First time home buyer looking for advice on terms and conditions
October 14, 2008 9:08 PM Subscribe
Just about to make our first ever offer on a house and need advice on terms...help? (lots more detail in click)
Rural beauty, small town, 1215sqft, 4.94 acres (1 acre cleared), dead end street, decent shape but 22 years old, needs a little non-structural work (deck plywood) but otherwise seems good. Dual furnaces, one oil and one wood, use the same ducting system with individual blowers and thermostats. Fridge, stove, dishwasher, washer, dryer, blinds, valances, fixed mirrors, blah blah blah included. Kitchen recently redone. Carpets and walls in great shape (not thrilled about the wall colours however). Decent landscaping (better than most in the area). Shallow well. Septic lagoon (legal). Two sheds of little or no value. Metal roofing.
Seller is leaving because they need more space. They are asking $169k, originally was $179k. One previous offer, which fell through because buyer could not arrange financing.
We will be getting a house inspection and a well test. A previous home inspection 4 years ago also detailed a few problems and recommendations (doubling floor joists, re-aligning siding, adding additional structural support to roof peak).
Bank says no real problems in us getting a mortgage (though it was close...admittedly because they are being restrictive in the current financial climate.
So...given all that we are thinking of offering $155k and requiring all firewood on site left behind (perhaps enough for this winter). What else should we ask for?
Specifically, we can ask for other things to be left in place, though I don't know what those would really be. We could accept if they refuse to leave other things behind if they don't try to keep too close to their asking price. What are our big risks, given the above info?
Any other suggestions?
Rural beauty, small town, 1215sqft, 4.94 acres (1 acre cleared), dead end street, decent shape but 22 years old, needs a little non-structural work (deck plywood) but otherwise seems good. Dual furnaces, one oil and one wood, use the same ducting system with individual blowers and thermostats. Fridge, stove, dishwasher, washer, dryer, blinds, valances, fixed mirrors, blah blah blah included. Kitchen recently redone. Carpets and walls in great shape (not thrilled about the wall colours however). Decent landscaping (better than most in the area). Shallow well. Septic lagoon (legal). Two sheds of little or no value. Metal roofing.
Seller is leaving because they need more space. They are asking $169k, originally was $179k. One previous offer, which fell through because buyer could not arrange financing.
We will be getting a house inspection and a well test. A previous home inspection 4 years ago also detailed a few problems and recommendations (doubling floor joists, re-aligning siding, adding additional structural support to roof peak).
Bank says no real problems in us getting a mortgage (though it was close...admittedly because they are being restrictive in the current financial climate.
So...given all that we are thinking of offering $155k and requiring all firewood on site left behind (perhaps enough for this winter). What else should we ask for?
Specifically, we can ask for other things to be left in place, though I don't know what those would really be. We could accept if they refuse to leave other things behind if they don't try to keep too close to their asking price. What are our big risks, given the above info?
Any other suggestions?
A lot depends on the situation of the current owner. Are they free and clear on the house? If so, in this economic climate, many people would probably advise them to jump at your offer. If their money had been tied up in a 401k in the market - they would have lost much more than 14 grand with that much money. Some people will look at it like that and a necessary thing to have to sell at a "loss" from their current asking price. Then again.....
Ask for anything reasonable and make that offer clear and urgent. The time is right. A lot of people would love to have 155K in cash right now.
posted by Gerard Sorme at 9:55 PM on October 14, 2008
Ask for anything reasonable and make that offer clear and urgent. The time is right. A lot of people would love to have 155K in cash right now.
posted by Gerard Sorme at 9:55 PM on October 14, 2008
Response by poster: I should add regarding the previous home inspection...I have no idea whether the recommendations of the home inspector were followed through 4 years ago. I will be finding that out before making the offer.
posted by Kickstart70 at 9:58 PM on October 14, 2008
posted by Kickstart70 at 9:58 PM on October 14, 2008
Anything the home inspector finds is potentially something you could ask the seller to fix as part of the terms - particularly anything that hasn't been fixed since the last inspection. When Mrs Morte and I bought our house we asked the seller to deduct the price of fixing the dampproofing. If we'd known that the built-in appliances were in as bad a state as they were, we would probably have asked them to factor in the replacement costs for those as well.
This is the right climate for you to be quite picky about the state of repair of a property.
posted by le morte de bea arthur at 2:29 AM on October 15, 2008
This is the right climate for you to be quite picky about the state of repair of a property.
posted by le morte de bea arthur at 2:29 AM on October 15, 2008
Best answer: Yes, what the others say.
1- Make an offer that works for you. Like you said, the purchase price + the firewood. Or put in a bonus for making the closing date convenient to you. Or a penalty for not.
2- You could make the deal seem better by offering $155 + firewood, or $157 if they want to take it with them. Instead of the seller thinking "they are lowballing me by $14k AND they are REQUIRING me to leave my awesome firewood? Fuck that," they could think "yeah, it's a low offer, but they are going to give me $1000 for my firewood, and now I don't have to pay to have it moved. Awesome." Same thing with any appliances or equipment. "Hey, that's a really nice lawnmower. I'll add $1000 to the purchase price if you agree to leave it." Since real estate deals in big numbers, it's easy to pay $1000 more or less for a place (what's that on the monthly payment, a dollar?) but on the sellers end, $1000 for a lawnmower is an awesome treat.
