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Well, you can't overpay if you don't have an accepted offer. I've no intention of offending, but it seems that you're not quite ready to commit. If you want the house go forward with your offer. A large concern in any real estate transaction is motivation: it appears in this situation that the seller has very little, and you are questioning yours... not an auspicious start for any contract.
No, I really want this house but the price is putting me off. My husband doesn't want to move but has agreed to do it but he will be a lot more ok with it if there is no decline in price subsequent to purchasing. I was just perusing the realtor's other listing and I noticed a recent sale of hers was on the market for 2 years with multiple price drops. Started around $1.7 and sold for $1.3.
OP: maybe I missed it somewhere but is the seller aware of your interest in the property? As for the house being overpriced: maybe they dumped a lot of money into fixing -renewing-upgrading? Perhaps your agent can obtain the info about 'improvements'. You might be surprised what was added. Perhaps there is a new roof? Refinished floors? New HVAC system? These all matter and guarantee you peace of mind for many years.
Just get an idea of what was done and maybe after you hear the answer you will feel differently about it being 'overpriced'.
I would also let the seller know of my interest. Just submit and offer with comps attached and see what happens.
Also another thought. The Seller will pay 6% (if not more) in commissions to your and his agents and perhaps some of your closing costs . Could it be the reason they price is so high? Perhaps all these expenses were factored in and after paying them out the seller will end at taking the loss.
I think you are confusing income taxes with property taxes.
maybe I am. help me out. you said:
Quote:
dropped about 10 percent since then. They are up from the recession, but down in the last year or so. It is because you can no longer deduct property taxes above $10k and mortgage interest above $750k mortgage.
you implied that a 10% drop in value was because you couldn't deduct SALT over $10K, and you couldn't deduct interest on over $750K.
Let's play with some math.
You could deduct interest on $1MM, but now it's $250K less. So $250K x 4.5% interest = $11,250. This is the interest you can no longer deduct. 35% marginal rate x $11,250 = $3,937.50 more in taxes.
The SALT is where you're getting nailed, assuming you have a state income tax. I see IL is 4.95%. If we assume you make $300K for that $1MM house (which is plenty to afford a 1MM house, BTW), then you're paying 300K x .0495 = $14,850 in IL income tax.
Google says the average rate in Cook County is 2.01%. So, $1MM house x .0201 = $20,100 in taxes.
If we assume that your state income tax and your property tax are the vast majority of your taxes, here's what it looks like:
20,100 in property taxes 14,850 in income taxes
$34,950 in SALT paid.
35K - 10K = 24,950 that gets taxed. At 35% marginal rate, you pay $8,732.50 more in taxes.
So, you pay $3937.50 + $8732.50 more, or $12,670 more in taxes. Of course, we're ignoring the drop in tax rate.
I am worried about overpaying. I feel like I am in a declining market and this could be made worse by what happens in the November election. They want to raise state income taxes a lot and also property taxes on top of already huge increases. THAT's why I am worried about overpaying.
that sucks - they just increased everybody's tax rate 33% last year.
When you say it's worth 25% less, if that's based on comparable sales, then include those comparable sales in your "highest and best, no negotiation on price needed, we'll close when you want" offer.
you implied that a 10% drop in value was because you couldn't deduct SALT over $10K, and you couldn't deduct interest on over $750K.
Let's play with some math.
You could deduct interest on $1MM, but now it's $250K less. So $250K x 4.5% interest = $11,250. This is the interest you can no longer deduct. 35% marginal rate x $11,250 = $3,937.50 more in taxes.
The SALT is where you're getting nailed, assuming you have a state income tax. I see IL is 4.95%. If we assume you make $300K for that $1MM house (which is plenty to afford a 1MM house, BTW), then you're paying 300K x .0495 = $14,850 in IL income tax.
Google says the average rate in Cook County is 2.01%. So, $1MM house x .0201 = $20,100 in taxes.
If we assume that your state income tax and your property tax are the vast majority of your taxes, here's what it looks like:
20,100 in property taxes 14,850 in income taxes
$34,950 in SALT paid.
35K - 10K = 24,950 that gets taxed. At 35% marginal rate, you pay $8,732.50 more in taxes.
