Buying a House... Negotiations...

[Phanuthier]

Thinking out loud here cause I can't sleep. Where I live (South Bay, San Francisco Bay area) I put in an offer for a house. (I'll use real numbers since I"m too lazy to come up with hypotheticals).

Townhouse: $438k listing price.... I offer $453k.... 12 offers on the house, the seller came back to the top 3 offers (I was one of them) and asked for $475k, remove contingency on home inspection, remove contingency on appraisal.

I think this is pretty ridiculous and bad form, but I would like this property around the range of $453k, so I said to my realtor offer $455k and give them 3 hours to decide. (Reasoning: my leverage is time) If they say no, then its no. If they say yes, great. If they are on the fence, give them 1 hr to take it or leave it as it is time sensitive and there is a Plan B option. Essentially, I've come to realize the past hour or so I'm facing Prisoners Dilmna / Game Theory, and in this negotiation where the "prisoner" is blind, I'm somewhat negotiating against myself.

Thoughts? Tactics? Stories on negotiations?

[freedogger]

Buy a house boat.

[Phanuthier]

Originally Posted by freedogger

Buy a house boat.

You might have said that as a joke, but I actually thought about it....

Oh and as for time limits... house was put on the market 5 days ago, they took offers today at 5pm, counter-offer at 9pm... gave me 48 hours to counter offer. In case anyone might think I'm aggressive with the time frame (which I am).

[Phanuthier]

Thinking more out loud, since they said mine was one of the top offers.... I offer $15k above asking, they want $22k above that (so $32k above asking)... I got to wonder if they are getting the $475k as near double of the top offer?

If $458k is my breaking point, and I counter their counter of $455k, if its close they'll keep it in mind and negotiate. If someone offers near their asking and I'm way off, they'll let me walk.

[freedogger]

Yeah I was half joking. My wife reads blogs of people who live and sometimes work from boats in the US with families. No property taxes, probably no mortgage. Easy to move to where the work is. The limited space keeps the useless possesions to a minimum and the families seem to bond and grow pretty close. That's the rosy side, I'm sure it would be quite easy to find som negatives...

Your situation with that house seems "non negotiable" at best you'll pay no more than you can stomach.

[SebC]

I would not agree to remove the contingency on home inspection if I were you.

[Sliver]

Originally Posted by SebC

I would not agree to remove the contingency on home inspection if I were you.

Waive the formal home inspection but then make sure they allow you another walk through so you can check everything out yourself. Then just bring a home inspector with you on the walkthrough. That's what I did and it worked like a charm. They never even knew.

[oilyfan]

Originally Posted by Sliver

Waive the formal home inspection but then make sure they allow you another walk through so you can check everything out yourself. Then just bring a home inspector with you on the walkthrough. That's what I did and it worked like a charm. They never even knew.

But did you make the sale contingent on the walk through? What if you found something wrong?

To the OP, I didn't realize that there are bidding wars going on right now for properties.

[Sliver]

Yes, the sale was contingent on the walkthrough otherwise it would have been a pointless exercise.

[mykalberta]

Back in 2006 when I was looking there were lots of bidding wars on Calgary.

Back the I had a 225k limit, the condo listed for 195 and when I looked at it I figured it would need 20K in renos to make it worth it so I bid 200 no conditions (already knew someone who lived there and used their home inspection).

Sat in the car for an hour, seller came back and said "love your "clean" offer but could I go to 220k, It told my realator to fk them and we drove off.

I know the dilema you are in, I was in 6 bidding situations all of which I lost until at the last round of looking I found a place that I made an offer and they accepted it but there was no bidding in that situation. The big thing for you is look to see what places like that are going for, if they are going for 460 then they want to much, if its going for 480 then its in the ballpark no matter what their asking price was.

[Bean]

Originally Posted by Sliver

Waive the formal home inspection but then make sure they allow you another walk through so you can check everything out yourself. Then just bring a home inspector with you on the walkthrough. That's what I did and it worked like a charm. They never even knew.

This is a great idea; especially in a market where things are going a little nuts. What happens if the seller or their agent discover that the buddy you brought with you is really an inspector?

Out of curiosity, if you used a realtor; did they know what you were doing?

[Northendzone]

that seems like craziness to spend $450k on something that has not been inspected by someone with a trained eye - man, I'd be sick over taking that kid of a chance.....

interesting they list the hosue at $438 and then come back and want $475 (an 8.5% increase). is this common practice now?

[darklord700]

If you Holmes on Homes enough, you'll know a lot of the so called home inspection isn't worth anything. That's is not to say you shouldn't do it though.

