Need advice about offer!!

[ezdriver]

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@MoreInfo1 wrote:

Hi all. First of all, I'd like to really thank the community for such great advice all the time. Anyway, I submitted an offer for a home recently and with advice from my agent, offered full asking price with minimal contingencies (regular stuff like contingent on getting the loan, etc) and asking seller to pay for 3.5% of closing costs. The offer price is for 190k.

After looking at properties similar to this home right on the same street (3 sold on the same street in past 3 months), I see that they have sold for 165k-176k. This home isn't upgraded or anything but appears to be move in ready with minimal work. My agent contacted me today letting me know that the sellers are going to come back with a counter offer asking for 195k in order to pay the 3.5% closing costs (also btw, this is the amount on the preapproval letter for a prior property I was interested in). Honestly, after seeing the other homes selling for much lower in the past couple months (the latest one was sold late 02/2014 for $165k, and the one that sold for 176k was almost 300 sq ft larger than this home, on a larger lot and has a pool), I really do not want to offer higher than what I've initially offered. I also don't think it'll appraise for much more than the 190k either.

Would it be normal for me to let my agent know that I won't budge on my offer? I had already been having second thoughts after I submitted the offer and am feeling kind of rushed now, especially as I've just started looking. Is this okay?

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Yes ... that is more than okay. You are the one buying the house and you are the one to tell your agent [who works for you] what your offering price is for any given property. Sounds like you are in a competitive housing market.

[MoreInfo1]

Thanks everyone. I just felt the agent would be annoyed. I have just started working with the agent a couple weeks ago and am unfamiliar with the process so I wanted to make sure it was okay. I had felt kind of pressured to make that initial offer anyway and although the housing market is scarce, I've only been looking for a little over two weeks and don't feel satisfied with the house in comparison to the cost so I will talk to the realtor again later. He told me he would be looking at the comps today too so I want to see what he says about a lower counter offer.

[MoreInfo1]

So I talked with my realtor again after he reviewed comps. He stated that offer I submitted was close to comps pulled. Based on sales, low is around $99/sq ft, avg is $117/sq ft and high is $130/sq ft. My offer was at $124/sq ft. The counter offer would bring it up to $127.50/ sqft. Since I'm not familiar with this stuff, I do want to also just say the high at $130/sqft is for a new build home finished at the end of last year, which is 10 years newer than this home. The low is for a home built in 1997 a few houses away with a bigger lot, pool and FHA financing. I'm doing a conventional loan with 5% down also if that makes any difference.

My initial offer was $190k, pest clearance, 3% closing costs (not the 3.5% I erroneously posted).

My agent says he thinks the seller's counter-offer is reasonable at $195k, agree to do pest clearance, agree to 3% closing and offered no other suggestions.

I asked the agent regarding whether it would be a good idea to counter-offer a lower purchase price (say $185k) and not have seller contribute to closing and he said he didn't think it would work because it's lower than what the sellers are asking for (no duh, but it's still higher than my first offer based on net). To be fair, the home has also only been on the market for a few days. I've also only been seriously looking for 16 days.

I can see where he might think the counter offer is reasonable because it would be lower than the high but I also don't think the home is much above average either. I really don't feel like I would be at a loss if I didn't get the home and most of all, I feel like the agent is advocating more for the sellers than for me when he's supposed to be looking out for my best interests...but then again, maybe it's just the market? I am aware it's a seller's market...

Would anyone have any further insight on this? I'm going to sleep on it but at this point, I'm also ready to look for a different agent even though I feel bad for the work he has done for me...

[ShanetheMortgageMan]

I don't like using price per square foot comparisons, and neither do appraisers.  Same size home, but with larger lot & better amenities will be at a higher price per square foot.  Good little blog article about using price per square foot at http://sacramentoappraisalblog.com/2010/10/13/is-price-per-square-foot-an-accurate-way-to-measure-th... & http://sacramentoappraisalblog.com/2013/03/13/the-danger-of-using-price-per-square-foot-to-determine... (there are other great blog articles on Ryan's site, you could spend hours reading them).

I feel the best way to compare is to find other homes of similar age, similar amenities, similar bed/bath count, similar square footage... and make adjustments on a comparison basis, such as below (FYI, this particular home appraised for $215k even though it was sold for $175k).

[BaileyMae]

I vote for new agent!

He doesn't seem to be advocating for you at all. My agent gave me a couple scenarios and ultimately I made the decision. You shouldn't feel rushed on such a big purchase. And you should feel like the agent is on your side. And you seem ok to walk away and to keep looking.

[irvinfitness]

Yes, do yourself a favor and walk away from the agent that you are working with. Contact a new agent and tell them you are interested in this home and have them evaluate comps and provide some insight. You can always submit an offer with the new agent based on their suggestions. 

(Tell your first agent that you refuse with no counter, so the selling agent doesn't tell your new agent that there are other offers on the table...haha) 

Good luck and don't be afraid to walk away from this house if you are not totally comfortable with the price. 

