Author Topic: Give me some house buying advice (please)  (Read 5865 times)

ritchie70

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Give me some house buying advice (please)
« on: January 17, 2014, 11:38:48 PM »
Wow this got long...

I live in the Chicago suburbs.There's a house for sale nearby listed at $430K. It was a 3-bedroom ranch built in the 50's that the current owner expanded quite a lot - new master bedroom and bath out the front (sacrificing one of the original bedrooms), big dining room/breakfast room addition out the back, original 2-car garage was turned into a family room, and a new 3-car garage (2 tandem) was built on that end. It looks like they did a good job, but it was clearly done 20 years ago and looks pretty dated (aside from the very high end kitchen, which I'm guessing was 10 years ago.) It probably started at 1400 square feet and is now 2200.

I think they've overimproved this property, and they've priced it like a recent remodel. When I went to an open house, the agent was all about how stuff had been remodeled - yes, since 1957, but not since 1995.

Aside from a couple weeks between listings, it's been on the market since May. There really aren't comparable houses in the area. Large single-floor houses are rare around here, because land is tight. It wouldn't surprise me to find out they had special dispensation from the city zoning department to add on the way they did.

It's one house off a busy street, there's a commercial building across the street (a daycare/preschool) and the next house down is worth in the $200K range (and looks like a wreck.) It is a half acre lot, which is really, I think, a big part of the high pricing. The house would require some work ($10K?) for us to be able to live there, not counting the decor changes (paint, wallpaper removal, new flooring.)

On the plus side, our "walk score" would go from 17 to 55, which is about as good as we're going to get and stay in the area. There are 2 grocery stores within a half mile and plenty of restaurants, a Walgreens, our bank and so forth in that same area. A couple bus routes stop at the nearer of the two grocery stores. We're in our 40's with an almost-2-year-old, and I think this place could house us comfortably for decades - but we really need a single floor house ASAP.

Do you folks think it's unreasonable to come in with a really low offer - like $300K - so long as we mean it?

I hate to waste people's time if there's no way they'll ever say "yes" to that, so is it reasonable to approach the Realtor with the ballpark we might be in before taking a proper look at it instead of 5 minutes at an open house? Or just better to spring it on them after we think we'd like to own it?

There's no way we'd ever pay anywhere near the asking price.

I know this whole thing isn't very Mustachian sounding in dollar amounts, but I respect your opinions so I thought I'd ask.

Wanderer

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Re: Give me some house buying advice (please)
« Reply #1 on: January 18, 2014, 04:57:10 AM »
I'm no real estate expert, but IMO even if your price evaluation is correct, they are very unlikely to take it.  On the market since May and still listed at $430 k looks like an unreasonable seller to me.  People get emotionally attached to houses, and potentially tied to them by debt, and sometimes are unwilling to sell for what the house is really worth.  On the other hand, they might finally be willing to negotiate. 

The worst that happens is that the seller says "No" and refuses to entertain any other offers by you or budge on their price. 

I would get a better look at it than a 5 minute open house before making an offer, though. 

I wouldn't tell the realtor anything about your bargaining range.  If you say a ballpark range, they'll likely tell the seller to hold out for the top end of that range.  (The realtor is not your friend.) 

arebelspy

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Re: Give me some house buying advice (please)
« Reply #2 on: January 18, 2014, 07:46:18 AM »
Who cares if (you think) they're unlikely to take it?   Don't make assumptions on behalf of the seller.

Absolutely make your offer!

I would get a better look at it than a 5 minute open house before making an offer, though. 

Meh, that's more than enough time.  You'll have a due diligence/inspection period after you agree on a contract with the seller.

Agree with previous poster about not giving info about your price range.
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Blindsquirrel

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Re: Give me some house buying advice (please)
« Reply #3 on: January 18, 2014, 08:33:13 AM »
   Make your offer but check out foreclosures in the area you are looking to buy. My advice is never pay retail for a house and you will end up wealthier if you can avoid spending more than 2-2.5 x your gross income. That is not possible in many high COL areas but good advice none the less.

ritchie70

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Re: Give me some house buying advice (please)
« Reply #4 on: January 18, 2014, 09:29:43 AM »
I'm no real estate expert, but IMO even if your price evaluation is correct, they are very unlikely to take it.  On the market since May and still listed at $430 k looks like an unreasonable seller to me.  People get emotionally attached to houses, and potentially tied to them by debt, and sometimes are unwilling to sell for what the house is really worth.  On the other hand, they might finally be willing to negotiate. 

The worst that happens is that the seller says "No" and refuses to entertain any other offers by you or budge on their price. 

