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Monday, February 9, 2009
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40 comments:
Say that you're a seller who bought ten years ago and has no mortgage now. You have the opportunity to sell without realtors for a price that is 65% more than what you paid. A price that is the result of steady 5.5% appreciation. A price that is $162/sqft when the average $/sqft in your zip code is $106.
Not only does the offer not involve realtors, the buyer is willing to pay closing costs and buy as-is and close whenever you want.
If you, the seller, turn this down, is it clear you are not a rational actor and no amount of logic, evidence, or persuasion will convince you that it is in your best interests to sell to this buyer, rather than hire a realtor and try to find a better offer? Is it absolutely pointless for the buyer to write one last desperate appeal in which she again lays out all the excellent reasons why it is in the seller's best interest to sell to her?
Just checking.
Tabitha,
Yes, the seller is hopelessly and completely irrational. Writing one final letter is not pointless however. It's cathartic. Conveniently enough, what you've written here is pretty much sufficient.
Best of luck. I think this situation means that you can clearly do better than this house pricewise, and eventually be happier for it.
Tabitha, from an outsiders point of view, I think you are wasting time with the male half of this couple. He already knows what you are willing to pay, he knows the comps you've already given him, etc. Giving him the same data again will only serve to make you appear desperate (IMO). If you do anything, I would recommend leaving it at a simple phone call to the male half letting him know that if he changes his mind to give you a call.
And by the way, the fact that he bought his house ten years ago, that he could sell it to you for 65% more than he paid, and that the sales price would result in a steady 5.5% rate of appreciation, have absolutely no bearing on the price he should be willing to accept today.
And if the male half does list the property with a realtor, go ahead and submit a written offer at the price you verbally offered. Make the offer directly with his listing agent without being represented by an agent. His agent will then get the full 6% commission if you are the buyer, and will push him to take your offer (which may be the only one he receives anyway).
Tabitha, that seller is an idiot. I'm sure he uses some wild "comps" as a justification for his selfishness, but whether he's selling for 2001 or 2006 price, it's still a bubbled price.
Went to an open house in my neighborhood yesterday, at 1948 N. Upton St., Arlington, 22207. It's a small colonial, in good condition, on a nice street.
The realtor had lived in the neighborhood. She knew I was a homeowner nearby and wasn't a potential buyer for this house. She said the market in our neck of the woods is doing quite well. She mentioned the house on N. 19th St. nearby that had gone under contract after two weeks. She noted that a client she's representing lost a bidding competition on another house on Yorktown Blvd. last week (winner paid full price, c. 750K).
Given the amount of foot traffic at the open house yesterday, I expect this one will go under contract pretty soon also.
So, there is definitely a busy market, at least in 22207 neighborhoods within walking distance of the Orange Line, provided the house is attractive and priced right.
Tabitha,
Personally, i would move on. It already sounds like a bad deal (for you) at your current offer price.
Just curious, why do you think it's worth $162/sqft when the average for the zip is only $106? Is it on a larger than average lot?
Tabitha,
There's great advice here. I would only add that I second the quick "let me know if you change your mind" phone call without stating your reasoning and research. I think it possible that too many facts irritate people who think they know best.
And then emotionally for yourself to breathe deeply and think about other positive things that you might like about other properties. I have had to do that myself after taking the plunge -- instead of seeing the negatives or dwelling on what I might have done differently I have to think about the positive things about our current house and work with those.
Also, double-check that you are calculating the land correctly with the $sqft price of the house. I am sure you are, I just wondered how that is done.
Tabitha: your assuming that people are rational actors. As Kahneman and Tversky have shown, they definitely are not:
en.wikipedia.org/wiki/Daniel_Kahneman
Tom,
Yorktown blvd is nowhere near metro. Ace had commented on the yorktown house listed at $775K here before and it didn't surprise him that it went under contract in 4 days. check it out.
Do you think the Upton St house worth just $120K less than the Yorktown house, to buyers who want to walk 1.2 miles to metro?
I knew I would find my catharsis here. Thank you all.
