We are ready to make an offer: How much did the Seller pay for this Property?

By
Real Estate Agent with Berkshire Hathaway HomeServices 01238708
https://activerain.com/droplet/4xT

We are ready to make an offer: How much did the Seller pay for this Property?Just recently I was asked by a first time buyer this question.

 Great question if you are curious or if you want to know if the seller is underwater due to higher loan to current value. If you know the answer to this question you can make a better offer and get an understanding of what to potentially expect as far as upcoming negotiations. I also think the next question that needs to be answered at the same time is what are the recent sales comparable to the subject property we are about to make an offer. I also find it is important to see what the active inventory is as well.

Keeping in mind, when this question was raised, my buyers already had the answer to the Active as well as the Sold properties.

 What I had to educate them on is:  The answer is a nice to know information; it is not the impetus to submit a low ball offer just because the seller is going to have a profit on the transaction. The primary focus is what the true value of the home?

The Offer should be a fair offer to all that way the Buyer & the Seller will be happy and it assures a smooth negotiation with the ultimate goal of the transaction closing.

If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at homes@endrebarath.com  or visit one of my websites at http://www.endrebarath.com  Your Pet Friendly Realtor. I contribute a portion of my commission to Local Animal Rescue Organizations

 

 

 

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Susan Emo 01/27/2011 07:38 AM
  2. Kate Bourland 01/27/2011 06:21 PM
  3. Lenn Harley 01/28/2011 12:52 AM
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Tags:
first time buyers
loan to value
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underwater sellers

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Rainer
375,414
Monica Foster
Monica Foster Team of eXp Realty - League City, TX
Broker, CRS, ABR, SRS, CHMS, CNE, CNHS

Endre,

Great post!  I agree about making the offer fair, and try to make it a win-win for both parties.  But I do agree with Emily, most buyers are not interested in what is fair right now ... it's a buyer's market in my area and buyers want a great deal and if they can't get it, they go elsewhere ... regardless of how fantastic the home is.  Thanks for sharing!

Feb 04, 2011 02:20 AM #71
Rainmaker
571,718
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Endre,  I agree that the question in your well written post should solely be used for informational use only.  I sopmetimes thing the buyer wants it so that they can say " The seller doesn't need to sell it for X amount, look at what they paid for it.  

Feb 04, 2011 02:51 AM #72
Rainmaker
240,532
Paul Weir
Re/Max Performance - Grass Valley, CA

Hi Endre,

I agree. It is a valuable piece of information when doing your collective homework from the buyers side . . . too many homes are facing the prospect of a short sale or foreclosure. I believe the actual amount paid/owed is a valuable piece of information for analysis - especially on homes that were purchased in the last 6-8 years. 

Dont forget to look for all the additional borrowing a seller may have done beyond the original purchase too (2nds, equity lines, etc.)

Good post,

Paul

Feb 04, 2011 03:09 AM #73
Rainmaker
374,572
Donna Yates
BHGRE - Metro Brokers - Blue Ridge, GA
Blue Ridge Mountains

Endre:  "nice to know information; it is not the impetus to submit a low ball offer just because the seller is going to have a profit on the transaction."  Perfect response!

Feb 04, 2011 03:16 AM #74
Rainmaker
171,067
Greg Miller
Ruoff Home Mortgage - Sarasota, FL
Florida Home Loans - Conventional,FHA,USDA,VA

Great points Endre. I especially liked your comment that it should be a fair offer to all. So many times in this economic climate, buyers feel that there should be a winner and a loser. Real Estate transactions should be a win/win.

Feb 04, 2011 03:24 AM #75
Rainer
49,366
Jim Courtney
OklaHomes Realty, Claremore Oklahoma - Claremore, OK
CRS, GRI, AHWD

Endre- I agree wholeheartedly! Just last week I was showing homes to first time buyers who were referrals from a past customer. We searched the internet, found 7 homes to tour. None of the homes seemed to fit their perfect home so we reevaluated the situation. We changed the criteria and found the perfect place. Total remodel, new stainless steel apps, new windows and the  list of new continues. They were excited and had her father join us (yes, the dreaded parental approval). The home passed everyone's scrutiny and they went home to talk about it. When we met the next day the buyers were somewhat subdued. It turned out that her father had done research to find out what the seller had paid for the home. Despite the fact the seller has purchased the home in disrepair, they buyer wanted to offer just $8K over the seller's purchase price, nearly $15K below list. I couldn't believe it. I educated my buyers about the danger of making such an offer. We put pencil to the cost of just the visible improvments the seller had made. I did a CMA right there in the office for them. The buyers left without making an offer and I haven't heard from them since. New home buyers who lost thier dream home because of the dreaded question, "how much did the seller pay?"

Great post that motivated me to make my very first response post! :)

Feb 04, 2011 03:25 AM #76
Rainer
122,979
Cory Barbee
San Diego, CA
Broker (760) 563-4022

Great post...I guess it's just human instinct to ask the question. It makes them feel like they are getting a steal or not. Using current market data is the best way to communicate with buyers about the market without having to be the bad guy...

