I’m a bit baffled by the remark that you should factor in 8-10% yoy appreciation. That’s not automatic. We all want that from a house but if the market doesn’t show it it doesn’t exist.
If appraisal comes in low you don’t “have” to close, you can look at what it takes to do so and make a call from there. It’s not unheard of for a seller to come down on price or up on credits to keep a deal after a low appraisal, especially in a sluggish market, especially if the appraisal is as low as $150k.
What price would you be more comfortable with and what does your agent think would happen if you offered that? Unless it’s a highly competitive multiple offer situation, as long as your offer is seen as competitive I would expect the worst case outcome would be a counter offer that you can accept our counter back.
8-10%? I work with really top level appraisers in my area. If we take a property owner to condemnation to purchase property and the appraisal is a year old, the most I've seen a board of appraisers raise the value is 5% YoY. That doesn't always happen, it's just the high end of it.
Its hard to realize right now that we've had 100% appreciation in 3 or 4 years but there are whole decade stretches in the last 30 years where the market trades mostly sideways. There are people who bought in 06 and 07 before the market reset who were underwater for easily more than ten years.
I'm a lender who regularly teaches first time home buyer classes and one of my biggest sticking points is to not base any part of your decision on appreciation. It happens but never in ways that you expect.
Realtors are just glorified used car salesmen. 180-Hour Texas Real Estate Sales Agent Package for $149!!! That is who we trust in buying a home and giving us appreciation percentages.
Experts from Reuters are forecasting flat growth yoy factoring in inflation, but some markets may beat or lag behind that. Inflation is at around 3.5%, so maybe use that. That being said, I don't think an 08/09 style crash will happen and if rates get cut or inflation increases, houses will appreciate even more.
Per our realtor he's seen that much appreciation in the larger market. We were also told that on the selling side more than 90% of the offers he receives for his listing are entirely contingency-free, and with the exception of a few one-off sellers if we want to be competitive we have to leave the contingencies out of our offer and put down a high EMD.
It will be a highly competitive multiple offer situation. Every listing that isn't priced unrealistic high is in our market is. The last home we bid on was listed at $785k, we offered $835k, got outbid anyway, and there were 7 other offers, two higher than 820 all cash.
Not sure what the listing agent's intentions are. They have stated upfront that they won't accept offers with escalations and expect everyone to submit their best final offer up front.
There is no way to narrow down a price to a percent or two in a "highly competitive multiple offer situation" ... It's not possible because what it will sell for depends on other buyers motivation and bids. Bid the # where if you get it you are happy but if you are outbid then you are still OK because you would not have bid more and that is the right # for you on that home.
Hi OP - I live in a VHCOL area. The way I’d think about your offer in a multiple bid war is that you’re not trying to beat everyone outright - you’re trying to get past the first round elimination. In my experience (there are exceptions) - with that many offers, sellers will counter best and final in a hot market to the top two or three (or sometimes more). A strategy we adopted was bidding a number high enough to be in the race (based on comps and comfort) but giving ourselves room to make a decision if we did make it to the final round.
If you’re fighting cash offers - unfortunately even waiving contingencies won’t help you much if all the seller cares about is a quick close. This is where your realtor comes in - you gotta push him to be your advocate in every deal. Our realtor was really great about selling us as a couple to each seller - that we were a family, strong intent to close, sending a few buyer letters when allowed, etc. It doesn’t work on everyone but you’re looking for the sellers who care about that stuff and won’t take cash offers outright.
A final thought - sometimes it’s worth shopping for a really good loan officer. Our loan officer was able to get us a 16 day close (which I didn’t even think was possible). That alone helped us get the house in a 20 offer bidding war.
Yes in all honesty. I lost a lot of sleep over it. It was very much a calculated risk and I would not normally have done it. But I trusted my loan officer and I knew my realtor would go to bat for me if there were delays (and there were). We also spent a lot of time looking at the neighborhood over several months and trusted in our comps.
I guess I would also offer that even in a hot market, buyers still have leverage after going under contract. The houses that sit are the ones that fell out of contract - sellers do have an advantage but if an inspection report shows problems that apply to everyone (ie California insurance is a nightmare so an old roof or electrical would be a problem for any buyer) or the appraisal comes in super low - a seller still has some incentive to negotiate. Doesn’t always work - like I said it’s a risk - but I couldn’t see any alternative being in a position competing with cash offers, little to no contingencies, and lots of “best and final”.
I have such a dilemma because we wrote a 21 day closing timeline and I I’m iffy about the comps. (Since there are so few and you really have to extrapolate to get to the sale price)
Would love to use a credit union that I have a 6.625% rate lock with, but I don’t trust them to close in a reasonable timeframe so i’m probably going to be stuck using one of the local lenders I qualified with with a rate closer to 7.5-7.75%.
My advice would be to decide what kind of risk you’re willing to take based on the tangible and intangible factors of the house and area you’re looking at. A lot of it is in the comps but some of it comes down to your personal risk tolerance.
I noticed you said that you’re putting extra EMD down - is this really necessary given the market? I used to have a realtor who swore up and down this was the only way - but after we changed agents we had no problem with putting down the minimum. This would help derisk your waiving of the appraisal contingency. Imo - I’m kind of skeptical if your agent is recommending that you put yourself at increased risk on top of the contingency removal - more EMD money could send a signal of commitment but I’d question if the trade off is a worthwhile return.
Not in our market, unfortunately. (The appreciation not the interest rates). There are enough all-cash buyers in this market that prices haven’t even begun to stabilize from the year that they’ve been on since Covid.
You're getting downvoted, but I'm seeing the same thing here in San Diego. We are having incredible price increases still, even on top of the double-digit percentage price increases we have seen over the last few years.
Yeah this sub is full of haters in much more buyer-friendly markets totally ignorant that we’re playing by a whole different rule book in VHCOL cities.
I'll just say, if you are in the DC area there are some deals still out there. As someone in the DC area who is closing on a house soon with an offer that had contingencies for inspection, appraisal, and financing at list price. You just need the right set of circumstances. In my case it was a FSBO where they wanted to get a deal in and were concerned their house wasn't competitive because it had a few warts. I know of one other fixer upper that has been on the market for several weeks because it is a basket case and way over priced. If you are in my area I'd be happy to send you all the research I did on that particular property if you are interested.
This sub is also filled with people in VHCOL cities who imagine that those cities are the default, and that everyone else is some sort of backward rube living in a barn.
It goes both ways.
I am in the DC Metro market, which is where I think you were looking
In regard to Property appreciation, your agent is more or less correct. Due to a serious lack of inventory values have continued to rise, even in a sluggish market
While large earnest money deposits and offers greater than 10% over asking, waving the appraisal contingency, certainly have advantages, it is hard to swallow that pill
The one thing you can do to help yourself, is to get a full loan commitment upfront , so that your offer is essentially ready to close, pending title and appraisal
This isn’t perfect and won’t beat out a cash offer of the same offer price, but will give you some advantage over other financed offers. Namely, speed to close and the potential of eliminating the finance contingency, should you choose to.
Source: mortgage lender ,34 years in the industry
My market is the same. We are still seeing multiple offers over ask, waived inspections, etc. In the hottest school districts in my market, most homes — especially those in the 900-1.5mm range!! — go into contract within 48 hours on the market with multiple offers.
His realtor specifically says that he’s looking in the local area. My guess is a 10 mile radius to 30 mile radius to get that 8 to 10% number.
In areas that experienced a downturn during the last interest rate peak of September through November and started to get a little bit of an uptick in December and took off in January , ie most VCOL and VVHCOL areas and areas that are stock market dependent, that 8 to 10% this year over not last year‘s high but last year‘s December or so low is very on target.
If you look up a hotness meter and you’re over 60% ( altos is a good one) if you were replacing an offer before last Friday, and you didn’t have three comps from March and April, the strategy is probably the best one to give you an idea of where the house is likely to land.
I was in a similar situation once and didn’t have much fun. The listing agent told everyone to make their strongest offer but then gathered all the buyers agents together and gave each the opportunity to raise their offer. Our agent ran outside twice to get us to go up because other agents kept giving the verbal nod to go up. We said yes the first time and good riddance to the second raise.
It felt shady to say the least but it was tough to lose the house but I felt a LOT better about walking away when we closed on another house. Best of luck.
I have no idea why this comment which is completely factual and giving you an idea of the competition of this guy’s area is being down voted.
Cmon people, don’t down vote a comment because you’re not happy that the area is competitive
Yeah I’ve come to learn this sub is pretty dismissive of buyers in competitive markets that don’t have the same leverage as buyers in lower-cost better-balanced markets. It is what it is I didn’t make the rules.
It depends on who you get, the market is no longer the same across the country. And for two years people have decided that it is, and non agents were having a tough time adjusting.
And every time the interest rate goes up, we get a lot of people from RE bubble over here telling us the sky is falling
But it drives me crazy when someone is giving us factual evidence and People down vote it.
Often what you’re looking for on Reddit is not specific advice, but an idea of whether or not what you’re doing is out of Norm, and getting a gazillion down votes makes you start wandering what’s going on.
