My girlfriend and I just got an offer on a home that she owns that was $18,000 less than what we had "sold" it for last August to a buyer who wasn't able to get a security clearance for her new job and that killed the deal. I also have a home on the market in another part of town where the comps say that I should be able to get in the mid 160's. It's on the market at $149,900 and it's sitting there.
Well, Kathy's new job is on the complete other end of St. Louis and it's taking her an hour and 15 minutes to get
home most days. Not only is it an hour and 15 minutes, it's 1 hour and 15 minutes in stop and go traffic. So, we've decided to go ahead and buy another home closer to her new work.
We've been looking and have found a home that meets almost all of our criteria and I'm curious what we should offer for it? In this market, what is the true value of that home?
I did the comparables and nothing has sold like it in over 4 months. That home sold for considerably less than what these folks are offering their home for. I can see where they got their asking price though. If you go back 6 months to a year, there are dozens of comparables that support their asking price.
That said, it's not the same market that it was back then. Back then we sold the property mentioned above for $18,000.00 more than we sold it for now. That's about a 10% drop in price. The home that I currently have on the market is sitting there with us asking about 10% less than the comps say.
On top of the market decline, this home has a few loose ends that would have to be taken care of before we would be able to move in. I've estimated that the repairs to correct these defects will be around $5,000.00 with my guys doing the work (retail value of these repairs would be at least $7,500).-- Repairs, not improvements --
Some other considerations to take into account are that we don't really anticipate owning this home for more than 3 -5 years, the home is vacant and has been on the market for over 120 days and the seller's have owned the property for a long time (I'm checking to see what mortgages they have recorded against the property right now), so they probably have a sizable equity position here. All told, I'm thinking about low balling them big time.
I know that some of you will be a gasp at this, but to me it's a business decision. If I'm going to buck up and pay to have the deficiencies corrected, only own the home for a fairly short period of time AND buy it during a declining market, I think that I would be silly to offer anything close to what they are asking. Now that I've got my bright yellow rain slicker on to protect me from the rotten fruit that I expect to have thrown at me here, what do you guys think? What percentage of asking price would you make your initial offer at? What percentage would you walk away from the deal at?
All's fair in love and war and turn about is fair play. He/she who cares least always wins (works in love and real estate), so let me know what you think.
Bob Mitchell
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