Feb 04, 2011 04:15 AM #77
Ambassador
1,154,678
Bryan Robertson
Los Altos, CA

I agree with comment #35, knowing the original purchase price is not relevant.  If it has been a while, the seller could have new loans and still be underwater.

In Silicon Valley, it seems that when I get that question, it is always a prelude to "how low can we go" with an offer.  The problem is that with most markets around here moving up, the question sets the buyer up for failure.

If I get this question I'll tell my client but als advise them that it doesn't matter, it only matters what the current comps are.

Feb 04, 2011 05:24 AM #78
Rainer
162,981
Trisha P Realty Group
Realty Executives - Leavenworth, KS
"Holding the Keys to Your Dream Home"
I always have buyers ask this question also. We do need to educate this that what they bought the house for doesn't matter. It's what the house us worth that matters.
Feb 04, 2011 06:01 AM #79
Rainer
32,054
Tracy McPeek
Cottonwood, CA

I agree that it doesn't matter what the seller paid, although it is good gee-whiz information.  Who am I as a buyer to determine what a seller should make, especially if I love the house?  As long as the comps support the offer I consider it a good offer.  If you low-ball, don't complain when you lose the house.

Feb 04, 2011 07:21 AM #80
Rainmaker
517,613
John Elwell
CENTURY 21 Bill Nye Realty, Inc. - Zephyrhills, FL
You Deserve a Full-Time Agent, Not Reduced Results

Here it is a matter of public record. However, buyers MUST understand that what the sellers paid for the home will likely have little to do with its current value. Turn the table on those who want to drive the current price down to what the sellers paid. Ask them if they had sellers that paid top dollar during the boom, would they, as buyers, be willing to pay the same amount for the home now???? It makes about as much sense as using what they paid years ago to determine what an offer should be. There are days when I just shake my head at the lack of common sense I see out there. Kind of sad actually.

Feb 04, 2011 09:19 AM #81
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Juli & Susan thank you for the recommendation, I have never had a Featured Post that came days after I posted it. This suprized me. Thank you for everyones input to the conversation. I will try to comment back to everyone between phone calls and e-mails to clients.:)))

Feb 04, 2011 11:09 AM #82
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Richard-- knowledge is power, provided it is good information, sometimes the Public Information is not 100 % 

Emily-- I would not say most buyers, I think they are the rare ones. The savvy ones do understand that if they want to get the property they need to be within the current comparable price or they will miss out. Now with the Internet Sellers are savvy as well.

Michael -- good points

Christy -- I agree totally

Irene- It allows you to plan a Negotiation Strategy, plus you can anticipate what type of response you will get based on the additional information.

Feb 04, 2011 11:24 AM #83
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jason-- We both would be able to buy lunch on those 'nickels' thank you for adding to the discussion

Kim & Gene --- great point about the "One Dollar" gifting

Feb 04, 2011 11:29 AM #84
Rainmaker
525,704
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

What the seller paid is irrelevant. Whether the seller paid one dollar or a million dollars for the house, the only thing that matters is today's market value.

Feb 04, 2011 12:59 PM #85
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Patricia, hope you come back and see the discussion has grown:))

Cheryl interesting point about improvements and the costs which might not show up because either they paid cash or with credit cards.

Barbara you are in the majority Comps are the true determinants of what an offer should consider.

Bill all valid points

Christine if I was a seller yes I would want to know what the Fair market Value is before I would accept a low ball offer:))

Feb 04, 2011 02:17 PM #86
Rainmaker
2,812,252
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Endre, When buyers or agents ask me that … I say … what difference does that make? After they finish their blah blah blah … I say … we really need to focus on fair market value … have you looked at the comparable sales? It is truly amazing – isn’t it?

Feb 05, 2011 02:17 AM #87
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Tom- I used to hate it years ago, now I have heard it so many times I take it as an opportunity to educate the buyer, who is in need of learning about strategies & market conditions.

Charita- you are so rightt

Rich-- true not often does it become a deal breaker only once in a while

Ryan- that is funny a $1000 over a 13 year period, sounds like an arbitrary number with no rime or reason.

 

Vickie- you are so right the Comps are the real determinants

Feb 06, 2011 05:56 PM #88
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jodie- how true, first time buyers always get advice from neighbors, relatives & friends not always up-to-date advice.

Phil, great point that needs to be added in as well.

Melissa- there are a few buyers I have seen over the years yes they only want the "steal" funny they are not really buyers I call them professional lookers. True Investors have margin that they go with below and above the comps depending on the specific area they are looking.

Feb 06, 2011 06:01 PM #89
Rainmaker
3,224,681
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Jim- Great point about making sure that there are enough moneys to pay closing cost as well as the lender. Other than that what the seller paid for is just helpful in planning a strategy to negotiate.

Geoff that is where I think the key is to find a "meeting of the minds"

Ruthmarie, well stated thank you for adding to the conversation

Jody & AJ you are absolutely right as long as they are willing to let the property go. This applies to sellers as well when they get an offer and if they are too firm on their price they might loose a good buyer as well.

Feb 06, 2011 06:09 PM #90
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Endre Barath, Jr.

Realtor - Los Angeles Home Sales 310.486.1002
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