Why Do Buyers Think Cash Offer on House Justifies Low Ball?

[Wolf359]

Originally Posted by JeffKeryk
Originally Posted by Wolf359
Originally Posted by JeffKeryk
Why would someone take less than market?
Perhaps if they had to sell due to another contingency sale, but that is different.


I don't know what you're referring to or what point you were trying to make.

What is market price? The seller determines the sale price, the buyer is only willing to pay whatever they think it's worth. The market price is whatever the buyer and seller can agree to. You can go by comps, but at a certain point, the greater fool theory takes over and all the people willing to pay the previous prices are gone and you are left with just the ones that made the offers that you have in hand. You can either wait for others or accept the one you have. That's the seller determining the sale price. If the price is too high, there's no sale. A comp is a comp. There's no difference to an appraiser, it's a meeting of the minds. They just adjust for size, location and other tangibles. If they had to sell in a hurry or not isn't reflected in the MLS database so back we go to a comp is a comp. You can always get more or less than a comp, that's how the market moves up or down. So hence the unknown meaning of why you would take less than market. If you're going to take something, that IS market.

Easy answer. The OP states his property is in a seller's market location. He also states buyers do not think he is overpriced. Why should he take a low ball offer?


The market price is whatever the property sells at. The asking price is just an estimated number of that value. You may get more or less. You don't really know what the "market" price is until it sells. If you've priced it well, you will get your asking price or above.

So your question is really meaningless. Why should someone take less than market? If you only know what market is after it sells, how do you really know what market is?

You take whatever you feel the house is worth. If you think it's worth more, you can hold out for more. OP hasn't posted any details so no real advice one way or the other.

 

[Kage860]

It is the tail end of the winter. Winter market prices are lower than summer. If OP wants full price he'll have to wait for it like everybody else.

 

[dishdude]

Originally Posted by PimTac
Let's turn the question around. If you are willing to pay cash for a house, wouldn't you submit a lower offer?


If the seller is looking for a quick close I guess that would be an incentive, otherwise I don't see how a cash offer makes much of a difference to the seller.

 

[JeffKeryk]

Originally Posted by Wolf359
Originally Posted by JeffKeryk
Originally Posted by Wolf359
Originally Posted by JeffKeryk
Why would someone take less than market?
Perhaps if they had to sell due to another contingency sale, but that is different.


I don't know what you're referring to or what point you were trying to make.

What is market price? The seller determines the sale price, the buyer is only willing to pay whatever they think it's worth. The market price is whatever the buyer and seller can agree to. You can go by comps, but at a certain point, the greater fool theory takes over and all the people willing to pay the previous prices are gone and you are left with just the ones that made the offers that you have in hand. You can either wait for others or accept the one you have. That's the seller determining the sale price. If the price is too high, there's no sale. A comp is a comp. There's no difference to an appraiser, it's a meeting of the minds. They just adjust for size, location and other tangibles. If they had to sell in a hurry or not isn't reflected in the MLS database so back we go to a comp is a comp. You can always get more or less than a comp, that's how the market moves up or down. So hence the unknown meaning of why you would take less than market. If you're going to take something, that IS market.

Easy answer. The OP states his property is in a seller's market location. He also states buyers do not think he is overpriced. Why should he take a low ball offer?


The market price is whatever the property sells at. The asking price is just an estimated number of that value. You may get more or less. You don't really know what the "market" price is until it sells. If you've priced it well, you will get your asking price or above.

So your question is really meaningless. Why should someone take less than market? If you only know what market is after it sells, how do you really know what market is?

You take whatever you feel the house is worth. If you think it's worth more, you can hold out for more. OP hasn't posted any details so no real advice one way or the other.

If you don't know the market value of a property, how do you set the price?
I a buyer doesn't know the market, how do they know how much to offer?
Additionally, bank loans are based partially on local market prices.
If you are asking for a loan way over market value you will be denied. Way under and the loan approval process becomes easier.

My question is the basis of all real estate sales. Given what the OP stated, why would he settle for less?
"The market price is whatever the property sells at." Wrong; that's the sales price. It will affect the market.
"OP hasn't posted any details so no real advice one way or the other." Wrong. He stated he is in a seller's market. He stated potential buyers are not complaining about his asking price.