I would get a better look at it than a 5 minute open house before making an offer, though. 

I wouldn't tell the realtor anything about your bargaining range.  If you say a ballpark range, they'll likely tell the seller to hold out for the top end of that range.  (The realtor is not your friend.)

The price has dropped twice in that time frame, by around $20k each time. Based on Google and property tax and deed record, which are all online, the owner is an elderly widower, so there's sure to be attachment and sentiment about the decor his wife probably did.

I wasn't thinking of a range, just calling her and floating an informal $300k offer.
« Last Edit: January 18, 2014, 09:47:02 AM by ritchie70 »

ritchie70

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Re: Give me some house buying advice (please)
« Reply #5 on: January 18, 2014, 09:37:38 AM »
   Make your offer but check out foreclosures in the area you are looking to buy. My advice is never pay retail for a house and you will end up wealthier if you can avoid spending more than 2-2.5 x your gross income. That is not possible in many high COL areas but good advice none the less.

There are actually comparatively few foreclosures in DuPage county, and basically no single floor houses on the market in our area without spending $800K+ unless you're overlooking the interstate or in a tiny run down house. Our max offer for this house would be about 3x my income. That would become maybe 1.8x once my wife is working again after our little girl is a bit older.
« Last Edit: January 18, 2014, 09:49:20 AM by ritchie70 »

Blindsquirrel

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Re: Give me some house buying advice (please)
« Reply #6 on: January 18, 2014, 10:43:32 AM »
  Excellent on the affordability scale then. The offer will cost you only a bit of time. Nothing ventured, nothing gained.

AccidentalMiser

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Re: Give me some house buying advice (please)
« Reply #7 on: January 18, 2014, 11:02:29 AM »

I wasn't thinking of a range, just calling her and floating an informal $300k offer.

I wouldn't make an informal offer.  I would write a formal offer with 5 or 10k earnest money (if you're dead serious about owning this house at your price) and a pre-qualification letter from your bank. 

They WILL reject an informal, verbal offer and you'll piss them off.  You have to convince them that you are dead serious about buying the house but only at your price.  It still probably won't work, but they have to be able to see that you are for real and not just "kicking the tires."

I've bought a lot of real estate for much less than the asking price.  It is vitally important to portray yourself as a serious buyer ready to buy.

Good luck!

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Re: Give me some house buying advice (please)
« Reply #8 on: January 18, 2014, 11:04:36 AM »
+1 for Accidental Miser's post.  A contract with an earnest money deposit requires a serious answer, not a brush off.

arebelspy

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Re: Give me some house buying advice (please)
« Reply #9 on: January 18, 2014, 11:24:46 AM »
Agreed on the formal offer.

The price drops are good news.

Make your formal offer, they will reject or counter (most likely) and you let it sit some more.  Eventually they may come around to your price.

But don't pay more than your price because you want it.

An offer now through at sits awhile they can stew on while the house sits vacant is a good thing though.
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ritchie70

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Re: Give me some house buying advice (please)
« Reply #10 on: January 18, 2014, 12:43:46 PM »
Agreed on the formal offer.

The price drops are good news.

Make your formal offer, they will reject or counter (most likely) and you let it sit some more.  Eventually they may come around to your price.

But don't pay more than your price because you want it.

An offer now through at sits awhile they can stew on while the house sits vacant is a good thing though.

I knew you guys would have good advice.

I don't think the house is vacant, though, although it's possible someone other than the owner is using it, or it's just being used for his business. There were trucks there every time I drive by. (Its on my commute.)

honobob

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Re: Give me some house buying advice (please)
« Reply #11 on: January 18, 2014, 03:05:20 PM »
Sounds like this property may be in a transitioning area and the seller is looking at a commercial buyer.  It may well only be worth $200-300,000 as a residential property but worth it to the owner to hold out for a commercial buyer for an extra $100-200,000.  One year is NOT a long marketing for a commercial property.
I think they've overimproved this property.
It's one house off a busy street, there's a commercial building across the street (a daycare/preschool) and the next house down is worth in the $200K range (and looks like a wreck.) It is a only be worth half acre lot, which is really, I think, a big part of the high pricing. 
My first question to the agent would be about the zoning.  Iíd be concerned about living in the middle of a retail area.  A day care today is a lot different than a bar/muffler shop 5 years from now.
You donít say how YOU came up with the $300.000 value.  Did you ask the agent where they came up with the over $400,000 asking price?  That might have led to the zoning discussion and support for the value.  If the agent had no clue then youíd at least know that your agent needs to be prepared to go around this obstacle when presenting your offer.  Oh, and if you canít support within 10% of YOUR value then Iíd say youíre wasting everybodyís time. 

