Thread: First Time Buyer - Negotiation Help

Tom -

You state you are currently working with an agent and you have all the statistical data you need to make an educated decision, so you are off to a great start. A couple of things about comparing amenities though, did you compare lot size and placement of the home within the neighborhood? This important data is often overlooked by buyers when they are comparing homes within a neighborhood. Another important factor when determining value is "not" to compare square footage across the board. If another comparable property was a short sale or foreclosure, it will affect the average square foot value. Single story homes will always comp more than a two story with the same square footage (in normal market conditions) Your agent can help you with this information.

It's a sad statement from a home buyer to hear they do not trust their agent to work in their best interest. It is in your agents best interest to represent you. A small percentage of the difference in list vs. sold price is not enough to make an agent violate their fiduciary duty to their client.

Have a heart to heart with your agent and ask him to show you the comps and his professional opinion of value. He should also be able to justify his opinion and assist you in understanding the value, so you can make the best decision for yourself.

I don't think anyone can tell you what a fair market value is and whether the price you want to offer is reasonable without enough data and knowledge of this specific home and neighborhood, but I can confidently say - there will probably always be a difference between what the seller believes their home is worth and what the buyer is willing to pay.

Hope this helps answer a few of your questions!

Ignore the sellers price and write your offer for what the comparables say the house is worth. It won't appraise for more then it is worth so there is no point in going under contract and paying for an appraisal to find out what you already know. Have your agent present the offer with the comparables to back it up.

Be prepared to be rejected. It is possible the seller can not sell the house for what it is worth because they owe too much. Can you find out what they paid for it? Did they refinance? Our deeds of trust are online.

If this one does not work out, keep looking. There are a lot of houses out there. While it is true that it is in your agents best interest to sell the house it is also in your agents best interest to hold onto a serious buyer. If your agent is uncooperative, get another agent. There are plenty of agents out there who appreciate an educated buyer with the ability to purchase.

In every market there are overpriced sellers that aren't truly motivated. Though it is very common for there to be disconnect between the buyer and seller, you and the seller are way off and will be difficult to put a deal together. An offer that low will most likely get rejected but you never know until you try.

Have you and your agent reviewed the comps and your spreadsheets together to make sure you are on the same page?

good luck!

Thank you for all your advice.
We are going back to the house for a second look tomorrow. We did carefully select the comps - the are all within a few blocks and similar build (2.5 story, built ~1925.)
The current owner has been there for almost 30 years, so I think it's unlikely that they have significant financial issues driving their sale.
One note regarding our realtor - he hasn't done anything clearly wrong, but as a first time buyer I'm being cautious as I do not want to be taken advantage of.
Thanks again, I'm sure I'll be back with more questions tomorrow.
Tom

Negotiation is based on justifiable facts, not feelings.

If the comps are less then offer less. If the comps are higher...offer less anyway

Originally Posted by tom3141

Thank you for all your advice.
We did carefully select the comps - the are all within a few blocks and similar build (2.5 story, built ~1925.)
The current owner has been there for almost 30 years, so I think it's unlikely that they have significant financial issues driving their sale.

Sounds like you are doing everything right - make the offer at the price you feel is fair, and heck even include your justification with the offer. If it gets rejected (and agents HATE this) try insisting that your agent contacts the seller and sets up an appointment with the seller - THE SELLER - not the seller's agent to have a heart to heart meeting. (though DON'T be surprised if the seller never received the comps - sometimes "they get lost in the shuffle." )

Also you CAN'T assume that the house is not HEAVILY encumbered, just because they lived there for 30 years - some people use their house as a bank - pulling out EQ whenever they can - and the homeowner MIGHT have done that when the banks were giving 125% interest loans. That is the ONLY error in your thinking that I can see - other than that you have done things all right.

As someone else mentioned - there are other houses as well - the market is flooded with inventory - if this doesn't work- there is always another.

Hello,

I'm not sure if you purchased the home yet, but I just came across your question.

I don't know what city you are in, but there are a few things to consider. The first is do you know who who the single largest landlord in America today is? The answer is the FDIC. The FDIC currently owns more properties than any other single entity in the country. Soon, they will be selling these properties off in mass amounts at probably 40-50 cents on the dollar.

I would recommend offering 60-70% of the asking price.

So that would be somewhere around $480,000 - $560,000 and just see what they do from there.....the buyer (you) is in a more powerful position than the seller. So of course they will ask for the moon, But I wouldn't offer as much as you are considering, You should consider being much more aggressive, the worst thing that could happen is the sell the property to someone else, and you find a better deal elsewhere.

Well, I hope this helps out a little with your question.