My poor husband thanks you, as well, or would, if he knew that I would now be able to calm down and let this rest. Of course, he has said basically everything you all said, and more, but I need to let this work through my system.
(An appraiser at the county records office once said to me, snarkily, that women should stay away from the calculations because they are irrational, emotional creatures when it comes to real estate. I wanted to squash him flat with my college diploma, but I guess I have a large piece of humble pie to consume now. I still think he's...oh, forget it.)
As to calculating $/sqft when there is a large lot, that is tricky, especially because large lots in nice neighborhoods are much more valuable than large lots in rural settings, and zoning matters, too. But I created a spreadsheet for large houses (3000+sqft above grade) built from 1998 on, on greater than 1 acre lots, that have sold since June, and tinkered with it for a while. The $/sqft varied from $106-$191, for an average of $135, ($191 was a real outlier...funny thing is, I know the people who paid that much, and I know why, just by coincidence...long story...) and the size of the lot seemed to diminish in importance once you got over 3 acres. I won't bore you with many more details, but we went with the higher value b/c #1 it's on one of the largest lots #2 it's one of the closest lots to the VRE #3 we knew we had a stubborn seller who wanted top dollar. But he wants his crazy $198/sqft, even though fantabulous brand-new custom-built mansions on 10 acres don't cost that much. grrr...
I just need to remember it has a small kitchen it has a small kitchen it has a REALLY small kitchen...
It was a tiny kitchen, you couldn't possibly cook for your whole family in there!!! I mean, how would your kids learn how to make (insert complex family favorite here) if you have to kick them out in order to avoid accidentally whacking them in the head?
;)
Tabitha,
This is on the market as of yesterday. 8 minutes to VRE.
Bookshelves!
I think it might be above your target price, but I'm not sure.
Harriet, that house is stunning. Demonstrates well why some people want to live out there. Even if this is not the one for you Tabitha I think it proves the point, that you will do better buying on the open market, for having "lost" the drama house(s).
That is a sweet place.
MM, I have no idea what the Upton St. house is worth.
I just know that the nearby, basically similar house on N. 19th Rd. went under contract in two weeks!
harriet, went by there yesterday ;)
intriguing enough for a trip to county records to check on 2nd mortgages and such. tax assessment has stayed about the same (upper $400Ks) last three years. only 2800sqft, no basement? hmmm...
Tabitha,
No basement. Ugh!
I wonder if the addition is new? The tax records don't seem to account for it, or do they?
hmm... another contract fell through? this owner-agent listing i've been following since last summer is back on the market. so maybe it's true that the credit market is unhealthily tight. of course it could be inspection or appraisal, but i'm starting to worry if we'd be able to get a loan. i mean i know pre-approval/qualify doesn't grantee a loan but if there is so much uncertainty it's very difficult to look for homes. is it possible it's now more strict than the old 3xincome rule?
Say that you're a seller...
Tabitha--
YES the seller is irrational. But I'll add a comment: the BUYER is irrational too. Paying $162 for something worth $106 is irrational, unless: 1) the buyer has money to burn, in which case it might be more satisfying and beneficial to give the $62 to charity; 2) the buyer has a UNIQUE opportunity to turn the $106 value into $162 again--which, in real estate, right now, it unlikely.
So the buyer might want to make their one last appeal--BUT, the CORE OF IT should be:
"Market conditions have taken a turn for the worse this winter. I'm now offering $150/sq ft. The expiration date for this offer is xxxx. After that, my offer drops to $140/sqft, and will drop another $2/sqft every weak until I find another property to make an offer on."
(It might be worthwhile to adjust these numbers based on some research on actual market conditions so you can explain the justification based on math and not just psychology, if asked.)
Okay, maybe my "buyer irrational" comment is too harsh--but what this plan does is (hopefully) give the seller a sense of urgency--a ticking clock--and a sense that the tide is turning against the seller market-wise as well as offer-wise.
Incidentally--since it puts the focus on the numbers, it might take chauvinism/gender issues out of the equation, since you're a female direct-buyer from a male seller---OR, perhaps it would INTENTSIFY that aspect, which could ALSO be to your advantage. "I don't want to be beaten by a girl!"
