Price negotiations on a house with a guy from India...

[apinomus]

I'm scheduled to set down with the owner of an FSBO house tomorrow. I've met him once when viewing the home before, and he seemed like a nice enough guy. When I told some people the owner was originally from India, they said I probably wouldn't be able to talk him down in price much... is there something in Indian culture where bartering is frowned upon, or that it's a form of disrespect to offer less than they are asking for? I just don't want to offend him and lose our opportunity to buy the home.

 

[KB]

Funny, the Indian people I know are full-time hagglers. They will sit and argue over 100 dollars for 3 hours when buying a car.
Second, this is America. We can offer less for a house. If the guy is offended he will have to get over it. You will get the price lowered if the market is not doing well or he is desperate to sell, no matter what culture he is from.

 

[shiner]

Don't worry about offending him. Worry about getting yourself the best possible deal. Believe me he is probably far more interested in selling than you are buying. You can always buy another house if the deal falls through.

Too many people let their emotions become involved when they are negotiating. That is what kills them. Leave the emotions at the door and put on your best Spock face and get to business.

 

[bapace]

has nothing to do with bartering, in general, people from that culture seem to be cheap. I had an Indian roommate for 3 years, also seemed to short payments for bills, etc. He made the same amount of money as myself too. He would never want to cover a bar tab or anything like the rest of us, always demanded things split down the middle.

 

[EagleKeeper]

By him using the FSBO method, either he does not want to pay the 6% commission because the market is strong or he is cheap.

Or the house may have been on the market for 3-6 months without a realator doing him any good.

Try to find out in advance how long the house has been on the market.


You should try to find out waht houses that are comparable are selling for; get the appraised value of the house and surronding units; see what others in the area are being listed for.

To not get shafted; you need to do a lot of leg work quickly.
Figure that you should be able to start with an offer of at least 15% below what the place is listed at.

 

[apinomus]

The market actually isn't all that great here right now, but we really need more space (moving from an apartment.) It went on the market Thursday, actually, which makes me think he will be even more reluctent to come down... not to mention he has his first open house this weekend and will probably want some offers from that.

There is one other home on the street basically identical to his that has been on for about at least a few weeks and is asking only $1500 less, and they are going through a real estate agent to sell it. We're touring the identical place tonight to take a look.

Everything in the one we're interested was very well taken care of and he was the first owner of the place. We would need to buy a new fridge and probably replace the range--everything else was in pretty good shape, so that seems to be our only wiggle room so far.

Any other advice on talking this guy down?

 

[shiner]

Like Common Courtesy said...try to find out what the REAL market value of the house is. See if you can get your hands on a CMA for the area. Don't trust a site like Zillow or something like that because I have found it to be waaaaaaaay wrong on some house prices.

Just for an FYI from a seller's perspective. I just sold 2 houses and when I listed them both I took the numbers from the CMA that had been done, arrived at what I thought was a fair price for them, then added $11,500 to the price of each as negotiating room. Everyone that is selling a house pads the price and has room to come down. Unless of course they are an idiot...but that is a whole other discussion.

You only problem might be the short time the house has been on the market.

Just remember.

DO NOT LET YOUR EMOTIONS BECOME INVOLVED AND LEAD YOU TO MAKING A BIG FINANCIAL MISTAKE!

 

[Safeway]

One of my ex-roommates (from a couple of years ago) told me that his parents were highly offended by hagglers. In India, they are considered rich. They own tons of land, livestock, numerous houses ... so money isn't an object to them. If they want something, they buy it without haggling. Haggling was reserved for the lower class citizens, and reflected poorly on the family and insulted the seller.

They brought the same mindset to the US. And FYI, he was the worst roommate I have ever had.

 

[Vette73]

Use Zillow.com and see what the comps are in the area.

 

[shiner]

Originally posted by: Marlin1975
Use Zillow.com and see what the comps are in the area.

I don't trust Zillow. Before I put my houses on the market I was looking at it to get a general idea of house prices in the area. It was WAAAAAAY off in both neighborhoods..... On one house it had the price of the house across the street as being nearly $30k below what I knew they guy who owned it sold it for. On another down the street it was nearly $50k over. Makes no sense at all.

On my other house when I looked at the neighborhood it was in it had the prices wrong by a large margin, though not as large as the other house, and had build dates, square footage, etc, etc, etc.... all wrong.

It may be a good resource to get a general idea is some areas, but in both areas where I was selling a house it was useless and actually quite comical.

 

[apinomus]

He had his home appraised and put it on the market for what it was appraised at...

We're also first time buyers and aren't really fully sure on how things are supposed to proceed. Should we maybe hire a buyer's agent to represent us and attempt to get a CMA in the area?

 

[shiner]

Originally posted by: apinomus
He had his home appraised and put it on the market for what it was appraised at...

We're also first time buyers and aren't really fully sure on how things are supposed to proceed. Should we maybe hire a buyer's agent to represent us and attempt to get a CMA in the area?

A house can appraise for wildly different prices depending on who is doing the appraising. On one house I was selling the appraisers, I brought in 3 just out of curiosity, the values ranged from $145,000 to $172,000. So....you can see there is a BIG difference depending on who does the appraising. Really to get a good idea of what it is REALLY worth you need a CMA.

It sounds to me like you would be better off if you hired someone to represent you in this process since you have never been through it before. There are a lot of pitfalls and gotchas. If you don't know what you are doing you can really end up screwing yourself.

 

[rivan]

Originally posted by: apinomus
He had his home appraised and put it on the market for what it was appraised at...

We're also first time buyers and aren't really fully sure on how things are supposed to proceed. Should we maybe hire a buyer's agent to represent us and attempt to get a CMA in the area?