[rd_aaron]

Originally Posted by Northendzone

that seems like craziness to spend $450k on something that has not been inspected by someone with a trained eye - man, I'd be sick over taking that kid of a chance.....

interesting they list the hosue at $438 and then come back and want $475 (an 8.5% increase). is this common practice now?

It's happening in the hot markets right now. Toronto is a good example. Lots of houses priced lower than they're worth to get a bidding war going. It's beneficial to the seller cause when you get multiple parties bidding against each other, they likely end up bidding slightly higher than they would had they listed the place accordingly. Also, as in Phanuthier's case, if they don't like any of the offers, they can counter something even higher.

[mykalberta]

Its a great tactics for sellers who are looking to get the most money and terrible for buyers who are looking to spend the least amount of money.

Remember, women are like houses, there are lots out there that will fit with you, dont get in a situation where you have blinders on and think this is the only one for me - trust me, its not.

[Bill Bumface]

I'd say any market were crazy bidding wars are happening (unless they created this one by purposely listing very low) isn't a market worth buying in right now. Rent and ride it out.

[Sliver]

Originally Posted by Bean

This is a great idea; especially in a market where things are going a little nuts. What happens if the seller or their agent discover that the buddy you brought with you is really an inspector?

Out of curiosity, if you used a realtor; did they know what you were doing?

My realtor was uncomfortable with it at the time, but his business partner thought it was a pretty cool move and had never heard of anybody doing that in her 25-year career.

I'm not sure what the seller and their agent would have done if they had discovered what we were up to. It worked out well for them and I know there were multiple offers. My offer was tight and forgoing the inspection was a real coup as I know a previous deal for them had cratered following a home inspection.

[Phanuthier]

Originally Posted by oilyfan

But did you make the sale contingent on the walk through? What if you found something wrong?

To the OP, I didn't realize that there are bidding wars going on right now for properties.

Originally Posted by hulkrogan

I'd say any market were crazy bidding wars are happening (unless they created this one by purposely listing very low) isn't a market worth buying in right now. Rent and ride it out.

I think its due to being caught in a situation where prices are still low from 2008, but low supply and high demand, combined with low interest rates. Over a 20 year period (3 economic cycles) assuming real estate inflation of 3%, we're still "low".... but low supply/high demand won't keep it there much longer.

Originally Posted by mykalberta

Back in 2006 when I was looking there were lots of bidding wars on Calgary.

Back the I had a 225k limit, the condo listed for 195 and when I looked at it I figured it would need 20K in renos to make it worth it so I bid 200 no conditions (already knew someone who lived there and used their home inspection).

Sat in the car for an hour, seller came back and said "love your "clean" offer but could I go to 220k, It told my realator to fk them and we drove off.

I know the dilema you are in, I was in 6 bidding situations all of which I lost until at the last round of looking I found a place that I made an offer and they accepted it but there was no bidding in that situation. The big thing for you is look to see what places like that are going for, if they are going for 460 then they want to much, if its going for 480 then its in the ballpark no matter what their asking price was.

Yeah thats the tough thing about where I am... in my neck of the woods, real estate more or less grew with the tech boom/bubble in the 1990's, and you can see it in the city planning, or lack thereof. In Calgary you can gauge prices from community, but here you see variation of 25% higher/lower from block to block. Thus I'm looking at "cheaper" blocks of high demand communities... problem is there appears to be no recent sales within this "block" in the past year or so. that fit the criteria.

Originally Posted by Northendzone

that seems like craziness to spend $450k on something that has not been inspected by someone with a trained eye - man, I'd be sick over taking that kid of a chance.....

interesting they list the hosue at $438 and then come back and want $475 (an 8.5% increase). is this common practice now?

this is what bugs the crap out of me, and i find dishonest (though I don't have experience playing these little negotiations in my workplace)..... but its to create a bidding war, prisoners dilemma as I noted above. Thus the motivation for my thread, how someone in my situation can get the upper hand or take back some leverage when I'm stuck in prisoners dilemma?

[burn_this_city]

I would stand firm on my original offer and see if they are just trying to gouge for more.

[Phanuthier]

Originally Posted by burn_this_city

I would stand firm on my original offer and see if they are just trying to gouge for more.

I just counter'ed their counter of a slight bump ($453k --> $455k, they asked for $475k just to recall; without a doubt they are trying to gouge for more, listing at $438k then countering at $477k?) and I waived the contingency on appraisal but said there is no way in hell I'd waive the inspection contingency.

In addition, I said they have 5 hours to decide on my counter or I withdraw my offer and I am ready to move on Plan B. I'm hoping by putting the time pressure on them, gives me the leverage up.