Bidding on Crazy priced homes

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LookieLucy

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So there are a lot of crazy priced homes out there. Say you are interested in a home.

Do you

A. Make an offer. Possibly offending the sellers and wasting your time.
B. Wait until the price drops.

What I've noticed in the past is that most of the time if you aren't willing to pay the asking price or close to asking you probably won't get it. I've seen agents tell me they had bids on homes but they are just waiting for better ones to come in.

But I see some homes out there that I would buy if the price was just like 50-75k less. ;) What do you think?

Thanks!
Still a lookie Lucy
 
LookieLucy said:
So there are a lot of crazy priced homes out there. Say you are interested in a home.

Do you

A. Make an offer. Possibly offending the sellers and wasting your time.
B. Wait until the price drops.

What I've noticed in the past is that most of the time if you aren't willing to pay the asking price or close to asking you probably won't get it. I've seen agents tell me they had bids on homes but they are just waiting for better ones to come in.

But I see some homes out there that I would buy if the price just like 50-75k less. ;) What do you think?

Thanks!
Still a lookie Lucy
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Unless you love the home, I would not bid on an overpriced listing (one that 3-5% over comps) within the first 30 days at least or until there is a price drop.  A lot of sellers have over inflated values for their homes because they aren't objective and/or the listing agent probably blew some smoke up their butt telling them that they can get them a price over comps to just get the listing. 
 
I always make offers on houses I like regardless of what the asking price is.  I dont care about insulting anyone and I have had multiple situations where people come back to me with something less rediculous. 

But the key is that I take about 30 minutes and write up an email spelling out the data that points to what the house is worth.  I usually include a graph from redfin that shows the declining price per sq ft in their community and also attached proof of funds and loan approval letter to show that I am not trying to waste their time.  Some times, the listing agent responds with a 1 word "no", other times, after a few back and forth emails, we come to a number that might work.  Also, if I am really interested, I send another email 30 days later reminding them that I am still interested.  I have done this for about 10 houses now and I need to look back but some came within $20K and in hindsight, I should have probably moved on one of those. 
 
i will post all my attempted offers one of these days and share the emails i write. 

i will tell you that the super agent in NWP gave me this answer literally: "no"  -- but i didnt let that deter me and emailed him back and forth and he actually had some pocket listings that werent up yet that almost worked for us so really YOU NEVER KNOW :)
 
rkp said:
i will post all my attempted offers one of these days and share the emails i write. 

i will tell you that the super agent in NWP gave me this answer literally: "no"  -- but i didnt let that deter me and emailed him back and forth and he actually had some pocket listings that werent up yet that almost worked for us so really YOU NEVER KNOW :)
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I do have to ask though RKP, if that "super agent" of NWP share those pocket listings with you because you were going to allow him to represent you on both ends of the commission?  If so, that's a great motivation for an agent versus a buyer who has their own agent submitting offers to the listing agent on the buyer's behalf.  Not sure that most buyers would want to be represented by the listing agent.  Listing agents become very motiviated when they have an opportunity to "double dip" on the both sides of the commission.  ;)
 
i fundamentally believe that you have to go to the listing agent in this environment.  i know that sucks to hear USCTrojanCPA but with short sales and REOs, seems like the only way to really be the first in line.  i think the creative buyers agents will come up a model that works in this environment like a flat fee or reduced commission.  it sucks but the listing agent has too much power

also, i see it as a give and get going to the listing agent.  i am cool with them double-dipping but i need something too and thats 1/3 of their commission towards closing.  they have generally been ok with that as they are getting 4% instead of 3% and i get 2%.  but not having an agent on your side and looking for your interests can be scary.

after reading through the documents multiple times and going through escrow a couple times, i realize its not that scary but with so many options, a punk listing agent can stick the buyer with a host of fees that normal practice dictates are sellers fees like title insurance etc.  any way, this isnt to get into a side way conversation about the value or not of having an agent.  just letting people know my strategy in this

btw, another thought for folks - buy the books.  i spent $400 on 8 broker exam books and soon will have same broker license.  not that i want to be in RE but i want knowledge and its not hard to obtain...
 
