About to become a first time home owner

Real Estate
1

Hello everyone,
long time reader first time poster here.

We’re in the process of buying a house in the surroundings of Geneva. We already visited a few times (it’s a house from 1980 that needs a bit of renovation).
I have two financing offers from banque Cler and Migros, and been also working with a mortgage broker that will give us two additional offers to compare.

Both Cler and Migros came out with a valuation of the property that differs a lot: Cler at 2M CHF and Migros at 1.6M CHF. From discussions with the agent that sells the house, he mentioned that the owners would be ready to sell it for about 1.9M.
So the thing we don’t really understand is.. since banks give you the mortgage based on what’s lower (either their valuation or the negotiated selling price) and since both banks had a 400k difference in valuation, how can I come up with an offer price that doesn’t get me out of the table immediately, but also doesn’t impact too much our own funds? (as if we go for, idk, 1.8M but the bank does a valuation for 1.6M, the difference will be out of our pockets).

I’m sorry if it’s a dumb question :slight_smile: but too much information around and don’t really understand if this stage is more of betting on getting the best lower price or what :slight_smile:

Thanks for reading and your inputs!
John

2

From what you write, one bank is willing to finance at 2M. I guess their estimation depends to some degree on their current risk appetite.

So in case you really want that house, make an offer at 1.9 with a short deadline.

Obviously if you’re ok with waiting and letting this opportunity pass by you could offer 1.6 arguing that this is what Migros is willing to finance. In GE there is public information about what houses were sold for btw.

Best of luck!

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3

Valuation from each bank is subjective, and it tells how much they want to lend you. The real value has nothing to do with it. You can compare the asking sell price with similar houses, then you make an offer that is ok for you (usually offers can be 10-15% below or over asking price). For how long is the house listed on the market, weeks or months? This should give an indication on interest… In the end you have to be happy with the price. The agent should do / could have an official house valuation document such as IAZI - which is still subjective but can give you an idea.

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4

thanks for your reply.
the listing has been online for 2 months now - they started at 2.5M, a month in lowered to 2.2M, and then while talking down to 1.9M.
so in the end, I think we’ll work out an offer price that makes sense around the asking price, and see what happens.

thanks again!

5

Lowering the price after just one month shows no commitment to having the asset listed for longer in order to get the best price out of it. They may value selling quickly more than they are willing to admit themselves and be playing cute with their asking prices. Anchoring around them might not be the best thing to do.

I would find the price you’d be happy to pay for the asset without regard for what they ask, discount it a bit for unplanned uncertainties you’re bound to discover at some point and either offer that if you’re positive you really want that specific asset or that minus an additional discount for negociating margin if you’re willing to walk away and settle on another asset.

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6

thanks for your input. indeed, from the narrative I got from the agent, it’s a family that inherited after the owner passed away and by the looks of it since the house has been empty for around 5 months now, they are trying to sell it fast.
I need to reflect on it a bit still, but I think I’m ok on approaching around 15% less of the 1.9M, and see what that gives in terms of negotiation. the agent also anticipated that should an offer come below 1.9M, he thinks they would split the difference probably (so in my head somehow the agent has already strategized the outcome)

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7

Make sure you do your DD. Probably they want to sell fast but you never know if there are other issues. This matters for any transaction but I wanted to make sure someone told You

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8

thanks for your insight. indeed, we already started part of this to try to discover uncertainties (as there will be a small renovation work included, asbestos removal, etc).

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