Author Topic: counter offer and bidding wars (buyer)  (Read 5282 times)

mustachioso

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counter offer and bidding wars (buyer)
« on: December 07, 2014, 06:46:28 PM »
Foreword: I live in Southern California and my realtor (a 'normal' person) tells me the behavior I'm seeing isn't typical but not unheard of. I tend to post here when I feel uneasy because who wants to listen to normal people when you've got a forum of mustachians? I'm prequalified, large down payment (although I'll only put 20%), great job and credit, and a first time buyer. Essentially the perfect buyer.


I liked a house that was listed below market value (listed: 480k)
Knowing that bid over asking (1st bid: 501k).
Seller countered with 575k! and the following:

EMD 3% within 24 hours of acceptance
Closing date in 17 days from that day
Remove all contingencies in 10 days.
No Appraisal Contingency.
I pay sellers PITIA for each day closing is delayed (unless using their lender)
I cross qualify with their preferred lender
I lease it to them for 60 days at my PITI.
Seller choice of services (which I'm told means they choose the title and escrow company?)
14 hours to respond

I thought, okay, that's everything _you_ want so I'll counter with everything I want and maybe we'll meet in the middle.

Price: 525k
30 day closing
lease for 60 days at my PITI
24 hours to respond

...... I got no response at all. They have been ridiculously tight lipped with my realtor and request email only (no phone calls) so it's hard to get a feel for what is non-negotiable for them.

Would any of this scare you away?
Can you explain a possible motivation the seller has to be so aggressive and close so quickly when they plan to continue living there for 2 months? Is there anything I can do but offer more or and which, if any, of the terms seem reasonable?

Another Reader

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Re: counter offer and bidding wars (buyer)
« Reply #1 on: December 07, 2014, 07:38:46 PM »
What is the fair market value of the property per comparable sales?  Typically a seller lists below market to generate a bidding war.  How many competing bids are there?  Did the seller counter multiple offers?

In your shoes, unless you can get the house at a fair price and terms, I would move on.  I would not waive the inspection, appraisal or financing contingencies.  You can't afford to do that.  If the house does not appraise, you lose your earnest money unless you make up the difference.  It is highly unlikely you could get an appraisal, fund and close in 17 days anyway.

You are not the perfect buyer in this market.  In fact, you are close to the bottom of the list, just above an FHA buyer.  The seller is looking for a strong cash buyer that will waive contingencies and close immediately.

Goldielocks

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Re: counter offer and bidding wars (buyer)
« Reply #2 on: December 07, 2014, 08:04:33 PM »
This seems not too, too strange, other than being VERY time aggressive.
 except for these three conditions:

I cross qualify with their preferred lender
I lease it to them for 60 days at my PITI.
Seller choice of services (which I'm told means they choose the title and escrow company?)


You are pre-qualified and will put 3% down in short order.  That should cover any concerns they have about cross qualifying and choice of services.  Also, if they choose the services, then you should not be on the hook for delayed close..

Do not lease it to them for 60 days.  They carry it until they are out.  suggest a closing date that matches their 60 days.  This is worth upping your price a bit for, to help them cover their own mortgage for this time.   The only exception is if you intend to be a landlord anyway, and are giving them a yearly (or at least month to month) lease. 

All of their other items are just about money.  I would expect a stinking hot deal to comply with the other terms, including speed of closing, etc.   This deal needs to cover the fact that you are giving a clean offer without a home inspection, which is worth a LOT more than just $40k off the asking price.      Maybe a clause from you about $50k to remain in escrow for 1 year, to cover any home expenses over $5k that need to be done due to unseen repairs / furnance/ plumbing  / leak / structural / safety or hidden issues?

Also, with the speed of signing - you would need to include a few clauses, such as they are responsible for making home available to inspector without any advance notice, at any hour, and are responsible for any delays caused by ...? 

tracylayton

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Re: counter offer and bidding wars (buyer)
« Reply #3 on: December 07, 2014, 08:30:40 PM »
I'm a real estate broker, and I think you'll need the full 30 days to get your loan thru underwriting. I think your counter offer seems reasonable.

Spondulix

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Re: counter offer and bidding wars (buyer)
« Reply #4 on: December 08, 2014, 07:19:52 AM »
Unfortunately in SoCal you are not the perfect buyer because you are not all cash. DH and I lost out on multiple homes we bid on because of cash buyers (in same price range). I wonder if they are countering to someone who is offering in cash but using your offer as a way of putting pressure (thus the short turn around time). It sounds like a deal they know you wouldn't take, but buying themselves some more time to negotiate with someone else.

In SoCal it might be easier to work with a casual broker, but the market can be really brutal - you might want to consider working with someone with an in in the area you like. One house we fell in love with only to find out later it had dozens of offers and we never had a chance. A serious agent will be out on show tours and seeing homes before they even show up on the MLS (or may be able to get you showings ahead of time, which is crucial).


Spondulix

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Re: counter offer and bidding wars (buyer)
« Reply #5 on: December 08, 2014, 07:20:38 AM »
Also lender may not do under 30 days - ask about that. We wanted to close early and lender denied.