rkp said:
i fundamentally believe that you have to go to the listing agent in this environment.  i know that sucks to hear USCTrojanCPA but with short sales and REOs, seems like the only way to really be the first in line.  i think the creative buyers agents will come up a model that works in this environment like a flat fee or reduced commission.  it sucks but the listing agent has too much power

also, i see it as a give and get going to the listing agent.  i am cool with them double-dipping but i need something too and thats 1/3 of their commission towards closing.  they have generally been ok with that as they are getting 4% instead of 3% and i get 2%.  but not having an agent on your side and looking for your interests can be scary.

after reading through the documents multiple times and going through escrow a couple times, i realize its not that scary but with so many options, a punk listing agent can stick the buyer with a host of fees that normal practice dictates are sellers fees like title insurance etc.  any way, this isnt to get into a side way conversation about the value or not of having an agent.  just letting people know my strategy in this

btw, another thought for folks - buy the books.  i spent $400 on 8 broker exam books and soon will have same broker license.  not that i want to be in RE but i want knowledge and its not hard to obtain...
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Since day one, I've always used a commission rebate model for my buyers because I believe that real estate agents are overpaid for what they do.  Plus it's my way of saying "thank you" for the business.  The listing agents may have the power now because we are in a seller's market but that can turn around where we are in a buyer's market and the buyer's agent now have the leverage.  Many buyers are not comfortable being represented by the listing agent for the most obvious reasons....independence issue and objectivity.  Many years ago (before the 80s or 90s...I read about it when I was taking my real estate exam) they used to not allow realtors to be dual agents but then the CAR changed the rules.  But yes, in today's world where Redfin has empowered people with information that realtors used to control in a blackbox it's not as scary not being represented by an agent but many buyers still like representation to be guided through the maze and red tape.  At the end of the day, people should do what they are most comfortable with.  Buyers will tend to go with a an agent who was referred to them by a friend, family member, or co-worker.  They feel more comfortable because it's a more known commodity versus random listing agents who they have no idea how they are.  I'm curious though, how did you deal with the greedy listing agents who refused to privde you any kind of credit or tried to sneak some costs over on you?  Did they show you the full listing so you could see what the buyer's agent commission was?
 
While I understand rkp's logic... I am more comfortable with a buyer's agent.

For the same reason I don't like haggling with a dealer for a car... I would rather have someone else on my side more familiar with the process and has possibly an existing relationship with the listing agent that could work in my favor.
 
we think no house is perfect so that pretty much spelled out our decision: no bid on crazy priced homes.
If it's regular sale, we feel more comfortable with a buyer's agent;
if REO/short sale, seems seller's agent is the trend to get you offer submitted and get deal done (in some cases).
 
irvinedav said:
we think no house is perfect so that pretty much spelled out our decision: no bid on crazy priced homes.
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i dont understand this.  what stops you from bidding what you want?  if $800K house has $1M asking, why not just offer $800K if you like the house?
 
When we were looking, we bid what we wanted on houses we liked regardless of the asking price or comps (we took comps into consideration).  We had every type of response from a buyer refusing to respond until we 'get real' to a heated back and forth negotiation which closed the gap to a possible deal.  The house we ended up buying (regular sale) was one where we low balled them (we knew we were low balling pretty badly) because we were interested in another house as well.  The sellers went with another buyer who offered what they were asking.  A week later the buyers backed out and the sellers agent called my agent (Martin AKA USCTrojanCPA) and said she was interested in hammering out a deal with us even though we were the lowest offer because she liked Martin's professionalism and I am sure the size of our down payment looked good.  She did state that we would have to come up on the offer to a more realistic number which we did and still ended up getting the house nicely under comps (the same plan sold in the neighborhood a year later for almost $100K more and a smaller plan sold for almost $50K more).
So submitting that low ball offer opened the door for a conversation with the sellers agent and sellers but having a good buyers agent like Martin helped bring the deal home.

P.S. on a side note, having SGIP (Soylent Green is People) doing my loan also helped in making the deal happen since the sellers were very time motivated and he guaranteed the shortened close date would occur (and did).
 
So... rkp... in your fishing expeditions... did you offer bids below comps or at comps?

I'm thinking about putting out some offers but they are lower than comps for homes that are in the same neighborhood. My rationale is that bigger, newer homes one street over are actually going for lower than my bid... which I doubt will work... but we'll see.
 
irvinehomeowner said:
So... rkp... in your fishing expeditions... did you offer bids below comps or at comps?

