A house I was interested in was listed for $169,900. It was dropped from $179,900 some time in November because nobody was buying it. While I was viewing the house my realtor said she thought the house was overpriced and that it was probably worth $160k.

A couple of days or so go by while I ponder. I eventually decide to make an offer on the house for $157k. They countered with $165k. (note: this is pretty scary, I've never negotiated with this amount of money before.) I considered re-countering to something lower like $162k, but wasn't sure if that kind of thing is standard and also want to keep the image of not being a hustler. I also was thinking the appraiser might evaluate it at $160k and just round up to $162k, because it is close enough, but might not round up if the agreed price was $165k. I ended up agreeing to the $165k thinking if the appraisal came in at $160k, I'd have more leverage to bring it down and possibly get more things out of the deal. The seller might not want to ditch the sale because of more time commitment and money.

I remember on the phone saying "that's pretty high." after hearing the counter offer. My mind was racing since I've never bought a house before and the stakes are so high. The realtor said to me that even if I agree now I can always lower it later if the appraisal comes in lower. She didn't suggest to make a counter offer either. I feel as though I got talked into accepting the offer by my realtor. The problem is not only does the seller have skin in the game, I do too.

Looking back at it now, it seems like the obvious move was to counter offer. I mean, even if they denied it I would still be able to go back to $165k if I wanted. They're selling a house, if I come in with a lower offer they aren't going to be like "oh nvm, not selling you the house now because you didn't accept our counter offer". I feel like a fool for not re-countering and it has been bothering me. Also, I don't have to risk as much time now that I've agreed.


A little back story on the owner. He now owns a 300k house with his wife so I'm assuming he is making double payments on both houses. The owner and his wife bought the 300k house back in July so he's been trying to get rid of this house for awhile. I Facebook stalked him and found out he is a manager at some local business. I have a feeling they could be motivated sellers especially with the massive 10k price drop in November.

The house I am currently going for is a 2 BD 1 BA house with 864 SF. It is small, but I'm by myself and don't need all that much space. There is an unfinished basement, but there are egress windows which I may be able to turn into bedrooms if I wanted too someday. My realtor sent me some comps of other houses that have sold in the area:

Comps:
$187,500
4 BD 2 BA
900 SF

$167,000
2 BD 2 BA
942 SF

$160,000
2 BD 2 BA
1000 SF

$180,000
3 BD 1 BA
994 SF

The inspector came in and checked the house over. Everything turned out to be fine. A bit of wear and tear here and there but nothing serious. There is evidence of possible water seepage in the basement though. The house doesn't have gutters so I was advised to get those. Should I be concerned that the inspector I work with happens to know the owners and was also chosen by my realtor?

I am a bit worried that I'm overpaying for the house though. The comps look promising, but this house is by a railroad, somewhat busy road close to a stoplight, and there is a fire station across the street. The other houses appear to be in subdivisions.

I was considering visiting the house during the appraisal for educational purposes and to possibly hint at the worry of overpaying for the house. Is this a good idea? There is no guarantee that the sellers will come down on the price if it comes in lower, but at least I will have the option to back out and not lose escrow money.

If the appraisal comes in lower to say $160k, is it wise to aggressively fight it? It is kind of like a game of chicken where both of us lose if either of us back out.

My image might be good to appear naïve/irrational. I did not counter offer on the $165k and I also did not get the washer and dryer that they agreed to leave behind in writing before signing the purchase agreement.

My realtor was able to get them to pay for the survey (this is great for psychological commitment). Apparently closing costs aren't discussed at closing those are determined at the time of the purchase agreement so as of now I will be paying for those. I'm not sure if it is worth fighting for those too if the appraisal comes in lower.

I really liked the house on the first showing, but when I went back with the inspector I noticed tiny details that I hadn't noticed the first time around. My mom thinks I should back out of the deal, but she's also biased because she likes having me at home.

This is getting to be a really long post so I'm just going to end it here for now. Advice?

Relax. You're stressing over $3000 which is peanuts compared to the total transaction. If you want the house then move forward. You will have the appraisal soon enough.

You mentioning multiple times what your "image" is during these negotiations seems really bizarre to me. You will never see any of these people again once the transaction is over.

Keep in mind that your realtor has skin in the game. The quicker you buy a house the quicker they get paid and they can move on to the next customer. Your realtors incentives are not really aligned with yours. They can be very helpful comparing different homes and pointing out things that increase or decrease the value or comfort of a home. But when it comes to the situation you are describing in the negotiation phase, they will always have the incentive to say "that's a pretty good deal, you should just take it". Your realtor literally has everything to lose and nothing to gain by you countering with a lower offer.

