How much should we offer? | First time home buyers

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kadye
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How much should we offer? | First time home buyers

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ResearchMed
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Re: How much should we offer? | First time home buyers

Post by ResearchMed »

What does your real estate agent suggest, for starters?

RM
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Re: How much should we offer? | First time home buyers

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atikovi
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Re: How much should we offer? | First time home buyers

Post by atikovi »

I wouldn't be shopping half million dollar homes in "upcoming" neighborhoods where a quarter of the homes are "rough." Which homes do you think will be targeted for break ins and robberies?
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Re: How much should we offer? | First time home buyers

Post by atikovi »

kadye wrote: Mon Jul 13, 2020 3:48 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?

RM
He said full price.
But off course. They work on commission based on the sale price.
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Re: How much should we offer? | First time home buyers

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Re: How much should we offer? | First time home buyers

Post by 123 »

Offer $579,500 for the house including the desired changes. The is based on the house list price $555K and 50% of the costs of the two improvements ($31K/2 and $18K/2).

With a few months to go the builder is not yet thinking of taking less than list for the house but you have wiggle room on the changes. Of course you just present one consolidated figure as an offer and the builder can do whatever mental accounting s/he might require.
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inverter
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Re: How much should we offer? | First time home buyers

Post by inverter »

The basement and porch look very reasonable. Perhaps offer a bit less on the house.
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hand
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Post by hand »

This is new construction in an area with lots of new construction... there will be other houses that meet your needs.

Tell your realtor that you want to spend the next two weekends 6 hrs a day with them looking at alternatives.

Then mention how disappointed you were that you liked the house you saw, but price was just too high.

Then shut up.

Realtor will likely suggest a more reasonable initial offer price.
runner540
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Re: How much should we offer? | First time home buyers

Post by runner540 »

key negotiation / game theory questions:
How much competition is there with other potential buyers of this particular house?
Is the builder desperate?
How badly do you want this house? I didn’t read any strong attraction in your post for the neighborhood or house.
What about the fourth quarter of houses? (25% new, 25% well maintained, 25% rough)
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Re: How much should we offer? | First time home buyers

Post by ResearchMed »

atikovi wrote: Mon Jul 13, 2020 3:50 pm
kadye wrote: Mon Jul 13, 2020 3:48 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?

RM
He said full price.
But off course. They work on commission based on the sale price.
Right.

But that agent cares a lot more that there IS a sale than whether it is a full priced sale.

Once they realize that you aren't going to just write a full priced check, so to speak, they should be helping you with offers. That can include a somewhat lower price or adding in some upgrades or changes, etc.

And are you sure that *this* is THE house that you want, if there are so many others being built?
To the extent that you are at all flexible, you have more bargaining power. (And you can always *say* that you'll just keep looking, or you are considering something else elsewhere, etc., just to keep the agent interested in helping you find a house and price that works.)

Looking at other homes as suggested (or a bit less time, etc.) is a good idea anyway, if you haven't already gotten a VERY good idea of the type of house and also the specific area/neighborhood.

And what do you mean by "rough"?
Older, not sparkly new? Or existing area residents who are possibly troublemakers? And note that you cannot always tell from appearances. Just because the homes aren't brand new, the owners could still be very proud of the house and also the general neighborhood.

But if "rough" means "in a state of disrepair", that's not good.

RM
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Re: How much should we offer? | First time home buyers

Post by bsteiner »

ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?
Is she the original poster's broker? Is the original poster paying her?
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Re: How much should we offer? | First time home buyers

Post by atikovi »

ResearchMed wrote: Mon Jul 13, 2020 4:08 pm
atikovi wrote: Mon Jul 13, 2020 3:50 pm
kadye wrote: Mon Jul 13, 2020 3:48 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?

RM
He said full price.
But off course. They work on commission based on the sale price.
Right.

But that agent cares a lot more that there IS a sale than whether it is a full priced sale.
Why wouldn't there be a sale if you offered full price?
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Post by ResearchMed »

bsteiner wrote: Mon Jul 13, 2020 4:15 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?
Is she the original poster's broker? Is the original poster paying her?
As, very important question. I assumed (based upon nothing!) that it was OP's agent.
That could explain the answer, straightaway of full price.

Also, OP, is this your first home purchase?

RM
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Re: How much should we offer? | First time home buyers

Post by ResearchMed »

atikovi wrote: Mon Jul 13, 2020 4:24 pm
ResearchMed wrote: Mon Jul 13, 2020 4:08 pm
atikovi wrote: Mon Jul 13, 2020 3:50 pm
kadye wrote: Mon Jul 13, 2020 3:48 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?

