Blog #03: Putting an offer on the property

Contacting the owner:

We knew that the property did not sell a year ago but we were not sure if the owner was still interested in selling. We searched public records to track down his contact details. We emailed him on the email-id we found online and also left him a message on the phone number indicating our interest in purchasing the property along with our contact details. We tried to keep the message to the point, if they were interested then they could call us back, otherwise we had our answer. To our surprise, we received a call back after a few minutes and were told that he was interested in selling. We asked if we could tour the house to confirm potential views before talking about making an offer and arranged for one the following day.

Condition of the property:

We found that the house sitting on the property was about 120 years old with no work done on it. When we entered the property, we couldn't even see the whole lot because of how unmaintained and overgrown the trees & bamboo bushes were throughout the property. The foundation of the house had huge cracks but we got a sliver of the view of the lake from the main floor. Since the property met all of our requirements and we knew it would be very difficult to find a similar property ready for demotion in our neighborhood, we decided to make an offer.

Should we hire a realtor?

At this point, we had already found the property, knew that the owner was interested in selling, and also knew the price he had put it on the market and couldn’t sell for a year ago. We knew we could go below the listed price. We were confident we could negotiate a price with him and to be honest, we were OK with buying the property at the price it was listed a year ago. So we knew our upper limit. There were three primary reasons which further pushed us to not go with a realtor:

1. We had already done a detailed comparable analysis of houses in our neighborhood through Redfin and Zillow to know the $$ range the property would fall under.

2. We wanted to incentivize the owner by doing a private sale and saving up to 6% on realtor fees.

3. Since we were going to demolish and build, we did not need any special clause on the contract. We knew we could use a basic contract to make the purchase.

Negotiations:

As a first step, we wrote up an email offering him 25% below what the property was listed for a year ago, comparable houses in the neighborhood to justify the price we were offering and the benefit of doing a private sale further justifying our offer. We knew we had low balled the offer but wanted to start from a lower baseline. Not surprisingly, the owner declined the offer. We contacted the owner again and asked if he would be willing to meet to give us his offer. He met us at a restaurant in the neighborhood, and came back with a price 25% higher than what he had listed for the property. The price was much more than what we were willing to spend. We decided to walk away.

The initial negotiations took about 15 days and by this time, we were emotionally invested in the house and wanted the deal to work out. After a few days we called him back and he seemed eager to negotiate. We suggested a price that would meet him in the middle (still lower than what it was listed at last year). He agreed!! We shook hands and that was it. The whole process was SO emotional and stressful. But I am glad we did it ourselves. The negotiation process pushed us and also helped us learn about our limits.

Contract:

Now it was time to sign the contract. We used a simple rocket lawyer pre-drafted "Intent to Purchase Real Estate" contract for purchase without any issues.