So once you get to the negotiation phase you should tune out your realtor and do what you think is best (unless your realtor is telling you it is a bad deal, that is a huge red flag that it really is a mistake)

Generally speaking, never negotiate on the phone. Ask your realtor to email you any offers and additional information so you have everything in writing. Always reply with "I'll have an answer for you tomorrow", never make a decision in the moment.

Re-countering is entirely standard in real estate transactions. Sometimes after a 2nd counter one party will make an offer they call "final & best" meaning they won't negotiate further so it's take it or leave it.

You shouldn't be concerned about looking like a hustler in negotiations. Portraying your self as naive or irrational is a negative.

Once you've agreed on a purchase price you aren't really going to have any chance to gain more leverage later.

I don't really understand the washer dryer. If they agreed to leave it just email your realtor and tell them it needs to be included and put in writing.

You'll get a closing statement before you close laying out exactly what all the fees are and which party is responsible for paying them. This is entirely standard.

Dale's correct that you're overthinking whether or not you're overpaying by 3k.

If you buy the house you should subscribe to the homeowner thread in OOT. It's a great resource for new homeowners and you'll get good advice.

Just buy it and have fun.

All houses have small things.

How much per month on a mortgage is $3000 more?

Assuming you stay in the house for 5 years and it appreciates at 7%yr, what is the bottom line on what your net gain is?


$3000 is nothing. If you want the house, no big deal.

It's definitely not worth sweating the 3k now that it's done. That said, there's nothing wrong with negotiating every penny possible in a real estate purchase. Many of the people you're negotiating against will have the attitude of $3000 is nothing. In that case the 3k might as well be in your pocket. Your hourly will rarely be higher than spending a few more minutes to make an extra counter, or push for the other party to pay a fee, or get them to throw in appliances, etc..

Before negotiations ever begin you need to have an idea of where you want to end up and how to get there. I've never made an offer and then accepted the first counter offer.

I would say that I wouldn't pay a penny over the appraisal, if it comes in under $165,000. But my guess is it will come in at that exact number.

It's kind of a rigged system in that the appraiser knows there's an offer, and the price, so if he wants to continue getting the realtors to refer work to him he needs to make sure the house appraises at a value that makes the deal go thru. There usually has to be a pretty big problem with the property for it not to appraise at, or above, the offer price.

On the other hand, since there is a written offer in place it's not that out of line for the appraiser to say the property is worth that much, regardless of condition, since someone is already lined up to pay that amount.

Which is exactly why I wouldn't pay a penny more than the appraisal if it comes in low.

If you’re not in a rush and your realtor says it’s worth 160 why would you put any thought into going over that? They’re sweating the double mortgage payments and will have to sell at some point. If I’m buying a 160k house and have no urgency to buy I’m prepared to wait it out to maybe get it for 157 (I’d have come in lower tbh) and if you miss out who cares.

Tbh it sounds like it’s worth less than 160 given proximity to railroad and fire station (and other features mentioned with all else equal) and I’d be reluctant to put much stock in what your realtor says it’s worth. There’s a built in conflict of interest in these relationships in them wanting to make a sale and being incentivized to make you think it’s a better deal than it is to cash their commission cheque for the least amount of work possible.

Also as someone familiar with appraisals they tend to be inflated. There are a lot of people with the mentality that giving optimistic numbers is more likely to get return business since people buying the reports generally want deals to go through and higher numbers encourage that.

People saying it’s “just” 5k or whatever areprobably looking at it through the lens of someone in different financial position. If you’re buying a house in that price range 5k is probably a lot to you.

Regarding the "just 3k" or "just 5k" statement. Keep in mind that that is the last 5k you will pay off. If you get a 30 year fixed mortgage at 4.5%, the "just 5k" will cost you $225 a year in interest every year for 30 years, at which time you need to pay off the 5k.

Or if you need to sell the house in a year or two for some reason, that 5k could be the difference between getting a check for a couple thousand at closing and having to pay a couple thousand at closing.

General comments:

- Realtors are mostly disgusting human beings who want nothing but to get money off you. They only get money off you if they close a sale. Everything a realtor says should be disregarded, especially when it comes to price and negotiations

- You could probably get these guys lower. Squeeze them hard. It sounds like a lower end house for its price range given its location and "little things".

- If you don't really like the house and location, don't buy it. You're in a price/feature range where you have 100+ similar options so there's no need to commit to something that isn't a great buy. I think your mom's advice is good.

This is an big no right away. From what you wrote you can get larger places in better locations (subdivisions) even with extra bedrooms/bathrooms for around the same price.

As for being by yourself, if you're going to own real estate then having a spare bed/bath is REALLY handy, and it's an absolute no-brainer if it doesn't cost much more. It's a free revenue stream to pay off your mortgage. You could be pulling in an extra $5000/year taking on a roommate. That's not pocket change, it's a nice supplement to your income and helps pay off your mortgage. Houses with more bedrooms and bathrooms will also hold their value better and sell easier.

