buying a house...featuring a stupid game of a system

Hello all
My first post here.

My question relates to buying a house. In my city, the system in which you bid on houses is downright ridiculous.

1) place an offer through your buying agent
2) the selling agent reviews the offers with the homeowners, selects three ones they like most
3) the three are contacted, and asked if they wish to amend their offers
4) the revised offers are submitted, and the sellers select their best offer

Now, here are the stupid components...the buying agent can ask the selling agent how many offers he/she has, but not any specific information about them (such as, how much over asking price are they, etc.)
In addition, when you are contacted about amending your offer, they are not able to tell you the problem with your offer, if there was one. Maybe they don't like that you put "subject to home inspection" in the offer sheet...you'll have to guess at taking that out.

Oh, one more thing: it's not like eBay where your offer is accepted to above the other highest bidder. If I am willing to buy a house for $1,000,000, and the other offers are all under $200,000; if I submit an offer for a million dollars, then I buy the house for a million bucks.

Honestly, I don't see who this system benefits in the long run. Almost every house is going for $10K - $40K above asking price though.


Anyway, my question, and I apologize for the rambling: what do you guys recommend for putting an offer in? Like, let's say I am willing to spend up to $300,000 on a house. If the house books for $250,000, what do you recommend the offer be? Should I maybe add $10K to my offer on the first shot and hope that's enough to get the chance to revise it, or go balls-out from the get-go?

Thanks in advance for any assistance.

Quote: jmurder

Like, let's say I am willing to spend up to $300,000 on a house. If the house books for $250,000, what do you recommend the offer be?

...What you think it's worth?
It really depends on how much you want it and what the other offers are. Always make offers for at least two houses at once. That way you avoid getting too attached. If you're prone to getting attached, have offers out for at least three at once.

If you're saying near everything is going for 10k-40k above asking price (presumably everything in your range), you could crudely map it to, say, a linear scale from 0% to 100% for respectively $0 and $40,000 above the asking price, for the probability of getting the chosen house. Then put a percentage value on each house you're considering, taking into account the asking price, and make the offers accordingly. Keep the total well under 100%, of course - you have many shots at it.

I can't believe there to be such a shortage of midrange real estate in this economy that you would need to go all-out on any house, there's always more where it came from. You only need a few percent, unless you really like the house and feel it's been undervalued.

More realistically you should actually map it from (Asking-$10k)=0% to (Asking+$40k)=100% at 2%/$1k, since there is a probability of getting it for the asking price and a small probability of getting it below the asking price. If you want to get into it, and can get fair statistics, more accurate mapping can be produced.

Do your homework. Make an offer that represents fair market value (or better yet, less than fair market value). If the offer is rejected, move on to another house. It's just a freaking house.

What some other idiot is willing to offer should have NO impact on your offer. Use your agent to gather information- be careful not to mix information (facts) with opinions of the agent. Their incentives are not aligned with yours.

Just my 2 cents.

Quote: jmurder

Honestly, I don't see who this system benefits in the long run. Almost every house is going for $10K - $40K above asking price though.

It benefits the seller as it should since they are the ones who have the item to sell and want to maximize revenue.

Solution is simple and a bit as the other poster said. Keep shopping. Put in a bid. If the seller's agent asks if you want to ammend it say, "no, this is my offer." If accepted you have a house, if not move to the next. Never bid more than what you feel is fair and you can afford. Except for a few high-demand pockets there is no shortage of houses, 2011 was the worst year ever for home sales.

If you are in an area of shortage like Manhattan or San Francisco you are more screwed. Still bid a fair price. You may need to bid on a few places, keep at it. You are not buying a box of popcorn.

Rule 1 of bidding, there IS a higher bid lurking, but you need to make an offer that
a.) gets taken out
b.) instills remorse on the better bid.

Rule 2. Cash (principal) only. No finance means stict adherence to Rule 1

Rule 3. Inquire about bank-owned properties, and cut a deal off the table, meaning pay to have it removed from auction if they take your offer.

Rule 4. WITNESSES, and Legal Counsel.

GL n GG

Don't fixate on one property. Line up a few that you would be happy purchasing and then put in lowball bids. You may not get any on the first round but time is on your side. Keep doing research ( try Zillow.com ) and keep looking. Your agent gets a buttload of cash for facilitating the transaction so make him/her earn the money.

Remember that the bidding process can work for you as well, especially in this market.

What happens if there is only one offer, not three or more?