Today’s post is a bit of a rant, I apologize. The frustration is just too large. Most of the time this blog talks about saving and investing, but today’s post is about spending. Yes, it’s ok to spend money on something you value. Let me explain the circumstance of us purchasing our dream home.
After three years of going back and forth of whether we want to move, we found the house of our dreams. It is an entertainers delight. The house comes complete with an acre, fully private lot, heated salt water pool, oversized patio and a covered outdoor kitchen with a fireplace.
However when we look inside, the owner neglected every finish on the interior. Instead, they poured all the money into the impeccable outdoors.
An unreasonable seller
We love the house and we put in an offer based on the price of the lower end of the market comparable properties with the intention to negotiate to a fair value. They have not shown a desire to be reasonable, even with the property sitting on the market for over four months. It is apparent the seller is a complete idiot with their money. Let me explain their circumstance as I know it today. Let’s see how many money mistakes we can uncover.
1. They purchased their home at the top of the market
They bought their home in 2006 and it was one of the best lots in the neighborhood. Houses today in the neighborhood are selling for less than they paid back in 2006. Granted, they have the best lot at the very last home in the last cul de sac so it should demand a premium for their lot. Simply put, this is the one of the best houses in the subdivision.
2. They are carrying 3 mortgages and not willing to negotiate
Yes, they have three mortgages. They moved into their new house, a near million dollar house two doors down. Here are the debts as we know it:
- Mortgage on the new property.
- Home equity line of credit on the house for sale. They extracted nearly 90% of the equity in the property. The home equity line of credit was used as down payment for their new residence.
- Original mortgage on the first property.
If I had to guess they are burning cash at a rate of $8k to $10k per month on all of these mortgages.
If it was me (and I would never put myself in this circumstance,) I would be extremely motivated to make a deal with a qualified buyer.
3. They over-invested in a pool and outdoors
The outdoor lifestyle they built is beautiful. It has a pavilion with a fireplace. Outdoor sink, grill, fridge and bar. The patio is fantastic and is outfitted with natural stone.
A waterfall flows from the spa to the pool.
They built an addition on the back of the house that includes a sun-room and an extra half bath that is accessible from the outdoors. Should they expect a dollar for dollar return on these upgrades?
4. They neglected the interior
The bathrooms and kitchen are original and look very outdated. All material used was builder grade. When comparing this house to other houses at the price point it is very easily noticeable that they are overpriced.
5. They purchased the house two doors down because of fancy upgrades and overpaid
To say they overpaid doesn’t do justice. They paid $250k more than any other house has sold for in the neighborhood. Now don’t get me wrong the house they bought has 7,500 square feet on 7 acres.
Every inch of the house was outfitted with high-end details. I looked at the pictures, the kitchen has all premium appliances. Think Wolf stove and custom Sub-zero fridge.
The house has extensive mill work on every inch. Every one of the seven bathrooms looks like a spa. The basement has a beautiful Irish pub, an exercise room and a movie theatre with seating for 20.
The best feature, out back in the woods they have a huge fort with multiple structures. It is equipped with power. It has climbing ropes, rope walks and zip lines.
The house they purchased doesn’t fit the neighborhood. Not even close. The rest of the neighborhood is young families with little kids and slightly upscale houses for the Atlanta suburbs.
Once they bought, the estimate for every house in the neighborhood increased $100k
6. A single realtor has been used for every transaction and she is the next door neighbor.
The realtor might be fantastic. I have no idea. Unless I really trusted someone, I would not let them be involved on every transaction I made especially when it led to overspending on every single transaction.
If the realtor cannot perform, they will see them everyday as she is the next door neighbor.
7. The seller believes they should see a 100% return on all the upgrades they put into the property.
A pool would be great for our growing family. Our kids would love it. However a pool can be a detractor for many families. I have read many statistics and I think a reasonable return on this pool would be 50% of the cost, at the very best.
To make another offer or walk away?
Mrs. TPM and I sit here and discuss the situation. Unless we can get a fair value for the property, we will surely walk. We have been discussing for the last three days whether we want to make a second and final offer as close to fair value as we think is right.
The issue is, if we make the offer and make it final, they will likely try to negotiate with an unreasonable response and we are back to where we are, walking away from the deal. On the other hand, just maybe they will come to their senses.
Have you ever negotiated with unreasonable sellers and listing agents? What strategies did you use to negotiate? Did you ultimately get your property or just walk away from the deal? Did you ever regret purchasing your dream home?
*The house pictured is only a representation, not the actual house we are considering.