What's a realistic offer?

swillybabe

I'm looking at a property and Asking price is now 200,000. What would be a realistic offer to make? As a first time buyer, i dont have a clue of how the system works!

robd

swillybabe wrote: »

I'm looking at a property and Asking price is now 200,000. What would be a realistic offer to make? As a first time buyer, i dont have a clue of how the system works!

These days it, usually starts at around 20% under asking on fairly priced property that's not been up for too long (i.e. over 6 months) The property being fairly priced is obviously very subjective.

At that price I'd advice you not to offer numbers rounded to €1000 as looks like you're too easy with money. Round to €250.

So offer say €159,500 or less to start with. Increase at 250-2000 at a time getting lower (maybe 50% lower) each time. Don't increase offer over phone if EA comes back to reject an offer. Wait a few days or a week or even two. Always take time and talk to other half or parents or financially savvy person between each offer.

Say it's final offer after two or three even though it might not be. There can always be an final final offer etc.

Try asking EA to get seller to come back with an offer of what they'll take if your offer is rejected. That's not to say that they will but worth a try as it brings asking down.

Best of luck.

daltonmd

swillybabe wrote: »

I'm looking at a property and Asking price is now 200,000. What would be a realistic offer to make? As a first time buyer, i dont have a clue of how the system works!

What's your budget?

What are your earnings?

Have you stressed your repayments to take illness/unemployment into account?

Will the house meet your needs in 7 years time?

It really is about what your budget is and what you can afford.

daltonmd

MrThrifty

I think it's worth stating that the old saying 'a house is only worth what a buyer is prepared to pay' was meant along the lines that a house is only worth what a buyer values it at assuming they have more than sufficient funds and NOT what a buyer can only afford. The latter would imply that a luxurious palace is only worth 50k because Jim the unemployed builder is the only person really interested in it but unfortunately has just 50k in his savings account.

I've been shocked over the last few days (outside of boards) with how people are currently putting a value on property. I appreciate that poor demand can mean that houses are sold at a discount but let's get real here. And this assumption that every single property out there on the market is 20% overvalued -> sure if we maintain this attitude then properties will be soon be worth 0. A brick alone costs something.

robd

MrThrifty wrote: »

And this assumption that every single property out there on the market is 20% overvalued -> sure if we maintain this attitude then properties will be soon be worth 0. A brick alone costs something.

Just to be clear. My opinion is that on average properties advertised have up to 20% negotiation (discount in sales terms) built into the asking price. This is different conceptually than being overvalued by 20%. Obviously every house is different and some properties can be overvalued or undervalued also.

daltonmd

MrThrifty wrote: »

I think it's worth stating that the old saying 'a house is only worth what a buyer is prepared to pay' was meant along the lines that a house is only worth what a buyer values it at assuming they have more than sufficient funds and NOT what a buyer can only afford. The latter would imply that a luxurious palace is only worth 50k because Jim the unemployed builder is the only person really interested in it but unfortunately has just 50k in his savings account.

I've been shocked over the last few days (outside of boards) with how people are currently putting a value on property. I appreciate that poor demand can mean that houses are sold at a discount but let's get real here. And this assumption that every single property out there on the market is 20% overvalued -> sure if we maintain this attitude then properties will be soon be worth 0. A brick alone costs something.

Sorry, this is the mistake that has got us into this mess.
People borrowing too much, maxing themselves to the limit, not sitting down and working out their worst case scenario to see if they could still afford to service a mortgage if anything went wrong in their lives, not planning for children, illness etc..

it's not an automatic entitlement to buy a home.

You should be working.
Have savings.
Have a steady income.

You should have a budget and if the house you are looking for is not within that budget then you need to look around, or wait until you find a home that suits your budget.

The value of houses is dictated in a large part to what you can borrow from the bank. This should be based on the points above.

daltonmd

Kosseegan

daltonmd wrote: »

Sorry, this is the mistake that has got us into this mess.
People borrowing too much, maxing themselves to the limit, not sitting down and working out their worst case scenario to see if they could still afford to service a mortgage if anything went wrong in their lives, not planning for children, illness etc..

it's not an automatic entitlement to buy a home.

You should be working.
Have savings.
Have a steady income.

You should have a budget and if the house you are looking for is not within that budget then you need to look around, or wait until you find a home that suits your budget.

The value of houses is dictated in a large part to what you can borrow from the bank. This should be based on the points above.

daltonmd

That only tells you how much you can spend, not what any particular house might be worth on the market.

The o/p should look at comparable houses which have sold recently and assess the value of his target house by reference to the selling prices of the other houses. offering about 90% of the estimated value as an opener would be realistic.

Theboinkmaster

swillybabe wrote: »

I'm looking at a property and Asking price is now 200,000. What would be a realistic offer to make? As a first time buyer, i dont have a clue of how the system works!

