Is my offer ridiculous?

dotcom

Registered User
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Hi all,

I'm a first time buyer with mortgage approval for €160,000. I've been viewing a lot of houses and just saw one today which was a good bit out of my price range but I absolutely loved it! It's a new build and comes with a very good finish: fitted kitchen, carpets, tiles, fireplace, wardrobes and even kitchen appliances. My question is: the house is on the market at €210,000 having dropped from €270,000. Would an offer of €160,000 on this property be completely ridiculous?!

I'd appreciate your views on this (go easy on me!).

Thanks!
 
The only one who can answer that question accurately is the vendor, but off the top of my head, not having seen the house but trusting your judgement, I'd be at 180 / 185. Chance 160 - all they can say is "No".
 
If you were selling your house for €210,000 and someone offered you €160,000 would you accept it? If its in the great condition you state it to be in then it deserves a decent offer. A €50k drop in price won't be accepted when they have already dropped it by €60k
 
Thanks for your advice mathepac. I'd love to be in a position to offer a bit more but €160k or at a big push €165k is my limit.
 
If you were selling your house for €210,000 and someone offered you €160,000 would you accept it? If its in the great condition you state it to be in then it deserves a decent offer. A €50k drop in price won't be accepted when they have already dropped it by €60k

Fair enough, thanks for your input. I wish I could offer more but looks like this one may be out of my reach.
 
It all depends on demand and supply and how quickly the vendor need cash. Many builders/developers have severe cashflow problems because there is very little demand so he may be willing to accept a low offer.

If I were you I would offer €150K first because that will give you room to negotiate up to €160K. It is not a good idea to offer him your maximum (€160K) straight away.
 
It all depends on demand and supply and how quickly the vendor need cash. Many builders/developers have severe cashflow problems because there is very little demand so he may be willing to accept a low offer.

If I were you I would offer €150K first because that will give you room to negotiate up to €160K. It is not a good idea to offer him your maximum (€160K) straight away.

Thanks Steve, I'll bear that in mind.
 
It all depends on demand and supply and how quickly the vendor need cash. Many builders/developers have severe cashflow problems because there is very little demand so he may be willing to accept a low offer.

If I were you I would offer €150K first because that will give you room to negotiate up to €160K. It is not a good idea to offer him your maximum (€160K) straight away.
Good advice, definitely try it, what have you got to loose?
 
I'm in the exact same boat as you, dotcom. I'm a first time buyer and while I've been approved for slightly more I think the game is the same.

I can offer you advise based on my experience.

I can understand Cat101's point but the fact is this is a buyers market, They can only say no to a lower offer. It is a negotiation afterall. I think as first time buyers we are often too afraid to question the asking price. They've already dropped it 60k because they can't sell it. This means once you make it clear that your offer is serious they will take it seriously.

DO NOT start with your top offer. As I already said this is a negotiation. If you offer 150k and they say no at least you have a bit more money to play with. Also, think about how you'd feel if you offered 160k and they accepted? Yes, you would have the house but if they were willing to accept 160k straight away perhaps they would have also accepted 155k, giving you a lower mortage and a little more money to decorate.

Even after making an offer keep looking at other houses. Since making my first offer on a house about a month ago (which I have since pulled out of) I have seen a least three other house which I am also considering making offers on.

Lastly, make sure you find out what situation the vendor is in. Are they owner/occupier, investor, do they have a deposit on another house or are they waiting to go sale agreed before looking at properties? This will go a long way to help you understand what frame of mind they may be in to consider your offer.
 
I'm in the exact same boat as you, dotcom. I'm a first time buyer and while I've been approved for slightly more I think the game is the same.

I can offer you advise based on my experience.

I can understand Cat101's point but the fact is this is a buyers market, They can only say no to a lower offer. It is a negotiation afterall. I think as first time buyers we are often too afraid to question the asking price. They've already dropped it 60k because they can't sell it. This means once you make it clear that your offer is serious they will take it seriously.

DO NOT start with your top offer. As I already said this is a negotiation. If you offer 150k and they say no at least you have a bit more money to play with. Also, think about how you'd feel if you offered 160k and they accepted? Yes, you would have the house but if they were willing to accept 160k straight away perhaps they would have also accepted 155k, giving you a lower mortage and a little more money to decorate.

Even after making an offer keep looking at other houses. Since making my first offer on a house about a month ago (which I have since pulled out of) I have seen a least three other house which I am also considering making offers on.

Lastly, make sure you find out what situation the vendor is in. Are they owner/occupier, investor, do they have a deposit on another house or are they waiting to go sale agreed before looking at properties? This will go a long way to help you understand what frame of mind they may be in to consider your offer.


Thanks rosagil, it's really helpful to get another FTB's view on this. It's interesting that you mention how important the vendor's position is. The vendor in this case is one of the bigger and more successful developers. Factors such as wanting a quick sale are probably less relevant to someone like this. However, I keep thinking that the price has already dropped so maybe they want to get the last few units sold!?

Thanks again. Good luck with your search!
 
Re vendor's position: it's difficult to know which way they would fall but even the big developers are finding times hard and I'd imagine they'd rather sell the house and have the money in the bank then wait even longer while house prices drop and they are less likely to get a better offer.

