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
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?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.
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.
The vendor in this case is one of the bigger and more successful developers.
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.
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.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.
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