Help me negotiate
June 12, 2010 1:14 PM Subscribe
Tell me what I should put in as an offer for this house.
There is a house for sale in my neighborhood. I really love it. The asking price is 270k. The comps:
Within the past 6 months two comps have sold. One sold at $150/square foot. The other at $170. The houses are basically comparable to the one I'm interested in, however, there is a key difference: they had updated/modern kitchens. Additionally, they were purchased when the $8000 tax credit was still in effect for first time home buyers.
The kitchen in this house is pretty dated. The appliances definitely need replacing, as does the floor. Other than that, everything is in very nice condition.
Ideally, we would like to get this house in the 240/245 range. If we got the house for 245 that would put it at 150/square foot, which is comparable to a recent sale (but that sale had an updated kitchen, as I said). I think that's fair.
The seller inherited the house and is carrying no mortgage on it, but I do think she is eager to sell. The house was listed 3 weeks ago and in that time she dropped the price from 275 to 270 and also ripped out the carpet and refinished all the hardwood floors.
We have 20% to put down, have a preapproval letter from the bank and can close immediately. We want to make the lowest offer we can without appearing insulting. What should it be?
There is a house for sale in my neighborhood. I really love it. The asking price is 270k. The comps:
Within the past 6 months two comps have sold. One sold at $150/square foot. The other at $170. The houses are basically comparable to the one I'm interested in, however, there is a key difference: they had updated/modern kitchens. Additionally, they were purchased when the $8000 tax credit was still in effect for first time home buyers.
The kitchen in this house is pretty dated. The appliances definitely need replacing, as does the floor. Other than that, everything is in very nice condition.
Ideally, we would like to get this house in the 240/245 range. If we got the house for 245 that would put it at 150/square foot, which is comparable to a recent sale (but that sale had an updated kitchen, as I said). I think that's fair.
The seller inherited the house and is carrying no mortgage on it, but I do think she is eager to sell. The house was listed 3 weeks ago and in that time she dropped the price from 275 to 270 and also ripped out the carpet and refinished all the hardwood floors.
We have 20% to put down, have a preapproval letter from the bank and can close immediately. We want to make the lowest offer we can without appearing insulting. What should it be?
Response by poster: Metahawk: we're going to make an offer for sure. I'm asking what people think the number that we offer should be.
Basically, my husband and I are in a disagreement about how much the initial offer should be. We are obviously willing to negotiate, but we want the offer to start low (just not insultingly low). We can always raise the offer, but there's no lowering it.
So I thought metafilter might give us an unbiased answer to our little disagreement. :c)
posted by sickinthehead at 1:35 PM on June 12, 2010
Basically, my husband and I are in a disagreement about how much the initial offer should be. We are obviously willing to negotiate, but we want the offer to start low (just not insultingly low). We can always raise the offer, but there's no lowering it.
So I thought metafilter might give us an unbiased answer to our little disagreement. :c)
posted by sickinthehead at 1:35 PM on June 12, 2010
On preview, it sounds like you're in a less competitive market than I was shopping in, so take this for whatever it's worth.
They tell you this when you're house-shopping, and it's true: the value of a house (at this moment) is what the market will bear at this moment. So, I'd ask a real estate agent what they are seeing as offers on similar houses. It may be that other buyers don't really care about updated kitchens. Particularly if you are really in love with this house, I wouldn't gamble by making the lowest offer that's not insulting. Where I live, they don't counter-offer, they just give the contract to another buyer.
If you did want want to do some math, a totally new and fairly sizable and upscale kitchen might cost $15,000-$25,000, paying retail and outsourcing the work. But you're only replacing the appliances and flooring, not redoing cabinets and counters and relocating or replacing some plumbing and electrical. So, it'd be less than that -- check the as-installed flooring and appliance costs at Home Depot to get an idea of what you'd pay (your contractor could likely get slight discounts on that but also would probably come up with a few improvements you didn't think of).
Again, though, a mathematical calculation might tell you what to consider "fair" for your own point of reference, but it isn't going to tell you what you need to offer to get the house. In fact, you might even offer a bit high to get into contract and then bargain down on the basis of a lower appraisal. However, you can't predict what the appraiser will say, and by that point, you'll have sunk your inspection costs, so you'll be less likely to want to bargain tough.
posted by slidell at 1:42 PM on June 12, 2010
They tell you this when you're house-shopping, and it's true: the value of a house (at this moment) is what the market will bear at this moment. So, I'd ask a real estate agent what they are seeing as offers on similar houses. It may be that other buyers don't really care about updated kitchens. Particularly if you are really in love with this house, I wouldn't gamble by making the lowest offer that's not insulting. Where I live, they don't counter-offer, they just give the contract to another buyer.
If you did want want to do some math, a totally new and fairly sizable and upscale kitchen might cost $15,000-$25,000, paying retail and outsourcing the work. But you're only replacing the appliances and flooring, not redoing cabinets and counters and relocating or replacing some plumbing and electrical. So, it'd be less than that -- check the as-installed flooring and appliance costs at Home Depot to get an idea of what you'd pay (your contractor could likely get slight discounts on that but also would probably come up with a few improvements you didn't think of).
