Properties do not always sell for the true market value. Some sellers,
and some buyers, are desperate and will take or make any offer.
In my town, the realtors do a pretty good job of setting an asking price
that will draw buyers, but will often tell you in advance that you
should accept a slightly lower offer, if it is credible, if you want a
prompt sale. Properties that are on the market too long get a
reputation of being overpriced, and draw fewer offers.
We have an aspiring slumlord in town who has his realtor bid 50 percent
of the asking price immediately when any property comes on the market.
A seller's realtor should advise the seller to reject that offer, but is
ethically bound to allow it to be presented. I am sure most people just
laugh at these offers, but I am also sure that once in a while it works,
or he wouldn't be doing it. A seller could, probably for emotional or
intellectual reasons, find a 50% cash offer, presented immediately,
I think the gentleman who said you cannot lose money by overbidding
exaggerated. Recently, in some markets, values have been appreciating
so rapidly that overbidding may not hurt you. But the news lately has
been full of predictions that the housing bubble will soon burst, and
sales have actually decreased very recently. If you overbid, and prices
do not continue to increase, you will certainly lose money. A case in
point: a home in our town sold a couple of years ago for far more than
similar properties, because the couple just had to have that house.
Soon the husband lost his job and had to relocate to the Dakotas; his
wife had to leave her lucrative local job to follow him and the kids.
Their house was on the market for six months at a high asking prices,
but drew few offers, none of which would have allowed them to pay off
their mortgage, and pay closing costs, including a realtor's fee. They
then decided to rent it to friends, but eventually the friends moved
out. So I think it is fair to say that they lost money by overbidding;
they just don't yet know how much they lost.
I would suggest a rule of thumb would be to check recent sales prices
for similar properties. Adjust that for any special circumstances (need
for repairs, exceptionally good condition, changes in the local economy,
etc.) and come up with a fair price, and offer just below that, being
ready to improve your offer depending on the response. If no realtors
are involved, offer to split the savings with the seller.
An unspoken premise of many conversations about house prices is that if
homes are appreciating quickly, the market value of the house will
catch up quickly to the high price you paid, so you won't lose money on
the house. Be careful with this one. The right way to think about
paying for a house is "how much do I have to pay to beat out the next
guy?" If you pay more than this, you're losing money on the purchase.
Whether the market value of the house catches up with your purchase
price doesn't matter.
The money you spent above what you had to pay (to beat the next highest
bidder) would have been in your pocket. You could invest it and be
making a return on it or (more likely) spend it on furnishing the
house. Determining the minimum price you need to pay is a very
difficult task, but the point is you should not take that task less
seriously simply because prices are rising rapidly.
A final note (a little OT): don't judge whether there is a "bubble" in
the market based on how many stories appear in the papers and on TV and
on newsgroups, blogs, etc. Judge whether there is a bubble based on
whether you believe a specific argument someone is making on this
point. Repetition does not make something true. A good place to start
is "Assessing High House Prices: Bubbles, Fundamentals, and
Misperceptions", by Himmelberg, Mayer, and Sinai, Journal of Economic
Perspectives vol. 19 no. 4, Fall 2005, available in any decent
university library. Their bottom line is that there is little evidence
of a bubble.
this is dumb as shit
you get in there and rip their guts out
if they sell it for a dollar then fuckem
send them a postcard
listen at you!
"if I ask to little money, they might not like me and won't deal with
if you're trying to rob equity from some young working couple that hits
on hard times then that's on your conscience...
if you don't wanna pay alot of money for a house, then buy a fixer
have the repairs done and double your investment
they are not making anymore land, get it while you can
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