Accepted offer may be too high... what to do?

buyers remorse -- very standard.
if you are not sold on the idea of acquiring the place you can try to change your offer, but if you made it and they accepted it, it would be really bad form -- at least the person may feel motivated to string you up (just kidding)
If there were other offers you may just be dropped or at least the seller may have a good laugh at your expense
One thing about appraisals -- they usually come back at or above your offer. The basis is that if some one is willing to pay a certain amount for this piece of junk (er... gem) then it must be worth that

Why didn't you check out the comps in the bldg before making the offer. One of the largest purchases of your life and you check out the information after you make an offer. If you want the apartment leave the offer on the table and cross your fingers.

"before a contract is signed"

Then back out before it's too late.

"it would be really bad form"

Who cares? Oral real estate contracts are not valid, for a reason. That's the form: written.

Back out.

Hi, Julia and Joe--thanks for your replies. I actually did check out recent comps in the general area (provided by my realtor), but did not come across this older comp until recently. Joe--you mention that appraisals usually come back at or around the offer--but my bank will not be disclosing the offer to the appraisers. Would they get that number elsewhere, like from the seller?

Until a contract is signed, you have no deal. If you determine you do not want to stand by your bid because you have determined the value of the apartment to you to be lower, then withdraw your bid immediately. If you want to still make a lower offer, then your reasoning should be explained to the seller clearly laying out why you feel your high offer was too high and your revised analysis of the value as you see it. Will you "lose" the apt? Maybe. But to insure you get the apartment by overpaying sounds ludicrous unless you have decided it is worth it to you even if you overpay (for example, it is the studio next to your 2 bedroom unit and you need to join them to avoid moving your family, or it is the ideal unit in the building you dream about living in and it is virtually never available and you can afford to overpay). This all said, this is likely one of the largest purchases of your life which will consume substantial wealth and impact you financially possibly forever. It is time for you to treat it that way. Before you make offers, do your homework. Use streeteasy to determine comps, become an expert in the segment of the market in which you are looking, speak to a qualified, independent financial advisor (not one at a bank or affiliated with a brokerage--they have too many conflicts of interest), and work with a lawyer and agent you respect and trust. Fail to do these things and you are behaving recklessly and may pay a dear price for it.

Steve--the reason I haven't backed out is because this apartment has amazing views and I expected there would be a major premium on that. But I'm becoming increasingly nervous, for some reason...

We all become nervous when we make an offer. If you plan on staying for a long time & don't mind doing the work, then it might be worth going through with it. As a warning, if you take out a mortgage with a high interest rate, chances are that eventually you'll be able to refinance. But you keep the principal balance forever.

Unless you can afford this with a standard 80/20 amortizing fixed-rate mortgage, I'd look again. Lots of people make the mistake of buying what they want, not what they can afford.

bramstar, can you give us more info? the 2002 comp is really old and whats the context? if this is a 7 mil place then 1 mil less in 2002 is probably irrelevant. if its a 2 mil place then 1 mil less in 2002 MIGHT be cause for concern.

ccdevi--the accepted offer is $2.5 mil; the apartment is in estate condition. It's real draw is the view. The 2002 comp was a few floors higher--I don't know what the condition was--that place went for something like $1.2 and change.

If you are spending $2.5 million -- let's say the apartment is on a five percent commission -- there's $125K in commission -- let's say your realtor sees a quarter of that -- $31K.

For that price, he or she should be able to run comps for you. In this market, agents increasingly have to have them to hand anyway, to go to war with appraisers.

Ask for both "recent solds" and "on-market" comps. Three to five of each should be sufficient.

Can you change your offer? Absolutely. But it is better to drop out than to waffle. If you drop down, be aware that the seller is going to read into that that you're fickle, and you're a dangerous flake until the deal is closed, and he/she might begin to function accordingly.

If I were a seller and the offer number started to come down, I would accept the lower offer -- but then fight a land war in Asia over the contract. If you're unsure about buying, that protracted battle won't make you feel better.

Study the comps and then sleep on it.

ali r.
{downtown broker}

steve makes a good point here bramstar, being nervous is natural. I sh*t myself before every large purchase and usually wake up in the morning asking "what the hell am I doing?". That said, one thing you need to do is come to terms with how much you are willing to pay for this apartment. Would you sleep better at night if the accepted offer was $2.4M? $2.0M? Is price really the issue here or is it just general nervousness and lack of confidence in a rocky market? Also, what else could you buy in that neighborhood right now for $2.5M? That is a better indicator of the value of this unit than a 2002 comp.

Here's a twist--We had an accepted offer from the seller, a couple of days later he says a new buyer just entered but he would allow us to match the higher offer (about 5% more). We refuse both because we didn't think it was worth it and it sounded fishy. Of course, the "new" buyer disappears and now the seller has lowered the asking price by 7%. I'm sure we could get the apt at the originally agreed upon price, but now that he lowered the asking price, I feel like if I decided I still wanted the apartment, it should be at a price lower than what we had originally agreed upon. ANy thoughts?

Yes. Send a letter to the seller and the seller's broker stating:

YOU F&CKING IDIOTS, HERE IS AN OFFER 5% LOWER THAN MY LAST ONE. TAKE IT OR I WALK.