Again, though, a mathematical calculation might tell you what to consider "fair" for your own point of reference, but it isn't going to tell you what you need to offer to get the house. In fact, you might even offer a bit high to get into contract and then bargain down on the basis of a lower appraisal. However, you can't predict what the appraiser will say, and by that point, you'll have sunk your inspection costs, so you'll be less likely to want to bargain tough.
posted by slidell at 1:42 PM on June 12, 2010
We want to make the lowest offer we can without appearing insulting.
Why do you care about not being "insulting"? A negotiation is a negotiation. Unless you're buying from someone you know or care about, you want the house and the lowest price possible.
Talk with your realtor first, but be frank: "look, that house over there sold for $150/sqft, the other for $170. They both had new kitchens. I'll need to put in a new kitchen and floor and have no tax credit on it. My offer is []"
posted by _dario at 1:43 PM on June 12, 2010
Why do you care about not being "insulting"? A negotiation is a negotiation. Unless you're buying from someone you know or care about, you want the house and the lowest price possible.
Talk with your realtor first, but be frank: "look, that house over there sold for $150/sqft, the other for $170. They both had new kitchens. I'll need to put in a new kitchen and floor and have no tax credit on it. My offer is []"
posted by _dario at 1:43 PM on June 12, 2010
Response by poster: Dario: I guess by appearing insulting I mean I want to make an offer that will invite negotiations and not be rejected outright.
posted by sickinthehead at 1:46 PM on June 12, 2010
posted by sickinthehead at 1:46 PM on June 12, 2010
If it were me, and if I was in a non-competitive market where someone would counter-offer so long as I didn't offend them, I'd use $160/sf to get my starting point, then subtract $5000 as a low end estimate for the kitchen upgrade if I was sure the other houses really were comparable in every other way (e.g., they had refinished hardwood floors) and otherwise I wouldn't subtract that $5000, and I would subtract $8000 for the tax credit. Including this documentation about how you determined the offer amount might demonstrate you were reasonable people open to negotiations. At the same time, the seller might not be reasonable, and she might say "I think I can get $170 if I sit tight, so take it or leave it."
posted by slidell at 1:49 PM on June 12, 2010
posted by slidell at 1:49 PM on June 12, 2010
We had nearly the exact same figures as you with out first home purchase back in '96. We offered 242K and got it. It had been on the market for a while and the owners were a bit desperate, since they'd moved out of the country, rented out to a bunch of kids and it looked a little worse for wear. I don't think anybody else offered on it because the asking was well above any other house on the street (it was one of the nicest houses on an otherwise run down street)
So this is a really hard question without knowing your neighbourhood. If she's putting money into fixing it up, it sounds like she's really hoping that she'll get something near her asking price. If I were you, lowball and I'd wait it out.
Carrying more mortgage that you can really afford is a huge drag.
posted by bonobothegreat at 1:50 PM on June 12, 2010
So this is a really hard question without knowing your neighbourhood. If she's putting money into fixing it up, it sounds like she's really hoping that she'll get something near her asking price. If I were you, lowball and I'd wait it out.
Carrying more mortgage that you can really afford is a huge drag.
posted by bonobothegreat at 1:50 PM on June 12, 2010
IIRC there is a $250,000 limit on the tax free profit one can make of the sale of their primary residence. So the seller may be happy to get just that. And $245,ooo is comp within the neighborhood. (Kitchen aside). I'd offer the 245k and be willing to go to 250k. Unless you find comps w/o kitchen updates it is going to be hard to compare prices. OTOH, how is the rest of the house? Bathroom(s)? Furnace/AC? Electric service? Roof? insulation? Don't get hung up on the kitchen alone
posted by Gungho at 1:55 PM on June 12, 2010
posted by Gungho at 1:55 PM on June 12, 2010
In my area the final price tends to be 93-94% of the asking price (251-254k). Do the comps you were provided have the asking prices? If not your real estate agent should be able to provide them. Even ask for additional comps including asking price. This will give you a better idea of what the average selling/asking price ratio is and what the seller might accept.
I would guess they were originally hoping for 255k+, then went to 250k+. Don't worry about price per square feet. If the house is what you want and the price is fair, make an offer of what you think it is worth. I would agree with Gungho that an offer of 245k with a counter of 250k is realistic, but an offer of 240k or lower probably wouldn't insult them.
posted by Yorrick at 2:17 PM on June 12, 2010
I would guess they were originally hoping for 255k+, then went to 250k+. Don't worry about price per square feet. If the house is what you want and the price is fair, make an offer of what you think it is worth. I would agree with Gungho that an offer of 245k with a counter of 250k is realistic, but an offer of 240k or lower probably wouldn't insult them.
posted by Yorrick at 2:17 PM on June 12, 2010
I know this might be counter to other advice you get, but I would give them your best price first and tell them that. "Rather than spend time haggling and the ill feelings that may come from it, we are giving you our best price first. That price is $242.5k. However, we are not open to negotiation since it already accounts for things such as the kitchen condition, the tax credit and comps. We really want this house and hope you see our offer as fair. The offer stands for 48 hours." You need to be quite comfortable walking away from the house if you don't get it for your price or be willing to swallow your pride after a few days and come back.
posted by JohnnyGunn at 2:34 PM on June 12, 2010
posted by JohnnyGunn at 2:34 PM on June 12, 2010
If you want the house in the 240/245 range, I would start negotiating at 235. That's about $142 per square foot, only $8 off the average for a house WITH AN UPDATED KITCHEN.
