Cash offers

valkyrie4791August 31, 2010

We are looking to make a cash offer on a property that has just recently been placed for sale. We know there will be another offer for the buyers, but it is a conventional financing offer.

We are planning to offer 20 k less than the asking price, and hoping this will carry some weight with the seller as the financing is a sure thing.

Our agent keeps telling us if we want the house we will need to put our maximum offer up first. We are reluctant to do that simply because the home needs a fair amount of work, and is priced way above the tax value. I am not so sure our agent isn't playing us just a little, especially since it is a colleague of her same agency that is representing the seller.

What advice do you have....put the maximum up first? My sense is they would accept our maximum offer. However, it would leave us with less $ for repairs after the inspections are done. Or would you take a chance and put up the lower (but still fair, I think) offer first and hope they decide to counter us rather than take a bigger chance with the conventional financing buyer??

I'm torn. Anything you can contribue is so appreciated!

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I've lost a couple of homes by not coming in with my best offer to start with....but I always ended up finding something if you're okay with losing the home go ahead and come in with a lower offer. You may get lucky and the buyer will accept your offer, but you have to be prepared for the fact that it may be out right rejected. The fact that the other offer will not be cash will definitely give you some edge as long as your offer is reasonable. The asking price of the home really would help in determining if your 20k below asking is reasonable. The tax value of the home isn't the true measure of the home's value, recent sold comps are what you should be looking at to determine value. Tax values are often way off real market value in some areas of the country.

    Bookmark   August 31, 2010 at 11:05AM
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I would give additional incentives such as no appraisal, flexible closing date, or any other item that would be attractive to the seller.

    Bookmark   August 31, 2010 at 11:38AM
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20k less? I've been tracking the sold values in my area and they are minimum 30k for a well priced beautiful home and up to 100k less than the initial asking price for houses just over the half mill range! Make the offer with less, this is a buyer's market. As cordovamom said, something else always comes along if this one is not successful.

    Bookmark   August 31, 2010 at 2:54PM
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Offer what the house is worth/what you are willing to pay. Don't count on the seller to think that a cash offer is worth $20k more than one with financing.

    Bookmark   August 31, 2010 at 3:14PM
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Maybe I don't understand the question - or maybe things are different here in Canada? But as the seller, why would I care which option is used? I end up getting the same amount, unless I'm taking back a mortgage (but it doesn't sound like it).

    Bookmark   August 31, 2010 at 4:21PM
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Financing can fall thru with either the worth of the house or the credit standing of the buyer.

With a cash sale you can close in a week and be done with it. Usually takes 30 days to close but a week can be done.

    Bookmark   August 31, 2010 at 4:38PM
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If you really want to live in this house, make a fair offer based on comparable sales.

If you are looking for a "steal" in a down market, make a lower offer and hope for the best. You might not get this place, but you will certainly find someone desperate for a quick sale.

As for tax value - just forget about that number. The government is horrible at estimating home values.

ottawavalleygardener - a cash offer is preferable because there is less uncertainty. Currently, a significant number of offers are falling through due to financing issues. Cash just eliminates a ton of potential problems.

    Bookmark   August 31, 2010 at 4:49PM
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This particular property is going to be difficult to get conventional financing for, according to our agent. Not impossible, but because there are almost zero comps for the banks to use to compare, they will require a huge down payment for this house. In fact, the other potential buyers have already figured this out and will not be making an offer. For this reason, I'm hoping our cash offer will carry some weight.

I know the tax value is 'iffy' but in this case we're talking about a house that will take a lot of work to get functional at what it's being advertised as (small farm).

We're not going to be able to get close to their asking price because of the repairs. Even what we know has to be fixed will bring us a little over budget...and we don't know yet what will be uncovered during the inpsection.

So...we're going to stick to our lower offer no matter what. We have saved about 5,000 dollars in room for negotation up, but that's it!!!

Hoping this works out!!

    Bookmark   August 31, 2010 at 5:22PM
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Thanks for the explanation - I guess it's a gamble for the seller then, if a higher offer with conventional financing comes in vs. a lower offer for cash. But in a bad market, cash rules :-)

    Bookmark   August 31, 2010 at 5:34PM
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They did not accept our offer. Their one and only counter offer was only a token attempt to negotiate.

In speaking with the property neighbor (who happens to be a mortgage lender), he said he feels the property is overpriced, and that the owners have "let it go" over the years since they've owned it and not attempted to keep the outside areas and outbuildings up.