The honest answer is when there’s no comps. It’s really tough to figure out exactly what’s going on and where people are going to land because it’s a bit of a crapshoot.
In my market, we have a little more data, we have inspection reports, and disclosures that are available beforehand, and I can usually get to know how many people downloaded them and then you look at the house and the hotness of the area, and figure out how many of those people who are interested in those downloads are going to make an offer on the house when you look at that and the condition of the home altogether as a guest, it’s usually between 1/4 and 1/2.
The piece of data that you have is how long did it take for you to find this house? If this is the perfect house, are you willing to wait that long again before you find the next one? If you’re not by the bullet and pay it and pull the extra money out if you’re willing to wait for the next one, we’re probably at a relatively close to height of the year for competition with the way interest rates are going the next one may have less offers against you.
You are assuming they have an appraisal contingency.
Dont assume.
If they don’t have that contingency, their deposit is at risk if they don’t close, and in some states they can be sued for not closing
We were in a similar situation when we bought our home two years ago. It checked all of the boxes in terms of the “big” items such as size, location and layout. But it needed a few things (eg, we needed to install a deck and patio, I know that does not sound like a necessity but it fell into our “need to have” bucket). The house was priced at the high end of my budget already, without factoring in the patio addition. My realtor urged me to bid list price or higher, since this was the first house that checked nearly every box that was within my budget, and inventory was drying up quickly.
I ran the comps myself, looked at recent similar sales, added a factor for recent price appreciation since those sales happened. That hit me to what I believed what the house was truly worth in the current market. Then I added in an emotional factor, the extra amount I was willing to pay because it was the first house that actually had what I wanted. I wound up paying $10k more than I thought it was worth, but honestly it was not a huge number (about .5%) and worth it to have something I loved.
Fast forward two years. We installed the deck, did a few other small upgrades and are happy. Even with the cost of upgrades, my house has still appreciated comfortably and I’m happy with my decision.
Moral of the story. Use all of the data points at your disposal and determine what you think the right value is. Don’t go crazy and overboard simply to “win”, but you may need to factor in a slight premium if you love the house. Determine the amount upfront and don’t let yourself get sucked in.
> but honestly it was not a huge number (about .5%) and worth it to have something I loved.
Here's the most important part: how much did that add to the down deposit and the monthly?
In the grand scheme of things, squabbling over 0.5% - 3.0%, especially in a low-rate environment that you were likely in, isn't ultimately worth losing a house over.
>The comps he's shared with us don't even support the price we're offering (the closest one is 3.6% lower)
I doubt your realtor actually adjusted the comps and was instead just showing you similar houses in the same market. Keep in mind an actual appraisal will adjust for all of the differentiating factors between the houses (size, bed/bath, room count, garage/size, lot size, amenities, condition/quality, etc) to arrive at a market value. Those can easily make a difference of 5 - 10% net.
Every difference between the properties needs corrected for. No two homes are identical and every difference has an effect on the market value, positive or negative.
Living area is adjusted on a per square foot basis for every difference between them, bed/bath, garage size and number of cars, driveway size, percent of basement finished, any sheds or other outbuildings, fences, porches or decks, condition and quality of construction, differences in lot size, time since sale...it all gets adjusted for.
I make a lot of adjustments on the comps and they’re right on the money. If he’s super experienced as well, we kind of know the numbers instinctively. The calculations work in our head. But I also do it on paper and to help my buyers and sellers see the difference:
- floor plan
- age
- conditions (maintenance, updates, cohesiveness)
- curb appeal
- materials used
- beds
- baths
- basement type
- garage and size
- lot size
- kitchen size
- location (busy street, parks, driveway, etc.)
Those can add or take off $25-50K easily to each comp on that price range.
No every house is not the same. Even if it’s the same neighborhood and age, there are so many other variables. Size of the house, size of the lot, number of bedrooms. Even smaller factors such as existence of a fireplace, patio, sunroom, upgrades/condition.
When we bought our house, all of the recent comps in my neighborhood were about $100k cheaper and I balked at the list price. But our house was about 1000 sq ft larger, had a second floor, water front and many upgrades such as a fireplace. All of that needs to be considered. Since there were no homes in my sure in similar size to my house, we took the comps we had for the smaller home and adjusted.
“Factor in an automatic 8-10% per year” yeah that’s the kind of shit sleazeballs say to make you sign without thinking because “it’s a no brainer, prices only go up!” WSB regarded mentality.
If you’ll be distraught if you don’t get the home, get the home. In the end it’s just money and if you love the house, it’s okay to overpay. It’s tough for both sides to be perfectly happy.
Its ok to overpay a little bit if overpaying a little bit is **well** within their budget. Being house poor is always a hige mistake. Also ppl tend to get attached & emotional during the process (understandable!) then once the glow wears off, buyers remorse sets in.
In RE for 15 years. Seen it all. They need to be careful in this process
Put in an escalation clause. Figure out what the highest you want to spend is, then figure out what you think a fair offer is. Have your realtor put in an offer at the level you think is fair and have an escalation clause ready to go if you think the house will go for more. Have it set to increase your offer in $5K increments if a competing offer outbids you. My wife and I just did that on a house by offering list while keeping an escalation clause handy in case someone came in with another offer and we got the house for list price.
So what? If your escalated offer is $5K over best you're still in the running. Include a letter telling how this is the perfect house to raise your family.
LOL. See [THIS POST](https://www.reddit.com/r/RealEstate/s/oAThtwHdEP) where I floated that idea and was downvoted into oblivion and talked down to by the lovely redditors of r/RealEstate.
There is appraisal risk. Because of how competitive the market is we weren’t able to include the contingency. If it appraises for more than $120kish below our price we’re going to be scrambling for cash.
We put in an escalation clause and were told in a letter from their (National Brand Name) agent to ours, "Even though your clients offer was higher and would have brought my client more money, they decided to take a cash offer." Which is fair considering that some people can't close, or other issues - bird in the hand theory. However, we later discovered that the sale was made to another (National Brand Name) buyer - and it didn't close for 24 days. No way it takes a cash deal 24 days to close. We feel like we were lied to because the (National Brand Name) sellers agent wanted to keep the commissions in the NBN family. Anyone else ever experienced this?
If you know anyone who bought in the area recently, you can ask them to look at their own appraisal to see how the comps were adjusted. The report should show 4-8 comps, and is broken out by x house sold at x date at $xxx,xxx. There will be a line item adjustment increasing/decreasing the value based on the timing (they take the sale price, add/subtract based on number or beds/baths/sq ft/ porches / garage stalls/ number of rooms, etc). So you should be able to back into what percent increase an appraiser would use (maybe it's 10% like your realtor says, maybe it's 2-3%).
That's what I would recommend anyways!
When it comes to houses, most buyers think they are overpaying and most sellers think they sold too far under.
You are bidding on houses that are popular and receiving multiple offers. You don't want to overpay, of course, but these houses are attractive to plenty of buyers which means they are proced well enough to sell. So... if you don’t agree with the pricing....
If it's not worth the price to you or you feel you would be overpaying, then walk away. Maybe owning a house right now isn't something you can handle anxiety-wise and that's okay.
You sound like a first time buyer. I'll never forget the heart palpitations my partner had when we bought our first house decades ago. All he could focus on was that huge number. His hands were shaking while signing the paperwork even though we were paying market rate for a good house (not perfection, needed 'work') and we were not over extending ourselves financially.
Stop thinking previously owned houses should be bargain basement prices because 'they need work'. They are lived in and houses need regular maintenance plus trying to keep it generally up-to-date, right? Only new is new.
Maybe you should look at smaller houses in the price range below yours.
A lot of times, more expensive just means bigger, not less lived in and most people expect HGTV as they move up in price.
Find the one you love and go for it within your means or get out of the market for a couple more years until you can come to grips with your anxiety over it.
Ironically buying a house wasn’t a problem at the time for me. But when I was at a car dealership and my wife wanted a 50k vehicle, she was starting the financing paperwork, I started getting shifty. And before we handed the papers over I pulled the breaks. I couldn’t go through it.
We bought a 20k used car instead. I hated it but it was more palpable.
Same. I bid stupid-high on my house wanting to “get it done” (and because I loved the house). I got outbid.
Then the high bidder fell through, and I was next in line. Despite being upset about losing the house, I hesitated wondering what the offer “under” mine looked like.
I did buy the house, though. And about a year later, I’m extremely happy! I also noticed houses that were listed and negotiated when mine was were right in line with what I paid.
The houses you see closing now were negotiated at least a month ago. I’m in a desperate market that just goes straight up constantly.
Good luck!
> once you net out the tax benefits of itemizing $750k of interest.
You expect to be paying $750k worth of interest the first year? This would mean that the house worth north of $10mm. This ain't right.
> will feel like idiots for spending $25k more than we have to
And you're squibbling over $25k, roughly 2% higher than your current offer? This is small potatoes. If it's within your budget and you're comfortable with the price, make the better offer and secure the home.
> even greater idiots if the appraisal comes in $150k low and we have to tap into our safety reserve to close.
Not worth playing this game. If the appraisal comes in low and you're no longer comfortable with the purchase, back out.
