Author Topic: Selling house. Should I accept low cash offer?  (Read 5945 times)

mchap

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Selling house. Should I accept low cash offer?
« on: September 09, 2014, 11:42:38 AM »
I'm selling a house for my uncle. It was his mother's house and it has been vacant for 7 years. It's located in East Texas and neither my uncle or lives there or has ever lived there. I flew out there a few weeks ago to find a realtor and get the house on the market. I've never bought or sold house before so I'm hoping for some advice.

It's been on the market for 3 weeks now. We had it priced at $133k. We recently lowered the price to $110k. I just got the first offer of $80k from an investor, all cash and close in 30 days. There is another investor interested and I'm hoping they will offer also. It sounds low but it doesn't seem that there is a lot of interest in the house. It needs a lot of work since it's been vacant for so long. There are back taxes owed in the amount of $22k.

I'm thinking of countering this offer, but I imagine they'll only come up a little. I'm considering taking the offer. It seems like every day they find some new problem with the house. I'm afraid that if we wait for a normal buyer it will take too long, or the deal will fall through. Since the taxes haven't been paid, the county could seize the house and auction it off. I've been told that that won't happen until December at the earliest, but I don't find their lawyers very trustworthy.

I'd be grateful for any advice!

GoldenStache

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Re: Selling house. Should I accept low cash offer?
« Reply #1 on: September 09, 2014, 11:51:41 AM »
Will you pay the $22k out of the $80 or will the buyer pay it? 

frugaliknowit

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Re: Selling house. Should I accept low cash offer?
« Reply #2 on: September 09, 2014, 11:53:35 AM »
Does the asking price account for the comparables adjusted for condition?  Does the asking price account for the back taxes?

mchap

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Re: Selling house. Should I accept low cash offer?
« Reply #3 on: September 09, 2014, 12:07:56 PM »
The $22k in taxes would be paid out of the $80, so we'd net $58k minus the realtors cut etc. 

Comparables is a question. The realtor ran comps in the beginning and that's how we arrived at $133k. When she first looked at the house she said $120k-ish. She then went back to her office and ran comps and arrived at $133k, but I think she might have been trying to please me. It was the cheapest house in that school district, which is supposedly good. But I don't think she was accounting for the problems that we've discovered because it was vacant so long. For example, needs a new septic, water damage in bathroom, cornices rotted since gutters haven't been cleaned, tree growing up through concrete, a/c heater not working . . .

I'd probably chose a different realtor if I had it to do again. At the same time, the house is on MLS and there really isn't that many buyers interested. I'm not sure another realtor would make much difference.

Catbert

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Re: Selling house. Should I accept low cash offer?
« Reply #4 on: September 09, 2014, 12:18:42 PM »
I would counter and hope the second investor makes a better offer.  Ultimately I would take a fairly low offer and consider it found money.  You could easily lose it for property taxes.


Frankies Girl

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Re: Selling house. Should I accept low cash offer?
« Reply #5 on: September 09, 2014, 12:30:15 PM »
Since you have no emotional hangups on getting rid of this property, you don't have to worry about what you think the house is actually worth if it was in better shape or worrying over getting the absolute best deal. Sell it ASAP and if it clears a profit after the back taxes and realtor fees, then it was good enough considering the fact that it's falling apart and has taxes owed, you need it gone ASAP. If you do a counteroffer, don't go crazy high - I wouldn't go above 90K for fear of them walking off.

frugaliknowit

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Re: Selling house. Should I accept low cash offer?
« Reply #6 on: September 09, 2014, 01:01:21 PM »
Since the realtor has been so "off" on her pricing, I would dig deep into her commissions.  Maybe 4-4 1/2% if she gets "both sides" with no other broker involved.

mchap

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Re: Selling house. Should I accept low cash offer?
« Reply #7 on: September 09, 2014, 01:34:47 PM »
Thanks for the replies so far.

Frugaliknowit, you think I can still negotiate with the realtor at this point? At what point do I need to agree with her on a lower commission? Do others agree that I should do this?

justajane

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Re: Selling house. Should I accept low cash offer?
« Reply #8 on: September 09, 2014, 01:40:44 PM »
It sounds like no one, including your realtor, has a real sense of what the house is worth. I guess ultimately it is only worth what someone is willing to pay for it. If you can, I would play the two investors off of each other. If it's a good school district, it's worth a try. I'm guessing they are seeing dollar signs once they improve it and resell it. Can you possibly let the person with the first offer know that another investor is close to making an offer? Perhaps get your realtor to mention if off hand? This might lead him or her to make a slightly higher offer. I'm guessing you would be pleased with anything between 90k and 100k.

GregO

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Re: Selling house. Should I accept low cash offer?
« Reply #9 on: September 09, 2014, 02:37:06 PM »
First thing I'd say is that you need to educate yourself on all of this.  These are some large $ amounts you are dealing with and I suggest you have a good understanding of what's going on.  First, you should get a much better understanding of what the house is worth.  Have the realtor walk you through how she came to her first price, and why it was decided to drop the price to $110k.  You can get a good idea of what the house is worth simply by looking at comparable listings online.  You can see what the houses are listed for and have recently sold for, then you can look at pictures to get an idea of what kind of shape they are in (redfin.com is a site I like to use).  If the house needs work, you can just deduct the cost of those items from the price you come to based upon the Comparables.  If you don't know how much the repairs are, you could always get estimates on them from a contractor.  Have you gotten the house appraised?   That's definitely an option that would be helpful.