ONE KEY ASPECT of this strategy--you DO have to be ready to WALK AWAY and start over. But it sounds like you're nearly at the point of knowing you have to do that anyway.
Best way not to lose to an idiot: be willing to walk away from the idiot.
One last thing--if a LOWERED offer gets any positive reaction, you MIGHT want to be prepared to come BACK UP a BIT toward the original offer--that way, the guy can say to his male glands, "I rescued this much back".
Just a thought.
Oh--and one last thought: in this market, a guy with ONE house and a mortgage/tax bill and ONE interested buyer and a relative who wants to sell is NOT the one with the power. The one with the power is the buyer who HAS THE MONEY and has arguably DOZENS of acceptable houses to chose from.
With the prime jumbo and conforming jumbo default rates going up exponentially (I think the discusssion here was within the last two weeks, it was a WSJ article, they didn't say "exponential" but your eyes can fit the chart) mortgages may indeed be tightening to batten down the hatches against more risk.
We'll see what the closings versus contracts numbers due, although February is bound to be haywire because of the stimulus package.
MM & Tom, I don't see the 1948 Upton St. as at all comparable to the Yorktown house (I may be confusing the houses). The Upton house is really little (1000 sq ft) and its updates, while nice, aren't nearly as extensive or expensive as the Yorktown's. The lot is half the size of Yorktown's, and there is no garage. There are going to be few prospective buyers who can/will want to squeeze into it, and given zoning rules with that size of lot, you probably can't add on (unless you could add on about the sunroom). In contrast, the Yorktown house would suit a lot of people, though it's more costly.
For what it's worth, the 1948 Upton's 2009 assessed value is about $23K lower than its 2008 value, i.e., it's in the 570s.
So IMHO, while Upton is certainly not the most overpriced house in Arlington, I suspect it may have to come down a bit to sell. We'll see!
Two pet peeves: why did the agent include that last photo with a close up of the pipe in the back yard, and why do so many agents put "this is where you want to be"? It provides no info, and it makes me think of Obi-Wan in Star Wards saying "these are not the droids you are looking for. Move on" in order to get compliance.
oops - I meant "add on above the sunroom."
Ace: The Upton St. house isn't comparable to the Yorktown house. It's comparable to the N. 19th Rd. house that went under contract in two weeks.
i think i'm going to catch this knife if i can get a big enough loan...
btw i knew it'd go into short-sale/foreclosue after getting the owner's 'personal' letter (through the agent) to the entire N Arl homes stating they're flippers and the 'flip' had gone bad and they *MUST* sell by end of 2008.
(ace, i remember thinking WTH? when seeing that pipe pic. lol.)
MM,
that's pretty, at least on the outside. Best of luck. I worry about the flippers and what stupid, overpriced, half-assed things they might have done to the inside, but you might be in luck.
MM,
Awesome.
tom said: "winner paid full price"
Now I didn't get a PhD in high finance, but it seems to me that the real winners in real estate don't pay full price (especially when prices are significantly in excess of true values). It just seems so odd to hear a person who pays full price for something referred to as a winner.
Maybe the next time I go to buy a new car, I'll pass on negotiating down the price of the car so I can be a winner too. Cause right now, I'm a real "loser."
MM,
Some cached pictures of the inside. I agree with Cara. I'm always afraid of "OPRs" (other people's renovations). But it might be ok.
mm, one block north of that "knife," on 23rd St., is a gorgeous new craftman style bungalow that i'm drooling over. at $1.349 million, the price is way too high, but its fun to look at if you like bungalows.
Thanks, Tom. I found 19th on frankly and they are similar. 19th has a very nice fenced back yard.
19th is nearly 300 square feet bigger than Upton - an important difference in this size range, if the Arl. website is to be trusted.
http://www.arlingtonva.us/Departments/RealEstate/reassessments/scripts/Inquiry.asp?action=view&lrsn=11518
Cara et al,
i don't know why i'm so excited that i can't get much done (well typical of me on Monday...) but here's a question coz i can't think clearly right now - is it a bad idea to work with the listing agent directly? i know i 'should' hire my own agent but i know i wouldn't be able to trust them so why bother? also i'm gonna low-ball it so that 3% commission selling cost could make my offer a bit more attractive, no?