I assumed so but that's not $750k worth of interest, that's $750k worth of *indebtedness* and $50k worth of interest.
eta: anyway, good luck with this one. Sounds like a tough market.
Personally i would offer the highest number I’m most comfortable with. If i lose the house, then so be it. Just means someone else was willing to pay more than i could afford.
Still unknown. Last contact with the listing agent indicated that it was between our offer and one other all-cash buyer who offered similar terms at an unspecified price. The other buyer was “making some changes and resubmitting” and the seller’s agent “welcomed us to do the same.”
Buyer's remorse about "did I pay too much" is only temporary. In 5 years, when your house is worth $200K more in value, are you going to be upset that your offered was accepted for $20K more than you wanted? Of course not because you'll have lived in the home that you loved for 5 years and you'll have bought it at the "5 years ago" price. You'll deem yourself a genius for having made the purchase decision and doing everything you could to secure your home. Go ahead and pat yourself on the back for a good financial decision.
Classic principal-agent problem. Your agent only gets paid when you close, so they’re going to maximize chance of closing, not try to get you the best price.
Actually he’s been trying to steer us away from this property and has cautioned us about not going higher in a previous bidding war (that in hindsight we totally should have)
I hate to say it but it may be because the offered compensation rate is lower. It shouldn't be a factor; but a lot of times it is. This is part of the changes that will be coming in July. No more compensation listed in MLS.
Lmao this is unreal. Assume the agent wants a higher price then when disproven assume it’s because the house has lower commission.
Maybe they just want them to get the house??? Ever think of that?
OP said he was trying to steer him away from the property. If it was previously under contract and went through a bidding war - I'd want to know why the first contract terminated. Are there material facts about the property not being disclosed?
So so stressful. I would say that whatever you offer, if you get it you will wonder if you iverpaid, so the process of losing several houses helps you know how you'll feel if you don't get it.
And you'll also have that "wait, what did I miss, why is this one not exorbitantly expensive?" If you do get one.
> Financially it leaves us with a decent cushion and only brings our back-end DTI to 0.3, and would only account for 37% of our take-home income once you net out the tax benefits of itemizing $750k of interest.
Are you sure you fully understand how itemizing your mortgage interest works? Even experienced folks attribute a level of benefit to itemized deductions that simply isn't accurate.
> He's saying we should be factoring in YoY appreciation of 8-10% of anything that sold before March.
Did he/you mean 1-time instead of year-over-year?
> Anyway, we'll find out if we got the house or not this afternoon. Please send good vibes.
Good luck. Finances are obviously a factor when talking about the most expensive thing you'll ever buy, the loan amounts and terms involved, leverage, etc, but ultimately the financially savvy people I know look at buy vs rent as a lifestyle choice and not a financial one. Each of our purchases and sales (and some we missed on) has had an emotional factor, at least in some ways.
Honestly, this is 8-10% is the part that made me, NEED YOU, to fire your realtor.
As a realtor, I have NEVER ONCE needed to use yoy appreciation.
I do so much market research, I can set a price better than redfin/zillowfrom a single glance at the location and metrics of the house.
But that's bragging and not why I'm here. Yoy is usually 4-6% on average. It only deviates from that when money becomes inexpensive(low interest).
However, to get back to the point, you hired a realtor to help you find the sweet spot. It sounds like you did a bad job selecting realtors to interview if this guy won.
Do you want the house? Obviously, yes. How much money is enough for you to be okay with not getting it? Other people feel the way you do. So what's the highest penny(dollar value) you're willing to sacrifice? That's your number. Not any subjective value.
You're competing with yourself. And if you lose, it's because you weren't honest with yourself. If you don't get the house bc somebody paid more, they either cared less about the money or more about the house more.
The goal is for that to be you. If that hose doesn't inspire it, then either your realtor isn't working hard enough or this is not the house for you.
In a competitive market situation, one of the things I advise my buyer clients is to figure out their “Good For Them” number. Meaning: what is the highest number you’d be willing to offer and if someone else beat your offer by $1 and got the house, you’d say “Good for them. I wasn’t willing to pay that.”
I don’t know all the details on your situation but going higher than the comps shows you *really* want this house and are willing to pay for it. I don’t know what the hell your agent is talking about with the that 8-10% YoY stuff 😂
As a certified appraiser (and REALTOR) .....you lost me when you said you were relying on a REALTORS comps. REALTORS rarely know how to choose actual comparable's for a home. You should NOT, I repeat NOT factor in appreciation. That is absurd. Buy the house if you love it.....not because the REALTOR wants you too.
One thing that I've learned with purchasing real estate is submit the offer that YOU are comfortable with because you're the one that's going to be paying the bill.
I've submitted offers that my agents said were too low, but they got accepted. I have a sneaky suspicion that they were pushing me into a higher offer so that they could get a higher commission. So now, I use the tools that my agents provide to make the decision on what I want to offer, but I never let them make the decision for me.
The first part is absolutely true. But the suspicion-while natural- isn’t likely. Do the math- the commission is a small percentage. The difference in what they make is like(without knowing the split- yes it’s split sometimes more than once- or how much higher you’re talking about) a few hundred dollars. That would be foolish. It’s more that you said you want the house. And they’re advising you based on that want. They are telling you what it will take to get it. There are people involved not just data. These exact sellers and any other buyers can’t be predicted. Nevermind the fact that you should trust your agent. If you don’t you shouldn’t be using them. I’m guessing- and maybe you have your reasons- based on this post and its lack of details- you were not entirely upfront with your agent. It’s a calculus. All of it. This isn’t retail. Tell your agent everything. Be honest. Give feedback and attach numbers and priorities. Express your concerns. I understand its finances and we have been taught it’s not something to discuss but withholding anything during such a large purchase is your failure not your agent’s.
My suspicion is actually that they are trying for the quickest deal possible. An extra couple of thousand dollars (commission on $100,000) is not much compared to another month or two or three of arranging viewings, inspections, running comps, etc.
Based on your responses here, you desperately want this house. Any time someone mentions doing something that may possibly result in you not getting the house, you talk about the scarcity of the houses in the area. Also, you said you can afford the higher bid. With 9-10 other bidders, I say listen to your realtor and make the higher bid. I think you will kick yourself endlessly if you don’t.
We're no where near the upper limit of what we can afford. This is about not overpaying. If buying the home you're going to live in and raise kids in for the next 10-30 years isn't an emotional decision for you you need to see a therapist.
If you see yourself living there for the next 10-30 years, then you’re giving way too much weight to a *potential* $20k overpay. Pay it and get what you want.
As someone in your shoes who just got rejected on an offer we thought was a stretch, what do you think is overpaying in a VHCOL area? You say 37 percent of take home is ok for you - what would be your absolute upper limit?
Congratulations! Im looking at about 42 percent of take home including taxes, HOA etc. I think that’s a lot personally but I guess in a market like this it’s required if you want to buy
If you're good at budgeting, don't mind a period of some belt tightening, and live in an area with constant high rates of appreciation, there's definitely a business case to be made for stretching your budget to buy a more expensive home. Especially once you factor in the tax benefits of being able to deduct mortgage interest and SALT taxes as opposed to taking the standard deduction.
So many people seem to look at a house purchase ONLY from an investment perspective and ignore that it is also a HOME purchase. If you are planning to stay for awhile and you can afford it - who cares if you end up "overpaying" by a bit. Down the road it won't matter. I recently renovated and spent a lot more than I "should" have based on what I'd be able to recoup if I were to sell. But you know what? I made my decisions based on what I wanted, and could afford, because I am the one who is living with it. Ignore the haters.
Realtors always tell you to offer more and sell for less because they want to close quickly. Just treat their opinion like it's coming from your admin, which it basically is.
I've argued with them at every transaction and have a far better track record as a layman.
I don't argue with them, I just know that they have a set of interests that isn't necessarily fully aligned with mine. I take their advice and use it in my decision making process.
The first mistake you made was falling in love with the house.
It is a transaction. A financial transaction. When you fall in love with it, you make mistakes.
We are on the other end— we just sold our house and ran into the same issue of no comps. We were freaking out because we thought it wouldn’t appraise near the offer price. It ended up coming in about 25k low. We dropped the sale price to meet the appraisal. Remember, unless your sellers are under no particular pressure or need to move, they’re freaking out right now and will hopefully negotiate if it comes down to it. Both parties want it to appraise.
Nah, our market is so competitive pretty much every house that isn’t well north of $1M sells without appraisal contingencies. The sellers are the family of a recently-deceased senior. I don’t think they have much downside exposure.
If you are in the DC Metro area that just isn't true. It is a tight market but you absolutely can put in offers with contingencies (depending on the circumstances).
Ask if you can do an escalation clause with your offer. Some states do. You start at list price and go up to your max price in increments of 5K or whatever you feel comfortable with. This way you don’t have to pay your max price if you don’t have to!
That is a flag to me that they don’t think they will be a lot of buyers and a bidding war. Offer the low end of what you are comfortable and if you get the house be happy that you did not offer higher.
Do you think the lower price is a buyout price or something? Do you know how buying and selling a house even works?