I'm thinking about putting out some offers but they are lower than comps for homes that are in the same neighborhood. My rationale is that bigger, newer homes one street over are actually going for lower than my bid... which I doubt will work... but we'll see.
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irvinehomeowner,

I know this question was not directed toward me but in my experience, we offered what we felt it was worth while still taking comps into consideration but also factoring in if it is in the area we liked a lot, had a layout we liked, upgrades we liked, size of yard, backs to street, ,school proximity, etc.  There were some homes we offered way under comps, near comps, at comps and above comps.  We went with our gut feeling of what we felt comfortable paying for the home we were offering on.

There will always be that 'Darn I should have offered more' or 'Wow, I am glad they did not accept my offer' feeling in hindsight based on new information or finding that 'better' fit home.  We have a few of both of those situations in our minds.  In the end, we got the home we really liked, in an area better than we believed it was and fit our budget and lifestyle in the right way.

 
 
irvinehomeowner said:
So... rkp... in your fishing expeditions... did you offer bids below comps or at comps?

I'm thinking about putting out some offers but they are lower than comps for homes that are in the same neighborhood. My rationale is that bigger, newer homes one street over are actually going for lower than my bid... which I doubt will work... but we'll see.
Click to expand...
Bid away IHO, you aren't out there looking to make friends.  As long as there is some rationale to your offer, it's worth a shot.  You really have nothing to lose and a lot to gain.  If a seller doesn't want to come down to your comfort zone price just move on to the next on.  You can always come back to that house if you see it still lingering on the market a month or two later.  No gutts, no glory!  ;)
 
comps is a funny thing.  like the property appraiser thread, you can paint a picture that really proves any price point.  i went with a combination of what the overall neighborhood is heading towards from a price per sq ft and then gave some selective comps.  my goal was to offer the low or lowest of the range of similar products.  also, in my email offer, i would attach bank statements and show that i can be 100% cash if necessary and i was using my cash strength as a selling point for my offer. 

for me, getting a deal (or at least thinking that i did) is important so i tended to go lower.  there was a $1M asking price WB house where i offered $815K.  it really made sense at $900K but it was a sucky layout for us and didnt really inspire us.  we were interested only if we got a crazy deal and that didnt pan out.  but my $815K offer and few exchanges did get them down to $905K.  point is always ignore the asking price

finally, if you have a buyers agent like scott or martin and they are fine with sending your offer in, what do you lose? 
 
It never hurts to bid, but I was always mindful of people involved.  If I know a house can sell for $780-800K, I'll bid a fair price if interested.  But I never saw a point in bidding $700K for that house because "I'd take it if the sellers are stupid enough to sell it to me at that price".  My opinion is that you still need to be in the right ball park. 

It's a different story when sellers are being idiots and are asking 450/ft for Northpark.  For those houses, I just ignore it. 
 
Like RKP I too am currently enrolled in real estate broker courses (Thank you USCTrojanCPA!).

I would highly recommend it to anyone looking to purchase real estate
 
I see this as two separate issues:

1. If he/she likes the property, should a buyer bid on an overpriced listing?
My answer is yes (I agree with rkp). Bid what the property is worth to you, but not one penny more. You never know how the seller will respond. Often times it is different even than they've shared with their listing agent. At worst they can say "no" and they might surprise you with a "yes."
Further, you might be the only person that's made a bid, and the only person that they have to come back to when the seller gets realistic.




2. Should a buyer represent themselves, work with the listing agent, or work with their own buyer's (selling) agent?
My answer is "it depends."

I believe a buyer can represent themselves very well if they feel like they know what they want, if they are comfortable with their own expertise/knowledge, and if they are OK with the risks they are taking on (if/when you get into uncharted territory and the little things that the contract doesn't spell out).

I also think it's perfectly OK to work with a buyer's agent.
From a buyer's agent perspective, when I vet a buyer, I want to know three things:
1. Does the client want my help?
2. Does the client need my help?
and
3. Is the client willing to let me help them?
As a personal admission, where I've had the majority of difficulties in transactions has been when one or more of these questions has been a "No."
When I'm a buyer, wanting/needing/willing to accept assistance, I want to make sure that the agent CAN help me.

Lastly, I believe it can be OK to work with the listing agent.
Again, you'll have to acknowledge your limitations in trusting that the person will represent your interests fairly, and know that no agent in their right mind does double the work with double the liability without some added $$$. Nobody works for free.

Any one of these can be good choices, and any one could be a very expensive and painful lesson.
Know yourself, and your risk tolerance, and choose accordingly.  :-)

Hope this helps.
-IR2
 
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