How low to go on an offer

[neophyte]

We're moving to a new state and looking at a property that's been on the market for nearly a year at this point with one price reduction a few months ago. It's essentially acreage. There is a nasty little hunting cabin on the property (roughly 600? 800? sqft A-frame) but it does have existing well and septic.  Looking at recent-ish sales in the county, I'm figuring a fair price is around 5k per acre with a bit more thrown in mostly because of the well and a decent shed. That only comes in at around 65% of asking.  But I'm getting attached to the idea of this lot and second guessing an offer that low.  I think I'm hoping for someone to tell me to stick to the number I've mathed out. Anyone care to do that? 😂

No idea how it relates to the market for land, but for comparison, most homes we've looked at in the area are under contract within one week with multiple offers. The high end houses aren't moving.

[YttriumNitrate]

Well, one time I made an offer on an acreage that was about 2/3rds asking. I even included a detailed explanation of how their allegedly 20 acre property was really 15 acres of land and 5 acres of public river. It did not go well and the property was sold to someone else. In the end, it worked out well as the fool who paid the seller's asking price ended up selling it a few years later for even less than I had originally offered.

If you think the property is way overpriced, stick to your number. Other acreages will come available, but you might have to wait a few years to find the right one.

[GilesMM]

Hire a realtor and get their advice.  Have them ask the listing realtor to defend the market value of the property based on at least three recent comparable sales.  Work from there.  People who list for a year without much price change are not motivated to sell and could refuse to budge or could jump on your offer.  If you make one, provide documentation on how it is a fair price.  Make sure you know what a well costs.  Cost per acre is fine but realize it can vary widely based on location, size, zoning, and tax factors.  Land within half a mile of my place is worth anywhere from $10k to $100k per acre for reasons that aren't entirely apparent to me although the low end looks like a bargain.

[neophyte]

Brief update: still interested in the property, seller just knocked it down another 30k, realtors haven't been willing to comment on a value. My partner will probably press them this week.

We've seen three other places in a two county radius that were definite "no's." One had obvious roof damage and water entry in the basement both marked as fine on the disclosure. The other was nicely situated but my partner said "well, first thing I'd do with the house would be burn it down." Both those are now under contract. Last one was a FSBO that was recently vacated by a tenant. Owner called us after the first offer fell through and we offered to rent for a year but didn't like it enough to buy. Haven't heard back on that.  There was a fourth house we also really liked but it appeared to have a pretty serious boundary dispute with the neighbor and we weren't willing to get involved with that. That one is also under contract for over asking.

I'm looking for rentals too, but there aren't many. Far fewer that will allow dogs. In fact, Zillow shows two (2!) rentals in the county we really want to be in that say they allow larger dogs. (5 or 6 in the next county over) Both are far over what we're willing to pay for a rental. Craigslist and Facebook are... slightly more promising? I'm going to call property management companies directly too.  But overall the housing market is discouraging. We've been tentatively looking since my partner moved in November and seriously since late winter, and there's just not much.

On the plus side, we're engaged now!  Yay!

[ysette9]

Congrats on the engagement. Good luck with the property hunt.

If you got the average, what would you do with it?

[Omy]

Now that they've dropped the price, how close is your proposed offer to the new list price? I suspect that anything under 80% would be viewed as "insulting" (especially in a competitive market.)

The first thing I'd do is have your realtor ask the listing agent if they have a recent appraisal or if they could provide comps to support their pricing.

If there aren't any good comps (which is often the problem with unique properties), you could ask your realtor to do a tax assessment CMA or you could actually hire an appraiser and order an appraisal before writing your offer. This might be overkill and a waste of time and money, but it may be your best chance of getting the seller to accept an extremely low offer.

I'd be inclined to write your best offer and submit it with any documentation that supports your price. You definitely won't get it if you don't write the offer.

[neophyte]

You definitely won't get it if you don't write the offer.

Yep. It turns out it went under contract while we were away camping last week. We're considering a backup offer, but it's probably gone. Back to the drawing board it is.

[Phenix]

You definitely won't get it if you don't write the offer.

Yep. It turns out it went under contract while we were away camping last week. We're considering a backup offer, but it's probably gone. Back to the drawing board it is.