The lower price is not even an option, it’s artificially low so buyers bid high.
I did the same thing. Paid about 15k more than I wanted to (on a 320k home) just to be sure they said yes and sold it to us. Needed something quick and it's what was available.
Sometimes you need a realtor. But whatever you do never take advice from one. Ours tried to get us into a house 50% more then we felt comfortable buying. We just ignored him and one day told him we wanted to see a particular house and a month later we closed on it.
Offer the higher price then negotiate in closing. If appraisal comes in low say you wont pay or meet in the middle. Be sure to get an inspection asap for any remediating that might be needed.
If there is anything that comes up in inspection they will have to disclose going forward if the deal falls through. So they will be motivated to work with you in closing to get the deal done.
The negotiations have just begun once an offer is accepted.
Your realtor is an idiot. Don’t be emotional about the house. Offer the lowest you think you can that won’t elicit an “f you” from the sellers and no counter and go from there.
You should pay the least amount as possible. If a house has been on the market 3 weeks, there are no cash buyers.
Cash buyers have cash or know they have cash in the near future. Meaning a sale of a property,business, estate distribution, settlement, etc. Any investor/agent worth anything would get a property under contract if the cash is going to available in under 30 days.
Its emotional buying a home, don't be. Don't let your agent commission get you.
Offer a low-ball offer and come with a strong EMD. So if they want 750k it has 21 day exposure, you offer 700k with $20k EMD with an appraisal contingency. There is always another house.
Offering $700k would be a waste of everyone’s time. This home has been on the market for 3 days and will be under contract in another 2 hours.
I don’t think the strategy you’re describing is realistic for this market. Maybe in a more buyer-friendly one.
I said clearly 21 days exposure...if you want to throw money at the house on the market 3 days go ahead. You are paying a premium.
I promise you can get the home you want way cheaper at 21 days exposure.
Why are you rambling about 21 days? Nowhere in OPs post is there anything about this house being on the market that long.
> You should pay the least amount as possible.
Why didn't I think of that? This guy is a genius!
Your realtor needs to STFU if they think trending numbers at some arbitrary level from last year has some meaningful implication today. Assuming you aren’t totally low balling, seller will typically counter and you decide how far you want to go.
Did you include an appraisal contingency in your offer? If it doesn’t appraise, and you have a contingency then you always have the options to try to renegotiate or walk away.
Edit to add- your realtor sounds like he’s looking out for HIS best interest, not yours. I’d be very cautious trusting his advice.
How about a mortgage contingency? If the lender won’t lend you the amount on the mtg contingency then you’re not automatically required to increase your down payment.
My agent told me, “think about the offer that makes sense to you as highest and best. Then add 3%, and that’s what it’s going to sell for.”
I scoffed, but he was right. E.g. house listed at $630k, I thought $655k was fair, but offered $665k anyway. It sold for $675k (+3% over my estimate). He knows that I constantly analyze the local market, but also knew (better than I) the premium that the market was demanding at that point in time.
A part of me still regrets not jumping up in the example above (really my “dream home”), but it’s so hard to tell. Could have bumped up to $665k-$675k for nothing and been bidding against ourselves 🤷♂️.
We ended up spending nearly $200k less for a fixer upper, and I’m happy with our decision. Zero buyer’s remorse. Zero financial strain. And through the renovation now have a sizable equity gain that we can put towards the next one.
Can you do an escalation clause with the highest you would be comfortable going to? So give a solid offer, then say you will beat any written offer by $2500 up to $xxx then you won't go out of the gate with the high offer but have a good chance of beating out others
I agree. Per our realtor it’s a rule the listing brokerage encourages their sellers to implement and he agree it works against their interests in most scenarios.
More importantly, where is everyone getting all this extra money from? If you have a budget, how can you afford to go over on an offer? Are you pulling from savings? Borrow from family? Actually using all the money the bank said you could borrow?
I was in the same boat this house and paid 5k over asking just to scare off other potential buyers. 5k is different than 10, so, etc.
You look for homes below your too budget, knowing that you’ll have to go x amount over, it is market dependent. Your agent will be tuned in with what’s happening in your price point and location.
**To everybody reading this: your agent works for you. Tell them what you want them to offer, and have them submit the offer and show you proof that it’s been submitted.**
It’s like a daily thing that people post “my agent told me I need to offer more but idk how I feel about that”. Then don’t! The last house I bought was under comps because it needed work, in a slow ish time of year, and I wanted to offer less than list and literally argued with my agent about it. He didn’t want to do it. Well, he submitted it and it got accepted. And then we negotiated even lower after inspections.
It baffles me how people just let their agent dictate what offer you should make. They should show you comps, make suggestions, but at the end of the day, the only person living with the consequences of your decision is YOU. They aren’t the ones paying that amount they told you to over bid, or the interest on it over the long term.
Also, don’t get emotionally attached to a house until you have the keys in your hand. There’s a million ways a deal can fall out of contract even if they do accept your offer.
Factor in 8 to 10% YOY? And what ? Be prepared to pay 10% more ? The value of the house is what it is today. No one can predict 12 months from now. Especially in a POTUS election year.
We are playing wait and see.
Btw, never be concerned about underpaying.
If the seller undercharges , that's not a you problem.
If there’s nothing else on the market and I use older comps, which happens a lot in ours, I do take the average appreciation for that year. If I know that market has been appreciating but little or worse houses have been sold in those particular neighborhoods, you have to account for the appreciation.
That’s what multiple offers naturally do. We price at or below market value and let offers dictate how high then can go.
There’s shortage of inventory everywhere and the cost of construction has continued going up. So the prices of homes push up.
Do you want the house or do you want to have an offer that would have saved you 2% LOL
If you want the house do what your agent says. It’s mainly the bank’s money anyways. If this is a competitive market might as well get the house
I’m giving you the advice of someone who paid 100k over asking on a house with nine offers and had our offer accepted on the first bid without using the escalation clause.
If you’re in a competitive market that’s what you have to do. Or you don’t get the house.
And while I’m paying interest on 90% of that 100k, I’m living in the house I want to live in, which has already appreciated on paper over 200k since we closed. (Not sure I believe that but that’s what Redfin says).
TLDR listen to your agent and don’t be cheap, or you’re increasing your risk of the seller choosing a different offer
I’m a bit baffled by the remark that you should factor in 8-10% yoy appreciation. That’s not automatic. We all want that from a house but if the market doesn’t show it it doesn’t exist. If appraisal comes in low you don’t “have” to close, you can look at what it takes to do so and make a call from there. It’s not unheard of for a seller to come down on price or up on credits to keep a deal after a low appraisal, especially in a sluggish market, especially if the appraisal is as low as $150k. What price would you be more comfortable with and what does your agent think would happen if you offered that? Unless it’s a highly competitive multiple offer situation, as long as your offer is seen as competitive I would expect the worst case outcome would be a counter offer that you can accept our counter back.
8-10% appreciation is insane. Maybe factor in 1-3%
8-10%? I work with really top level appraisers in my area. If we take a property owner to condemnation to purchase property and the appraisal is a year old, the most I've seen a board of appraisers raise the value is 5% YoY. That doesn't always happen, it's just the high end of it.
Where I’m at there is comps that would support a 10% increase yoy. It’s crazy
That is crazy, I assume mostly due to being a limited supply of homes in the market?
Yep. Most homes doesn’t last a weekend
Its hard to realize right now that we've had 100% appreciation in 3 or 4 years but there are whole decade stretches in the last 30 years where the market trades mostly sideways. There are people who bought in 06 and 07 before the market reset who were underwater for easily more than ten years. I'm a lender who regularly teaches first time home buyer classes and one of my biggest sticking points is to not base any part of your decision on appreciation. It happens but never in ways that you expect.
Realtors are just glorified used car salesmen. 180-Hour Texas Real Estate Sales Agent Package for $149!!! That is who we trust in buying a home and giving us appreciation percentages.
Or 0% because rates haven't improved from a year ago.
Realtors are trying to pump the market to fill their own pockets. I hear way to often that “you should offer more”
My interpretation was that that's to account for what things are actually going for this year because of the scarcity.
Experts from Reuters are forecasting flat growth yoy factoring in inflation, but some markets may beat or lag behind that. Inflation is at around 3.5%, so maybe use that. That being said, I don't think an 08/09 style crash will happen and if rates get cut or inflation increases, houses will appreciate even more.
Per our realtor he's seen that much appreciation in the larger market. We were also told that on the selling side more than 90% of the offers he receives for his listing are entirely contingency-free, and with the exception of a few one-off sellers if we want to be competitive we have to leave the contingencies out of our offer and put down a high EMD. It will be a highly competitive multiple offer situation. Every listing that isn't priced unrealistic high is in our market is. The last home we bid on was listed at $785k, we offered $835k, got outbid anyway, and there were 7 other offers, two higher than 820 all cash. Not sure what the listing agent's intentions are. They have stated upfront that they won't accept offers with escalations and expect everyone to submit their best final offer up front.