I'd strongly recommend getting an agent, being a first time buyer.

As for the guy being cheap because he doesn't want to pay 6% to agents - you're a moron. If I thought I'd have been able to sell my last two homes compentently without an agent, I'd have done it in a heartbeat. Would have saved me .... about $26k. It's not chump change.

Also, shop around - 3% for a seller's agent is NOT set in stone. As I had two homes to sell within 6 months of each other, I negotiated the seller's agent fee down by .75%. Again, not chump change - and well worth the little bit of 'homework' I had to do for it.

Edit: as a buyer, you're in a weaker position to negotiate the commission for your agent and have little incentive to do so. Agent commissions (at least here in Missouri) are both paid by the *seller*. That won't keep the seller from building the commission into the final negotiation number, however, so it'll still end up in your mortgage. The best you could do is gain a slight edge with a seller by having an agent with a lower commission.

As shinerburke mentioned, there are a LOT of pitfalls for the first-timer.

 

[Double Trouble]

Originally posted by: apinomus
He had his home appraised and put it on the market for what it was appraised at...

We're also first time buyers and aren't really fully sure on how things are supposed to proceed. Should we maybe hire a buyer's agent to represent us and attempt to get a CMA in the area?

Do yourself a huuuuge favor and get a buyers agent. Normally it costs you nothing as the agent is paid by the seller. If you are experienced in real estate or home transactions, you might not need a buyer agent, but for someone like you (first time buyer), they are a valuable tool. They know what bases to cover, what questions to ask, how the processes work, what additional costs/fees you might be looking at etc etc etc.

This will likely be one of the biggest financial transactions of your life, having someone knowledgable represent your interests is a good idea. Seller or dual agents primarily represent the seller. A buyer agent represents you, and only you. A good one can help you save money, and more than likely can help in any negotiations. They know what the price should be and how much you should offer.

 

[mugs]

Originally posted by: apinomus
I'm scheduled to set down with the owner of an FSBO house tomorrow. I've met him once when viewing the home before, and he seemed like a nice enough guy. When I told some people the owner was originally from India, they said I probably wouldn't be able to talk him down in price much... is there something in Indian culture where bartering is frowned upon, or that it's a form of disrespect to offer less than they are asking for? I just don't want to offend him and lose our opportunity to buy the home.

I think it has more to do with Indians having a reputation for being tightwads. That's probably part of the reason he's selling it FSBO. The other part is that he doesn't have enough equity to afford a commission. Another reason why he wouldn't drop the price. Don't worry about offending him or losing the opportunity to buy the house. His house is not unique.

 

[HomeBrewerDude]

Don't worry about the seller. You determine what $$$$ you're comfortable and offer that. If it is a market is soft, then there will be plenty of other houses for you to buy.

 

[torpid]

"some people" that you know are apparently racist morons I guess. The only reason someone wouldn't be willing to negotiate a price is if they are stupid, not if they are indian or any other race.

 

[yuppiejr]

I effectively "FSBOed" my townhome, priced it 5% under the going market price in my complex and sold in less than a week. I hired an agent to handle the transaction and everything went smoothly.

Most for sale home prices are inflated by 5-7% to cover the agent's fees since most homeowners can't or won't take the hit out of their take. If this guy is trying to sell his home without representation and still get the inflated 'market value' based on pricing for realtor represented listings he's going to be waiting a long time.

I also purchased a home from another FSBO guy and he was of the "this is what I need to get" versus the more realistic "this is what the house is worth" mindset when pricing his home. After it had languished on the market for 6 months since no realtor will show a house that doesn't pay them a commission, he was pretty ripe for the picking. Not only did he sell the house below market value, he also paid my realtor's commission.

As a first time buyer you are in absolutely the BEST bargaining position on the planet. You've got no ties to an existing home and mortgage, the market is RIPE for a buyer with a ton of inventory and interest rates are still relatively low. Get your financing pre-approved and then start looking for sellers who've purchased another home and are looking for a quick-turn transaction with a non-contingent buyer for the absolute best price.

I'd advise hiring a buyer's agent or realtor to help, however you should still learn as much about the entire process as possible. Being a "new home buyer" is no excuse for walking into the biggest financial decision of your life unprepared or uneducated. Everyone but you involved in this transaction has their own interests to watch out for which may or may be in yours. At the end of the process, you are the one who writes a check every month to pay the mortgage so keep that in mind throughout the process.

More random advice...

- don't forget to verify the yearly taxes on any property you look at and make sure there are no outstanding assessments or other large homeowner funded expenses you don't know about on the horizon (call the city if you are not sure)

- don't forget to consider homeowner insurance costs - fireplaces & swiming pools drive these up and are better second home investments than first home choices. Watch out for flood plain designation or other factors that could make insurance expensive or perhaps even unavailable (again, the city should be able to help you with appropriate survey maps of the property).

- anyone telling you to "buy a house payment you will grow into" is talking out of their ass (usually realtors and mortgage brokers)... remember, the more house you buy/finance the larger their cut. Figure out what you can afford per month (create a budget) before you do anything else, then figure out what kind of financing you qualify for.

- watch out for value reducing location factors like being near multi unit housing (apartments particularly, some townhomes) if you are in a single family property, power lines/water towers, commercial/industrial zoning nearby, busy roads, etc... that may hurt you down the road when it comes time to sell.

- if you are looking at homes built in the early 90's and late 80's, consider the costs of a roof, HVAC and appliance replacement when you make an offer if they still have originals in the home.

- if you find a house you like, pay for an independent inspection (not one your realtor sends you to)