Poorman

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Re: counter offer and bidding wars (buyer)
« Reply #6 on: December 09, 2014, 12:56:22 PM »
It doesn't sound like they are negotiating in good faith.  Everything about their counteroffer makes it sound like they want you to lose out on the deal. 

-95k price increase (this alone would make me walk)
-3% EMD (1% should be sufficient)
-Closing date in 17 days (If you've already gotten pre-qualified through lender's underwriting, it might be possible.  Otherwise 30 days or longer is the norm.  I wouldn't risk it.)
-No appraisal contingency (don't agree to this under any circumstances)
-Seller PITIA paid (no way)
-Cross qualify with their lender (how are you supposed to close in 17 days?)
-Lease to them for 60 days (do you really want to deal with these sellers as tenants?)
-14 hours to respond  (72 hours is standard.)

The market in SoCal has really slowed down over the past year, but a lot of sellers are still living in the past.  I would walk from this deal unless they meet all of your terms.  Don't get suckered into bidding over market value and don't agree to any of their wacky terms.  There's a saying in real estate that the deal of a lifetime comes along every week.  As a first time buyer, it's hard to be patient but you won't regret it in the long run.
« Last Edit: December 09, 2014, 01:39:08 PM by Poorman »

dandarc

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Re: counter offer and bidding wars (buyer)
« Reply #7 on: December 09, 2014, 01:06:20 PM »
You're not under contract now - they countered with 14 hour deadline, you re-countered (I'm assuming within 14 hours) with 24 hour deadline, they didn't respond = no deal, yes?  Time to find a different house.

pzxc

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Re: counter offer and bidding wars (buyer)
« Reply #8 on: December 09, 2014, 01:07:39 PM »
I would walk away, and not even attempt to negotiate further.

Many of those conditions or overly restrictive, but the worst is how the countered you with a higher price at all.

You don't list something for a price, and then when somebody makes you an offer above the listing price, counter with an even higher price.  That's absurd. That means they weren't at all serious about the listing price, they were just using it to get people interested so they could start their manipulations.

mustachioso

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Re: counter offer and bidding wars (buyer)
« Reply #9 on: December 09, 2014, 03:07:25 PM »
As much as I liked the house I took all the advice here and walked away. I notice its now in contingent status so apparently someone took the bait.
Can't wait to see what it sold for.

Fallenour

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Re: counter offer and bidding wars (buyer)
« Reply #10 on: December 12, 2014, 09:11:28 AM »
Walk away from this property.

California properties are HEAVILY overvalued at the moment due to silicon valley presence, and it is showing signs of moving away from california due to outrageous housing costs. The market is FLOODED with real estate investing, and is extremely overvauled due to massive and excessive "house flipping".

I always walk away with just this one line:

"No Appraisal Contingency."

If they want me to buy a home on honest faith and goodness that they arent trying to overcharge me for their property, they must be insane.

Additionally, why would i lease it to them for 60 days when IM BUYING IT? Its mine, GET OUT. IF you wanted to keep the property, dont sell it.

They are obviously taking a "make me move" approach, which is always an over value asking price, due to them being unwilling to move, which shows.

If you make a bid thats over asking price, and they try to jack that price up further, they are just trying to milk you for more money, and they never wanted the asking price to begin with.


MrFrugalChicago

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Re: counter offer and bidding wars (buyer)
« Reply #11 on: December 13, 2014, 07:11:59 PM »
I had a lender get me fixed up in 10 days start to closing to meet a crazy deadline, but that is not the normal.

Those terms suck. I would not touch it.

zinethstache

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Re: counter offer and bidding wars (buyer)
« Reply #12 on: December 15, 2014, 07:40:28 PM »
In Washington state it is the same. Very aggressive sellers with crazy contingencies. I agree with Spondulix that they might have a low cash offer they are working on using your offer as leverage.

What is interesting is if you could inspect on your own (out $500 or so = we always try to pre inspect if we really want a property) and keep the appraisal contingency in, then you could pursue it. But it would need to be the perfect property.

After 3 painful property purchases, I would pass on this, it is just too much work. My lender is great at expediting and we've closed in 12 days before. There are situations that are beyond the lenders control that would extend past the 17 days. and how the offer is worded, you would betaking on the full burden, they aren't willing to budge at all.

I think they just want all cash investor type folks...

Quick story to illustrate that even a quick closing lender is somewhat limited. We bought a triplex this summer. It used to be a 4 plex. No one changed the county record to triplex. So....we ended up waiting 8 extra days for closing because the trickle effect of that error from 2001. I personally wanted that error to stay on the record... I would have been happy to pop out a couple of walls and have it back to a 4 plex...

mooreprop

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Re: counter offer and bidding wars (buyer)
« Reply #13 on: December 17, 2014, 09:10:49 AM »
I think this is merely an example of how ridiculous sellers have become.  Personally, I would rather lose a house than encourage this outrageous behavior.  I had an experience in which a foreclosure house was listed at a fairly low price, so I and two other parties all offered full asking price.  Of course, they countered with "give us your highest and best offer".  All three of us decided (independently) that if they did not want to accept the price they were asking, that they could keep their house.  Two months later, I purchased the house for less than my original offer. 

This was in Indiana.  Buyers might be bigger suckers in California.  lol