Secondly, the property taxes owed are not just based on when some lawyer decides to foreclose on you.  The rules are very rigid and straightforward.  You need to know when the oldest taxes were due, then you can calculate when the county could put the house up for auction.  And you can pay off the taxes on the house all the way up to the day of the auction (maybe even up to 2 years after the house is auctioned too, I believe).  I'm sure a phone call to the County Tax Collector could get you all the information you need.  The County would much prefer to get it's money than having to deal with auctioning the house, so it's in their best interest to help you understand the situation you are in.  So make sure you understand the risk, or lack of risk, there. 

Lastly, I don't know where you the house is (or where you are from), but houses in rural areas move much slower than they do in big cities.  Just because it's been a few weeks and no one is interested doesn't mean that no one will be.  Ask your realtor what the average listing time is on a house.  I would venture to guess that it is more than 30 days.  Don't panic and take a low ball offer from an investor just because it's been a few weeks. 

Hopefully your realtor is helpful, but you should absolutely counter.  You are never going to run an investor off because you came back high.  99 times out of 100 they will accept or counter.  He may counter back at his original offer, but he will counter.  Don't forget that this is what he deals with everyday and will try every trick he can to get the house for as cheap as possible.  I'll repeat, don't panic and just accept a low offer because you are scared it won't sell.  Remember, you are in possession of a huge asset: a house in a good school district.  You will be able to get the deal that you are currently offered any day of the week, even the day before your house is up for auction.  Think about it like this: the house is worth at least $130k when it's fixed up.  I'm sure it needs some work, but unless you think it needs $50,000 of work (unlikely), then make sure you hold out for what it's actually worth.
« Last Edit: September 09, 2014, 03:38:42 PM by GregO »

Fishingmn

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Re: Selling house. Should I accept low cash offer?
« Reply #10 on: September 10, 2014, 05:29:28 AM »
I wouldn't accept that.

As a Realtor I believe the best way to find the true market value is the following - keep marking the price down in regular increments every 14-21 days until you get an offer near list price (within 3-4% of list).

unpolloloco

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Re: Selling house. Should I accept low cash offer?
« Reply #11 on: September 10, 2014, 07:20:27 AM »
So comparables (presumably in average condition, which the property is not) go for ~$130k.

Your property needs a new septic ($5-15k), has water damage ($5-10k), needs a new HVAC system ($5k), and has rot and a tree growing through a sidewalk ($5-10k).  So that's $30k in repairs alone (assuming things are contracted out).  And that's not counting any updates that are needed.  So that gives you an as-is value of $100k, not counting updates.  The investor has to make money off the deal for him to take it, so that's why he offered $80k, which is a bit low (esp. since he can probably trim some costs off here and there), but not unreasonably low.  See what other offers you can get (wait for the other investor) and then make a decision.  It's unlikely you'll get a homeowner-type coming into a project this large (but still possible!)


usmarine1975

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Re: Selling house. Should I accept low cash offer?
« Reply #12 on: September 10, 2014, 07:38:09 AM »
I will throw down my thoughts just for measure.  I am a buyer and have made low offers.  I haven't made offers with Cash so that changes things a bit.  There are a couple reason's they use the Cash offer.  One you as the seller do not have to worry about inspections, mortgage going through etc... It's essentially cash money and you walk free and clear.  For you it can be a quick transition.  The reason he is offering cash is so he can get a better price.  He or she knows that Cash talks. 

I have made lower offers with financing and my take on some of the responses.

Immediately accepting my initial low offer= scared me, made me think something was truly wrong with the property, I walked.

A counter offer= Loved it every time and was willing to keep moving.  I have always set a top price and know from the beginning what my top price would be.  I have yet to go above it.  I have walked from multiple offers for this reason.

Refuse offer= no real feelings just walked

I agree with another poster, find out your tax situation you really need to know how that will play out.  Make sure no leans exist. 

Research the properties in the area.  Zillow has made this extremely easy for the novice (please understand Zillow is not always accurate on pricing properties.)  But used properly and with the right frame of mind it can help you have a better understanding of the neighborhood your home is in.

You can negotiate with your Realtor up until the sale in regards to their commission.  The Realtor will most likely not want to.  But it can be done.  I have had the commissions reduced the day before the Mortgage was finalized.  If you signed a contract you can not go to another realtor for whatever time frame you'r contract states.

And yes a Good Realtor will make all the difference in the world for you as the seller or as a buyer.  A bad realtor can make it miserable. 

Bobberth

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Re: Selling house. Should I accept low cash offer?
« Reply #13 on: September 10, 2014, 02:14:16 PM »
The septic and water damage will probably keep most people from being able to finance the property so your current pool of buyers are going to be the all cash investors right now.  If you have the resources, you can look at it like the investor is: I can put in $20k of work and get it to sell for $50k more, is that worth it?  I think your only options are to work with the investors or put $ and time into the house to improve it for a retail buyer.

mchap

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Re: Selling house. Should I accept low cash offer?
« Reply #14 on: September 11, 2014, 09:09:59 AM »
Thanks for all the responses.