RM
He said full price.
But off course. They work on commission based on the sale price.
Right.

But that agent cares a lot more that there IS a sale than whether it is a full priced sale.
Why wouldn't there be a sale if you offered full price?
:confused

The goal for OP, presumably, is *not* to pay full price.

RM
This signature is a placebo. You are in the control group.
CycloRista
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Re: How much should we offer? | First time home buyers

Post by CycloRista »

runner540 wrote: Mon Jul 13, 2020 3:57 pm key negotiation / game theory questions:
How much competition is there with other potential buyers of this particular house?
Is the builder desperate?
How badly do you want this house? I didn’t read any strong attraction in your post for the neighborhood or house.
What about the fourth quarter of houses? (25% new, 25% well maintained, 25% rough)
^^^^this

Also, do not appear to be super-interested in the property that is most appealing... take a look at others and circle back to a few, including "the one".

Never have been a fan of new construction myself. My youngest does spec home wireframe and interior design (from $500k attached on up into single family homes in the millions). She is constantly smacking her head over all of the shortcuts builders take to "get the job done and move on".
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Re: How much should we offer? | First time home buyers

Post by atikovi »

ResearchMed wrote: Mon Jul 13, 2020 4:27 pm
atikovi wrote: Mon Jul 13, 2020 4:24 pm
ResearchMed wrote: Mon Jul 13, 2020 4:08 pm
atikovi wrote: Mon Jul 13, 2020 3:50 pm
kadye wrote: Mon Jul 13, 2020 3:48 pm

He said full price.
But off course. They work on commission based on the sale price.
Right.

But that agent cares a lot more that there IS a sale than whether it is a full priced sale.
Why wouldn't there be a sale if you offered full price?
:confused

The goal for OP, presumably, is *not* to pay full price.

RM
Of course but the agent suggests full price to maximize commission. No chance there wouldn't be a sale if you do.
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Post by Watty »

kadye wrote: Mon Jul 13, 2020 3:08 pm There are approximately 40 houses/lots on this street, and about a quarter of them are brand new, another quarter are well maintained old houses, and the remaining quarter are rough.
I don't know if it would apply in this case but in a typical new subdivision I have always read that builders really do not like to negotiate on price because that will affect future sales and possibly upset prior buyers who paid a higher price. If that is the case then you may have better luck with trying to get upgrades since that will not show in the selling price that other people see.
kadye wrote: Mon Jul 13, 2020 3:08 pm It is a new construction and is halfway done. Roof, walls, windows, stairs, etc. are almost done
Even though it is new construction be sure that your contract allow you to have the home inspected several times during the building process. Your home inspector will be able to see things now that they will not be able to see when the house is finished. Just with them knowing that the house will be inspected you will likely get better construction.
kadye wrote: Mon Jul 13, 2020 3:08 pm We want the builder to finish the basement, with a bedroom and full bath.
The extra finished space may add to the load for the furnace and AC. Be sure that they size those right if they had already planned for an unfinished basement.

Be aware that in future appraisals that the basement bedroom may not be counted the same because it is below grade. The rules on this have been changing recently and people have posted about having problems with appraisals when they had below grade living space.

Also consider if you have an immediate need for the extra bedroom. I really like having an unfinished basement for storage and projects. Kids can also play and do crafts in an unfinished basement with less worry about them trashing the place. That makes the rest of the house a lot more functional.

It is also really really hard to make a basement bedroom actually feel like a nice place to be and they sometimes are really unpleasant. Since this is your first house you may not really know just what you want and what will work for you. Since you already have plumbing in for the bathroom adding the bedroom later will not be that hard to do. I would really consider not getting the extra bedroom right now unless you really need it.
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Re: How much should we offer? | First time home buyers

Post by 8foot7 »

Your bargaining position is weak here because the builder has no real incentive to accept a below-market offer on an unfinished spec home. It hasn’t even hit the market as a finished home yet, so accepting a “weak” offer now caps the builder’s potential profit before he even had a chance to test the market with it. This applies less to custom builds and more expensive homes but I get the sense this is a tract builder constructing multiple homes in a neighborhood. I think you will find there is little room for negotiation on price.
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Post by whereskyle »

kadye wrote: Mon Jul 13, 2020 3:08 pm We are about to make an offer on a new home. It is a new construction and is halfway done. Roof, walls, windows, stairs, etc. are almost done. The builder said (through our real estate agent) s/he will get it ready by Oct. We asked if we can make selection on the finishes and they said many of it is already ordered. The realtor said we can ask to change it if we dislike their selection but we are not worried about this as much as the price. We can afford it but we just don't want to pay more than what it is worth.