 

[Wolf359]

Originally Posted by JeffKeryk
If you don't know the market value of a property, how do you set the price?
I a buyer doesn't know the market, how do they know how much to offer?
Additionally, bank loans are based partially on local market prices.
If you are asking for a loan way over market value you will be denied. Way under and the loan approval process becomes easier.

My question is the basis of all real estate sales. Given what the OP stated, why would he settle for less?
"The market price is whatever the property sells at." Wrong; that's the sales price. It will affect the market.
"OP hasn't posted any details so no real advice one way or the other." Wrong. He stated he is in a seller's market. He stated potential buyers are not complaining about his asking price.


It's a guess. There's no actual number. It can be based on the comps. The buyer will offer whatever he feels the property is worth. The seller decides the sale price.
Bank appraisers are somewhat of a joke. They basically get to see the P&S where the sale price is already determined. They just rubber stamp the price. As long as it's within a few percent of the other comps, they let it go. There was a meeting of the minds. Therefore whatever the sale price is, is the market price. They play games once in a while where the buyer might offer a little more and it's way out of line with other comps.
Why would the seller settle for less? Seller has provided no real details. There's always seller bias. Ever seller always feels their house is worth more than the one down the street for whatever reason as they know their house better than any other house on the market. We only have what the seller has told us. We don't know that it's actually true. I represent potential buyers all the time. Unless it's grossly off, I never really say anything about the price, I'm not giving away work for free. Buyers usually have no clue what the house is really worth unless they like the place. Then we look up the comps for the area. Comps change all the time.

 

[LoneRanger]

JeffKeryk, you seem to get it. I have zero incentive to give consideration to a low offer of any kind at this time. Potential buyer throwing the word cash around is also zero incentive at this stage in the game, unless the offer is reasonable. Only thing the house is costing me right now is gas and electric, and that bill hasn't cut yet since the move-out.

 

[JeffKeryk]

Originally Posted by LoneRanger
JeffKeryk, you seem to get it. I have zero incentive to give consideration to a low offer of any kind at this time. Potential buyer throwing the word cash around is also zero incentive at this stage in the game, unless the offer is reasonable. Only thing the house is costing me right now is gas and electric, and that bill hasn't cut yet since the move-out.

I will be putting up my folks home in Sunnyvale, CA (heart of Silicon Valley) in a short time. The house next door went up for $2.25M which was over the market value. The owners thought they should get top money but their house needed a new kitchen and more.
After 2 weeks, they dropped the price to $2.1M and had 3 offers in 1 day, all over $2M. That's the market value vis a vis other comparable properties.
I will do the kitchen, paint the inside and refinish the hardwood floors. The we will price the house accordingly.

 

[billt460]

Originally Posted by JeffKeryk
He stated potential buyers are not complaining about his asking price.

They're not the one's making an offer. So what they're not complaining about means little. The offer on the table is 10% under his asking price. Everything else is just talk. And that comes cheap.

 

[Vuflanovsky]

It doesn't matter how anecdotal the potential buyers view is as long as it aligns with what they're selling for in the neighborhood. In fact, buyer pricing sentiment is probably more reflective in that idea than a first offer that doesn't align with the goals of the seller or the selling prices in the neighborhood.

 

[PandaBear]

Originally Posted by JeffKeryk
If you don't know the market value of a property, how do you set the price?
I a buyer doesn't know the market, how do they know how much to offer?
Additionally, bank loans are based partially on local market prices.
If you are asking for a loan way over market value you will be denied. Way under and the loan approval process becomes easier.

My question is the basis of all real estate sales. Given what the OP stated, why would he settle for less?
"The market price is whatever the property sells at." Wrong; that's the sales price. It will affect the market.
"OP hasn't posted any details so no real advice one way or the other." Wrong. He stated he is in a seller's market. He stated potential buyers are not complaining about his asking price.



That's an easy answer. If you do not have competing offer you don't know. If you don't have a price that you are about to walk away from you don't have a market price.

Just one buyer and one seller making offers not acceptable to either side is NOT a market price.

Make a counter offer, wait for a few more offer, you'll figure out very quickly.

 

[Vuflanovsky]

What does that 5-10% under asking price represent in relative monetary terms??...you might not need to even worry about it representing a market price. An offer like that definitely wouldn't in our area.

I think the OP has already come to conclusion that this offer isn't about establishing a market price but it's more akin to somebody who's under the gun with a 1031 exchange that needs to get a property when he can wait and probably sell it for X percent more.