3- Do not let emotion get in the way of making an equitable deal. If you LOVE the house and the location, be willing to pay more for it. But if it's just a house that will work for you, like any other similar house could, don't pay more because you have accidentally emotionally invested in the place. If it's just a commodity for you, only pay what the commodity is worth.
4- Find a way to make it known that your offer isn't some kind of final, last, best price that you can pay. You would be glad to entertain a counter offer and to negotiate so that the best possible deal is hammered out. The seller may well take a lower price if they feel like they have done business with someone who is fair and respected their position. This is just being a good person, and using this tactic has always worked extremely well for me.
(Quick, easy example: you are at McDonald's and order chicken nuggets. They give you the standard one sauce packet. You want an extra one. If you say "One? I need another one!" you know the counter person is going to give you shit and charge you. But if you say "hey, can I have an extra Hot Mustard? How much is that?" they are going to give it to you free almost every time. You treated them and their rules with respect, and got a better deal.)
5- Some people say to negotiate the small things first. That's one way to go, and works in a lot of cases. Like an employment contract. But for a house, I think looking at the whole picture at once works better. It's just a more emotional thing.
6- Make sure you read the offer contract you hand to them and that it has provisions for the unknown. What happens if the place burns down? What happens if your financing falls through? What happens if the inspector sees a $2000 flaw in the heating system? What happens if they accept the offer, and then pull out a week before closing? What happens if the seller dies? (This happened to my dad- he was buying a house from an old lady and she died right before closing. There was no way to change the contract, and these poor people had to move house and bury their mother at the same time. We moved in, and the next day, the afternoon after the funeral, the people had to come back to get something they forgot and see us clowns living in their barely cold mother's house. It was tragic. There should be wiggle room for these things.)
7- Get contact information for the sellers new location. You'll save yourself a ton of hassle in six months when the furnace goes out and you need to find out who installed it. And being friendly always pays off.
8- Buy, or make a slightly higher offer in exchange for, a home warranty. They are a few hundred bucks for a year or two of coverage that covers your HVAC, roof and other major expenses. Well, well worth the price just for the peace of mind.
9- Be prepared for the unexpected and roll with the punches. If the seller is a jerk, remember that they are just a means to an end: getting the house you want. If they are wonderful, be happy that you met some nice people.
That said, it's hard to say whether your offer is out of line or not- depends completely on the area and how high/low the original $179 was. If that was a good price, $155 might be low. But if it was a high price, $155 might be just right. Don't get too hung up on the purchase price- it's the other stuff that matters. So what if you pay an extra percent or 5 to get what you want, in the manner you want it?
posted by gjc at 4:49 AM on October 15, 2008 [1 favorite]
1- Make an offer that works for you. Like you said, the purchase price + the firewood. Or put in a bonus for making the closing date convenient to you. Or a penalty for not.
2- You could make the deal seem better by offering $155 + firewood, or $157 if they want to take it with them. Instead of the seller thinking "they are lowballing me by $14k AND they are REQUIRING me to leave my awesome firewood? Fuck that," they could think "yeah, it's a low offer, but they are going to give me $1000 for my firewood, and now I don't have to pay to have it moved. Awesome." Same thing with any appliances or equipment. "Hey, that's a really nice lawnmower. I'll add $1000 to the purchase price if you agree to leave it." Since real estate deals in big numbers, it's easy to pay $1000 more or less for a place (what's that on the monthly payment, a dollar?) but on the sellers end, $1000 for a lawnmower is an awesome treat.
3- Do not let emotion get in the way of making an equitable deal. If you LOVE the house and the location, be willing to pay more for it. But if it's just a house that will work for you, like any other similar house could, don't pay more because you have accidentally emotionally invested in the place. If it's just a commodity for you, only pay what the commodity is worth.
4- Find a way to make it known that your offer isn't some kind of final, last, best price that you can pay. You would be glad to entertain a counter offer and to negotiate so that the best possible deal is hammered out. The seller may well take a lower price if they feel like they have done business with someone who is fair and respected their position. This is just being a good person, and using this tactic has always worked extremely well for me.
(Quick, easy example: you are at McDonald's and order chicken nuggets. They give you the standard one sauce packet. You want an extra one. If you say "One? I need another one!" you know the counter person is going to give you shit and charge you. But if you say "hey, can I have an extra Hot Mustard? How much is that?" they are going to give it to you free almost every time. You treated them and their rules with respect, and got a better deal.)
5- Some people say to negotiate the small things first. That's one way to go, and works in a lot of cases. Like an employment contract. But for a house, I think looking at the whole picture at once works better. It's just a more emotional thing.
6- Make sure you read the offer contract you hand to them and that it has provisions for the unknown. What happens if the place burns down? What happens if your financing falls through? What happens if the inspector sees a $2000 flaw in the heating system? What happens if they accept the offer, and then pull out a week before closing? What happens if the seller dies? (This happened to my dad- he was buying a house from an old lady and she died right before closing. There was no way to change the contract, and these poor people had to move house and bury their mother at the same time. We moved in, and the next day, the afternoon after the funeral, the people had to come back to get something they forgot and see us clowns living in their barely cold mother's house. It was tragic. There should be wiggle room for these things.)
