Making an Offer (contingent, 5%, agent, mortgages)
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We are going to make an offer on the house that already has a contingency offer. What % below the asking price we can start with? Can we offer 5% below the asking price?
No such "rule of thumb" exists / is useful. Listing price is MEANINGLESS for determining the FAIR MARKET VALUE as determined by recently closed comparable sales.
What EVERY buyer and their agent really needs to do is pull together comps. Beyond that I strongly recommend that additional analysis is useful: folks that list far above what is supported by comps are unlikely to accept an offer that reasonable -- better to let others "beat them up" with what be perceived as "low ball offers", similarly given how many folks are currently upside down it is good to determine if the property is a likely "short sale" as that can influence their ability to deal, so to can it be useful to pull together data from the local assessor so that you have a sense for both what the taxes have been and what they might change to especially relative to similar homes in the neighborhood...
The situation that you encounter when a home has a offer that is contingent upon those "buyers" selling their home is tricky -- presumably the seller accepted that contingency because they felt that the "buyer" offered them a good price and the other home would sell, but even that assumes that the seller has a skilled agent -- too many inexperienced agents recommend such deals when there is pretty much NO chance that the other house will sell at the price needed. Heck when I have advised my sellers to turn down a contingency sometimes it has been because I take a quick look at the "buyers" house and have seen that its condition is such that it is unlikely to ever attract buyers at anything near the suggested listing price.
Sometimes you can "wait out" such contingent offers and get a bargain as the sellers are desperate to get any offer.
On the other hand I have seen a few contingent offers when the buyer REALLY wants the house and although their preference is NOT to carry two mortgages they have the financial ability to do so. In such cases the contingent buyer will respond to your new offer by cancelling the contingency , matching your offer, and essentially entering into a "bidding war" against you. This can happen even in "down markets" as there is every reason to suspect that the original contingent offer is /was reflective of current inventory level BUT the presence of ANOTHER BUYER changes the dynamic tremendously...
In short, you GOTTA OFFER what the MARKET says makes sense. If the seller counters you GOTTA stick with your comps and avoid the tendency to let emotion sway you. Regardless of who else wants this home and what they are willing to pay the value that you assign to the home needs to be based on supportable numbers or no lender will finance you. EVEN THEN the potential to drive prices higher is EXACTLY how legitimate price gains did happen not too long ago and you ought to keep in mind that there are almost certainly other houses that will meet your needs so you should have a few alternatives to make bids on if this does not work out. Crazy low rates will not last forever and non-contingent offers are much simpler to deal with...
Thank you very much for everythink you explained. We did comp analysis. It is much desired gated golf community, and the house is priced resonably. But I don't think we are going to enter in the bidding war. If the other buyer remove the contingency and will start bidding against us, I think we will walk away.
I would not offer full price in any case. But if there wasn't any contract on the house, I would be more agreressive with my offer. Now when the seller already has a potential buyer, I don't know how agressive I can be, probably not as agressive as I would be if there was no contract. Does it make sense? I would like to know what you think on this reasoning.
Thank you
I would not offer full price in any case. But if there wasn't any contract on the house, I would be more agreressive with my offer. Now when the seller already has a potential buyer, I don't know how agressive I can be, probably not as agressive as I would be if there was no contract. Does it make sense? I would like to know what you think on this reasoning.
Thank you
If you like the house and you want the house why wouldn't you be agressive regardless? As long as you don't get too emotionally attached to the home you can still go after it like you want it.
Otherwise why even put in an offer in the first place??
I would not offer full price in any case. But if there wasn't any contract on the house, I would be more agreressive with my offer. Now when the seller already has a potential buyer, I don't know how agressive I can be, probably not as agressive as I would be if there was no contract. Does it make sense? I would like to know what you think on this reasoning.
Thank you
My home is worth about $285,000--$295,000.
If I put it on the market at $240,000 to get a quick sale, would you refuse to pay asking price?
What percentage would you offer off list price?
... In such cases the contingent buyer will respond to your new offer by cancelling the contingency , matching your offer, and essentially entering into a "bidding war" against you. ...
Our contingency addendum allows the first buyer 5 days to remove the contingency if the seller accepts a back-up offer, or the contract is canceled. No bidding war involved. The first buyer has a valid contract and once the contingency is removed in the allowed time, it's still valid and the seller is committed to follow through even if the backup is higher.
The OP may want to consider submitting a backup offer just in case the first buyer is unable to remove the contingency. Even if it's a lower offer, the seller may prefer it over an uncertain outcome with the first buyer.
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It is about VALUE, not PRICE!