Asking price is completely irrelevant when ascertaining value and hence your offer. Do some research on this forum - plenty of info to help.

Snakeblood

Kosseegan wrote: »

That only tells you how much you can spend, not what any particular house might be worth on the market.

The o/p should look at comparable houses which have sold recently and assess the value of his target house by reference to the selling prices of the other houses. offering about 90% of the estimated value as an opener would be realistic.

How is anyone supposed to know the selling price of the few recently sold houses? Also, I think 90% is over generous.

Kosseegan

Snakeblood wrote: »

How is anyone supposed to know the selling price of the few recently sold houses? Also, I think 90% is over generous.

Research asking prices, talk to selling agents operating in the area, make offers and see what the vibes are. I am not talking about 90% of the asking price, I am talking about 90% of a realistic selling price.

daltonmd

Kosseegan wrote: »

That only tells you how much you can spend, not what any particular house might be worth on the market.

The o/p should look at comparable houses which have sold recently and assess the value of his target house by reference to the selling prices of the other houses. offering about 90% of the estimated value as an opener would be realistic.

I disagree.

Until we have a property database he may as well stick his finger in the air.

What he has to spend is what he should base his budget on, his budget dictates what he can afford.

He should buy what he can afford, not the other way around.

daltonmd

Milk & Honey

He is not asking how much he can afford.
He is asking what are the best tactics for bidding on a particular house. To do so involves trying to determine what that house is worth on the open market.
There are houses he can't afford, there is no point in bidding on them. There are houses he can afford, he should try and get the best price.
The only guide to the value of the house offered so far is the asking price. That is a completely unreliable guide. He will have to do more research.

MrThrifty

swillybabe wrote: »

I'm looking at a property and Asking price is now 200,000. What would be a realistic offer to make? As a first time buyer, i dont have a clue of how the system works!

This is the first post in this thread. Yet, fascinatingly, no one initially asked what type of house etc. was involved before advising the OP.

Obviously people should only spend what they can afford to but in today's climate it's hard to see how that couldn't be the case given the over-cautiousness of banks etc. Before I get jumped on here, I agree that caution is a good thing. But the stories out there which I've heard tell me that things have gone OTT in terms of cautiousness.

The craziness that caused our housing bubble is in some ways the same craziness that's contributing to the crash. During the boom, the selling price for property was dictated by whatever amount people could 'afford' to buy it at rather than its true value. And this amount was generally OTT since banks were throwing mortgages around like bananas, saying 'you'll be grand, you'll be grand, are you sure you don't want more?'. Now, there seems to be a notion out there that a property is only worth what someone can afford to buy it for rather than its true value. Spot the similarities?!

The solution in my opinion is this infamous selling price register PLUS a price index on the construction cost involved in building the various different types of houses etc. etc. That will stop some of the craziness out there, like someone I know getting offered am amount for a house that with today's building costs, is worth twice that not including project management, land cost etc.

Apologies, rant over.

the groutch

hard to answer the OP's question without all the relevant retails, but if I had to go out on a limb I'd say offer €150k, see what they say.

MrThrifty

the groutch wrote: »

hard to answer the OP's question without all the relevant retails, but if I had to go out on a limb I'd say offer €150k, see what they say.

Aghhhh!!! Stop winding me up! :mad:

Milk & Honey

MrThrifty wrote: »

This is the first post in this thread. Yet, fascinatingly, no one initially asked what type of house etc. was involved before advising the OP.

.

Quite right too. It does not matter a damn in relation to his query. It might be a one bed cottage in Dublin 4 or a 6 bed in Leitrim or a 4 bed semi in North Dublin.
How to negotiate a good price has nothing to do with what kind of a house it is.
He is getting a good deal if someone would appear within a short time and pay more for the house. He is getting a bad deal if he would not be able to sell at his purchase price without difficulty or at all. He may also be wise or unwise depending on the point in the economic cycle in which he buys.
The starting point of all of it is valuation.

MrThrifty

Milk & Honey wrote: »

Quite right too. It does not matter a damn in relation to his query. It might be a one bed cottage in Dublin 4 or a 6 bed in Leitrim or a 4 bed semi in North Dublin.
...
The starting point of all of it is valuation.

Exactly, by type of house, I obviously meant type, location etc. etc.

Milk & Honey

MrThrifty wrote: »

Exactly, by type of house, I obviously meant type, location etc. etc.

Type of house has nothing to do with location. A 2 bed house is a two bed house whether it is in Cavan or Cork. A semi detached house is a semi detached house whether it is in Kerry or Kildare.
The three most important factors in valuation are:- in order, location,location,location.

stepbar

It would help if a link to the house in question was posted.

The only barometer I use is based on rent and yields (especially apartments).

robd

There's an awful lot of noise on this thread. It's turned into the usual debates about houses being overpriced etc.