I've written a book on real estate negotiation, so I'd be the first to tell you if you screwed up. Sure, you likely could have gotten a better deal, but stressing over $3000 simply isn't worth it, especially assuming you plan to live there for at least 5 years.

These days, in most places, appraisals are getting more aggressive, and if the comps don't fully support the contract price, you can be sure that the appraisal will come in low. If that happens, I would suggest asking the sellers to drop the price to the appraised amount, and would likely recommend that you stick to your guns on that.

Depending on the type of financing you're getting, the appraisal may stick with the property for 180 days, but even if it doesn't, the sellers know that they'll likely run into this same issue with future buyers, and it won't be worth letting your contract fall through just to deal with this again later (when the market may have dropped even more).

Move forward in good faith, wait for the appraisal, and don't stress over the extra few bucks a month in mortgage...or your image.

Never thought about this, with realtors it's obvious it's rigged, but you make a very good point.

Penny wise, pound foolish. I fight over every dollar like i would if it were a $100 bicycle. Why give money away?

Because realtors are lying scumbags and just want to make a sale. Their cut doesn't change enough to make them want to go another week on this sale.

My second to last realtor said sell at $325. I said **** you, i want $350. I got $345.

I was under the impression that appraisers are randomly selected from a pool of people from the bank and are not in relation with realtors, but the lender. Is this not true?

$5k is a lot of money for me. I make $34k a year. After taxes it is more like $25k a year. That is 2 and a half months of my life. I probably should have focused on getting a better job before house searching, but I've been at my current job for about 2 years and so I'm dong that afterwards instead.

I actually was planning on getting a room mate some time down the road. I've been toying with the idea of getting rental properties to grow my wealth, but I feel it is best to do it with a primary residence first in order to gather the experience to know what to do and what not to do.

The one really convenient thing about this place is that it is really close to my parents and one of my siblings. It is also close to where I work. Most other places in the area that go for 150k or less are pretty much in the ghetto or have problems.

There is still a lot of things to consider, some of which I haven't posted on here, but I'm going to wait for the appraisal to come in to determine my next course of action. If it comes in lower, I'm definitely going to fight it.

Does it ever make sense to negotiate even if the appraisal comes in at what it is? I'd really like the sellers to pay my closing costs. I think I read somewhere that I can do an addendum or something like that.

The realtor I am using was recommended to me by the lender whom was recommended to me by my brother in-law. I read online that having a lender and realtor that work well together is a good thing, but I've also read that there could be conflict of interest.

That's an expensive house for that income...I'd suggest you consider a house for significantly less if I were you.

And you're right. The appraiser is meant to protect the lender.

You are under contract right? If so negotiation is over unless the appraisal comes in low. The only thing to negotiate is stuff relevant to the inspection.

Like half that price...

Why are you buying rather than share-renting at this point?

Not a terrible idea. Given low income a room mate is essential imo. That free extra money is really sweet, and it's low risk since you can take your time and pick someone you like. It's also give you a feel for the kind of dregs that will flow through rental property. So your instincts are good on this one.
Your instincts are good here. But you showed similarly priced in the burbs, off main roads - why not one of those? Much broader appeal.
If you're holding this for a long time, also consider the major health and mental effects of being close to a main road. They're not trivial.

I would personally consider living in share renting for a while to get some life experience with people and renting and living in different locations before putting down for a house. You're entering an enormous financial commitment pretty under-roled, 10 years into an economic expansion with rising rates.

I think financially I'll be okay even though it is on the high end. I've done a lot of worst case scenario simulations in excel for expenses and I still end up in the green which is good. I do have a little over $100k in net worth so even if things went badly for awhile (which I don't think will happen), I'd still be in pretty good shape for a long time.

I'm not going to do share renting though (I'm assuming this means renting a place with another person). I'd rather own a place of my own.

One of the cool things about owning a house is that It will be paid off in 30 years and will likely appreciate in value too over a 30 year period. If the dollar starts facing some crazy inflation (This seems highly likely, but you never know) the debt will be even easier to pay off.

The rising interest rates is another thing that makes me want to buy a house now rather than later. I could see rising interest rates make housing prices go down which would make sense for me to wait. However, I'm far from an expert on the housing market and economics in general so if it continues to increase it could be really hard to get a house in the future, in which case, I'd rather buy a house now.

Almost no one stays in the same house for 30 years.

either I was looking at things completely wrong when I bought my house, or you are. yeesh

Oops, typo. I meant to say highly unlikely for hyperinflation.

True, however I could choose to turn it into a rental instead of selling when/if the time comes.