DO NOT WORRY ABOUT INSULTING THEM. All they can do is say no, and then you're back to square one. You can always offer more after an initial rejection. Even if they reject you outright with no counter-offer at all, that doesn't mean you can't make another, higher, offer. Plus, all this is taking place through realtors, so it's not like you have to be face-to-face.
Modestly priced appliances are going to run you around $800 a piece for stove, dishwasher and fridge. That's almost $2500, and doesn't even include a microwave or the flooring. Decent flooring will run you at least $3 per square foot, and that's on the low end (for tile or wood). So now you're over $3k in necessary improvements, plus stuff that may come up in the inspection, not to mention the $8k tax credit that you won't get (although that part really is not their problem, but it can still be a factor in how YOU arrive at your price).
My current house was originally listed at $298k. We waited until the price dropped to $245. We offered $215 and they countered with $219500. I NEVER expected them to go that low, but by low-balling WAY below what I was willing to pay (which was $230), I got what I wanted and then some.
You won't know if you don't try.
posted by wwartorff at 3:15 PM on June 12, 2010 [1 favorite]
DO NOT WORRY ABOUT INSULTING THEM. All they can do is say no, and then you're back to square one. You can always offer more after an initial rejection. Even if they reject you outright with no counter-offer at all, that doesn't mean you can't make another, higher, offer. Plus, all this is taking place through realtors, so it's not like you have to be face-to-face.
Modestly priced appliances are going to run you around $800 a piece for stove, dishwasher and fridge. That's almost $2500, and doesn't even include a microwave or the flooring. Decent flooring will run you at least $3 per square foot, and that's on the low end (for tile or wood). So now you're over $3k in necessary improvements, plus stuff that may come up in the inspection, not to mention the $8k tax credit that you won't get (although that part really is not their problem, but it can still be a factor in how YOU arrive at your price).
My current house was originally listed at $298k. We waited until the price dropped to $245. We offered $215 and they countered with $219500. I NEVER expected them to go that low, but by low-balling WAY below what I was willing to pay (which was $230), I got what I wanted and then some.
You won't know if you don't try.
posted by wwartorff at 3:15 PM on June 12, 2010 [1 favorite]
Response by poster: I just want to make note: I'm not just being picky about the kitchen. The kitchen is truly horrible. There are three different types of flooring in it (tile, lino AND some stained white carpeting!) and the stove is 37 years old. The other appliances don't look too much younger.
posted by sickinthehead at 3:34 PM on June 12, 2010
posted by sickinthehead at 3:34 PM on June 12, 2010
If you want to get the house for somewhere around 240K-245K, I suggest your initial offer be no less than 235K and negotiate up from there. It depends on your neighborhood and other factors, but your ideal final price is 10% off asking, which is quite a bit, so I wouldn't pin my hopes and dreams on that price if I were you. Agreeing with Yorrick above that the final price will probably fall somewhere around 7-8% off asking (but you never know).
posted by puritycontrol at 3:45 PM on June 12, 2010
posted by puritycontrol at 3:45 PM on June 12, 2010
Make an offer, and make it contingent on appraisal. Ask the bank NOT to tell the appraiser what the price is. Seller knocked 10k off my house when the appraisal came in 10k low. The appraiser took off for the crappy kitchen and general not-so-great condition. All I saw was the awesome view.
Sometimes, people who lived in a house, or visited Auntie Lou, have an emotional connection. You may want to note that you really like the house, neighborhood, etc., but then put in a value for rehabbing the kitchen, and probably the bath. In fact if the kitchen is that bad, you should be extra careful to check wiring and other things that may need updating.
posted by theora55 at 2:12 PM on June 13, 2010
Sometimes, people who lived in a house, or visited Auntie Lou, have an emotional connection. You may want to note that you really like the house, neighborhood, etc., but then put in a value for rehabbing the kitchen, and probably the bath. In fact if the kitchen is that bad, you should be extra careful to check wiring and other things that may need updating.
posted by theora55 at 2:12 PM on June 13, 2010
Response by poster: Update on the house: yesterday we found out the roof is 20 years old!
And today we are putting in an offer of 235K. *crossing fingers!*
posted by sickinthehead at 10:27 AM on June 14, 2010
And today we are putting in an offer of 235K. *crossing fingers!*
posted by sickinthehead at 10:27 AM on June 14, 2010
This thread is closed to new comments.
When we made a recent offer, we also offered to pay up to $5000 in fix-it costs that might come up in the inspections. This meant that there was no haggling about who would pay what and that we could close faster since the repairs didn't have to be done before closing (plus we could chose the workmen and the quality of the materials.)
posted by metahawk at 1:30 PM on June 12, 2010