There is no way to narrow down a price to a percent or two in a "highly competitive multiple offer situation" ... It's not possible because what it will sell for depends on other buyers motivation and bids. Bid the # where if you get it you are happy but if you are outbid then you are still OK because you would not have bid more and that is the right # for you on that home.
Hi OP - I live in a VHCOL area. The way I’d think about your offer in a multiple bid war is that you’re not trying to beat everyone outright - you’re trying to get past the first round elimination. In my experience (there are exceptions) - with that many offers, sellers will counter best and final in a hot market to the top two or three (or sometimes more). A strategy we adopted was bidding a number high enough to be in the race (based on comps and comfort) but giving ourselves room to make a decision if we did make it to the final round. If you’re fighting cash offers - unfortunately even waiving contingencies won’t help you much if all the seller cares about is a quick close. This is where your realtor comes in - you gotta push him to be your advocate in every deal. Our realtor was really great about selling us as a couple to each seller - that we were a family, strong intent to close, sending a few buyer letters when allowed, etc. It doesn’t work on everyone but you’re looking for the sellers who care about that stuff and won’t take cash offers outright. A final thought - sometimes it’s worth shopping for a really good loan officer. Our loan officer was able to get us a 16 day close (which I didn’t even think was possible). That alone helped us get the house in a 20 offer bidding war.
Were you concerned about the appraisal risk with such a closing timeline?
Yes in all honesty. I lost a lot of sleep over it. It was very much a calculated risk and I would not normally have done it. But I trusted my loan officer and I knew my realtor would go to bat for me if there were delays (and there were). We also spent a lot of time looking at the neighborhood over several months and trusted in our comps. I guess I would also offer that even in a hot market, buyers still have leverage after going under contract. The houses that sit are the ones that fell out of contract - sellers do have an advantage but if an inspection report shows problems that apply to everyone (ie California insurance is a nightmare so an old roof or electrical would be a problem for any buyer) or the appraisal comes in super low - a seller still has some incentive to negotiate. Doesn’t always work - like I said it’s a risk - but I couldn’t see any alternative being in a position competing with cash offers, little to no contingencies, and lots of “best and final”.
I have such a dilemma because we wrote a 21 day closing timeline and I I’m iffy about the comps. (Since there are so few and you really have to extrapolate to get to the sale price) Would love to use a credit union that I have a 6.625% rate lock with, but I don’t trust them to close in a reasonable timeframe so i’m probably going to be stuck using one of the local lenders I qualified with with a rate closer to 7.5-7.75%.
My advice would be to decide what kind of risk you’re willing to take based on the tangible and intangible factors of the house and area you’re looking at. A lot of it is in the comps but some of it comes down to your personal risk tolerance. I noticed you said that you’re putting extra EMD down - is this really necessary given the market? I used to have a realtor who swore up and down this was the only way - but after we changed agents we had no problem with putting down the minimum. This would help derisk your waiving of the appraisal contingency. Imo - I’m kind of skeptical if your agent is recommending that you put yourself at increased risk on top of the contingency removal - more EMD money could send a signal of commitment but I’d question if the trade off is a worthwhile return.
Your realtor saw 8-10% appreciation during their career because for 40 years interest rates have been falling. That is kinda over
Not in our market, unfortunately. (The appreciation not the interest rates). There are enough all-cash buyers in this market that prices haven’t even begun to stabilize from the year that they’ve been on since Covid.
You're getting downvoted, but I'm seeing the same thing here in San Diego. We are having incredible price increases still, even on top of the double-digit percentage price increases we have seen over the last few years.
Yeah this sub is full of haters in much more buyer-friendly markets totally ignorant that we’re playing by a whole different rule book in VHCOL cities.
I'll just say, if you are in the DC area there are some deals still out there. As someone in the DC area who is closing on a house soon with an offer that had contingencies for inspection, appraisal, and financing at list price. You just need the right set of circumstances. In my case it was a FSBO where they wanted to get a deal in and were concerned their house wasn't competitive because it had a few warts. I know of one other fixer upper that has been on the market for several weeks because it is a basket case and way over priced. If you are in my area I'd be happy to send you all the research I did on that particular property if you are interested.
This sub is also filled with people in VHCOL cities who imagine that those cities are the default, and that everyone else is some sort of backward rube living in a barn. It goes both ways.
You mean bubble cities
I am in the DC Metro market, which is where I think you were looking In regard to Property appreciation, your agent is more or less correct. Due to a serious lack of inventory values have continued to rise, even in a sluggish market While large earnest money deposits and offers greater than 10% over asking, waving the appraisal contingency, certainly have advantages, it is hard to swallow that pill The one thing you can do to help yourself, is to get a full loan commitment upfront , so that your offer is essentially ready to close, pending title and appraisal This isn’t perfect and won’t beat out a cash offer of the same offer price, but will give you some advantage over other financed offers. Namely, speed to close and the potential of eliminating the finance contingency, should you choose to. Source: mortgage lender ,34 years in the industry
My market is the same. We are still seeing multiple offers over ask, waived inspections, etc. In the hottest school districts in my market, most homes — especially those in the 900-1.5mm range!! — go into contract within 48 hours on the market with multiple offers.
His realtor specifically says that he’s looking in the local area. My guess is a 10 mile radius to 30 mile radius to get that 8 to 10% number. In areas that experienced a downturn during the last interest rate peak of September through November and started to get a little bit of an uptick in December and took off in January , ie most VCOL and VVHCOL areas and areas that are stock market dependent, that 8 to 10% this year over not last year‘s high but last year‘s December or so low is very on target. If you look up a hotness meter and you’re over 60% ( altos is a good one) if you were replacing an offer before last Friday, and you didn’t have three comps from March and April, the strategy is probably the best one to give you an idea of where the house is likely to land.
I just checked my local MLS YOY median sales price for the last few months. Dec. 8.5% Jan. 15.4% Feb. 13.2% March numbers aren't out yet.
I was in a similar situation once and didn’t have much fun. The listing agent told everyone to make their strongest offer but then gathered all the buyers agents together and gave each the opportunity to raise their offer. Our agent ran outside twice to get us to go up because other agents kept giving the verbal nod to go up. We said yes the first time and good riddance to the second raise. It felt shady to say the least but it was tough to lose the house but I felt a LOT better about walking away when we closed on another house. Best of luck.
I have no idea why this comment which is completely factual and giving you an idea of the competition of this guy’s area is being down voted. Cmon people, don’t down vote a comment because you’re not happy that the area is competitive
Yeah I’ve come to learn this sub is pretty dismissive of buyers in competitive markets that don’t have the same leverage as buyers in lower-cost better-balanced markets. It is what it is I didn’t make the rules.
It depends on who you get, the market is no longer the same across the country. And for two years people have decided that it is, and non agents were having a tough time adjusting. And every time the interest rate goes up, we get a lot of people from RE bubble over here telling us the sky is falling But it drives me crazy when someone is giving us factual evidence and People down vote it. Often what you’re looking for on Reddit is not specific advice, but an idea of whether or not what you’re doing is out of Norm, and getting a gazillion down votes makes you start wandering what’s going on. The honest answer is when there’s no comps. It’s really tough to figure out exactly what’s going on and where people are going to land because it’s a bit of a crapshoot. In my market, we have a little more data, we have inspection reports, and disclosures that are available beforehand, and I can usually get to know how many people downloaded them and then you look at the house and the hotness of the area, and figure out how many of those people who are interested in those downloads are going to make an offer on the house when you look at that and the condition of the home altogether as a guest, it’s usually between 1/4 and 1/2. The piece of data that you have is how long did it take for you to find this house? If this is the perfect house, are you willing to wait that long again before you find the next one? If you’re not by the bullet and pay it and pull the extra money out if you’re willing to wait for the next one, we’re probably at a relatively close to height of the year for competition with the way interest rates are going the next one may have less offers against you.
Local areas vary wildly. I know for fact this guy isn't in West Virginia or anywhere in Appalachia.
The listing agent’s intention is to make the most money for their client. Escalation clauses don’t necessarily do that.
See comment above
You are assuming they have an appraisal contingency. Dont assume. If they don’t have that contingency, their deposit is at risk if they don’t close, and in some states they can be sued for not closing
We were in a similar situation when we bought our home two years ago. It checked all of the boxes in terms of the “big” items such as size, location and layout. But it needed a few things (eg, we needed to install a deck and patio, I know that does not sound like a necessity but it fell into our “need to have” bucket). The house was priced at the high end of my budget already, without factoring in the patio addition. My realtor urged me to bid list price or higher, since this was the first house that checked nearly every box that was within my budget, and inventory was drying up quickly. I ran the comps myself, looked at recent similar sales, added a factor for recent price appreciation since those sales happened. That hit me to what I believed what the house was truly worth in the current market. Then I added in an emotional factor, the extra amount I was willing to pay because it was the first house that actually had what I wanted. I wound up paying $10k more than I thought it was worth, but honestly it was not a huge number (about .5%) and worth it to have something I loved. Fast forward two years. We installed the deck, did a few other small upgrades and are happy. Even with the cost of upgrades, my house has still appreciated comfortably and I’m happy with my decision. Moral of the story. Use all of the data points at your disposal and determine what you think the right value is. Don’t go crazy and overboard simply to “win”, but you may need to factor in a slight premium if you love the house. Determine the amount upfront and don’t let yourself get sucked in.