Personally, if you really like the house I'd go in at 150k and see what they say.

Hope it works out well.
 
The vendor in this case is one of the bigger and more successful developers.

The way things are at present the more successful they are the harder they are falling. You would not believe the state of the market and the way the Banks are treating these guys. I think you may beshocked that they just might accept your offer.
 
It's a new build and comes with a very good finish: fitted kitchen, carpets, tiles, fireplace, wardrobes and even kitchen appliances.

In today's market any bid will be taken seriously. Builders are desperate to offload property.

More seriously those items you mention as a very good finish would not be my reason for picking a house. They are incidentals. The location, structure, location, size, location, orientation, commute and a finished estate are more important.
 
In today's market any bid will be taken seriously. Builders are desperate to offload property.

More seriously those items you mention as a very good finish would not be my reason for picking a house. They are incidentals. The location, structure, location, size, location, orientation, commute and a finished estate are more important.

I completely agree with you Bronte, I have considered all of these and the house is perfect for me because it meets all these criteria. I mention things like tiles, carpets, fitten kitchen because I mean to show that the house itself is finished to a very high standard.
 
Hi Dotcom,

Absolutely try your hand - personally I would go in first with €155k. I am selling a house at the moment and we refused an offer early on that we would accept now. Find out what you can from the EA - have there been any other offers, how eager is he to sell etc. The EA of the house that we are hoping to buy (after we sell our own) has blatantly told us that he is desperate to sell to get the bank off his back. The house is probably costing him money every month so there is a possibility he will consider your offer.
My tip would be to sell sell sell the fact that you are loan approved, FTB so not in a chain and ready to go. That's what every vendor is looking for at the moment - not someone who has yet to get mortgage approval/sell another house/ might back out at the last minute. You are worth €20/€30k more to him if you can convince them you will do a quick purchase - Good Luck!
 
I'd be surprised if you got it for the 160K.

The vendor probably is aware that the house was over priced at the beginning.
Is there any other houses similar to it in the same area? if so look at these.

What you could do is offer the 160K, and make it known that you are ready to move ASAP as the approval has been granted (no waiting). If the house is in as good condition, be prepared to offer between 15-25K extra, i.e. stuff you would have to do normally.

Key is that you are ready to move on the property, no waiting around for approval
 
Hey Dotcom, I'm in a similar boat to you - ftb and can only go up to a certain upper limit, seeing a few lovely houses just above that limit! Its very difficult to know what offers are reasonable because it depend on how reasonably priced the property in question is. At the end of the day if that is all you can offer then go with it. Unfortunately you may have to accept that you might not get it at you highest offer. The fact that you are a ftb and are not in a chain could make your offer more attractive becasue you would be in a position to move immediately - assuming you're mortgage approved.
 
You can only offer what you can afford. Why should it bother you if someone else decides to be offended?
 
Its very difficult to know what offers are reasonable because it depend on how reasonably priced the property in question is.
The going rent can be a useful proxy to determine whether an offer is reasonable or not. The rule of thumb is that fair value is normally around 12-15 times the annual rent.

This technique hinges on the fact that tenants are unwilling to overpay for rent longer than they have to. Therefore market rental rates generally adjust to "real" levels quicker than that of the illiquid property market.

In the case of a developer trying to sell a property, we can imagine his thought process as the following (Note for simplicity sake we imagine that the developer has no debts to pay):

Option 1) Accept an offer of 160k from a buyer
If he accepts this he could invest the 160k somewhere else. At the moment he could probably earn about 6% per annum with minimal risk.

Option 2) Rent it at market rate of 800 per month
This would give an annual amount of 9600 or a yield of 6% on the current offer (9600/160000).

In effect both cases offer the same return of 6%, however the risk profile for each is very different. Accepting the offer and taking the money to invest elsewhere would allow diversification for example (and hence a lower risk). If the developer was rational they should accept the offer of 160k.

Using the multiplier rule of 15 we can see that an offer of 144k (i.e. 15 x 9600) or less would be considered ridiculous.
 
The going rent can be a useful proxy to determine whether an offer is reasonable or not. The rule of thumb is that fair value is normally around 12-15 times the annual rent.

This technique hinges on the fact that tenants are unwilling to overpay for rent longer than they have to. Therefore market rental rates generally adjust to "real" levels quicker than that of the illiquid property market.

In the case of a developer trying to sell a property, we can imagine his thought process as the following (Note for simplicity sake we imagine that the developer has no debts to pay):

Option 1) Accept an offer of 160k from a buyer
If he accepts this he could invest the 160k somewhere else. At the moment he could probably earn about 6% per annum with minimal risk.

Option 2) Rent it at market rate of 800 per month
This would give an annual amount of 9600 or a yield of 6% on the current offer (9600/160000).

In effect both cases offer the same return of 6%, however the risk profile for each is very different. Accepting the offer and taking the money to invest elsewhere would allow diversification for example (and hence a lower risk). If the developer was rational they should accept the offer of 160k.

Using the multiplier rule of 15 we can see that an offer of 144k (i.e. 15 x 9600) or less would be considered ridiculous.

Great reply, Afuera. That definitely makes me feel more confident about making the offer. Thanks so much.
 
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