buying a fsbo property -help with figuring out offer

kiki_thinkingJune 4, 2009

we've found a little fsbo home we really like. it hasn't been for sale for a loong time, but they did drop the price 10% a couple of months ago.

we're not sure what to offer on the house - there are some odd factors.

1. Only this neighborhood houses can be used as comps because it's a unique/odd little area. 9 houses on the left side of the road are on the river. 9 houses on the right side of the road aren't on the river, but have a right of way plus 30' of river front lot and dock. nothing else like them at all in the whole county. so just those 18 houses are comps.

2. We like a house on the right-side, no river house. The riverside houses are much much more expensive (like double the price). So we can only use right side houses as comps I assume.

3. All homes are built in 1986 or later, most in 2000 or later. Most people bought the lot and built their homes. So the courthouse recorts reflect the amt they financed but not the value of the home. Few homes have been sold after built, so there is very limited buy/sell info.

4. The house we like has about the same square footage as all the others (about 1600 sqft) and 2 BA but only **2BR**. We think it may be the only one of the houses that is a 2BR. How can we compare the 2BR value when all the comps are 3BR?

5. Of the houses that have been sold, 2/3 were sold in 2004 or 2005. House values have really dropped since then, so how could those be comps?

5. Of the nine houses on the right side of hte road, 3 are for sale. The other two have both been on the market for around 600 days. One is really overpriced and rented, so that's why it didn't sell. The other is much smaller ith a small yard. The fsbo has not been on the market a long time, not long enough to be feeling the no-sell panic. (Our home just sold after 2 years on the market!)

So I'm wondering, if all the comps have similar sq footage, but this one has just 2 BR, is there some factor I can use to calculate the comps like an appraiser would? I know the cost/sqft for some of the others. How to I take the numbers I have for similar 3BR houses in the neigborhood and adjust them for a nearly identical 2BR which has the same square footage?

Anyone have any ideas for pricing ideas for the house besides "it's worth what it's worth to you" ? Can we put some sort of thing in the contract saying "we're offering 95% of your asking price but if the appraisal comes back x amount lower than asking price then we will renegotiate?

Or something like that? Is there a better way?


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Our REA once compared the town assessment of sold homes to their selling price and came up with the fact that most homes in our town sold for X% above their assessed value. The numbers were very consistent across the board for some reason. You could look at that across the whole town, see if the result is consistent for your town, then work with the resulting number.

I don't know about the appraisal condition. What if the appraisal came in higher? Wouldn't they want more (if you are entitled to less if it comes in lower)?

    Bookmark   June 4, 2009 at 6:21AM
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You can write in anything you want as long as it isn't illegal to do so. Appraisal contingencies are commonplace. If the property doesn't appraise at least as high as the sales place, the buyer may opt out. Normally you don't have to supply the sellers with a copy of the appraisal unless you invoke the contingency, so they won't actually know what the property appraised for, unless it comes in too low.

Appraisers can locate comps elsewhere, if they have to. We just had an appraisal done on some acreage. The comps were from all over the county, since nothing similar had recently sold locally. This was done under the new, stringent rules. The appraiser just has to work a little to find the comps.

    Bookmark   June 4, 2009 at 6:38AM
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If you really have no clue, you could always hire an appraiser on your own. You'll end up paying twice for it because the bank likely won't accept your version for the loan. It is better to pay a couple hundred bucks up front than to try to negotiate a price without any solid information.

    Bookmark   June 4, 2009 at 9:35AM
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You don't say if you will be borrowing money to buy this property, if you are your lender will require an appraisal and those guys will have their own system of comparing sold properties. I'm in the process of purchasing a house that doesn't really match anything around it and the appraisal only featured 5 properties, one of which was "my" house with my offer, only one other place was what I considered comparable. They had mathematical formulas that were applied to the square footage of the house and then to the size of the lot. It had nothing to do with what else was for sale in the neighborhood or nearby, it was only concerned with recently sold properties. The appraisal came back much lower than what anyone thought it would be - so don't be surprised if the house you're looking at is worth a lot less than they're asking. I will also add that in my case the bank's appraisal was closer to what the average of all the online "whats my house worth" type of free appraisal sites listed. So you might want to run those numbers, but I wouldn't consider them perfect.