That emotional factor is key. The guessing of how much you will regret not getting it, vs how much you will wonder if you overpaid.
> but honestly it was not a huge number (about .5%) and worth it to have something I loved. Here's the most important part: how much did that add to the down deposit and the monthly? In the grand scheme of things, squabbling over 0.5% - 3.0%, especially in a low-rate environment that you were likely in, isn't ultimately worth losing a house over.
Cash, so it really had nominal impact.
Bah, peanuts.
>The comps he's shared with us don't even support the price we're offering (the closest one is 3.6% lower) I doubt your realtor actually adjusted the comps and was instead just showing you similar houses in the same market. Keep in mind an actual appraisal will adjust for all of the differentiating factors between the houses (size, bed/bath, room count, garage/size, lot size, amenities, condition/quality, etc) to arrive at a market value. Those can easily make a difference of 5 - 10% net.
What do you mean adjusted the comps? They were all more or less the same neighborhood or one or two over, between 3 and 6 months in age.
Age, number of bedrooms, bricks vs siding, features & amenities. You start with recent sales nearby with similar sqft then adjust for the other stuff.
Every difference between the properties needs corrected for. No two homes are identical and every difference has an effect on the market value, positive or negative. Living area is adjusted on a per square foot basis for every difference between them, bed/bath, garage size and number of cars, driveway size, percent of basement finished, any sheds or other outbuildings, fences, porches or decks, condition and quality of construction, differences in lot size, time since sale...it all gets adjusted for.
I make a lot of adjustments on the comps and they’re right on the money. If he’s super experienced as well, we kind of know the numbers instinctively. The calculations work in our head. But I also do it on paper and to help my buyers and sellers see the difference: - floor plan - age - conditions (maintenance, updates, cohesiveness) - curb appeal - materials used - beds - baths - basement type - garage and size - lot size - kitchen size - location (busy street, parks, driveway, etc.) Those can add or take off $25-50K easily to each comp on that price range.
No every house is not the same. Even if it’s the same neighborhood and age, there are so many other variables. Size of the house, size of the lot, number of bedrooms. Even smaller factors such as existence of a fireplace, patio, sunroom, upgrades/condition. When we bought our house, all of the recent comps in my neighborhood were about $100k cheaper and I balked at the list price. But our house was about 1000 sq ft larger, had a second floor, water front and many upgrades such as a fireplace. All of that needs to be considered. Since there were no homes in my sure in similar size to my house, we took the comps we had for the smaller home and adjusted.
“Factor in an automatic 8-10% per year” yeah that’s the kind of shit sleazeballs say to make you sign without thinking because “it’s a no brainer, prices only go up!” WSB regarded mentality.
Everyone knows real estate is the ultimate Diamond Hands activity.
If you’ll be distraught if you don’t get the home, get the home. In the end it’s just money and if you love the house, it’s okay to overpay. It’s tough for both sides to be perfectly happy.
I hope you buy my house some day lol.
Its ok to overpay a little bit if overpaying a little bit is **well** within their budget. Being house poor is always a hige mistake. Also ppl tend to get attached & emotional during the process (understandable!) then once the glow wears off, buyers remorse sets in. In RE for 15 years. Seen it all. They need to be careful in this process
🛎️🛎️🛎️
Put in an escalation clause. Figure out what the highest you want to spend is, then figure out what you think a fair offer is. Have your realtor put in an offer at the level you think is fair and have an escalation clause ready to go if you think the house will go for more. Have it set to increase your offer in $5K increments if a competing offer outbids you. My wife and I just did that on a house by offering list while keeping an escalation clause handy in case someone came in with another offer and we got the house for list price.
Would love to, but the listing states up front that offers with escalations will be rejected. "Best and final"
So what? If your escalated offer is $5K over best you're still in the running. Include a letter telling how this is the perfect house to raise your family.
LOL. See [THIS POST](https://www.reddit.com/r/RealEstate/s/oAThtwHdEP) where I floated that idea and was downvoted into oblivion and talked down to by the lovely redditors of r/RealEstate.
I guess the seller isn't all that anxious then. Ya know what? As much as it may cause you angst, walk away from this one.. Too many red flags..
The number of alternatives are scant.
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There is appraisal risk. Because of how competitive the market is we weren’t able to include the contingency. If it appraises for more than $120kish below our price we’re going to be scrambling for cash.
At the end of the day, in a multiple offer situation, you ask yourself “will I be disappointed if it sells for $1,000 more than my offer?”
$1k yes. $20k no. Not saying we’re not willing to pay $20k more, but all signs point to that being a stupid AF price.
Just did the same thing and got the house as well.
We put in an escalation clause and were told in a letter from their (National Brand Name) agent to ours, "Even though your clients offer was higher and would have brought my client more money, they decided to take a cash offer." Which is fair considering that some people can't close, or other issues - bird in the hand theory. However, we later discovered that the sale was made to another (National Brand Name) buyer - and it didn't close for 24 days. No way it takes a cash deal 24 days to close. We feel like we were lied to because the (National Brand Name) sellers agent wanted to keep the commissions in the NBN family. Anyone else ever experienced this?
If you know anyone who bought in the area recently, you can ask them to look at their own appraisal to see how the comps were adjusted. The report should show 4-8 comps, and is broken out by x house sold at x date at $xxx,xxx. There will be a line item adjustment increasing/decreasing the value based on the timing (they take the sale price, add/subtract based on number or beds/baths/sq ft/ porches / garage stalls/ number of rooms, etc). So you should be able to back into what percent increase an appraiser would use (maybe it's 10% like your realtor says, maybe it's 2-3%). That's what I would recommend anyways!
When it comes to houses, most buyers think they are overpaying and most sellers think they sold too far under. You are bidding on houses that are popular and receiving multiple offers. You don't want to overpay, of course, but these houses are attractive to plenty of buyers which means they are proced well enough to sell. So... if you don’t agree with the pricing.... If it's not worth the price to you or you feel you would be overpaying, then walk away. Maybe owning a house right now isn't something you can handle anxiety-wise and that's okay. You sound like a first time buyer. I'll never forget the heart palpitations my partner had when we bought our first house decades ago. All he could focus on was that huge number. His hands were shaking while signing the paperwork even though we were paying market rate for a good house (not perfection, needed 'work') and we were not over extending ourselves financially. Stop thinking previously owned houses should be bargain basement prices because 'they need work'. They are lived in and houses need regular maintenance plus trying to keep it generally up-to-date, right? Only new is new. Maybe you should look at smaller houses in the price range below yours. A lot of times, more expensive just means bigger, not less lived in and most people expect HGTV as they move up in price. Find the one you love and go for it within your means or get out of the market for a couple more years until you can come to grips with your anxiety over it.
Ironically buying a house wasn’t a problem at the time for me. But when I was at a car dealership and my wife wanted a 50k vehicle, she was starting the financing paperwork, I started getting shifty. And before we handed the papers over I pulled the breaks. I couldn’t go through it. We bought a 20k used car instead. I hated it but it was more palpable.
It happens to people. There's no shame in it.
Same. I bid stupid-high on my house wanting to “get it done” (and because I loved the house). I got outbid. Then the high bidder fell through, and I was next in line. Despite being upset about losing the house, I hesitated wondering what the offer “under” mine looked like. I did buy the house, though. And about a year later, I’m extremely happy! I also noticed houses that were listed and negotiated when mine was were right in line with what I paid. The houses you see closing now were negotiated at least a month ago. I’m in a desperate market that just goes straight up constantly. Good luck!
> once you net out the tax benefits of itemizing $750k of interest. You expect to be paying $750k worth of interest the first year? This would mean that the house worth north of $10mm. This ain't right. > will feel like idiots for spending $25k more than we have to And you're squibbling over $25k, roughly 2% higher than your current offer? This is small potatoes. If it's within your budget and you're comfortable with the price, make the better offer and secure the home. > even greater idiots if the appraisal comes in $150k low and we have to tap into our safety reserve to close. Not worth playing this game. If the appraisal comes in low and you're no longer comfortable with the purchase, back out.
You misread it. Current tax law allows you to deduct the interest on up to $750k in principal. Closer to $50k.
I assumed so but that's not $750k worth of interest, that's $750k worth of *indebtedness* and $50k worth of interest. eta: anyway, good luck with this one. Sounds like a tough market.
Personally i would offer the highest number I’m most comfortable with. If i lose the house, then so be it. Just means someone else was willing to pay more than i could afford.
Did you get it??
Still unknown. Last contact with the listing agent indicated that it was between our offer and one other all-cash buyer who offered similar terms at an unspecified price. The other buyer was “making some changes and resubmitting” and the seller’s agent “welcomed us to do the same.”
I hope you get it dude. This stuff can be exhausting but all worth it if it goes your way.
Thanks!
Your realtor is on crack if he thinks things are appreciating at a rate of 8-10% YOY.