Question. How much should we offer? Here is some information.
  • We want the builder to finish the basement, with a bedroom and full bath. The pluming/water, etc. for the full bath is already in the plan, so they are not drilling new water/sewage line. We also want the builder to add a cover to the porch. (The existing floor plan includes a porch; we want to add a cover to it.) The builder is asking $555k for the house, and $31k for the basement and $18k for the porch.
  • It is in an up and coming area of town with years of tax abatement (approximate value is $75k). There are approximately 40 houses/lots on this street, and about a quarter of them are brand new, another quarter are well maintained old houses, and the remaining quarter are rough.
  • I pulled up the tax records of the houses on this street, and recent selling prices for the new construction include: $580k on 09/2019, $433k 12/2016, $417k 11/2016, $394k 03/2016, $355k 07/2015, $342k 03/2016.
  • Current listings on this street include $530k (offer pending; has one less bedroom), and new construction for $599k, $564k, $499k (has one less bedroom), $550k, and $564k
  • Here are additional comparable sales the next few streets with almost identical floor plans. $565k offer pending, $535k sold on 02/2020, $565k 04/2020, $508k 03/2019, $515k 09/2018, $480k on 10/2018.
All these houses have similar tax abatement.

Question. How much should we offer?
Similar neighborhood in a different HCOLA. We offered 15% below asking and eventually agreed on 7% below asking. I see no reason to offer asking for anything but the most desirable real estate. Ever.
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Post by stan1 »

In my city the regional and national tract builders will not negotiate on base price but they may offer some incentives such as work on the basement or porch or upgraded counters or a flooring allowance. Maybe a little more leverage with a local builder if that's your situation. Builder doesn't want to set the precedent of lower prices for future sales and they don't want the people who bought houses last month angry at them for underselling.

It's all based on supply and demand though. Maybe demand is drying up. You'd want to try to focus on comps for similar new construction within the last 6-12 months.
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wfrobinette
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Post by wfrobinette »

kadye wrote: Mon Jul 13, 2020 3:08 pm We are about to make an offer on a new home. It is a new construction and is halfway done. Roof, walls, windows, stairs, etc. are almost done. The builder said (through our real estate agent) s/he will get it ready by Oct. We asked if we can make selection on the finishes and they said many of it is already ordered. The realtor said we can ask to change it if we dislike their selection but we are not worried about this as much as the price. We can afford it but we just don't want to pay more than what it is worth.

Question. How much should we offer? Here is some information.
  • We want the builder to finish the basement, with a bedroom and full bath. The pluming/water, etc. for the full bath is already in the plan, so they are not drilling new water/sewage line. We also want the builder to add a cover to the porch. (The existing floor plan includes a porch; we want to add a cover to it.) The builder is asking $555k for the house, and $31k for the basement and $18k for the porch.
  • It is in an up and coming area of town with years of tax abatement (approximate value is $75k). There are approximately 40 houses/lots on this street, and about a quarter of them are brand new, another quarter are well maintained old houses, and the remaining quarter are rough.
  • I pulled up the tax records of the houses on this street, and recent selling prices for the new construction include: $580k on 09/2019, $433k 12/2016, $417k 11/2016, $394k 03/2016, $355k 07/2015, $342k 03/2016.
  • Current listings on this street include $530k (offer pending; has one less bedroom), and new construction for $599k, $564k, $499k (has one less bedroom), $550k, and $564k
  • Here are additional comparable sales the next few streets with almost identical floor plans. $565k offer pending, $535k sold on 02/2020, $565k 04/2020, $508k 03/2019, $515k 09/2018, $480k on 10/2018.
All these houses have similar tax abatement.

Question. How much should we offer?
From my experience builders rarely negotiate much on the price. You have 1 recent sale at 565k, one pending at 565. Throw out anything older than 2019.

Offer 535k and see where he goes.
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Post by wfrobinette »

kadye wrote: Mon Jul 13, 2020 5:57 pm
hand wrote: Mon Jul 13, 2020 3:55 pm This is new construction in an area with lots of new construction... there will be other houses that meet your needs.

Tell your realtor that you want to spend the next two weekends 6 hrs a day with them looking at alternatives.

Then mention how disappointed you were that you liked the house you saw, but price was just too high.

Then shut up.

Realtor will likely suggest a more reasonable initial offer price.
Thanks for this suggestion. I have known the realtor for quite sometime now. He is a brother of a good friend, so I don't know how this strategy will work but worth trying/considering.
I don't know what this accomplishes anyway. Your agent has to take you offer to the seller regardless of the price. They are there to counsel you on where to start.

