Tuesday, January 22, 2013

An Offer

Though I've never explicitly stated it on either of my blogs, my wife and I hope to eventually move away from our current house and town to a quieter location out in the woods somewhere.  We'd like to have a large chunk of undeveloped land (preferably forested) to go along with a modest house, tucked away into a quiet corner of the state, away from neighbors, crowds, and traffic.

Though we haven't mapped out a specific plan to achieve this dream, my own preference would be to live mortgage-free in our current house for several more years as we continue working, saving, and investing.  Once we have enough income-producing investments, I'd like for us to scale back our work commitments and look for a way to transition to our future house in the woods.  I'd be open to either selling our current house or renting it out depending on the market conditions at the time, though at this point I think selling would be my first choice.  The sale proceeds could then be used to purchase the new property, using other saved money if needed to avoid taking on a mortgage.

Recently we noticed a property for sale in a location near some relatives.  The house and accompanying woods matched our dream well enough that we decided to explore it as an opportunity to get a head start on our next stage of life.  Unfortunately the seller was asking what in our opinion was an unreasonably high price -- even higher than what it last sold for in 2006 at the height of the real estate market in this part of the country.  Furthermore, the house had not seen any improvements recently, and was in need of maintenance in a few key areas like the roof and the furnace.  After discussing these concerns with our real estate agent, we decided to submit a low offer to see if the seller would be willing to come down in price.

Unfortunately the seller was not willing to even submit a counteroffer, but encouraged us to submit a higher offer of our own.  We decided against doing that.  While the property was nice, it is only a matter of time before the next owner has to spend some serious cash on upkeep.  Because we hadn't been actively seeking to take the next step in our life at this point, we decided not to stretch ourselves thin.  Potential sale proceeds of our current house wouldn't cover even the lower price we'd be willing to pay for the new property, so we would have to take out a mortgage for the difference.

We told the seller that the ball remains in his court.  If he ever decides to resume negotiations, we'll be willing to continue discussion at that time.  Until then we'll keep saving and investing our money.  If someone else comes along and decides to overpay for that property, so be it.  We'll find another one when the time is right.

Even though we came away empty-handed, I'm glad my wife and I had the opportunity to discuss our goals in more concrete terms.  When the next opportunity comes along, we'll be more prepared to act.

17 comments:

  1. And I'm sure you'll act wisely with the same level of discipline and emotional detachment required to avoid making the mistake of over-paying for a property you really like.

    Good job!

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    1. Thanks. There are some parallel lessons to help avoid overpaying for both real estate and stocks. Emotional detachment is key.

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  2. Exciting times! I've found that you do need to go through the steps towards a goal, whether it is regularly browsing what is "out there" to trying an offer and seeing if that particular opportunity was meant to be.

    Each step helping to solidify the next. We've found running numbers for a real opportunity much different from the theoretical ones (mls) in our heads of "we can afford this..." because it now involves whether we would really be willing to pay for it and if the the difference in price (and potential mortgage debt) is worth the value gained in the new location.

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    1. It was definitely good practice. I'm not sure that our buyer's agent appreciated the lack of a follow-up offer on our part though. I think she was hoping for a commission on this sale.

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    2. If she has been around long enough, she ought to know that no all deals get completed, especially if it was overpriced.

      We walked away from the counteroffer on our current house because I didn't like the way they came back after our initial offer "this is our final...we won't entertain a counter..." because in my mind, we just started! I hadn't sold my house yet either.

      Two weeks later we got a call from their agent saying they wanted to play ball. In our case, the owners were too emotionally attached to their (our) house because of all the work and money they put into restoring it over the 10 years they lived there.

      As much as I appreciate the value in their work (well over 100K), the only thing that mattered was market value as we don't always get our money back on renovations. And in your case, sounds like he hasn't done the work...

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    3. Exactly. I have no idea what logic he used to come up with the current asking price. It must be based on emotion.

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    4. We looked at the comparables and offered the highest amount a house had ever sold for in the previous 6 mnths as a starting point because his house was in better condition than anything that had sold in 1 1/2 yr prior.

      He wanted 130K higher, having recently come down 15K (again, not our issue). We ended up paying 15K higher than our original offer.

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  3. And because of this entry I added a little Goals page to the blog. The list is short but each goal is weighty.

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  4. Sounds like a wise decision you are making. No need to rush into anything, especially when you aren't desperate. It's worth taking a shot though, b/c you never know, you just might get lucky. That's kind of how I recently won my second property. I thought it was a long shot, and just through together an offer I was 99% sure would get rejected.

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    1. Yeah I certainly didn't feel the need to overextend ourselves since we already live mortgage-free. I figured it was worth a shot, just didn't pan out in our case.

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  5. I find it really hard to keep emotions out of the equation - thankfully my husband doesn't and keeps me grounded.

    It sounds like you made the right decision - something else will come along in the future :)

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    1. I hope so! Fortunately we aren't in a rush to move due to a job change or similar situation. It's a luxury for us at this point.

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  6. Way to keep both eyes open for opportunities but be strong enough to know when to stand down. My wife and I weren't necessarily looking to make a move to our dream location, but when a dream property cam up for sale we had to look further. We were lucky enough that our offer was accepted and are now in the process of rearranging our lives (jobs) to be able to live our dream life. Hopefully your story has a happy ending too!

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    1. I'd like for some of your good luck to rub off on us. Glad things worked out for you.

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  7. I believe that you made the right choice. Just keep waiting until a new opportunity arises. Good to see that you are saving and investing while you wait!

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    1. Thanks for the encouragement. It's nice to have a little more certainty for the near term. I had been avoiding making any new purchases recently in case we needed to come up with a down payment out of our savings.

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  8. No need to rush into any decisions, so good move on your part. Let it sit on the market for a few months and see if his mind doesnt change...or just chalk it up to experience and look elsewhere.

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