The reality is that if the house is priced at X then the EA and vendor usually think it's valued at something around that. The EA usually prices based on other properties up for sale in area or other properties he or another friendly agent sold recently.

Sealing a deal is about both parties agreeing a price where they both think they're getting an OK deal. Recession or not the principle is still the same. The difference is that the deal price will likely be under rather than over the asking price.

Now you can offer based on rental yields, what houses were in 2000, what some other house sold at last year minus X% taking into account CSO data etc. However if vendor/agent don't agree with you there's no sale. Bit of a common problem these days and the reason why houses sit there for months and even years.

20% under asking is about the max you'll squeeze out of vendor/EA in most cases. They generally won't take you seriously with offers under this. If you think it's worth less then by all means enquire but you'll likely have to wait for 6 months + till vendor/EA finally come round to idea that it's actually worth less than they thought. It's a slow process hence the term "prices being sticky on the way down".

Me, I gave up looking 2 years ago as really no value and no negotiation. Starting to dip my toe back in now. Agents certainly seem a lot more open to offers these days but still not > 20%. Some still appear to use the line of offer refused which is slightly under 20% lower than asking to set a floor on offers.

MrThrifty

Milk & Honey wrote: »

Type of house has nothing to do with location. A 2 bed house is a two bed house whether it is in Cavan or Cork. A semi detached house is a semi detached house whether it is in Kerry or Kildare.
The three most important factors in valuation are:- in order, location,location,location.

?!!!

I think you'll find that I originally said "type of house etc.":rolleyes:

Anyway, seems like you'll still want to find something to have a go at, for whatever reason.

As for that location cliche, well what can I say?!! Sounds like you'd be a supporter of folk so who bought shoebox type apartments in 'good' locations for crazy money during the boom then. By your logic, whether a property is a 1 bedroom terraced house or a 5 bedroom high-spec detached house or even palace for that matter with 3 acres of gardens is irrelevant. Sure. :rolleyes:

desertcircus

MrThrifty wrote: »

I think it's worth stating that the old saying 'a house is only worth what a buyer is prepared to pay' was meant along the lines that a house is only worth what a buyer values it at assuming they have more than sufficient funds and NOT what a buyer can only afford. The latter would imply that a luxurious palace is only worth 50k because Jim the unemployed builder is the only person really interested in it but unfortunately has just 50k in his savings account.

I've been shocked over the last few days (outside of boards) with how people are currently putting a value on property. I appreciate that poor demand can mean that houses are sold at a discount but let's get real here. And this assumption that every single property out there on the market is 20% overvalued -> sure if we maintain this attitude then properties will be soon be worth 0. A brick alone costs something.

If there's only one potential buyer and he's not budging past 50,000, then that's exactly what it's worth. It doesn't matter how amazing something is; if you cannot sell it for more than a certain price, then it's worth that price. Full stop. It may go up in value in the future, but its value is what a buyer will pay irrespective of whether they don't want to pay more or simply can't.

kennyb3

MrThrifty wrote: »

And this assumption that every single property out there on the market is 20% overvalued -> sure if we maintain this attitude then properties will be soon be worth 0. A brick alone costs something.

MrThrifty wrote: »

The craziness that caused our housing bubble is in some ways the same craziness that's contributing to the crash. During the boom, the selling price for property was dictated by whatever amount people could 'afford' to buy it at rather than its true value. And this amount was generally OTT since banks were throwing mortgages around like bananas, saying 'you'll be grand, you'll be grand, are you sure you don't want more?'. Now, there seems to be a notion out there that a property is only worth what someone can afford to buy it for rather than its true value. Spot the similarities?!

2 points

1. On the 20% bit its a rough guess, people know that there are a lot of falling knives out there and a lot of owners still in the denial stage of market emotions. From your posts you seem to have the notion that high property price = good. This is the agenda the VI's are still pushing too.

2. Fundamentals such as wage levels, deposits, stress testing for interest rate rises are key. Yes there is a lot of new bar stool economists and housing experts out there now but you can't just pass off fundamentals just because some of the sayings are bandied about and popular - they are still accurate. I'd much rather concentrate on them - affordibility being one of them.

robd

desertcircus wrote: »

If there's only one potential buyer and he's not budging past 50,000, then that's exactly what it's worth. It doesn't matter how amazing something is; if you cannot sell it for more than a certain price, then it's worth that price. Full stop. It may go up in value in the future, but its value is what a buyer will pay irrespective of whether they don't want to pay more or simply can't.

There's somewhat of a wrong assumption in your post. And that's that the vendor has to sell at the best price they can get. They don't. If they don't like the offer price they'll decline it and the house will just sit there and sit there.

Also, rightly or wrongly there's a moratorium on repossessions which is encouraging or adding to this lack of reality. Hence most houses for sale at the moment are executor sales.