Like others have said this home is months from being finished so no reason for builder to negotiate much. As I said builders DO NOT like to negotiate much because once they start discounting there is not going back. If the house is done and sitting for a while then they may start to move.

I have purchased two brand new spec homes in Virginia 350 miles apart..

1. First home 1998 listed at 149,900 offered 139,900 closed at 149,900 with upgraded floors.
2. 2007 3rd home 389,900 list with unfinished basement 25k to finish including separate heating for basement. Closed 389,900 with basement framed. 20k to finish after the sale. Builder wanted homes to stay under 400k for marketing purposes.

Go in with a strong offer for everything. The porch is most important thing to be done with the new construction so it's covered under builder warranty

I'm now on home #6(all but #1 and #2 were relo deals).
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Re: How much should we offer? | First time home buyers

Post by atikovi »

kadye wrote: Mon Jul 13, 2020 3:08 pm The builder said (through our real estate agent) s/he will get it ready by Oct.
Just noticed this. Why on earth do you have a RE agent for buying a new house? The builder would be much more amicable to give you a price discount if he knew he didn't have to pay a sales commission to an agent as well.
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Re: How much should we offer? | First time home buyers

Post by ensign_lee »

Just bought a new David Weekley home last year - similar situation, similar price range.

The main benefit to buying a home before its complete is that you get to choose how it's finished. If the builder is already not budging on that, you've lost the main advantage of doing so.

Already completed inventory homes give you the maximum amount of price leverage - the builder paid for everything, and has to continue paying while it sits. I paid roughly $480k for my completed inventory home; it was listed originally for $550k while it was under construction, then the price kept dropping after it was finished. My neighbors who bought similar sq footage non-inventory homes paid between $530k and $550k .

If money is the main thing for you, I'd say do that. Even better, if this house is finishing in October, the market will have dried up a lot by then (most buyers want to be moved in by Fall).
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Re: How much should we offer? | First time home buyers

Post by nigel_ht »

CycloRista wrote: Mon Jul 13, 2020 4:35 pm
runner540 wrote: Mon Jul 13, 2020 3:57 pm key negotiation / game theory questions:
How much competition is there with other potential buyers of this particular house?
Is the builder desperate?
How badly do you want this house? I didn’t read any strong attraction in your post for the neighborhood or house.
What about the fourth quarter of houses? (25% new, 25% well maintained, 25% rough)
^^^^this

Also, do not appear to be super-interested in the property that is most appealing... take a look at others and circle back to a few, including "the one".

Never have been a fan of new construction myself. My youngest does spec home wireframe and interior design (from $500k attached on up into single family homes in the millions). She is constantly smacking her head over all of the shortcuts builders take to "get the job done and move on".
Yah, but every house was new construction at one point...
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Re: How much should we offer? | First time home buyers

Post by Mr.Chlorine »

I assume location matters in all real estate questions, but I had a similar situation earlier this year. Builder had three options (same floor plan) all priced the same: choose one of their already built homes, one of their in progress homes, or one of their empty lots and they will build the home. The in progress and not started homes I could pay extra for upgrades, but the base price was the same for all three. My realtor (family friend) said they would only accept full price, no negotiating there. Mentioned that was a marketing tool for them, since no one would pay full price if they saw public records of their neighbor paying less. He did, however, say that some would negotiate on upgrades or lender credits. I ended up going with a different home but I trust my realtor was being honest about my local market.
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Re: How much should we offer? | First time home buyers

Post by Freetime76 »

atikovi wrote: Mon Jul 13, 2020 4:24 pm
ResearchMed wrote: Mon Jul 13, 2020 4:08 pm
atikovi wrote: Mon Jul 13, 2020 3:50 pm
kadye wrote: Mon Jul 13, 2020 3:48 pm
ResearchMed wrote: Mon Jul 13, 2020 3:40 pm What does your real estate agent suggest, for starters?

RM
He said full price.
But off course. They work on commission based on the sale price.
Right.

But that agent cares a lot more that there IS a sale than whether it is a full priced sale.
Why wouldn't there be a sale if you offered full price?
I think this person meant the builder would accept full price, so it’s a done deal. If they negotiate, there may not be a sale at all if the builder declines.

For the OP: another vote for considering the basement finish...my mom has a full basement, unfinished except for hvac, plumbing stubs, windows and French doors to a patio. It’s her dumping ground (things go down there...and never leave :shock:, kids can rollerblade in laps down there - it’s huge ).
Congrats and good luck!
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