Do you folks think it's unreasonable to come in with a really low offer - like $300K - so long as we mean it?
But do you really, really mean it?  Seriously do you see how silly this sounds?  Iíd really, really mean it if I could get 25% off market but you donít know what market is. 
Newer inexperienced people need to not be shy about asking a seller/agent how they came to their valuation.  Youíll learn more about the property, neighborhood, market, SELLER, AGENT by doing this.  ASK.

ritchie70

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Re: Give me some house buying advice (please)
« Reply #12 on: January 18, 2014, 03:43:54 PM »
Sounds like this property may be in a transitioning area and the seller is looking at a commercial buyer.  It may well only be worth $200-300,000 as a residential property but worth it to the owner to hold out for a commercial buyer for an extra $100-200,000.  One year is NOT a long marketing for a commercial property.
I think they've overimproved this property.
It's one house off a busy street, there's a commercial building across the street (a daycare/preschool) and the next house down is worth in the $200K range (and looks like a wreck.) It is a only be worth half acre lot, which is really, I think, a big part of the high pricing. 
My first question to the agent would be about the zoning.  Iíd be concerned about living in the middle of a retail area.  A day care today is a lot different than a bar/muffler shop 5 years from now.
You donít say how YOU came up with the $300.000 value.  Did you ask the agent where they came up with the over $400,000 asking price?  That might have led to the zoning discussion and support for the value.  If the agent had no clue then youíd at least know that your agent needs to be prepared to go around this obstacle when presenting your offer.  Oh, and if you canít support within 10% of YOUR value then Iíd say youíre wasting everybodyís time. 

Do you folks think it's unreasonable to come in with a really low offer - like $300K - so long as we mean it?
But do you really, really mean it?  Seriously do you see how silly this sounds?  Iíd really, really mean it if I could get 25% off market but you donít know what market is. 
Newer inexperienced people need to not be shy about asking a seller/agent how they came to their valuation.  Youíll learn more about the property, neighborhood, market, SELLER, AGENT by doing this.  ASK.

I don't think it's a zoning problem or in transition; the daycare is on the corner at the busy street, and the rest of the little dead-end is residential. It's on the edge of the town's business district, but there's plenty of vacant space in that business district, so I don't think there's going to be movement any time soon.

I came up with the $300K figure not as a valuation in general but what it would be worth to me. It's been sale for $430K+ for eight months so it seems like the market has already rejected that as a valuation.

The "overimproved" is based to a large degree on the kitchen - it's as nice as is common around here in $800K houses, but it's in little ranch that had some stuff tacked on. Aside from the kitchen, it is unquestionably out of data with respect to decor, and the family room would be a LOT of work to get modernized.

I do see how silly my phrasing sounds. I guess you wouldn't make an offer you didn't mean.

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Re: Give me some house buying advice (please)
« Reply #13 on: January 18, 2014, 04:00:15 PM »
For once I have to agree with Honobob. 

It's going to be impossible to come up with comps for a functionally obsolete ranch with a lot of funky additions sitting on what may be a piece of commercially zoned land.  If the house on the corner lot is being used commercially or is owned by someone that wants to convert it to a commercial use, the highest and best use might be to combine the two properties and put the combination to a commercial use.  Having a discussion with the listing agent that does not involve what you might be willing to pay to continue the subject property's residential use should be informative.  A look at zoning and general plan maps plus a conversation with the zoning people should also help.  As Honobob says, ask questions.  Lots of questions.

honobob

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Re: Give me some house buying advice (please)
« Reply #14 on: January 18, 2014, 05:41:27 PM »


I don't think it's a zoning problem or in transition; the daycare is on the corner at the busy street, and the rest of the little dead-end is residential. It's on the edge of the town's business district, but there's plenty of vacant space in that business district, so I don't think there's going to be movement any time soon.

I came up with the $300K figure not as a valuation in general but what it would be worth to me. It's been sale for $430K+ for eight months so it seems like the market has already rejected that as a valuation.

 

NEVER make an offer on a property that YOU do NOT know the market value.  At least a ballpark figure.  Now if it's worth it to you to pay $50,000 OVER market value, fine, but at least know that you are doing it.  You're communicating with a San Jose guy and a guy sitting in Honolulu and YOU still don't know the zoning but THINK it's not commercial and now you are an expert on commercial vacancy absorption in the business district.  Pick up the phone and call the listing agent or look it up on MLS fact sheet (you got one at the open house?) I searched Realtor.com and couldn't find it.  Post the listing.  You said that single stories are limited in the area.  The house only needs one buyer and maybe that buyer hasn't been in the market for the last 9 months.  Sounds like the seller has a renter (commercial with the trucks?) so they may just be waiting for that buyer at that price and feel 9 months is not too long.  But if your question is "Am I wasting peoples time making a 25%+ less offer on a property that I don't know the market value of?"  The answer is yes.