    Bookmark   June 4, 2009 at 10:53AM
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thanks for the ideas! i'll definitely check the ratio of overall sales to appraised value.

so if i made them an offer, and suspected that is was possible that the appraisal would come back wackily low -
anybody have any creative ideas on what sort of contigencies we could put in the contract as a safeguard? I'm not angling to beat the price down so much as I'd just like to figure out a fair value for the home and be able to sell the house in about 8 years or so.

We are using a bank, and an appraiser for the bank. I wonder if we could get the banks appraiser to come appraise the house before we made an offer - i was thinking though that appraisers usually know the selling price before they come appraise and then use his appraisal if we purchase so we wouldn't have to pay for it twice.

    Bookmark   June 4, 2009 at 11:24AM
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erk, i meant check the ratio of overall sales to assessed value.

    Bookmark   June 4, 2009 at 11:27AM
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My last offer came from the buyer with a bank pre-approval letter and the bank's appraisal on my property.
So apparently that's not unusual.

You have the right idea about making your own comps, but you do need to expand the area that you're using so that it includes recently sold properties. Be sure to check the $ per sq foot. You just add or subtract amounts based on the differences. For example, river front might be a $30K reduction to comp a non-riverfront home. View, maybe $10K. Extra room, $8K. Finished basement, $3K. These are just examples; the amounts will vary by area and what buyers want.

To come up with a fair price for my very unique house under contract, I used the average $/sqft in the area times my actual sqft, then added a few thousand for the basement, a few more for the view, a few more for it being end-unit townhouse, valuable features unique as compared to those other listings/expireds/solds/etc.

Hope this helps.

    Bookmark   June 4, 2009 at 1:48PM
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What I meant to say - about the appraisal that I had done on the property I am buying - it that square footage of the lot and the house were ALL the appraiser seemed to look at. The quality of the construction, the state of repair, the amount of non-permit homeowner remodeling done on the place meant nothing. It was not part of the equation at all, only the square footage. The appraisal was long and complex but it seemed to me that they used two types of mathematical equations, one for brand new homes and one for older homes.

My understanding is that home appraisals are handled differently in different parts of the country so your banks appraiser may figure some of the plusses and minuses into the value of this house.

The realtor selling the house had done her own rough math using what she considered comps. Her numbers did not match what the banks appraiser came up with (a big surprise to her, not so much to me). That is why I say to check out any of the online services like Zillow and anything you come up with when you google "what's my house worth?". Though no one thinks these places offer valid numbers, I will say that the banks appraisal came in closer to Zillow than I would have thought.

I'm trying to say that the whole process is very cut and dry, not a lot of wiggling to come up with a number.

    Bookmark   June 4, 2009 at 2:24PM
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"The quality of the construction, the state of repair, the amount of non-permit homeowner remodeling done on the place meant nothing. It was not part of the equation at all, only the square footage."

There are places to note adjustments for these things on the appraisal form, but most of them have no real value as far as the lender is concerned as long as they are 'adequate.'

    Bookmark   June 4, 2009 at 3:35PM
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As stated above appraisals are coming in close to Zillow and not cyberhomes. I would find out how much paper is on the house, average listing price per square foot in the area, and go from there.

    Bookmark   June 5, 2009 at 9:18PM
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The appraisal that came in for our property was for the buyer to make an offer and we wrote a contract for that amount. The bank's appraisal just came in $10K less, 4 days before closing, so we're in crisis.
Zillow is $45K higher than the bank's appraisal.
Just for thought.

    Bookmark   June 6, 2009 at 12:49PM
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My bad, I meant to say assessment close to Zillow, or where Zillow obtains its info. We're buying a beautiful 4/3/3 home in SW FL and am trying to get the lender to leave the appraiser without a purchase price, should be fun!

    Bookmark   June 7, 2009 at 12:42PM
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Update: The underwriter is trying to get the appraiser to drop the value another $5K, putting it $15K below the sales price. Ugh!
The loan officer is pleading the case. The comps used for the appraisal were terrible. Not that there are any better ones, though. Nothing remotely close has sold.

    Bookmark   June 8, 2009 at 9:21AM
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