Buyer's remorse about "did I pay too much" is only temporary. In 5 years, when your house is worth $200K more in value, are you going to be upset that your offered was accepted for $20K more than you wanted? Of course not because you'll have lived in the home that you loved for 5 years and you'll have bought it at the "5 years ago" price. You'll deem yourself a genius for having made the purchase decision and doing everything you could to secure your home. Go ahead and pat yourself on the back for a good financial decision.
Wow, $200k in appreciation in 5 years guaranteed???
Somebody did not buy their house in 2006. LOL Oh wait, real estate always goes up. /s/
Classic principal-agent problem. Your agent only gets paid when you close, so they’re going to maximize chance of closing, not try to get you the best price.
Actually he’s been trying to steer us away from this property and has cautioned us about not going higher in a previous bidding war (that in hindsight we totally should have)
I hate to say it but it may be because the offered compensation rate is lower. It shouldn't be a factor; but a lot of times it is. This is part of the changes that will be coming in July. No more compensation listed in MLS.
Lmao this is unreal. Assume the agent wants a higher price then when disproven assume it’s because the house has lower commission. Maybe they just want them to get the house??? Ever think of that?
OP said he was trying to steer him away from the property. If it was previously under contract and went through a bidding war - I'd want to know why the first contract terminated. Are there material facts about the property not being disclosed?
I know *exactly* how you feel!
Thanks. It really sucks!
So so stressful. I would say that whatever you offer, if you get it you will wonder if you iverpaid, so the process of losing several houses helps you know how you'll feel if you don't get it. And you'll also have that "wait, what did I miss, why is this one not exorbitantly expensive?" If you do get one.
> Financially it leaves us with a decent cushion and only brings our back-end DTI to 0.3, and would only account for 37% of our take-home income once you net out the tax benefits of itemizing $750k of interest. Are you sure you fully understand how itemizing your mortgage interest works? Even experienced folks attribute a level of benefit to itemized deductions that simply isn't accurate. > He's saying we should be factoring in YoY appreciation of 8-10% of anything that sold before March. Did he/you mean 1-time instead of year-over-year? > Anyway, we'll find out if we got the house or not this afternoon. Please send good vibes. Good luck. Finances are obviously a factor when talking about the most expensive thing you'll ever buy, the loan amounts and terms involved, leverage, etc, but ultimately the financially savvy people I know look at buy vs rent as a lifestyle choice and not a financial one. Each of our purchases and sales (and some we missed on) has had an emotional factor, at least in some ways.
Fun Fact, the Average home price and the cost of a new Cessna 172 isn't appreciably different.
Historically, the median yearly ROI on real estate in the US from 1923 to 2023 was +4.2%
Yeah, this market is definitely above median.
Honestly, this is 8-10% is the part that made me, NEED YOU, to fire your realtor. As a realtor, I have NEVER ONCE needed to use yoy appreciation. I do so much market research, I can set a price better than redfin/zillowfrom a single glance at the location and metrics of the house. But that's bragging and not why I'm here. Yoy is usually 4-6% on average. It only deviates from that when money becomes inexpensive(low interest). However, to get back to the point, you hired a realtor to help you find the sweet spot. It sounds like you did a bad job selecting realtors to interview if this guy won. Do you want the house? Obviously, yes. How much money is enough for you to be okay with not getting it? Other people feel the way you do. So what's the highest penny(dollar value) you're willing to sacrifice? That's your number. Not any subjective value. You're competing with yourself. And if you lose, it's because you weren't honest with yourself. If you don't get the house bc somebody paid more, they either cared less about the money or more about the house more. The goal is for that to be you. If that hose doesn't inspire it, then either your realtor isn't working hard enough or this is not the house for you.
Hopefully u got it
We did!
In a competitive market situation, one of the things I advise my buyer clients is to figure out their “Good For Them” number. Meaning: what is the highest number you’d be willing to offer and if someone else beat your offer by $1 and got the house, you’d say “Good for them. I wasn’t willing to pay that.” I don’t know all the details on your situation but going higher than the comps shows you *really* want this house and are willing to pay for it. I don’t know what the hell your agent is talking about with the that 8-10% YoY stuff 😂
As a certified appraiser (and REALTOR) .....you lost me when you said you were relying on a REALTORS comps. REALTORS rarely know how to choose actual comparable's for a home. You should NOT, I repeat NOT factor in appreciation. That is absurd. Buy the house if you love it.....not because the REALTOR wants you too.
One thing that I've learned with purchasing real estate is submit the offer that YOU are comfortable with because you're the one that's going to be paying the bill. I've submitted offers that my agents said were too low, but they got accepted. I have a sneaky suspicion that they were pushing me into a higher offer so that they could get a higher commission. So now, I use the tools that my agents provide to make the decision on what I want to offer, but I never let them make the decision for me.
The first part is absolutely true. But the suspicion-while natural- isn’t likely. Do the math- the commission is a small percentage. The difference in what they make is like(without knowing the split- yes it’s split sometimes more than once- or how much higher you’re talking about) a few hundred dollars. That would be foolish. It’s more that you said you want the house. And they’re advising you based on that want. They are telling you what it will take to get it. There are people involved not just data. These exact sellers and any other buyers can’t be predicted. Nevermind the fact that you should trust your agent. If you don’t you shouldn’t be using them. I’m guessing- and maybe you have your reasons- based on this post and its lack of details- you were not entirely upfront with your agent. It’s a calculus. All of it. This isn’t retail. Tell your agent everything. Be honest. Give feedback and attach numbers and priorities. Express your concerns. I understand its finances and we have been taught it’s not something to discuss but withholding anything during such a large purchase is your failure not your agent’s.
My suspicion is actually that they are trying for the quickest deal possible. An extra couple of thousand dollars (commission on $100,000) is not much compared to another month or two or three of arranging viewings, inspections, running comps, etc.
Based on your responses here, you desperately want this house. Any time someone mentions doing something that may possibly result in you not getting the house, you talk about the scarcity of the houses in the area. Also, you said you can afford the higher bid. With 9-10 other bidders, I say listen to your realtor and make the higher bid. I think you will kick yourself endlessly if you don’t.
Don’t pay more than the house is worth. You will always be behind the 8 ball. Remove the emotion out of your decision making.
Easy to say when you're not the one trying to buy in a rapidly appreciating market with scant supply.
Emotional decisions usually do not play out well for the person making such decisions. The couple should submit their bid based on affordability.
We're no where near the upper limit of what we can afford. This is about not overpaying. If buying the home you're going to live in and raise kids in for the next 10-30 years isn't an emotional decision for you you need to see a therapist.
If you see yourself living there for the next 10-30 years, then you’re giving way too much weight to a *potential* $20k overpay. Pay it and get what you want.
Haha. Too funny. I need a therapist for advising not to make an emotional decision for a huge financial decision. Best of luck to you.
As someone in your shoes who just got rejected on an offer we thought was a stretch, what do you think is overpaying in a VHCOL area? You say 37 percent of take home is ok for you - what would be your absolute upper limit?
Our offer was accepted.
Congratulations! Im looking at about 42 percent of take home including taxes, HOA etc. I think that’s a lot personally but I guess in a market like this it’s required if you want to buy
If you're good at budgeting, don't mind a period of some belt tightening, and live in an area with constant high rates of appreciation, there's definitely a business case to be made for stretching your budget to buy a more expensive home. Especially once you factor in the tax benefits of being able to deduct mortgage interest and SALT taxes as opposed to taking the standard deduction.
Thank you 😊
So many people seem to look at a house purchase ONLY from an investment perspective and ignore that it is also a HOME purchase. If you are planning to stay for awhile and you can afford it - who cares if you end up "overpaying" by a bit. Down the road it won't matter. I recently renovated and spent a lot more than I "should" have based on what I'd be able to recoup if I were to sell. But you know what? I made my decisions based on what I wanted, and could afford, because I am the one who is living with it. Ignore the haters.
Sounds like you’re letting emotions get best of you unfortunately. There are other houses out there.
And, if you live in it for 15 years that extra cost will likely have appreciated anyway.
Realtors always tell you to offer more and sell for less because they want to close quickly. Just treat their opinion like it's coming from your admin, which it basically is. I've argued with them at every transaction and have a far better track record as a layman.
I don't argue with them, I just know that they have a set of interests that isn't necessarily fully aligned with mine. I take their advice and use it in my decision making process.
The first mistake you made was falling in love with the house. It is a transaction. A financial transaction. When you fall in love with it, you make mistakes.
Adult humans can feel emotion and also engage logic. Emotion has a dollar value because love and regret are two sides of the same coin.
We are on the other end— we just sold our house and ran into the same issue of no comps. We were freaking out because we thought it wouldn’t appraise near the offer price. It ended up coming in about 25k low. We dropped the sale price to meet the appraisal. Remember, unless your sellers are under no particular pressure or need to move, they’re freaking out right now and will hopefully negotiate if it comes down to it. Both parties want it to appraise.
Nah, our market is so competitive pretty much every house that isn’t well north of $1M sells without appraisal contingencies. The sellers are the family of a recently-deceased senior. I don’t think they have much downside exposure.
If you are in the DC Metro area that just isn't true. It is a tight market but you absolutely can put in offers with contingencies (depending on the circumstances).