BEST REGARDS,
dmf13

Nice work calling their bull, rub their nose in it. Even if you don't get the place it will give you some personal satisfaction.

dmf13, completely agree with JuiceMan on this. It's amazing in this market that people still think they can job you. They know you're a serious bidder at this point, so the hassle of finding another legit buyer probably isn't worth it to them. Lower your offer a bit and see what they do.

I agree with JuiceMan. In this market anybody who says there's a counteroffer, just say, okay let's hold an open outcry, bring them to the table face to face.

Or, I'd offer 20% less, say you found an apartment you like just as much, with no work required. Nanny nanny boo boo.

Wow. I am in this exact same situation. On a much smaller scale though. Advice would be appreciated.

Asking was 395. Agreed to 380. Seemed reasonable since all the apts in the area were asking 380-425. Question about financials in the building, so purchased access to some info to see whats going on (propertyshark). Later, saw that apt 2 floors below closed for 295 on 5/15. Apt 3 floors above sold for 315 in December.

What to do?

a) I could try to renegotiate, but broker thinks the seller will just move on.
b) I wanted to send in an appraiser, but both brokers objected, saying that the seller would think that the appraiser is "on our side" and not accept anything he says anyway.
c) They are suggesting that I sign the contract with clause that it must appraise for sale price. Then if it comes back at 380 or above, I should be happy to move forward. If not, then we renegotiate and it doesnt look like I was trying to backdoor a lower price.

I know this is not the multi-million dollar estates you guys usually talk about, but this is a big purchase for me. Thoughts? Suggestions?

By the way, we do like the place (obviously). In the area (Queens), other 3 bed/2 baths are going for about 320-360. There WAS one sale at 387 and another at 373. After that, its 360 or below. So I dont expect to get it for 295 or 315. Maybe 340 or 350...?

Ooops, sorry to steal the thread. If anyone objects, I will start another one. This should be about Bramstar. But whatever advice you give him is probably applicable to me too. And vice versa. lol.

Relying on appraisers is not a good tactic. It is not magic that the appraisals often come back within pennies of the negotiated sale price. It's the way it usually goes if the price is at all connected to comparables.

My advice, stated differently, is business is business. Get rid of the emotion or you'll make silly decisions. If you don't want a deal for a price you offered, take it back since it isn't in contract yet. If the seller isn't locked in, neither are you. Nothing stops the seller from changing his/her mind about selling to you if there is no contract, and you have every legal right to decide not to buy at a given price. Just be ready to walk away from the apartment. You'll think more clearly. Surely there are better comps than a 2002 sale, even if in nearby buildings.

If, however, you can afford to overpay and know you will be happy for a long time in this highly special and unusual apartment, then the premium may be worth it. Only you know.

roykirk1, as thread hijackings go, that was pretty mild. I wouldn't worry about it.

When you say "There WAS one sale at 387 and another at 373. After that, its 360 or below." it sounds like you're talking about comps prior to more recent ones at 295 and 315. More recent means more applicable. Also, comps in the specific building are much more appropriate than others in the area. Were the units at 295 and and 315 in the same line as the one you're considering? If so, they are ideal comps. You're in the middle of the two, height/floor-wise, so I don't think view is an issue. That only leaves condition. If the 295 & 315 units were in bad shape and yours has a mint high-end renovation, that will account for much, maybe all of the price difference. If the condition of all three units is similar, it sounds to me like the current value of your unit is 305, splitting the difference of the value attributed to a higher floor. The only thing the old, higher comps - compared to the new, lower comps - tell me is that value in the building or in that part of the market is declining. The higher asking prices are irrelevant if no one is buying the units.

Both brokers get paid only if the sale happens, and both make more money if you pay a higher price, so the fact that "your" broker is in agreement with the seller's broker is also irrelevant. Neither's interests are aligned with yours.

Maybe there's more to it, but it seems that the arc of comps in the building is going down. In this market, I don't think it makes sense to go against them. In a choice between losing the apartment or overpaying by as much as 25%, I say let it go.

roykirk1, you should walk, your comps are recent and obviously a large % below what you're paying. There could be a reason for that (maybe your place is gut renovated, and those places were in bad condition) but otherwise hard to justify anything close to your price.

Bramstar needs some better comps to work with.

roykirk, i'd walk, and then fire my broker for not sharing comps info with me earlier. he cant expect 3% of proceeds for just wearing a tie and accompanying you to the showing. he should be adding some real value and un-earthing stuff you cannot find. it's pretty telling that you find data he was supposed to find ..

"both brokers objected"

YOU NEED A NEW BROKER. Now. That broker isn't working for you.

You have every right to hire your own appraiser; it the buyer doesn't like it - too bad. Maybe they don't want an inspection, either.

I hate to agree with ccdevi, but he's right: you should walk.

This does not smell good.

Again, apologies for hijacking. Please continue to respond to the original thread as well.

Thanks for your replies: I've started a new thread to ask for help with my situation:

"Need to Renegotiate Agreed Sale Price - How?"

Thanks everyone for your comments. This is truly agonizing, as we are now nearing a point where a contract will have to be signed.

Good luck ... let us know what happens.