Reader Question: “We live in a small town with numerous homes on the market. Many have sat for a year. For this reason, we’ve decided it’s best to look at a no-maintenance townhome, as we don’t know how long we’ll be here and feel that it would be the easiest type of property to sell down the road.
“It’s an FSBO and the owner is asking $162,500. The other townhomes are identical and the most recent sale was 5 months ago for $135,000. It was listed at $154,500. The average sale price over 10 years has been $154,000. This townhome is dated with 14-year-old appliances, furnace and master bath. After extensive research, we offered $142,500. They have countered at $150,000.
“My husband doesn’t feel we should continue to negotiate; however, I feel that we should stick with where we are. The couple is an elderly couple moving into assisted living and owe $80,000 on their mortgage. I feel that my husband’s emotions are getting in the way of a business transaction. I’m more concerned with having to update and trying to at least break even when it comes time to sell. Any advice?”
If the sellers were smart, they would accept your offer. It sounds reasonable to me, based on the market data you’ve provided. But some homeowners let their emotions get the best of them when selling a home. They’ve spent years in the house, and they have a lot of memories. You and I know that emotional value doesn’t translate into financial value. But try telling that to the homeowner!
If I were you in your spot, I would first want to know if the sellers had other offers. If not, you can safely negotiate with them until you land on a price that is acceptable to both parties. You could even hold your ground at $142,500 to see if they change their minds. But if they’ve had other offers, there’s a chance you will lose the townhome to a higher “bidder.”
The sellers have shown they are serious by dropping their asking price by $12,500. So I’d be willing to bet they’ll negotiate further. Do you know how long their townhome has been on the market? This is a key factor that ties into the seller’s motivations. If they’ve been on the market for a long time, there’s a higher chance they’ll accept whatever counteroffer you make (if you decide to make one). If they are newly listed, they might not realize how much of a buyer’s market they are in.
Are you using a mortgage lender? If so, you have to consider the home appraisal as well. The lender is going to have the townhome appraised to make sure it’s worth the amount you’ve agreed to pay. If the comps support your offer, there’s a good chance the property will meet appraisal. But if you offer well above the comps, you might run into a low appraisal situation.
How much do you want this townhome? That’s the last consideration you need to make. If it’s a dime a dozen, then it probably won’t break your heart to miss out on it. You’ll find another suitable property soon enough, and it might be better priced.
So, to recap. You need to consider how long the townhome has been on the market. You need to think about the home appraisal (if you’re using a mortgage), and the problems that can arise when you offer more than comparable sales. You need to think about how badly you want this property, and how many other homes are available in the area.
When you made your offer, did you present the comps to the seller? They might not be in touch with local market conditions. So if you do decide to make a counteroffer (somewhere between $142,500 and $150,000), make sure you support it with comparable sales data. Attach them to your offer. This sends a strong message to the seller. It says, “I am offering this amount, because that’s what the current market supports. See for yourself.”
Like I said, a smart seller will jump on a reasonable offer — especially in a slow market. But these sellers might just have their heads in the sand. There may come a time when you have to walk away.
Keep this in mind. You’ve basically given the sellers two choices:
- Take our reasonable offer and walk away with $62,500 in net proceeds.
- Reject our offer and wait around for the next buyer, even if it takes six months or more.
It seems like an easy decision to me.
I’ll tell you what I would do. But first, I want to make it clear that I’m not familiar with your local market. So don’t take this as gospel. If I thought the townhome would appraise (and I really wanted to buy it), I would offer $145,000. I would attach some sales data to support my offer. And I would make it clear that this was my final offer. If the sellers have a brain between them, they would jump on it. On the contrary, if I was only lukewarm about this particular property, I would probably hold my ground at $142,500. Again, that’s just me.
I hope this helps you in some way, and I hope it all works out. Good luck.