How aggressive to go on duplex offer?

Question

Given the market conditions right now and the pandemic, I am less sure of what to do when it comes to submitting an offer. I am a new investor and not familiar with purchasing MFH. I am interested in a duplex priced at $379K. A duplex across the street recently sold for $399K and was on the market for apparently 8 months. Based on property values the duplex prices range from $350-$410K. Based on the market situations right now I have this gut feeling that I should go in aggressive with $365 and seller to pay all closing costs. My realtor suggested $379K and seller to pay all closing costs, but not asking for both a price reduction and closing costs. It's been on the market for 2 weeks now and I am solid buyer. Also the seller bought the place for $130K. Is there anything else I should look into to better price estimate this duplex? Would this be too aggressive of an offer? Is price of $379 vs $365 minimal if I can just pay as little cash out as possible? Looking for suggestions or advice on the best approach. Thank you!

Russell Brazil · Answer

I wouldnt be expecting a large discount with only 2 weeks on market....however a net offer of $25k below list isnt exactly a lowball....Id expect they would counter that offer.  If you were like $50k below, theyd probably ignore you.

Account Closed · Answer

@Maggie Thompson I read your other post as well as this one and wanted to ask, have you run this property through a deal analysis calculator (BP or otherwise)?

Putting all the numbers in and then being able to tweak them is super powerful! I know this doesn't exactly answer if 365k is a low ball offer or not but it should give you an idea of which numbers you can play around with and by how much.

I am also in favor of trusting your realtor. If they give you a suggestion, I would follow it. If you do not trust their opinion, find a different realtor that better aligns with your strategy.

Peter Walther · Answer

I always check the public records if I can to figure out what they may owe on the property.  If they have a $370k mortgage it's unlikely they'll accept a $365k offer unless they're planning a short sale.  On the flip side if the have a $150k mortgage it appears they have significant flexibility in what they can afford to accept.  I'm also trying to figure out if there's anything else going on that might affect what they can afford to accept.

I believe making an offer like that also makes me look like a novice and makes it less likely the seller's will take subsequent offers seriously.

Evan Polaski · Answer

@Maggie Thompson, when you say seller pay all closing costs, what do you mean?  I have never bought or sold in Oregon, but closing costs tends to mean different things to different people.  You will likely have to prepay a full year of insurance.  That is a cost incurred to close on your end, but not a closing cost to the seller or bank.  Title insurance is another one.

In my market, standard practice is to put an offer price, and ask for a specific amount as a buyer credit at closing.  I.e. $3,000, that will simply be a $3,000 credit on the closing statement.

To answer your question, an offer of 96% of ask after 2 weeks is not bad.  In my market, good properties correctly priced are going under contract in 24-72 hours.  When you factor in any closing cost assistance, your number will drop, but even if you ask for $3,000, your offer is essentially $362k, which is still 95.5% of ask, which to me is still a very strong offer for sitting 2 weeks.  And as others mentioned, the more comfortable you are going in with your price and walking if they say no, the better position you will be in.

Mike Cumbie · Answer

I as well don't know the property or values in that area or anything except what is written. Starting a conversation around the 95% range is where deals get done. It's when people say Asking is "379,000 and I think it's worth $135,000 so I want to start at $89,000" that it is a complete waste of time for everyone. The seller has certain expectations and 2 weeks usually doesn't totally discount them.

Also though, your agent has reasons for their opinion and them being the local expert I would lean heavily on that. Ask them more questions and see where their mind is at. Get you two on the same page and it can come together.

Good luck!

Bryan Mitchell · Answer

Maggie, keep asking questions and learning more about the buyers interests. This may help you better understand what’s a good offer to start with. Of course, you should always be willing to walk away from the deal. Being able to do so, you’ll have more strength when you negotiating. So know your price range before offering. As for your agent, trust but verify what they tell you. Some have very little experience when it comes to good investments. In the end, Have a plan. Good luck.

Maggie Thompson · Answer

Thanks Russel!

How aggressive to go on duplex offer?

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