sometimes you can't do business with someone else for whatever reason; there can be no meeting point. Only you can decide how bad you want this place and if you're willing to overpay for the property. A lot of times I think people justify overpaying for a property because they figure it's just a few thousand from the seller's "final" offer, whatever that is, when in reality the seller's final offer is overblown because the starting point was so far out of whack. You see this in car sales all the time. 

I consider market value to be: how likely is it that I could sell this property within 30-60 days should it become absolutely necessary? Market value, to me, is not waiting a year for the right buyer to come along (maybe it would be if we were talking houses in 7 figure territory). Anything can be sold for any amount given the right set of circumstances; market, as far as I'm concerned, is a product that has a strong level of demand at the right price.  

I went to Zillow and looked at a sampling of homes that had sold recently in the same town. Compared their assessed value to the selling price. 

hat I found was all sold for more than the assessed value by anywhere from 8% for one that sold for 240 to 58% for one that sold for 245. If you take off the one for 8% which went for a bit over assessed value, add up the remaining seven and divide by seven it comes to an average selling price of 37% over assessed value.

So, if this house is assessed at 196 it should theoretically sell in the neighborhood of 268. If this follows any kind of logic their asking price of $235 sounds reasonable to me. 

What do you folks feel?

@Digger Odell the tax assessment and the appraisal are two very different things. 

The assessment is part of a formula used by whoever collects the taxes (county or city) to determine the property tax. There are very few instances where it is the same as the market value, and it is sometimes wildly different. 

The appraisal is created by a professional appraiser as an estimation of the current market value. This is used by lenders to determine how much they are willing to lend on a property. So if the appraisal on this property is lower than the asking price, people will have difficulty getting a loan unless they want to make up the difference by paying more cash as a downpayment.

Be careful with Zillow- those are weird computer generated averages that they come up with. They're sometimes in the ball park but sometimes way off. Your agent should be providing you with actual data on the recent solds in the area -he has access to better information.

For a personal residence that you are paying cash for, the only thing that really matters is how YOU feel about the price. I assume you've looked at other places that are priced similarly, and at some priced a bit above and a bit under. How does this place stack up?

It sounds like it's kind of a unique property. Which means there won't be as many people interested, probably. But if it's the kind of "unique" that you like and want, it might be hard to find an equivalent.

Good luck! When you are buying as an investor you can leave your emotions out of it and go by the numbers. When you are buying a home it's a lot more complicated.

Jean Bolger

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