Sorry for Party Rocking complainy pantsing.
« Last Edit: January 18, 2014, 06:05:58 PM by honobob »

ritchie70

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Re: Give me some house buying advice (please)
« Reply #15 on: January 18, 2014, 06:47:36 PM »

NEVER make an offer on a property that YOU do NOT know the market value.

So when I believe the asking price is out of line, how do i do that?

There are 3 bedroom single story houses and 4 bedroom 2 story houses selling around 300k. They're calling this 4 bedroom but number 4 is located behind the bar in the family room far from the others, nowhere near a full bath, and measures 10x10. It's an office.

Yes there's 2200 square feet instead of 1800 and the kitchen is nice, but that's all its got going for it.

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Re: Give me some house buying advice (please)
« Reply #16 on: January 18, 2014, 07:05:24 PM »
If it's being marketed based on its commercial potential, comparing it to other houses is irrelevant.  The proper comparables are other houses with commercial potential or already converted to commercial use.  If the value is in the land, you would have to estimate the land value based on similar commercial land sales and subtract demolition costs.  If it has no commercial potential, the comparables are probably the properties similar to what you describe that have actually sold.  Those comparable properties need to be adjusted down for the odd layout, poor quality additions, and proximity to a busy street.  If the lot size is well above the comparable lot sizes, you would make a positive adjustment for that.  A good agent should be able to pull comps and give you an idea of what the adjustments should be.

This house MIGHT only be worth $250,000.  Or it MIGHT be worth $400,000.  You simply do not have the information you need to determine what it is worth.

honobob

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Re: Give me some house buying advice (please)
« Reply #17 on: January 18, 2014, 07:14:54 PM »

NEVER make an offer on a property that YOU do NOT know the market value.

So when I believe the asking price is out of line, how do i do that?

There are 3 bedroom single story houses and 4 bedroom 2 story houses selling around 300k. They're calling this 4 bedroom but number 4 is located behind the bar in the family room far from the others, nowhere near a full bath, and measures 10x10. It's an office.

Yes there's 2200 square feet instead of 1800 and the kitchen is nice, but that's all its got going for it.
I thought the big lot and the walkability score were big pluses for you.  WHY are you interested in this property?  Is it just because you THINK it will sell for so much below a fictional (at this point) asking price?
1.  Pay $300-500 and get a professional appraisal.
2.  Have your agent do a CMA.  You do have an agent, I mean you're not afraid of them are you?  Most are somebody's Mom.
3.  Ask the fricking listing agent how they came up with the asking price.  If the answer is we used a dart board yer screwed but a good agent will tell you they started with the 3 bedroom comps at $300,000 added $100 per SF for the additional space (400sf) and $75,000 for the extra lot space and the better zoning (maybe NOT commercial but maybe higher density residential so you can add a duplex in back).  $20,000 for the better kitchen.  Then you ask for any support for valuations that YOU think are oout of line.  Really, $75,000 for an extra 10,000 sf lot?  Yes, the house over two streets sold for $65,000 more just 8,000 more land.
4.  If the house was rented find out what multiplier of the annual rent the asking price is.  Compare to other recent sale of rentals.
5.  Compare to $ per SF of other similar sized houses are selling for.
6.  Educate yourself on market conditions.  When you go to an open house ask a question, you will learn something.  When you are in the $300,000 three bedroom ask them why they think the $430,000 house has been on the market so long?

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Re: Give me some house buying advice (please)
« Reply #18 on: January 18, 2014, 07:39:57 PM »
Not sure the average residential appraiser is going to get this one right.  However, "When you are in the $300,000 three bedroom ask them why they think the $430,000 house has been on the market so long?" is exactly what I would do.  Go to all the open houses, chat up the agents, and find out what they know about the property you like.  Heck, one of them might find you an even better property, priced correctly.

The other idea would to buy a 3 bedroom on a larger lot that is configured so you can add your fourth bedroom.  That's probably a lot cheaper than the asking price for the house you like and you will get a better quality end product.


honobob

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Re: Give me some house buying advice (please)
« Reply #19 on: January 18, 2014, 08:28:40 PM »
Not sure the average residential appraiser is going to get this one right.   
 