 

[pandus13]

Originally Posted by Vuflanovsky
... but it's more akin to somebody who's under the gun with a 1031 exchange that needs to get a property ...

[off-topic]
I would not have believed somebody on this site knows about these 1031s....

OP, stick to your guns. The house does not eat much now, and selling seasons just starts in a bit...

 

[Vuflanovsky]

Originally Posted by pandus13
Originally Posted by Vuflanovsky
... but it's more akin to somebody who's under the gun with a 1031 exchange that needs to get a property ...

[off-topic]
I would not have believed somebody on this site knows about these 1031s....

OP, stick to your guns. The house does not eat much now, and selling seasons just starts in a bit...


Thanks? I think?? You could say that in any "hot" real estate markets these 1031 exchanges are more common than the common cold and kind of smack of the type of offer the OP received. I sold last December and a third of the potential buyers involved 1031 exchanges so it rang familiar to me.

 

[ArrestMeRedZ]

Ca'mon, we all know about 1031s.

I had somebody that wanted to buy one of my properties once. It was a bad rental I got stuck with when a partner bailed. I indicated I would have to get a ridiculous price in order to be made whole and named the number. He agreed, and set a quick closing to meet his 1031 timing requirements. He got his tax break, and I made a big loss into a bit of a win.

 

[Sonic]

My wife and I have bought and sold MANY homes over the last 20 years. Just sold 2 inside the last 24 months. To US the 'cash offer' is basically a buyer coming in and stating that they are removing one of the big contingencies in the process of buying a house. If someone is paying cash then they don't have to deal with a mortgage. Getting a mortgage on a house requires a mortgage appraisal (although the results may not matter to the buyer depending on how much they are putting down). Now, depending on where you are starting price wise when first listing your house you may be close to what it can actually sell for or you're asking for quite a bit more to give room for negotiating. Having bought and sold well over a dozen homes I can tell you that the mortgage appraisal can totally throw a wrench in the works. It can help you or hurt you whether you are buying or selling. Or it can completely ruin a sale altogether. I've been in all situations. Realtors almost always tell a seller where to start the asking price. That's their business to know what things in the area are selling for. Of course they run the number up a bit, you have to start high. Say you get an offer for 20K less than asking. Are you sure your house will appraise for that amount? Or will it appraise higher? Might even be much lower. You really don't know. A mortgage appraiser comes in and uses comps and comes up with a number. Buyers will almost always use this number if it's lower than your agreed upon sale price. We've done it and had it done to us. We've gotten good deals on homes because the appraisal came in low and we said that's the number we'll pay. Take it or leave it. depends on the seller and their situation. We've walked from sales and had people walk on us because we couldn't negotiate where everyone was happy. So, if a buyer comes in with a cash offer they most likely won't get any type of appraisal. Another thing we have done is get an appraisal as sellers to see what the house is worth before listing. This way you can save time deciding what to do with offers.

 

[hatt]

Originally Posted by Sonic
My wife and I have bought and sold MANY homes over the last 20 years. Just sold 2 inside the last 24 months. To US the 'cash offer' is basically a buyer coming in and stating that they are removing one of the big contingencies in the process of buying a house. If someone is paying cash then they don't have to deal with a mortgage. Getting a mortgage on a house requires a mortgage appraisal (although the results may not matter to the buyer depending on how much they are putting down). Now, depending on where you are starting price wise when first listing your house you may be close to what it can actually sell for or you're asking for quite a bit more to give room for negotiating. Having bought and sold well over a dozen homes I can tell you that the mortgage appraisal can totally throw a wrench in the works. It can help you or hurt you whether you are buying or selling. Or it can completely ruin a sale altogether. I've been in all situations. Realtors almost always tell a seller where to start the asking price. That's their business to know what things in the area are selling for. Of course they run the number up a bit, you have to start high. Say you get an offer for 20K less than asking. Are you sure your house will appraise for that amount? Or will it appraise higher? Might even be much lower. You really don't know. A mortgage appraiser comes in and uses comps and comes up with a number. Buyers will almost always use this number if it's lower than your agreed upon sale price. We've done it and had it done to us. We've gotten good deals on homes because the appraisal came in low and we said that's the number we'll pay. Take it or leave it. depends on the seller and their situation. We've walked from sales and had people walk on us because we couldn't negotiate where everyone was happy. So, if a buyer comes in with a cash offer they most likely won't get any type of appraisal. Another thing we have done is get an appraisal as sellers to see what the house is worth before listing. This way you can save time deciding what to do with offers.

