Friday, November 11, 2005

I'm either a Genius, or an Idiot, or...

...or I've just got a big swinging set of brass ones, because I just composed an email to the seller offering about 30% less than his asking price, even though he told me he already has one offer on the table!
Even at the asking price, this place is a good deal financially compared to anything else I've seen, but I had some serious concerns about actually paying that much. I did a lot of research on comparable sales, prices per square foot, price increases over the past couple of years, and after talking to a great lawyer, I decided that even in relation to housing bubble heights, the asking price was out of line. The last few days' news articles only helped seal the decision.
I don't want to get stuck in one of those situations where the bank appraises the property for way less than you've agreed to pay and then you have trouble with the mortgage.
Tomorrow morning, I'll reread that email and hit the send button... if the suspense is killing you, just think what it's doing to me!


Anonymous said...

Madame X

My suggestion : Don't send that email. Not as it is.

Looking at the numbers you showed - that property returns the down payment in 4 years. While paying for itself. If those numbers can be verified and true, that's a gold mine you'd want to have!

If your apprehensions are around the cashflow, recheck. Satisfy yourself that the numbers are safe to deal with. Including a buffer margin of a higher interest rate or higher expenses and lower rent etc.

If you're concerned over the valuation and mortgage, either ask for that to be resolved upfront or make a "subject to..." offer.

If you do feel that a lower offer is justified, you can. But a softer approach (Hey, I like this place. I'm trying my best to make a better offer - looking for better mortgage etc. I don't want to lose out on this. But if you want a fast closure, I can go upto ... )

A low key, non threatening approach, without a formal offer works a lot better. Leaves you the option to up your bid without any hardening on either side. And the option for both to compromise or walk away without hard feelings.

But you can't do that by email. It has to be in person.

With a 30% lower, take it or leave it approach through the email, you're asking to be rejected. A personal "pretty please" allows the possibility of a 20% lower offer. I'm speaking from personal experience - that's how I got my home at a price that made financial sense.

If it doesn't allow for the compromise option, then you don't have that option anyway. And your 30% lower offer isn't any good either.

But you might. Fish without cutting bait.

Anonymous said...

I agree with commenter #1. A good way to position yourself if you are worried about the apprasial coming in lower than expected would be to submit your offer with a "subject to..."

When I purchased my place three years ago, I ran into a situation where the apprasial came in at 15% lower than the agreed upon price. Knowing the seller was in a bind because they had just purchased a home in Long Island and finding a qualified buyer for this co-op would not be the easiest task, I knew I had some leverage. I spoke with the seller and let them know that if I ended up in a position where I would have to pay PMI due to the negative equity, I would not be able to afford the place. So I offered 1.5% above the apprasial and it was accepted.

Good luck!

savvy said...

I say send it. The worse they can do is say no. The best case scenario (a stretch) is you get it. If they say no, offer something else. I made a gazillion offers on my house before I got it, with no counter to any of them. Finally I submitted two offers, one for more money, but closing when my lease was up, the other for less money but closing sooner. I told them they were my last offers and I was walking away. They both expired and I was ready to give up when they called and asked me to resubmit one of them. I did and I bought my house... on my terms. It was stressful, but I don't regret it.

Madame X said...

Thanks all for the support!
Anonymous-- great idea, I considered taking that route: a higher offer with an appraisal contingency so I could get something knocked off the price later once the seller was committed. However, he isn't buying another place, so he would have been able to walk away from the deal at that point if he wanted to...
As of 5:28pm, I haven't heard back from him!