Home buying question

[Incognito]

Is an offer of 90% of asking price normal-ish? I know it would depend on the market and the asking price vs. value. We are thinking about puttnig an offer in on a house in our area - it is nice, but we don't NEED to get it. We like it, it has a little more land than we have, and it is well-maintained. They're asking 15% over assessed value, so we'd be coming in at about 108% above assessed value.

 

It's a fairly active market, but we know the sellers do really need to sell this summer, the sooner the better. I don't want to take advantage of them, but we don't really want to take on a huge mortgage right after paying off the one we have now.

 

Anyways, any advice, real estate gurus among the hive? :) Is there a way for me as a layman to see what % of asking price things are going for in my area? Is there a way to know if they have overpriced it (we think so, but perhaps that 10% is just built in negotiation room)?

 

Thanks.

[Cera]

That sounds very reasonable to me. You are still offering 8% over assessed value and the reality is that unless it is a very hot market there won't be many people willing to pay over the assessed value (especially when you consider how assessed value factors in to obtaining financing).

 

I'll be honest, I would probably start by offering the assessed value and make sure that your realtor conveys to theirs that you are offering what you are because that is what the house is assessed at (unless comps show that most houses are selling for above assessed value).

[Mama Geek]

I would look at comps from the last 3-6 months. Assessed value doesn't always mean market value.

[Tita Gidge]

Assessed value isn't a great gauge in trying to determine what to bid on a home. Those are typically done every year or two, during which time the MARKET value will have likely ebbed and flowed. And improvements may have been made to the home or property but not yet assessed. Not only that but assessed value is influenced by the homeowner - does he protest his taxes? If so, his assessed value will be lower. He wants that! Does he not protest his taxes? If not, his assessed value will be higher. You don't want to pay for that! It's a game, and the assessed value depends on each player's strategy. Foreclosures in the area will also affect assessed value. It's not the best baseline for making a bid.

 

Market value is what you want to look for. If a buyer is willing to pay their asking price, it's not over-priced even if it's more than you'd be willing to pay LOL.

 

You could register at Redfin. They have a search feature that allows you to see what on-market homes are listed at (including any changes in the listing's history), but also allows you to search for what recently-sold homes were last listed at and sold for. Some states don't make public the final selling prices, but the last listing price and pricing history may help you by giving you a ballpark idea. That's essentially pulling your own comps. A real estate agent would happily do the same, perhaps with added expertise to advise with.

 

New homes can be exciting :) Let us know if you make a bid!

[UrbanSue]

You need to find some comps: recently sold homes in your area that are similar to the one you are looking at. In my neighborhood the assessed value has nothing to do with market value. When we bought every home was selling for way under assessed value. Everything was just reassessed this winter so we'll see what happens but, so far, things are selling for way over assessed value. That's really just a property tax question and doesn't necessarily reflect what the market will bear because the market is much more flexible than city governments.

 

A fair price for this home is the one you are willing to pay and the seller is willing to take. That's what negotiation is for. We paid 82% of the asking price on our home. Not that it matters unless you live in my neighborhood but there is no magic percentage number.

[Um_2_4]

Yep, what urbanSue said. Here houses almost always go for well over assessed value. Right now we could sell for probably 20-30% over our current assessed value.

 

So you really need comps. Your Realtor should have access to those (and look only in the past 6 months if possible) and be advising you. That is how we got this house. We offered 8K over asking.

 

Assessed value is really only for property taxes.

[Incognito]

Our area is funny - it's a small old town. A lot of houses have been updated here and there, but aren't thoroughly re-done. Some are old and crappy. Few are lovely - like the one we are considering. There isn't zoning to build new, so generally a person has to buy something that needs work and get it done. It is hard to know what is really comparable. Unless you have toured the property (which is hard to do after it has sold :) ). Our small town has prices about 10-15% higher than the surrounding areas.

 

We know of one that we thought was comparable to ours - but it sold for about $100k more than we think ours would go for. We toured one yesterday that is asking a similar price to what we are considering, and it was a dive. THe MLS photos looked nice. So yes, comps from a realtor would be really handy, but without touring it is a crapshoot.

 

We haven't had the mortgage crisis here like you did in the States. We also live in an area bound by land reserved for agriculture (our house is in that area now).

 

We know the family selling this house. I wish we could just sit down and have a conversation together about it... but we don't know how to do that, and there is a realtor in the middle already, so that won't work. So maybe we do need a realtor to talk to their realtor to know what % of asking price is reasonable.

[QueenCat]

Assessed value is generally not relevant.......... unless it's the mortgage company's assessment. Most people are referring to the tax assessor's assessment when they are talking about assessed value. Market value and comps are what really matter.

[Mama Geek]

Our area is funny - it's a small old town. A lot of houses have been updated here and there, but aren't thoroughly re-done. Some are old and crappy. Few are lovely - like the one we are considering. There isn't zoning to build new, so generally a person has to buy something that needs work and get it done. It is hard to know what is really comparable. Unless you have toured the property (which is hard to do after it has sold :) ). Our small town has prices about 10-15% higher than the surrounding areas.

 

We know of one that we thought was comparable to ours - but it sold for about $100k more than we think ours would go for. We toured one yesterday that is asking a similar price to what we are considering, and it was a dive. THe MLS photos looked nice. So yes, comps from a realtor would be really handy, but without touring it is a crapshoot.

 

We haven't had the mortgage crisis here like you did in the States. We also live in an area bound by land reserved for agriculture (our house is in that area now).

 

We know the family selling this house. I wish we could just sit down and have a conversation together about it... but we don't know how to do that, and there is a realtor in the middle already, so that won't work. So maybe we do need a realtor to talk to their realtor to know what % of asking price is reasonable.

 

If you know them, talk to them. The realtor is just mostly interested in getting the commission. If you guys came to an agreement you would just have their realtor write it up and if you didn't trust their realtor, have a second person, lawyer or realtor look it over.

[UrbanSue]

I don't know how it works in Canada but, in the States, the SELLER pays a commission to both the seller's and buyer's agents. Generally this is about 3% of the purchase price each. If this is the case where you are, and you aren't working with a realtor, you might mention this savings to the seller and use it as a negotiating tool. If it is legal to just come to an agreement with the seller and go straight to the lawyer to write up the contract, that is even more savings for the seller and that should be reflected in the price you pay for the house.

[Incognito]

Update for now:

We made an offer. We'll have to see what they think. We should know late tomorrow night if they accept it or have a counter offer (or outright reject it, but I don't think that will happen). I think there will be a counter offer.

 

UrbanSue - The seller has a contract with the realtor, so they really can't go around them. Also, they agree to the fee up front, so they pay the realtor the same thing they agreed to in the contract - they don't get a break, but the realtor does (doesn't have to split the commission). We agreed to use this realtor for this transaction (so we don't have a separate realtor).

 

 

Oh, and we did figure out a bit about the local market by some random websites (I wouldn't cite those sources for a research paper, but for our purposes they seemed adequate). It's apparently a Buyer's market, and houses seem to have sold between 90-95% of list price (and our offer is in there).

[Mama Geek]

You should still be able to get the realtor to agree to say 4% commission instead of the typical 6% that would be split between to realtors. We did this when we sold our house. It will save you some money if the realtor is agreeable.