There's a gap between sellers and vendors and the stock just builds up. That's what we're seeing at the moment. Hence buyers are left in frustration still not being able to buy at realistic or affordable or sustainable levels. If you feel you need to buy and you have sufficient funds and can get a mortgage you're left with a huge choice but still have to pay a bit more than you probably should.

sbsquarepants

Most of you are missing the point entirely and not answering the OPs question at all. All he asked is what is the protocol for making an offer, not for help with budgetting or stress testing or anything else. For all any of us know he's just won the euromillions, or the 200k house sould be a 10 bed mansion in Killiney.
My advice OP is that it is very much a buyers market, offer well less than the asking price and see how you get on from there, don't be hurried or rushed, odds are there isn't a que outside the estate agents door! Look around the area for sold signs or sale agreed signs and see if you can get talking to people who have recently bought in the area to find out what they paid and so on. Both time and circumstance are on your side, so relax and don't rush into anything. Also if you are in a positon to wait another while, prices are still going south.

robd

sbsquarepants wrote: »

Most of you are missing the point entirely and not answering the OPs question at all. All he asked is what is the protocol for making an offer, not for help with budgetting or stress testing or anything else. For all any of us know he's just won the euromillions, or the 200k house sould be a 10 bed mansion in Killiney.
My advice OP is that it is very much a buyers market, offer well less than the asking price and see how you get on from there, don't be hurried or rushed, odds are there isn't a que outside the estate agents door! Look around the area for sold signs or sale agreed signs and see if you can get talking to people who have recently bought in the area to find out what they paid and so on. Both time and circumstance are on your side, so relax and don't rush into anything. Also if you are in a positon to wait another while, prices are still going south.

I agree. I think I answered the question well in the first reply. It then descended into houses are overpriced argument.

Kosseegan

robd wrote: »

There's somewhat of a wrong assumption in your post. And that's that the vendor has to sell at the best price they can get. They don't. If they don't like the offer price they'll decline it and the house will just sit there and sit there.

The value of the house is the highest bid which can be procured after proper marketing. The owner does not have to accept it but any intending purchaser must use that value and not the asking price as a yardstick.

swillybabe

sbsquarepants wrote: »

Most of you are missing the point entirely and not answering the OPs question at all. All he asked is what is the protocol for making an offer, not for help with budgetting or stress testing or anything else. For all any of us know he's just won the euromillions, or the 200k house sould be a 10 bed mansion in Killiney.
My advice OP is that it is very much a buyers market, offer well less than the asking price and see how you get on from there, don't be hurried or rushed, odds are there isn't a que outside the estate agents door! Look around the area for sold signs or sale agreed signs and see if you can get talking to people who have recently bought in the area to find out what they paid and so on. Both time and circumstance are on your side, so relax and don't rush into anything. Also if you are in a positon to wait another while, prices are still going south.

Thanks sbsquarepants... u got the jist of my question! this has turned into a real debate.. its got way out of control!!!
2 points.. One He is actually a she
two... was gonna offer 100, but me thinks the EA may laugh at me!

wexford12

I would say it depends on what the house value was a year or more ago. It may be priced right at the 200K, I have been looking at many houses over the last few months and some are asking 280k where as some sellers are asking 160k for the same size house in same area.I know the ones around the 160k will not take much less if indeed any less than asking price.I have my house up and i wont be taking anything less than 5k under my asking price as its priced at a value for money house. If someone offered me 75k i would think they are just waisting my time and would be hard pushed to let them view again not worth the clean up and staging the house if someone was that far of the mark

Spiritofthekop

MrThrifty wrote: »

This is the first post in this thread. Yet, fascinatingly, no one initially asked what type of house etc. was involved before advising the OP.

Obviously people should only spend what they can afford to but in today's climate it's hard to see how that couldn't be the case given the over-cautiousness of banks etc. Before I get jumped on here, I agree that caution is a good thing. But the stories out there which I've heard tell me that things have gone OTT in terms of cautiousness.

The craziness that caused our housing bubble is in some ways the same craziness that's contributing to the crash. During the boom, the selling price for property was dictated by whatever amount people could 'afford' to buy it at rather than its true value. And this amount was generally OTT since banks were throwing mortgages around like bananas, saying 'you'll be grand, you'll be grand, are you sure you don't want more?'. Now, there seems to be a notion out there that a property is only worth what someone can afford to buy it for rather than its true value. Spot the similarities?!

The solution in my opinion is this infamous selling price register PLUS a price index on the construction cost involved in building the various different types of houses etc. etc. That will stop some of the craziness out there, like someone I know getting offered am amount for a house that with today's building costs, is worth twice that not including project management, land cost etc.

Apologies, rant over.

Your trying to sell a house at the moment are you not???