what kills me?

This is a good one! And right near the highway too. Very convenient.

jrn - you have to become immune to this nonsense if you want to buy out there. In my experience 90% of the time it is the seller who is diving this. And the broker will agree to anything to get the listing. Do your own homework, use your broker only to open the front doors. You will find the seller that needs to sell. It will happen! Forget FMV. You will never know if you made a really good deal until well after the fact. My brother is going through this in California. He has been looking for 3 years (while renting!) and is so obsessed with not paying more than "FMV" that he has lost three potential houses in bidding wars. And each time he convinces himself that the winning bidder "overpaid." A house is worth what a buyer will pay. Period.

PS I believe Nestseekers is successor to Engels&Volker. They had similar listings and lasted about three years out east before they folded.

Regarding the point "a house is worth what a buyer will pay", I don't totally agree. A house is worth what a consensus of informed buyers (plural) is willing to pay. You might be able to find a one-off uninformed buyer who will pay in excess of fair market value for a house, but that doesn't mean the house was really worth that much. That's why you can't blindly look at comps. When I consider making a bid on a home out there, the broker always shows me the highest comps she can find--- when I probe her on some of them, she will respond "that buyer paid too much...the seller just got lucky." So don't get fooled that a house is always worth what someone paid. You really need to do your homework and look at the concentration of trades in an area, and look at comparable homes.

Personally, I would not "forget FMV." Most of us can't afford to overpay for a house in today's market, especially considering how long it takes these days to sell something if we need to get out. Rather, I would say "be reasonable about FMV." Do your homework, and don't blindly look at a single comp, or listen totally to your broker---remember they are there to make a living, not to protect you as the buyer.

thank you both for your thoughts. unfortunately, it is impossible to be 'immune to this nonsense'. as i look through listings, i try to bracket my searches. such an action makes these searches less meaningful and acts to increase the amount of time and effort that goes into targeting some actual properties to visit. the associated frustration reduces my inclination to even begin the process. i have no issue in paying a 'fair value' for a property - only ascertainable after lots of looking and 'timely' comparables. after all, with all the brokers and builders out there, any good deal will get swiped up quickly (yes, call me cynical). however, one does not want to wind up finding out, after the fact, that they were, unwittingly, the 'one-off' buyer that needadvice mentioned. hence, when i see an action such as the one that was taken here, i naturally cringe and ask myself 'am i making a mistake?'

The hamptons is all nonsense, but the market out east is a different demon then anything else one could ever experience. That house your referring to is a classic example of a stalemate between a potential buyer and a financially comfortable seller

Needadvice - a house is not worth what a consensus of buyers is willing to pay. Tons of houses get sold with only one buyer at the table. and if there are several a bidding war ensues. Any given house is worth what the highest bidder is willing to pay for that house at that time. Period. The market at that moment on time has determined the FMV of that house. You are confusing FMV with whether or not you got a good deal. You cannot know that without the benefit of hindsight. So someone like jrn or my brother will always be afraid to pull the trigger.

JRN - you really need to take a seller out of the equation. You are wasting your time trying to "control" the seller. Who knows what his/her situation is and you should not care. Here is what you need to ask yourself:

1. Do you really want to buy a house in the Hamptons right now (putting aside price)?
2. If yes, how much money can you afford to spend for a house in a location you want (all in, including renovations (if any) and closing costs)?
3. Look at homes ONLY asking NO MORE THAN 10% above the total amount you came up with in #2.
4. If you find something you like - offer a starting price that you think will ultimately get you to no more than the amount in #2.
5. If you don't find anything you like after about a month - you must come to terms with the fact that you cannot afford what you want IN THIS MARKET TODAY. You will then have to change your parameters - size of house, location, etc.

If you are only focused on the seller and "FMV" chances are you will NEVER buyer a house. And why you may think you are "punishing" a seller by not buying - what you are really doing is punishing yourself - because you are not enjoying the house you said you wanted.

So someone who doesn't know the market pays 20% more than he could turn around and sell it for to anyone the next day , and you think he paid FMV? That's ridiculous. I'm not confusing anything. You've never heard of anyone who paid too much for a house because he was uninformed? That doesn't make it FMV.

Your comment is mixing up a whole bunch of issues. A buyer has no idea when he buys something what he could sell it for tomorrow. If you could we would all be rich. How do you know he could not turn it around the "next day" for more than he paid? Look at 15 CPW in the city. What I am saying is that the moment he bought the house - that was the FMV of the house at that moment in time. A "market" requires only two people - a buyer and a seller. The price they agree on is the FMV. That has nothing to do with whether or not it gets sold at a profit or loss the next time it is sold.

Of course I think people have "overpaid" - but what I am really saying is that I would not have paid that amount for the house. But I did not determine the value of the house - the actual buyer and seller did.