Posts like this are why real estate agents will always have employment.

 

[pandus13]

Originally Posted by ArrestMeRedZ
Ca'mon, we all know about 1031s.

I had somebody that wanted to buy one of my properties once. It was a bad rental I got stuck with when a partner bailed. I indicated I would have to get a ridiculous price in order to be made whole and named the number. He agreed, and set a quick closing to meet his 1031 timing requirements. He got his tax break, and I made a big loss into a bit of a win.

ArestMeRedZ and Vuflanovsky, I think is good people knowing about the tax saving/defering of a good executed 1031.

I didn't really see them in the Midwest, but heard about them. (I'm also out of the game for about 1.5 years)

OP/LoneRanger, sorry for thread derailing. But that would explain the rush.

 

[Sonic]

Originally Posted by hatt

Posts like this are why real estate agents will always have employment.



When moving for a job from one state to another the simplest way to do it is with a realtor. We don't move for the fun of it either. Usually all costs associated with the move are covered too. House hunting trips, closing costs, realtor fees, moving semi and movers.

 

[Andrew1972]

You are making the home owners or buyers mistake of getting emotional attachment to a financial decision becoming "mad".

A initial offer is just that, you can counter offer and see what transpires. I have made a lot of home owners "mad"(even at closing) including the one I live in but in the end its a financial decision for all parties.

 

[alarmguy]

Originally Posted by LoneRanger
Realtor called. Excited to relay to me that I got an offer on my house that we just listed week or so ago. Wanted me to come to the office this evening. I told him to summarize first. Turns out it's a "cash offer" but is more than 10% below asking price, they want everything including full year of upcoming property taxes (which aren't cheap around here). I told him that while it's nice to get an offer, 1. the spring real estate rush hasn't even started yet here, 2. we just listed recently, 3. it's a clear deed (mortgage is paid off), so why would I get excited about this offer the house is not costing me much to sit there ,and 4. every single feedback we've received from showings so far have checked the box "at market price" among the choices for opinion on where we have it priced. So why would a low ball "cash" offer that also demands full yr of real estate taxes up front get me all hot and bothered?

Most houses sell for 96% of their asking price...

I know you're not supposed to let emotion get hold of you in these matters, but you guessed it-- the low ball offer made me mad. I am still meeting with realtor this evening at their office to write a counter-offer. But being only weeks into it, I'm not going below 97% of asking and could not give a shizzle if it's cash, FHA, conventional mortgage or even Bitcoin (LoL). Funds are funds, long as it's legit. This isn't a car, it's a house. Cash my butt.


I have have handled literally tens of millions on real estate transactions for about a decade.
This is why many people need a good real estate agent.
You are looking at your house as a home but its a financial transaction, nothing more.
You need to take the (understandable) emotion out of it and look at it from that perspective.

So -
You should be thrilled that you got an offer.
The offer is not a low ball offer as no one else who has seen the house has made an offer. So, so far, its the best offer you have had to date and these people stepped up to the plate and made it.

Cash offers are terrific for people who MAY have CO issues and such, more or less, cash offer "as is" is a great sale for SOME people.
When a bank is involved, the bank decides if they will buy the house for the buyer to pay them back.

Spring selling season, yes, ok I get it, but some of my clients would get their best offers before all the other homes came on the market in the spring, more or less, some people, if moving into a new area tend to get nervous on timing and like things done ahead of time to feel secure.
More homes on the market, more competition in the spring.

Anyway, every area is unique, every market is different and your feelings may very well be right hanging in there but just make sure you are looking at every aspect of every deal with an open rational mind and not trash someone for making an offer.
They make an offer on their feelings of what something is worth to them, dont over react and take it personal and thank them for being the only ones to offer anything so far.

If you take their offer in an understanding way, you can nicely counter or tell them flat out no but in a nice way with an explanation of why, because you never know, the buyers might actually see your point and accept your counter offer.
Dont be a hothead.

BTW, it doesnt matter to the buyer if its a clear deed or not and if most homes sell for 96% percent that doesnt mean yours will BUT with that said, if your expecting within 96% then you are only 6% off the price you expect not 10%, to me, that seems darn close to the offer and maybe a deal could be put together. )

Good Luck.

(disclaimer these are my personal thoughts I am not practicing real estate or giving professional advice, only your real estate agent can) *L*


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