7- Get contact information for the sellers new location. You'll save yourself a ton of hassle in six months when the furnace goes out and you need to find out who installed it. And being friendly always pays off.
8- Buy, or make a slightly higher offer in exchange for, a home warranty. They are a few hundred bucks for a year or two of coverage that covers your HVAC, roof and other major expenses. Well, well worth the price just for the peace of mind.
9- Be prepared for the unexpected and roll with the punches. If the seller is a jerk, remember that they are just a means to an end: getting the house you want. If they are wonderful, be happy that you met some nice people.
That said, it's hard to say whether your offer is out of line or not- depends completely on the area and how high/low the original $179 was. If that was a good price, $155 might be low. But if it was a high price, $155 might be just right. Don't get too hung up on the purchase price- it's the other stuff that matters. So what if you pay an extra percent or 5 to get what you want, in the manner you want it?
posted by gjc at 4:49 AM on October 15, 2008 [1 favorite]
Two quick thoughts:
1) Make the offer and get the agreement in principle worked out before you get the inspection, then deduct the costs of any necessary repairs from the offer.
2) Make damn sure that the home inspector is YOUR home inspector, not the realtor's. There can be a huge conflict of interest here if the inspector relies on the realtor for more work later.
posted by jenkinsEar at 9:43 AM on October 15, 2008
1) Make the offer and get the agreement in principle worked out before you get the inspection, then deduct the costs of any necessary repairs from the offer.
2) Make damn sure that the home inspector is YOUR home inspector, not the realtor's. There can be a huge conflict of interest here if the inspector relies on the realtor for more work later.
posted by jenkinsEar at 9:43 AM on October 15, 2008
Ask your bank to order an appraisal that can be used for financing. Having the appraisal in hand helped me negotiate the purchase of my house. The appraiser did not know the asking or offering price, so it was as independent as I could get.
Septic lagoon may be legal, but it's not ideal, and you should check to see if it will stay legal, and what it would cost to do a leaching field. Make sure you have a very good home inspector. Ask to have any significant flaw fixed, or money taken off.
posted by theora55 at 10:54 AM on October 15, 2008
Septic lagoon may be legal, but it's not ideal, and you should check to see if it will stay legal, and what it would cost to do a leaching field. Make sure you have a very good home inspector. Ask to have any significant flaw fixed, or money taken off.
posted by theora55 at 10:54 AM on October 15, 2008
Response by poster: Followup here....hopefully helpful to those watching this topic.
Tonight we made an offer. $155k and requested leaving firewood and window coverings for us. They countered with $163k but asked that she shortened the dates involved (first date for inspections and financing and second date for final closure and financial release), admitting that they needed the money soon for their next place. We countered with $160k and agreed to move the first date closer by a couple days and by more than a week for the final trade. We also accepted that they wanted to keep some of their window coverings which matched their bedspread.
We are currently awaiting a response to that, but feel that they played their hand a bit...they know it's a tough market and they also showed that speed was of the essence for them, therefore we are in the stronger position in terms of money.
posted by Kickstart70 at 7:57 PM on October 15, 2008
Tonight we made an offer. $155k and requested leaving firewood and window coverings for us. They countered with $163k but asked that she shortened the dates involved (first date for inspections and financing and second date for final closure and financial release), admitting that they needed the money soon for their next place. We countered with $160k and agreed to move the first date closer by a couple days and by more than a week for the final trade. We also accepted that they wanted to keep some of their window coverings which matched their bedspread.
We are currently awaiting a response to that, but feel that they played their hand a bit...they know it's a tough market and they also showed that speed was of the essence for them, therefore we are in the stronger position in terms of money.
posted by Kickstart70 at 7:57 PM on October 15, 2008
Response by poster: Accepted! :)
Now it's paperwork, well inspection, house inspection and all the games with that. Final hurdle is over though!
posted by Kickstart70 at 8:52 PM on October 15, 2008
Now it's paperwork, well inspection, house inspection and all the games with that. Final hurdle is over though!
posted by Kickstart70 at 8:52 PM on October 15, 2008
congrats, Kickstart70! I hope the rest of the process goes as smoothly!
posted by j at 9:29 PM on October 15, 2008
posted by j at 9:29 PM on October 15, 2008
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Realtors and lawyers may try to dissuade you from asking for something, but keep in mind: anything besides "I'll give you your asking price, let's deal" means more work for them. Make your offer, and if it's acceptable, great. If not, then you may get a counter-offer. If that's good enough for you, great. Lather, rinse, repeat.
Keep the seller's position in mind, though. If you ask for a year's worth of ice cream sundaes, delivered by the seller's charming daughter, and a pony too! they're likely to figure you for a flake and ignore any further offers. Make it reasonable, and make it something you can live with if the seller says "OK."
Good luck.
[IAAL, but IANYL. TINLA.]
posted by spacewrench at 9:37 PM on October 14, 2008