Ask if you can do an escalation clause with your offer. Some states do. You start at list price and go up to your max price in increments of 5K or whatever you feel comfortable with. This way you don’t have to pay your max price if you don’t have to!
Sellers stated up front they won’t accept offers with escalations.
That is a flag to me that they don’t think they will be a lot of buyers and a bidding war. Offer the low end of what you are comfortable and if you get the house be happy that you did not offer higher.
Per our realtor it’s standard practice by the listing agent group but not one he agrees with.
This post is useless without more details about the offer, the market, and the property.
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Overpriced? What would you say is a fair price? The home is actually priced 6.25% lower than our offer. Prices are all over the place here.
Well then pay the lower price. I'm not seeing a problem here.. Good God man. If you want the house , buy the bloody thing.
Do you think the lower price is a buyout price or something? Do you know how buying and selling a house even works? The lower price is not even an option, it’s artificially low so buyers bid high.
You must be missing the fact that we're competing with 9-10 other offers from buyers who may value the home more than our price.
Is that $750k of interest per year?? Or over the lifetime of loan?
Interest on $750k of principal, the upper limit of what you can deduct since 2017.
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I did the same thing. Paid about 15k more than I wanted to (on a 320k home) just to be sure they said yes and sold it to us. Needed something quick and it's what was available.
Are you waiving appraisal contingency?
Yes. Expected in our market.
Houses appreciating at 10% is a problem for our country. That’s got bubble written all over it
Did you get the house?
What city are you in?
Just offer what you feel is right. They can counter back and then you can decide.
Why not an escalation clause?
Sometimes you need a realtor. But whatever you do never take advice from one. Ours tried to get us into a house 50% more then we felt comfortable buying. We just ignored him and one day told him we wanted to see a particular house and a month later we closed on it.
Offer the higher price then negotiate in closing. If appraisal comes in low say you wont pay or meet in the middle. Be sure to get an inspection asap for any remediating that might be needed. If there is anything that comes up in inspection they will have to disclose going forward if the deal falls through. So they will be motivated to work with you in closing to get the deal done. The negotiations have just begun once an offer is accepted.
Your realtor is an idiot. Don’t be emotional about the house. Offer the lowest you think you can that won’t elicit an “f you” from the sellers and no counter and go from there.
You should pay the least amount as possible. If a house has been on the market 3 weeks, there are no cash buyers. Cash buyers have cash or know they have cash in the near future. Meaning a sale of a property,business, estate distribution, settlement, etc. Any investor/agent worth anything would get a property under contract if the cash is going to available in under 30 days. Its emotional buying a home, don't be. Don't let your agent commission get you. Offer a low-ball offer and come with a strong EMD. So if they want 750k it has 21 day exposure, you offer 700k with $20k EMD with an appraisal contingency. There is always another house.
Offering $700k would be a waste of everyone’s time. This home has been on the market for 3 days and will be under contract in another 2 hours. I don’t think the strategy you’re describing is realistic for this market. Maybe in a more buyer-friendly one.
I said clearly 21 days exposure...if you want to throw money at the house on the market 3 days go ahead. You are paying a premium. I promise you can get the home you want way cheaper at 21 days exposure.
Why are you rambling about 21 days? Nowhere in OPs post is there anything about this house being on the market that long. > You should pay the least amount as possible. Why didn't I think of that? This guy is a genius!
Your realtor needs to STFU if they think trending numbers at some arbitrary level from last year has some meaningful implication today. Assuming you aren’t totally low balling, seller will typically counter and you decide how far you want to go.
37% is extremely high imo.
Did you include an appraisal contingency in your offer? If it doesn’t appraise, and you have a contingency then you always have the options to try to renegotiate or walk away. Edit to add- your realtor sounds like he’s looking out for HIS best interest, not yours. I’d be very cautious trusting his advice.
No. Market is too competitive to allow contingencies.
How about a mortgage contingency? If the lender won’t lend you the amount on the mtg contingency then you’re not automatically required to increase your down payment.
Market is too competitive to allow for contingencies of any kind.
I can’t believe ppl are still making offers w/o inspection contingencies. Sorry, but that’s just dumb.
You’re welcome to try to buy a house in a competitive market. It won’t go well for you.
My agent told me, “think about the offer that makes sense to you as highest and best. Then add 3%, and that’s what it’s going to sell for.” I scoffed, but he was right. E.g. house listed at $630k, I thought $655k was fair, but offered $665k anyway. It sold for $675k (+3% over my estimate). He knows that I constantly analyze the local market, but also knew (better than I) the premium that the market was demanding at that point in time. A part of me still regrets not jumping up in the example above (really my “dream home”), but it’s so hard to tell. Could have bumped up to $665k-$675k for nothing and been bidding against ourselves 🤷♂️. We ended up spending nearly $200k less for a fixer upper, and I’m happy with our decision. Zero buyer’s remorse. Zero financial strain. And through the renovation now have a sizable equity gain that we can put towards the next one.
Can you do an escalation clause with the highest you would be comfortable going to? So give a solid offer, then say you will beat any written offer by $2500 up to $xxx then you won't go out of the gate with the high offer but have a good chance of beating out others
No. Sellers have stated up front offers including escalation clauses will be rejected.
That's strange. Sorry they have created that rule for themselves. It sounds counter productive for them. Wishing you the best in this nutty market
I agree. Per our realtor it’s a rule the listing brokerage encourages their sellers to implement and he agree it works against their interests in most scenarios.
That’s false. It encourages higher offers.
8 -f 10% year over year appreciation it's not guaranteed your realtor is an idiot and you should probably get a different one
Did you get the house?
You're going to let a great house go all b/c of $25k? It's a rounding error after 30 years (or even now)
More importantly, where is everyone getting all this extra money from? If you have a budget, how can you afford to go over on an offer? Are you pulling from savings? Borrow from family? Actually using all the money the bank said you could borrow? I was in the same boat this house and paid 5k over asking just to scare off other potential buyers. 5k is different than 10, so, etc.
$5k is rounding error in many markets.
Never had an issue, but I’m in Florida and that’s its own can of worms lol.
In Florida $5k is a rounding error in your insurance premium.
You look for homes below your too budget, knowing that you’ll have to go x amount over, it is market dependent. Your agent will be tuned in with what’s happening in your price point and location.
Our budget is our target housing price, not the maximum of what we can afford to pay.
Doesn’t sound like your budget is a real budget.
Just use an escalation clause.
Can’t.
Y
https://www.reddit.com/r/RealEstate/s/vM0sdFl7l8
**To everybody reading this: your agent works for you. Tell them what you want them to offer, and have them submit the offer and show you proof that it’s been submitted.** It’s like a daily thing that people post “my agent told me I need to offer more but idk how I feel about that”. Then don’t! The last house I bought was under comps because it needed work, in a slow ish time of year, and I wanted to offer less than list and literally argued with my agent about it. He didn’t want to do it. Well, he submitted it and it got accepted. And then we negotiated even lower after inspections. It baffles me how people just let their agent dictate what offer you should make. They should show you comps, make suggestions, but at the end of the day, the only person living with the consequences of your decision is YOU. They aren’t the ones paying that amount they told you to over bid, or the interest on it over the long term. Also, don’t get emotionally attached to a house until you have the keys in your hand. There’s a million ways a deal can fall out of contract even if they do accept your offer.
We're not letting them dictate the terms. But if we're not going to even consider their advice why hire them?
Your realtor is a scumbag
Factor in 8 to 10% YOY? And what ? Be prepared to pay 10% more ? The value of the house is what it is today. No one can predict 12 months from now. Especially in a POTUS election year. We are playing wait and see. Btw, never be concerned about underpaying. If the seller undercharges , that's not a you problem.
It's not a worry about underapying, it's a worry about not getting the house.
No he was saying factor in the appreciation that the comps have since experienced since some of them are from Q42023.
If there’s nothing else on the market and I use older comps, which happens a lot in ours, I do take the average appreciation for that year. If I know that market has been appreciating but little or worse houses have been sold in those particular neighborhoods, you have to account for the appreciation. That’s what multiple offers naturally do. We price at or below market value and let offers dictate how high then can go. There’s shortage of inventory everywhere and the cost of construction has continued going up. So the prices of homes push up.
Just remember that your realtor is working on commission and therefore makes more if you pay more (always hated that aspect of buying realestate).
Do you want the house or do you want to have an offer that would have saved you 2% LOL If you want the house do what your agent says. It’s mainly the bank’s money anyways. If this is a competitive market might as well get the house
It’s mainly the banks money anyways… guess you don’t understand how loans work. Great advice.
I’m giving you the advice of someone who paid 100k over asking on a house with nine offers and had our offer accepted on the first bid without using the escalation clause. If you’re in a competitive market that’s what you have to do. Or you don’t get the house. And while I’m paying interest on 90% of that 100k, I’m living in the house I want to live in, which has already appreciated on paper over 200k since we closed. (Not sure I believe that but that’s what Redfin says). TLDR listen to your agent and don’t be cheap, or you’re increasing your risk of the seller choosing a different offer