Our realtor kept giving us this bs about how this home was well worth the asking price and that in a good market it would be worth more. I have to call her on that...seems to me she is looking out for her agency more than anything else. She sent me a list recent "comp" sales, and basically it reinforced for me how dramatically overpriced the property is.

We still want it...but aren't willing to pay what they want. Maybe in a few months they will be willing to enter the negotiation process again when/if they can't get a sale to go through. My guess is that the property won't appraise and that the bank will be wary to lend with no real comps in the area to go on.

Home buying and selling is a PAIN!!!!!

    Bookmark   September 3, 2010 at 7:22PM
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Valkyrie, I so wish my DH and I were in your position, rather than the one we're in. We just relo'd to CO and I could have written your post two months ago.....We did the SAME THING only our offer was accepted. Here's the situation-we were under pressure, our realtor was (shoulda figured it out) pretty hungry, and we did precisely what your realtor told you to do. Ours was saying the same thing nearly verbatim to yours. We stupidly believed she "knew the local market" (we were coming from another state, completely different situation, yada yada). We (surprise!) got the house after giving them full price cash, no contingencies, no special requests from us the buyer. We moved in and said within a week, "Oh sh**" The place was beautiful, but totally wrong on too many levels, worst among them too far away from our work. We thought (stupidly) that it'd be a cinch to simply put it back on the market and sell it for what we paid, knowing we'd still lose $$ from commissions, most likely. It's six weeks later right now. We are in a nice rental very close to work. That "hot property!" with "multiple bidders lining up!" "Worth far more, sellers are only asking what they 'have' in it!" is still sitting empty, with only passing interest. I can't explain how DUMB we think we are at this moment....The contempt with which I'm holding our friend the realtor who we truly, mistakenly, believed had our best interests at heart. Here's the thing--the listing realtor is shrewd (and in no way culpable here, what was HE supposed to do, say oh no don't pay us full price! ;) told me as soon as we asked him to relist it that he nevered imagined someone would fly in there with a full cash offer, that he and original seller were prepared to take up to 10% LESS. Nice. Yeah, our realtor was very happy to spend our money without thinking her bluff would ever be called, i.e. that we'd relist the thing within days!

So, I hope our present situation, bad as it is, can help inspire someone else NOT TO DO IT LIKE WE DID. Watch your money and be wary.

    Bookmark   September 4, 2010 at 12:35PM
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I am sorry for your situation, Fraser. That is awful. I started getting really leary of our realtor when she all of a sudden changed her tune about how the property was actually worth *more* than what they are listing it for. This was *after* she suggested what our starting bid should be and it wasn't accepted. I think she and the listing agent (same company) got together and ran a scheme on us as buyers. I bet in a couple of months if the property hasn't sold they will go to the sellers and talk about how "fair" our first offer was!! It just makes me angry. I don't begrudge them earning their commissions, but I really got the feeling that something sneaky was going on.

Oh well. We only had so much money and simply wouldn't allow ourselves to be saddled with that house "as is." It needed too many repairs and we wanted to have the funds to do that.

We did some research and found out what the property owners paid for it when they bought it (when it was in MUCH better condition), and it was $75k LESS than what they have priced it as!!!!!!! The market hasn't changed that much, I know!

I hope your situation turns around. It's a bad feeling to feel you've been taken advantage of. :-(

    Bookmark   September 4, 2010 at 4:14PM
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1. Make and offer that if they accept you don't regret it.
2. Plan for "undiscovered or undeclared" problems. I bought a house that at closing the seller said "oh, the fence never got a final inspection.". What to do? I sold my other home and had already scheduled the movers. So I signed, wham, the fence failed inspection. The company that installed it came back and correct the setback, but I had to paint it. 1,000 dollars for paint and materials and I painted it myself, in Florida, 6 weeks, nights weekends. Pissed off.
3. Treat Real Estate agents like used car sales people.
4. I paid cash but found that it did not matter much because the market was slow. The seller would not talk to any buyer unless they were pre-approved anyway.
5. Double check with the city/county for any open permits on that property.
6. Look around and see if the seller had done any "DYI additions, new windows, etc..ask them point blank if they did any remodeling, major repairs, especially electrical.
7. Ask at least 30 percent below selling. If they are not mad at you, you did not go low enough.
8. Homes are like the city bus, if you miss one, there will be another one in 15 minutes.

    Bookmark   September 4, 2010 at 6:19PM
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