So, you pay $3937.50 + $8732.50 more, or $12,670 more in taxes. Of course, we're ignoring the drop in tax rate.
Have I done that math correctly? What did I miss?
Your math logic is correct but the numbers are a little higher than that. Also, in Illinois, you won't see this in the press much and the only reason I knew about it is because they had a tiny blurb in a sunday paper was that they increased the IL taxes higher on higher earners. They did this by eliminating deductions if you made over a certain income. So instead of a 33 % increase, higher earners got a higher percentage increase. And they want to raise them higher.
that sucks - they just increased everybody's tax rate 33% last year.
When you say it's worth 25% less, if that's based on comparable sales, then include those comparable sales in your "highest and best, no negotiation on price needed, we'll close when you want" offer.
I will give them the benefit of the doubt and say 20%. When discussing comps with their realtor, every time my realtor brought up a comp she would say stuff like that house is on a flood plain or backs commercial or has one fewer bedroom and all of those are true. But not $650k true. Oh, and when we showed her comps that were MUCH bigger, she said and I quote "I don't get all caught up in square footage. "
flood plain or commercial neighbor could be worth 20% less. it's very hard to arrive at. # of bedrooms, an appraiser could adjust for. Especially if this house has a larger than normal # of BR's.
but it's certainly not the listing agent's job or place to say "I know, you're right! Just offer $350K under ask and I know the seller will accept it."
flood plain or commercial neighbor could be worth 20% less. it's very hard to arrive at. # of bedrooms, an appraiser could adjust for. Especially if this house has a larger than normal # of BR's.
but it's certainly not the listing agent's job or place to say "I know, you're right! Just offer $350K under ask and I know the seller will accept it."
#1) Yes, I agree that backing commercial and flood plan could be a 20% hit to the value but in this case, I don't think it is. I drove the comp and the lot appears to be narrower so since it's the same size, it's deeper and the flood plain is on the very back of it. I listened to hear if there was any noise from the traffic on the street behind it and heard nothing. The neighborhood is full of mature trees so I think the backing commercial thing is not going to be a huge hit. Also, the comp is bigger than my house by about 300 sf. The curb appeal isn't as good but the bedroom/bath count is the same and the year built is similar. It's just more of a style preference. It's a mission style which isn't really my thing. So yes, I adjusted for commercial, flood plain but I am not adjusting for finish level because it's similar. (And maybe you didn't see it in my posts, but I used to be an appraiser). I haven't worked professionally in this area but I have been watching the market for 12 years so while I don't consider myself a major expert on the market, I know this house is overpriced. And I also know that the market here has slowed substantially.
2) I understand that the broker is not going to say offer $350k less. (It's actually more like $550k) but I was hoping she might say something like yes, I realize we are priced high, but the seller's chose the price and I obliged. When I get some market offers in, they will realize the market here is really soft now. BUT, as I said, this realtor's MO is to price high and let it sit a long time. I looked at her other listings and she has some others that have been on the market a long time, like 2 years. Seriously.
the way upper end of the market - probably 3MM+ everywhere but NYC, CHI, DC, MIA, SF and coastal properties - sellers have always put a price tag where they'd love to get. Very few actually care if they SELL, they care about getting the price they want. And frankly, the eventual Buyers care as much about the house as the comps.
If you're talking about the same house in both topics you started, then it's time to fish or cut bait. Get your contractor in there, get his pricetag, and make the offer for the most you're willing to pay, all things considered. Then you can either get the house or MOVE ON.
But I will point out that on multiple occasions, you've referred to it as "my house"
the way upper end of the market - probably 3MM+ everywhere but NYC, CHI, DC, MIA, SF and coastal properties - sellers have always put a price tag where they'd love to get. Very few actually care if they SELL, they care about getting the price they want. And frankly, the eventual Buyers care as much about the house as the comps.
If you're talking about the same house in both topics you started, then it's time to fish or cut bait. Get your contractor in there, get his pricetag, and make the offer for the most you're willing to pay, all things considered. Then you can either get the house or MOVE ON.
But I will point out that on multiple occasions, you've referred to it as "my house"
Haha on the 'my house'. Yeah, I don't think my husband is too crazy about that either.
These are two different houses. The one that needed remodeling is a no.
And with all due respect, YOU think it's time I 'fish or cut bait'?
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