Making an offer - what discount on asking price?

djk1000

I'm completely new to the property thing, I'm happy as larry renting for many years, but my mother is wandering around a fairly big house by herself now and she has decided that it's time to downsize.

She's looking around for a small place in south Dublin and luckily she has the funds to buy outright (budget of about €240,000). So far she has been looking online and in auctioneers windows for places advertised at 240k or less.

My question is, how do you think prices are being set now? Are agents deliberately advertising a higher price expecting a lower bid? Or are the prices advertised reasonably close to what sellers expect to get? Should she be looking at properties advertised at say, 300k and under for example? Does the fact that she is a cash buyer strengthen her position much?

Thanks in advance!

who_ru

well i'm no expert but i'd say a cash buyer is as good as it gets in the property game these days.

it's not just estate agents pricing up, but vendors too. a very rough rule is to find out what property in the area you're looking at is renting for. for example say 1,000euro per month, multiply this by 12 for 1 year and then by 15 to get an approx estimate of a property's worth - at least this is what i came across before. but of course a lot of property in ireland is still vastly over valued, so compare all similar properties, i bet there is a vast difference in asking prices. check local amenities - public transport etc.

Also be prepared to be outbid by a 'phantom bidder' - that is after you make a bid the estate agent will suddenly tell you someone else has bid within 5% of the asking price - tell the agent ok and you withdraw your offer. wait for the phone to ring again with the agent asking you if your offer is still there.

you can also check out irish property watch http://irishpropertywatch.com

this will tell you about any changes in prices in an area.

Good luck - never pay the asking price - go low - you are a cash buyer!

Wibbler

djk1000 wrote: »

My question is, how do you think prices are being set now? Are agents deliberately advertising a higher price expecting a lower bid? Or are the prices advertised reasonably close to what sellers expect to get? Should she be looking at properties advertised at say, 300k and under for example? Does the fact that she is a cash buyer strengthen her position much?
Thanks in advance!

As the previous poster has said, being a cash buyer is a fantastic position to be in (ignoring the question as to whether now is a good time to buy). Do not underestimate the power of cash. At the moment, buyers who have approval in principle for a mortgage of a certain amount are finding those approvals being watered down or withdrawn once they set the wheels in motion to buy. It's a lot of hassle for a vendor to go through the process of accepting an offer and then have it fail. In a market where prices are dropping at over 1% per month a few trips through that can be very costly for a vendor. So your cash offer is less risky for the vendor and they can be more certain of the outcome. This has significant value, IMHO.

I think in pricing a property, vendors are expecting to have to take between 10-15% less than asking in order to sell the property. Buyers know this and are offering accordingly.

So bid low. You can always raise your offer if it makes sense to do so.

Benedict

The thing to remember is that the time is fast approaching where the vendor will be under pressure to accept even a very low offer. If he waits, he may not get any offer at all come 2011. The economy is in freefall, there are over 300,000 properties unoccupied, 30,000 mortages in serious arrears, businesses going bust by the skip-load, wages being cut and yet houses are still grossly overpriced. It's the biggest bluff in history.

Don't offer 15 or 20% less than the asking price. Offer 40-50% less because that is generally what the house is worth.

who_ru

Benedict wrote: »

The thing to remember is that the time is fast approaching where the vendor will be under pressure to accept even a very low offer. If he waits, he may not get any offer at all come 2011. The economy is in freefall, there are over 300,000 properties unoccupied, 30,000 mortages in serious arrears, businesses going bust by the skip-load, wages being cut and yet houses are still grossly overpriced. It's the biggest bluff in history.

Don't offer 15 or 20% less than the asking price. Offer 40-50% less because that is generally what the house is worth.

Sound advice can't go wrong by following this.

Treehouse72

Benedict wrote: »

The thing to remember is that the time is fast approaching where the vendor will be under pressure to accept even a very low offer. If he waits, he may not get any offer at all come 2011. The economy is in freefall, there are over 300,000 properties unoccupied, 30,000 mortages in serious arrears, businesses going bust by the skip-load, wages being cut and yet houses are still grossly overpriced. It's the biggest bluff in history.

Don't offer 15 or 20% less than the asking price. Offer 40-50% less because that is generally what the house is worth.

Correctamundo. IMOamundo.

RATM

OP first I'd advise that your Mum rents for the next 1-2 years- if she approaches landlords and says she can pay all of the two years rent up front in one go then she'll be like gold dust in this market and will get a very good deal.

But assuming you cannot convince her of the financial logic of this then why not play the estate agents at their own game? This sounds like it will be your Mum's final house so its important for her retirement that she doesn't over pay in a falling market.
So what you do is this. Your Mum goes house hunting on her own. When she finds a place she likes she'll let you know. Then you go house hunting to the same house. A few days later put in a riducously low-ball offer, perhaps 35-40% below the asking. Here you are testing the market, you're not expecting this to get accepted (but if it does then bite their arm off).

Then let a few weeks pass and the agent will get back to you saying the offer is refused. Next your Mum asks for a second viewing of the house. She shows some more interest. You now have information as to what the vendor won't accept (from the first refused offer) which can guide your decision on what they will accept.

Also it has another advantage- if a seller gets a low ball offer and later gets an offer 10% above this then they'll begin to see the second offer in a better light even if it is below their asking price. They'll start thinking if they don't sell now at that price it may well drop to the low ball offer they refused in the first place. You'll be placing a seed of doubt in the sellers mind- in the absense of independently verified sales prices this is exactly what you should be aiming for.

The EA's would pull the exact same trick on you with their phantom bidders so don't feel one bit guilty about pulling this stunt, in a falling market it is one way to get the price you want.

djk1000

Lots of good advice there, thanks!