You completely miss the point. This all started with your comment that a house is worth what a buyer will pay. Have you never heard of a buyer who paid a premium for a home for reasons that went beyond it's true market value? For instance, he paid more because he needed to live on the same street as his ailing parents (or for a variety of personal reasons). If the same exact house went on sale next door the next day, general buyers would not pay the same price because they don't have the same reason to pay the premium as the other buyer. According to you, the one buyer's purchase established fair market value for the house next door, when in fact no one else will pay the price the other guy did just the day before for essentially the same house. You are mixing up what ONE person would pay to what other educated buyers would. All I was saying is that you have to look beyond that, and not just blindly accept that a single trade necessarily establishes value in a neighborhood. It does not establish FMV, only that one particular buyer paid that much, for a whole variety of reasons that may not apply to anyone else. Even general accounting principles allow you to ignore one off trades when valuing your assets.

Let me ask you this. Assume a house for sale asking $1M. Four offers come in (assume they are final - no negotiations): $800K, $900, $1.0M and $1.1M. The buyer sells his house to the highest bidder. On the day of the closing (immediately after the closing), what is the FMV of the house?

As to your comment that I have missed the point. OK. But I have a lovely Hamptons home which I am enjoying and the original writer on this thread and my brother do not.

lkgsoh,
the problem with your approach is that the market appears to me, to quote a previous poster, 'nonsensical'. if i want to spend $3MM on a home, i used to feel that i needed to look at homes between $2MM and $4MM. i guess i felt that on the low end, they may be priced 'to sell', whereas on the high-end, there may be more 'wiggle-room'. if there is a rhyme and reason to how homes are priced, i have not gotten it yet (albeit, i have only looked at about 15 properties this go around). regardless, to look at the homes simply in this price range would take me much more than a month. now, with the price increase that i pointed out in my initial post, the range may be even bigger. so, the process takes even longer. moreover, this action screams out to me that the seller is, in fact, looking for that one outlier. i guess if i was the seller, maybe i would do the same thing. however, it just raises a lot of red flags in my eyes. i appreciate your thoughts and perhaps, someday, like you, i will be enjoying a home out there. but for now, and especially in these times, i will need to spend much more time trying to figure things out. btw, are u a full time resident out there?

hi jrn - We live in the city and bought a weekend home out there spring 2010. We gut renovated and did an addition and just moved in September 2011. We rented for 8 years prior (different homes) so we were pretty familiar with all the areas.

I totally feel your pain. All the years we rented we just looked at houses and thought we could never get in. The asking prices are absurd. Houses sit for years on the market because the price bears no relation to reality - and they are all looking for that one exceptional buyer that wants to live on the same street as their mother or whatever. You need to ignore these listings.

So let's say you want to spend $3M max on a home all in (including work). So assume you want to do no work - you should not be looking at a home asking $4M. You will never get it. I made the same mistake. Sellers won't budge and they will end up renting it out for yet another summer. For move in ready homes - only look at houses asking up to $3.3, maybe $3.4, TOPS. Be firm with your broker about this. If you are willing to do work, factor in cost of doing work - so let's say house needs to be gut renovated or basically torn down - factor $450/sq foot (all in) x 3000 sq ft (for example) - so that's $1.35M. So tell your broker you only want to see tear downs under $2.0M. Assume you can negotiate 10% off the price almost for certain. Maybe even 15%. So now you will pay $1.7 plus $1.35 in renovations gets you to $3.05. For houses between teardown and perfect there is a sliding scale but you get the drift. Then I assume you have a neighborhood in mind. Say you want south of highway between South and Bridge. Or Sag Harbor or whatever. Only look in your desired area. Only look at your desired lot size (ballpark). I promise you that given those parameters you will only find 8-10 houses that are even in play. There will be many houses that will be unacceptable at any price - for example a really busy street or an unkempt neighboring property or a wetland issue or whatever. Now after this if you don't find anything, you have to give up something. Location, smaller house, smaller lot, whatever. And then you start over again with your new parameters. If you are not finding anything after searching for 2 years you need to look in the mirror. You need to accept that you cannot afford your wish list and adjust it accordingly.

When we saved enough money to buy, we had our max budget, were willing to do work, knew what location we wanted, and approx what size lot and house. We looked at about 15-20 houses over the course of about 3 weekends spread out over 3 winter months. Of those houses only 2 met all our parameters! Both of them were tear downs. The preferred one we lost in a bidding war to a prominent builder. The second one we got - 15% below asking. And it turned out just beautiful. For the price we paid for the house and the reno we could not replicate buying a new house on the market now. I am certain we would get more than we put in if we were to sell it (one guy on our street already wanted to buy it from us!) but honestly I don't care because I am staying put! I highly recommend a tear down but I understand some people just don't want to do it.

I wish you the best of luck. I think the Hamptons is one of the most beautiful spots on earth and try to remember that this is more than just a business deal. It's your life! Enjoy!