[tskstorm]

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@MoreInfo1 wrote:

So I talked with my realtor again after he reviewed comps. He stated that offer I submitted was close to comps pulled. Based on sales, low is around $99/sq ft, avg is $117/sq ft and high is $130/sq ft. My offer was at $124/sq ft. The counter offer would bring it up to $127.50/ sqft. Since I'm not familiar with this stuff, I do want to also just say the high at $130/sqft is for a new build home finished at the end of last year, which is 10 years newer than this home. The low is for a home built in 1997 a few houses away with a bigger lot, pool and FHA financing. I'm doing a conventional loan with 5% down also if that makes any difference.

My initial offer was $190k, pest clearance, 3% closing costs (not the 3.5% I erroneously posted).

My agent says he thinks the seller's counter-offer is reasonable at $195k, agree to do pest clearance, agree to 3% closing and offered no other suggestions.

I asked the agent regarding whether it would be a good idea to counter-offer a lower purchase price (say $185k) and not have seller contribute to closing and he said he didn't think it would work because it's lower than what the sellers are asking for (no duh, but it's still higher than my first offer based on net). To be fair, the home has also only been on the market for a few days. I've also only been seriously looking for 16 days.

I can see where he might think the counter offer is reasonable because it would be lower than the high but I also don't think the home is much above average either. I really don't feel like I would be at a loss if I didn't get the home and most of all, I feel like the agent is advocating more for the sellers than for me when he's supposed to be looking out for my best interests...but then again, maybe it's just the market? I am aware it's a seller's market...

Would anyone have any further insight on this? I'm going to sleep on it but at this point, I'm also ready to look for a different agent even though I feel bad for the work he has done for me...

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I'll be blunt. Based on what you are saying, your offer was too much, their counter offer is terrible. Don't hold on too tight to a specific home. If this is really the one you want, sometimes it wont always make the most financial sense, but you have to live with it either way.  

I suggest a strong counter, with the intention of walking away if not met. Something along the lines of 192K, 4% closing costs, pest  clearance, This would get you to about 120$/sqft and I might eveb add in any other minor things you might want to add in such as a cash consession to get the locks changed, a home warranty, or even a mortgage buy down. I would also put a deadline on the offer of 24hours.

You NEED a new AGENT this one doesn't deserve you.

[MoreInfo1]

I decided to withdraw the offer. When I asked regarding higher purchase price and 4% seller costs, my agent basically said it wasn't going to work because sellers NEVER pay more than 3% (although I've read they could up to 6% or something like that).

I don't see that I've signed an agreement with the agent but I did sign papers for the offer to include disclosure for representation more than one buyer/seller, market advisory, disclsure of real estate agency relationship and the purchase agreement/escrow instructions.

I've read through all the paperwork but don't see anything regarding me and agent or how long, etc I'd have to be with the agent. I was wondering if there was a specific way I'd have to let the agent know I no longer want to work with him. He's not with an agency either. Is it okay to email? I feel bad but I don't want to drag this on either like this. The agent's shown me three houses I found and asked him to show in a two week period- would I compensate him for this as well? Thanks everyone!

[ezdriver]

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@MoreInfo1 wrote:

I decided to withdraw the offer. When I asked regarding higher purchase price and 4% seller costs, my agent basically said it wasn't going to work because sellers NEVER pay more than 3% (although I've read they could up to 6% or something like that).

I don't see that I've signed an agreement with the agent but I did sign papers for the offer to include disclosure for representation more than one buyer/seller, market advisory, disclsure of real estate agency relationship and the purchase agreement/escrow instructions.

I've read through all the paperwork but don't see anything regarding me and agent or how long, etc I'd have to be with the agent. I was wondering if there was a specific way I'd have to let the agent know I no longer want to work with him. He's not with an agency either. Is it okay to email? I feel bad but I don't want to drag this on either like this. The agent's shown me three houses I found and asked him to show in a two week period- would I compensate him for this as well? Thanks everyone!

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You do not owe any money to the agent. Just thank him for his efforts and tell him that you no longer want him to represent you in any future transactions. Done and done!

[JustJen]

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@MoreInfo1 wrote:

I decided to withdraw the offer. When I asked regarding higher purchase price and 4% seller costs, my agent basically said it wasn't going to work because sellers NEVER pay more than 3% (although I've read they could up to 6% or something like that).

I don't see that I've signed an agreement with the agent but I did sign papers for the offer to include disclosure for representation more than one buyer/seller, market advisory, disclsure of real estate agency relationship and the purchase agreement/escrow instructions.

I've read through all the paperwork but don't see anything regarding me and agent or how long, etc I'd have to be with the agent. I was wondering if there was a specific way I'd have to let the agent know I no longer want to work with him. He's not with an agency either. Is it okay to email? I feel bad but I don't want to drag this on either like this. The agent's shown me three houses I found and asked him to show in a two week period- would I compensate him for this as well? Thanks everyone!

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Whenever I put in my offer I signed pretty much the same type of documents you described. However, mine did include a paragraph stating that I agree to work with said agent for a specific duration of time. If yours doesn't say that anywhere then I would think you should be free to move on!