You're probably correct on that AND any appraisal will mostly be 60-90 days behind the market.  My point was that by NOT "chatting up" the agent for free, one recourse would be to spend money on a property that you may not make an offer on anyway.  If you're timid but frugal that can be a strong motivator.  Real estate is NOT for sissies.  If you cannot state a fact or your opinion or listen to someone else's facts or opinions without getting all complainy pantsey then stay the hell out of real estate.  The listing agent SHOULD be the expert on the property if not the market.  Why wouldn't you squeeze them for everything you can get?  FOR FREE!

ritchie70

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Re: Give me some house buying advice (please)
« Reply #20 on: January 19, 2014, 08:57:38 AM »
I a!appreciate all the advice.

Those of you talking about commercial zoning and so forth don't understand the area or the property. There is no commercial potential here. I'll check the zoning but its going to be residential. A lot of contractors work out of their house around here and its no more disruptive than someone who gets a lot of UPS deliveries from HSN and Amazon. The guy in this house helped found the city so I doubt anyone is going to enforce against him without a bunch of complaints.

I'm interested in the property because it's single story, in a good location, and has various interior features that my wife would like.

I have an agent we've used in the past but haven't talked to her lately. Yes, she's a mom.

I talked to the listing agent at the open house but it was total sales pitch about move in ready, remodeled, etc. I asked about the price and what I got compared to the ones at $300k was lot size, condition and square footage. I'm just not buying that those make it worth the difference, since some at $300 have had the same sized lot.




honobob

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Re: Give me some house buying advice (please)
« Reply #21 on: January 19, 2014, 03:36:03 PM »
I a!appreciate all the advice.

Those of you talking about commercial zoning and so forth don't understand the area or the property. There is no commercial potential here. I'll check the zoning but its going to be residential. A lot of contractors work out of their house around here and its no more disruptive than someone who gets a lot of UPS deliveries from HSN and Amazon. The guy in this house helped found the city so I doubt anyone is going to enforce against him without a bunch of complaints.

I'm interested in the property because it's single story, in a good location, and has various interior features that my wife would like.

I have an agent we've used in the past but haven't talked to her lately. Yes, she's a mom.

I talked to the listing agent at the open house but it was total sales pitch about move in ready, remodeled, etc. I asked about the price and what I got compared to the ones at $300k was lot size, condition and square footage. I'm just not buying that those make it worth the difference, since some at $300 have had the same sized lot.

In all fairness to us YOUR description of the property sounds very commercial/transitional and we, at this point are as correct as you are about it NOT being commercial.  Do you really want to live across from a daycare?  Traffic noise morning and afternoon.  Some uppity parent blocking your driveway cause "I'll just be a minute!".

Unless the Chinese are throwing all cash for properties in this NBHD then the seller and the agent realizes they have to deal with financing.  So if this property is really worth $300,000 then a buyer needs about $190,000 cash to buy a property the bank says is worth $300,000.  So it is worth more or you would be dealing with delusional people.  Lose/lose for you.

At first you said the lot size was where the money difference was but now you say you can get a $300,000 place on the same size lot.  If you bought that how much would it cost to add SF on the ground floor that you need and the features your wife wants?   If it is the location you want then you'll have to pay as much as the owner wants up to where you can find a comparable substitute. 

I give you an "a" for your tenacity but I think you need to move along on this property.  Surely your agent or the listing agent has gotten back to you by now.  what are they saying?

« Last Edit: January 21, 2014, 07:50:53 AM by honobob »

ritchie70

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Re: Give me some house buying advice (please)
« Reply #22 on: January 21, 2014, 09:02:19 AM »

I give you an "a" for your tenacity but I think you need to move along on this property.  Surely your agent or the listing agent has gotten back to you by now.  what are they saying?

I kind of put the cart before the horse... finally got my wife to do a drive-by and she HATES both the house (just from the  outside) and the location (too close to Main St., too much road noise) so I'm just going to stop thinking about it...

SunshineGirl

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Re: Give me some house buying advice (please)
« Reply #23 on: January 21, 2014, 09:16:18 AM »
Laughing....

I was going to say the location sounded less than ideal, and I really believe more and more that the right location is worth paying more for and worth waiting for. You'd be well served to find the best walkable neighborhoods and circle on a map what your boundaries are, and then rent or look to buy in those neighborhoods. You want good "bones," which it sounds like that ranch house did have, and be willing to consider buying a smaller place that you can do an addition onto at some point, if desired, rather than buy more house than you need.

I also advise actually walking through neighborhoods together, many times, because you'll notice a lot on foot that you wouldn't notice driving. I would start by finding the nicest park in the area and walking in neighborhoods surrounding it.