That's unfortunate. I'm in a similar boat currently. Really like this acreage that's been on the market for over a year. Has a nice barn, fenced in pasture, and a well. We offered 80% of asking and they countered at 98% of asking price. We're going to wait a month and put in our 80% offer again. I don't want to miss out on this, but if we pay asking (which is probably more than it would appraise at), there's not a lot of wiggle room to build a house.

[FINate]

But I'm getting attached to the idea of this lot and second guessing an offer that low.  I think I'm hoping for someone to tell me to stick to the number I've mathed out. Anyone care to do that? 😂

Don't get attached to properties. Offer what the property is worth and what you're willing/able to take on. We've had many offers rejected over the years because I refuse to overpay just because the seller has unreasonable expectations and/or buyers created a feeding frenzy with everyone trying to "win."

You didn't get the property, and in many cases this IS winning if you avoid a bad purchase.

[ChpBstrd]

That "nasty little hunting cabin" probably added $30k to the price of the property. I've noticed people in my area will only discount a house maybe 20-25% when it really deserves to be taken down to the studs and have half the construction costs invested back into it. The issue is you're competing with people who have low expectations for the quality of a building, have always lived in houses that were falling apart around them, who think this is normal and what an average price should buy, or who are not well-informed enough to understand building issues. They'll buy a falling apart shack and live in it for 20 years, whereas you would immediately burn the place down and start over. Thus they have a higher willingness to pay.

To avoid competing with people who would be happy to live in or rent out a poor-quality house, look for empty acreage. You're in the market to build your own place.

Also, go ahead and throw a reasonable offer at the land under contract. If the first buyer can't get the financing arranged, you might buy it still.

[ysette9]

The benefit of a falling down shack can often be that it has utilities plumbed to it, and is already zoned for a dwelling. That can remove headaches when you are looking to build. Paying an extra $30k for a tear down may be a better deal than putting in the trenches to bring water and sewer to your build site.

[neophyte]

The issue is you're competing with people who have low expectations for the quality of a building, have always lived in houses that were falling apart around them, who think this is normal

The benefit of a falling down shack can often be that it has utilities plumbed to it, and is already zoned for a dwelling. That can remove headaches when you are looking to build. Paying an extra $30k for a tear down may be a better deal than putting in the trenches to bring water and sewer to your build site.

Both true. A well and septic system would run probably run around 30k just for that.

We ended up putting in a backup offer yesterday and found out that the first buyer misled them about his financing situation, but our offer is lower so we'll see what happens. We kicked around the cabin last week and the structure does seem solid. Very ugly, it does need to be gutted. I think the plan would be to rehab it, live there for a bit while we built a bigger house, and then use it as an AirBnB/guesthouse.   We also put in a rental application for a reasonable house. It was one of many and while we're very well qualified for it, it sounds like they might go with someone who "needs" it more.  I've got my fingers crossed on that. Heard back from the other place we offered to rent that they've found a buyer, so that's out. 

[Omy]

If you're in a competitive area, the question is usually "how high do we need to go" to purchase a home or win the rental.

[neophyte]

Yes. Though a property that has been on the market for a year is still overpriced. Clearly we weren't the only ones waiting for a price reduction though.

As for rentals... Well, they are just a mess. Not many available period. And with a dog it's even harder. It's not a time I would choose to move for sure.

[Askel]

Sometimes, you just gotta be the one with an offer on the table for when the stars align. 

Our current home was initially listed for $220k. A year and half later, we got it for $100k. In between all that, they turned away an offer for $170k, ultimately lowered the price to $139k, and ignored my initial $110k offer because it was "insulting".   

Of course, this was pre-covid market insanity, but still- sometimes you just need to be there at the right time. 

[Phenix]

Sometimes, you just gotta be the one with an offer on the table for when the stars align. 

Our current home was initially listed for $220k. A year and half later, we got it for $100k. In between all that, they turned away an offer for $170k, ultimately lowered the price to $139k, and ignored my initial $110k offer because it was "insulting".   

Of course, this was pre-covid market insanity, but still- sometimes you just need to be there at the right time.

Patience and a little luck can really pay off when it comes to real estate. I bought my current house in a very LCOL area in 2011. It listed for $110k and the owner had already moved away from the area. Offer for $90k was rejected. Owner ended up losing their job a few months later and gave the house to the bank. Bank relisted the property for $69k and I scooped it up for $59k. Mortgage payment, $221.95/month.