John Fontain, "winner" means the person who won the bidding competition for the Yorktown house.
I realize you're being sarcastic, but, regardless of whether you wish it weren't the case, there is competition for houses in N. Arlington at that price point.
MM, at one time Frankly had a link on listings explaining the benefits of a buyer agent. For example, you may not be negotiating as good a deal as you think, e.g., if you don't have MLS data on comparables, and the seller's agent will keep the full 6% that the seller pays, since there is no one with whom s/he must split it. So you may end up paying the buyer's agent fee without the benefit of having an agent. you might want to search Frank's blog posts for more info on this before making up your mind.
mm, you could consider a discount agent, who is basically an offer-maker, or a question-answerer, if you have any questions. my brother used i-agent, and was pleased with their services, and he is a demanding guy with even more OCD-induced spreadsheets than his big sister. then you get to call the shots, you get access to all their "secret" information, and you get a check for 2/3 of the buyer's agent commission at closing. i haven't decided to go that way myself, but it's an idea.
mm,
I second Ace and Tabitha. While there may not seem to be any point in having a buyers agent if you've already identified the house and been doing comps yourself, you inherently weaken your bargaining position. Going with at minimum a discount agent like redfin seems to be in your best interest. Now redfin itself may not be the right choice because they "don't do low-balls" but it depends on what you mean by that.
Especially in a negotiation with a bank, I think having someone with experience on your side is worth it. Furthermore you should check with Frankly and see if they're following through on that concept of "no seller's agent fee if you loose money selling a house we helped you buy" thing.
On the other hand, this is a bank. They are going to be accepting "best and final offers" from all comers for a determined period of time (how that's set I don't know), so if your hope is that you'll be the only offer, and that they'll just go with it, in a way I see your point as to why you don't need an agent. Because basically what you're saying is that if there are other buyers who are willing to pay more than you, then you don't want to buy now anyway, so what's the point of an agent's advice on how to bid in order to "win".
Don't count on that 3% buyers side commision evaporating though. In some ways I doubt the bank will give it to the listing agent, but who knows.
thank you ace, Tabitha, cara et al.
my own experience is agents are there to make deals happen, which is a good thing when you are open to negotiations. but my plan is really simple - i have a fixed budget that i want to stick with, no matter what happens. i don't want my agent whisper to my ears 'picture yourself grilling on the deck in summer' or 'in the end it's only $200 more per month' in the process, if anything, i want someone to hold me back because i'm bound to get emotionally involved after putting in the offer. i know my agent won't do that, and i wonder if such agents exist.
maybe i'm not 'emotionally ready' to buy?
MM,
A rebate from a discount agent would be nice.
I would ask around for referrals, at a minimum. I'm not sure I see the advantage in going with a listing agent. I've often found them to be wary of doing that, and their seller might not understand or like it. There's no question that once you "hire" one, they will try to get you to make a purchase. That's their job . . . . Still, some are more palatable than others, depending on how well you get along. I've noticed that the more professional they are the better I work with them. I like full-time experienced agents, for example, who do everything with competence.
Tabitha said...
I knew I would find my catharsis here. Thank you all.
Tab, about 2 years ago I put in a lowball on a new build. It had sat on the market for almost a year.
After successive price drops to $100K off original listing price, the place sold. I checked mdlandrec and saw that it had been purchased with a 0% down ARM.
It currently sits on the market as a foreclosure for $40K less than original sold price.
Woosah
MM said...
my own experience is agents are there to make deals happen.
Unless it’s a flat fee buyers agent, they are there to ensure that you pay as much as possible for a home.
i don't want my agent whisper to my ears
It’s not what the agent would whisper in your ear that you should be worried about. It’s what they would whisper in others ear. Never let an agent know how much you are fully qualified for.
i want someone to hold me back because i'm bound to get emotionally involved after putting in the offer.
Then you do not want a real estate agent.
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