question about a possible offer for a home

scrappy25April 18, 2010

Greetings, I see there are mostly sellers posting on this forum. I'd like some opinions.

There's a home that I'm interested in that first came on the market almost 3 years ago. Since then the sellers have dropped their price 25% but the last price drop was in November (6 months ago). My realtor still thinks it is overpriced. It's difficult to compare as it is a rather unique home. I might be interested in this home if we could get it for another 10% less, but am hesitant to put in an offer since I don't want to "insult" the sellers. I don't want to offer 10 pct less and be countered with 5 pct less, since it is would not be an easy resell either. It is custom built and the owners are already offering financing so they are not at risk of foreclosure or anything like that. I wonder if the house has been on the market so long because they have been unwilling to compromise.

Another thing, the house has been unoccupied for that time although it looks well maintained. I'm a little nervous about functioning systems.

What do you think?

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Put your offer in for what you think the house is worth. (it would help if the offer was presented with comps from your agent) The worst thing the seller can say is 'no'. Check to see if the house has actually been vacant for three years. It could just be recently vacant. Always put a contingency in your offer for the ability to have the systems inspected to your satisfaction.

    Bookmark   April 18, 2010 at 9:34AM
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"hesitant to put in an offer since I don't want to "insult" the sellers."

Sellers that are "insulted" by offers are just plain dumb.

This is a business transaction between buyers and sellers.

Injecting emotion like being "insulted" means the sellers have not really come to grips with selling.

A property is only worth what a buyer will pay no matter what the seller may ask.

    Bookmark   April 18, 2010 at 12:03PM
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I agree, put in the offer, worst thing, they could say no way--another thing, you should get financing, not let sellers finance themselves. Go to a credit union/your bank or savings and loan. If you are concerned about the house, check with the local building and safety dept to make sure all the permits were pulled, inspected, and signed off.

    Bookmark   April 18, 2010 at 4:40PM
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OP, I also recommend that you put in an offer for what you think the house is worth. However, I think you are right; there is a risk that the seller may feel insulted. Yes, I know that would be a silly and dumb reaction on the seller's part. They should really look upon this as a rational economic transaction. Nonetheless, many sellers have a hard time not getting emotional in a declining real estate market. I had an offer rejected. I moved on, that house stood on the market, and I found out later that it eventually sold for less than my original "insulting and ridiculous" offer. In the end, it worked out for me because I found a different house that was even better. To make a long story short, you'll never no unless you make the offer, so go ahead! Best of luck.

    Bookmark   April 18, 2010 at 4:52PM
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So should we offer the 10 pct less that would be our top offer, (with an additional allowance for roof replacement, looks like that really has to be replaced asap) or go lower to start so there is room for negotiation? Not even sure my husband would go for it at that price, it's still not a bargain at that price, just a fair price.

    Bookmark   April 18, 2010 at 4:55PM
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Also, mariemd, why do you say not to take the owner financing? Is there a danger with this? I thought that was usually offered as an incentive for buyers since closing costs are less?

    Bookmark   April 18, 2010 at 4:57PM
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If the loan documents are drawn up by an attorney, & they're the same documents used by mortgage companies, then you'll likely save money by using seller financing;
sellers don't charge loan origination, discount points, or junk or processing fees.

It may be that the sellers want to finance the house so they can get a higher price for it, since they can qualify a buyer that a traditional lender cannot.

    Bookmark   April 18, 2010 at 5:44PM
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My concern about seller financing is this--is the buyer really qualified? What happens if there is major problems like a heating system fails within a year of so, or leakage etc, building without permits, paying too much, feeling sorry for the sellers, (which I have seen), not putting enought down, payments too high/too low etc. I realize there are advantages, but depending on the amount involved the seller could get stuck with other serious problems, like the buyer not making payments, partical payments, not on time etc. I feel if they cannot qualify, they should not buy.

    Bookmark   April 18, 2010 at 6:16PM
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So do you think the sellers are more likely to accept a lower offer with outside financing? We don't need the seller financing, it would be nice to save the fees, but we can qualify outside.

For the buyer, is there any downside to seller financing?

    Bookmark   April 18, 2010 at 6:42PM
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You might also check if the sellers are offering a "wrap" mortgage. This is when the seller does not pay off their current mortgage. They accept payment from the buyer and continue making their existing mortgage payments. Most mortgages contain a "due on sale" clause, so the sellers offering the wrap mortgage could find their entire mortgage being due and payable if/when their lender finds out about the sale.

Here is a link that might be useful: What is a wrap around mortgage

    Bookmark   April 18, 2010 at 11:30PM
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As far as your offer price goes -- Whatever you offer, the sellers will think it's your 'starting point' as opposed to your 'final price'. So I wouldn't go in with your absolute top price; but I also wouldn't go too much lower since you believe it may 'insult' and backing it up with sales comps to buffer the impact is a good idea.

I also wouldn't deduct for a whole new roof in your initial offer. Leave that for after the inspection, when you (and the seller) have independent documentation that a new roof is needed.

    Bookmark   April 19, 2010 at 3:00PM
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thanks sweeby
the seller have already offered to replace the roof through their agent so I didn't want to lose that.

terriks, thanks for the warning about the wrap around mortgage, I didn't know about that!

    Bookmark   April 19, 2010 at 11:17PM
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mariend, your follow-up post listed numerous negatives for a seller in offering financing, but your original comment was to the buyers advising them to stay away fromm seller financing. Why? What do you believe to be the downside for the buyers?

    Bookmark   April 20, 2010 at 12:39AM
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I would suggest you make the offer taking the roof part into account and do the offer as a credit for the roof for you to do it yourself. Then it is clear you know about it and the offer looks higher even though you're asking for a credit back to you.

Also, this way you get to pick the company, color, roof type and you get any warranty the roofing company offers along with the full warranty on the materials as some of these doesn't always transfer etc. They are little technicalities, but if you ever need them it is easier that way. I'm speaking from experience with this.

    Bookmark   April 20, 2010 at 10:45AM
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You might wanna read this article on it (check link)

Here is a link that might be useful:

    Bookmark   May 2, 2010 at 10:21PM
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