How much lower then asking price should your 1st offer be?

[Jurollo]

So I am about to purchase a 1900 sq ft house in MA. The current asking price is $134,900. I havent really done the real estate thing before so I am curious as to how much I should likely go under said asking price. Here are some bullet points about the property:

- Its a foreclosure (in January)
- Has had the price reduced twice and the bank took back control over it for a short while before the realtor got their hands back on it
- It is a TOTAL redo, the house is in terrible shape and is a total gut job sans the frame
- It is a 1700s cape
- Needs a new well

I am thinking I will offer about 90k first and go from there, is that way too low? I am also not getting financed at all and will be buying up front with cash, does this effect the equation? Would it be better to go straight to the bank's foreclosure department?
~Justin

[mosdef]

It all depends on the number of other bids.

Has this place been advertised as an "auction"; i.e. will you be putting in a bid on the house concurrently with other buyers? This is common practice for highly desired properties. In this environment, the property NEVER goes for under list. The list price is set artificially low to attract participants.

Are you the only one interested in this property? If so, you can make a low ball bid under the asking price. If you do, you have to be prepared to have them turn around and say "screw you, and don't come back". Also, if you're going to offer really low have your agent fax in the offer instead of delivering it in person. If you want to get this place on the cheap, keep it impersonal.

[Jurollo]

It has been on the marker for a while and has had 1 offer in that time which the potential buyer eventually backed out. Its a LOT of work. I know of one other builder in the area that might be interested. So perhaps I should go slightly higher to make sure I can get it.

[JTrout]

$90,000 sounds about right.
But don't offer exactly $90,000- make it $88,700 or $90,350 or something like that.
I was told this by someone that has bought hundreds of rentals/fixeruppers.
I don't know if it really makes a difference, but he said it gives the appearance that this number is what the house is actually worth.

He also told me to make offers on 10 houses that are so low that you are embarrassed to make the offer. One or two of the ten will counter with an offer that is lower than what you would've paid.
He was right on that one.

[Jurollo]

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Telling them 'all cash' is a powerful tool. Don't blow your wad on that one, slowplay it a bit [img]/images/graemlins/wink.gif[/img]

90k seems about right for an offer, but expect to have to pay a bit more.

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Yea I mean I would pay up to $125k for it considering the price of building lots without a working septic (this has that) is about $150k+ in my town. So I shouldnt mention that I will be financing this myself? I was reading about how banks have to keep money for negatively performing assets in their reserve so I was thinking this is a really nice point to push early since over the course of a normal mortgage they could multiply this into a lot more then market value. I was thinking this could help me get it a lot cheaper. Should I be going with the impersonal fax approach or in person? I don't think 90k is an insulting offer for the property.

[Jurollo]

blue,
thank you very much for you advice. Really nice to, as a 24 yeard old kid with no experience in this kind of thing I appreciate all the advice I can get here from people who have been there and been through the ringer with housing purchases.
~Justin

[JTrout]

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so low that you are embarrassed to make the offer

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can you give an example?

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I'm certainly no expert at this, so take any advise from me for what it is- advise from someone that's bought a few houses, and read a couple of books.

Examples-
I put in 5 bids in one day. Each of them were around 30% below the asking price, and about 5-10% below what I'd pay.
I quickly found the motivated seller of this bunch- they countered with an offer that was $3,000 more than mine. We ended up splitting the difference.
If the offer puts a frown on the realter's face, it's about right!
I asked the realtor to make an offer of $82,500 on a new zero-lot line home that the builder still owned.
He'd built about 10, and had 2 left.
Asking price $109,900.
The realtor told me I was wasting everyone's time, and she didn't bother to do the paper work, or even give the man a call.

After dinner with my buddy (the fixerupper guy), he told me that she HAD to make the offer, and to go back tomorrow and make her put the offer in.
I go back to her office, but told her that I'd offer $85,000 (I was embarrassed and out of my element or I would have kept it at $82,500).

She repeated that there is no way that he'd entertain this offer.
I said call him.
She called, he asked if I could close in two weeks, done deal.
No counteroffer, no hesitation.
He'd made his money in that project, and was ready to move on to another.