I bet you think this is the best way to achieve your home buying goals. But is it?
First, let me explain what a lowball offer is:
A lowball offer is an offer that is much lower than the list price and/or the value of the property
Some people will say a lowball offer is any offer that insults the seller. There isn’t a set percentage of list price that changes an offer into a lowball offer.
There are some disadvantages and problems when making a lowball offer on a house.
Let’s look at how to make an offer that will get you the best deal!
Negotiating the price is a small part of the home buying process. Some sellers pretend to be pissed when in reality they’re happy they got an offer!
On the other hand, there is a good chance a low ball offer will anger the seller. After putting blood, sweat, tears, time and money into their house, it is possible they will react negatively.
Just because someone is selling a home doesn’t mean their emotions and memories suddenly disappear. If your low ball offer does piss off the seller, it is possible the seller will not be willing to negotiate.
All home sellers should be prepared for getting a low ball offer by their Realtor. The best strategy isn’t to get angry or ignore the offer since an offer means someone IS interested! Sellers can learn more by reading Memories Emotions and Your Bottom Line
Home buyers must understand that low offers can sting the seller’s pride! The seller may understand that you want the best price OR they could refuse to even respond!
Buyers do not normally know the seller and what their life story is or why they are selling the house. Sellers seldom know the buyers and may not understand who they are or why they made a low ball offer.
Occasionally low ball offers come because people are from other another country or culture. Some people from other cultures do things differently when it comes to negotiating. In some places, if the buyer doesn’t start low they are considered gullible or ignorant.
In a perfect world, the buyer and the seller will not let emotions cloud their judgement or affect the negotiations. They will look at the dickering back and forth as a necessary part of the process.
I must also warn you to NOT get mad at the agents involved. Neither your agent or the seller’s agent are going to do anything shady to make a sale!
Real estate agents must do what our customers want so long as it’s legal, ethical and part of our fiduciary responsibilities. If a seller makes a stupid or emotional response, the agent has to find a way to comply. Even if they know it is not the best idea and have tried to explain this to their client.
You should discuss with your agent the best way to make the initial offer. I suggest…
My suggestion on how to make a lowball offer is to include some reality with your offer!
It is possible the listing agent has tried to get the seller to accept what their home is worth in today’s market. It is possible the seller is thinking emotionally or working with faulty information about their home’s value.
Including recently sold prices of similar houses may help the seller to accept reality.
One risk of making a low initial offer is the seller may become difficult to work with. The seller could think what they paid or what they want or what Zillow says is the truth. The seller should have been told the truth by their agent but that does not always happen.
If a home is overpriced, your lowball offer is actually a reality based offer!
The best way to make an offer is to base your price on reality.
Your Realtor will look at similar sold homes and active listing PLUS any pending home sales. They will suggest the best price based on that data.
When your offer is based on reality, you have ample justification your offer.
The listing agent can use this data to explain to the seller how your offer is both fair and legitimate. If the seller isn’t willing to negotiate, then it is better to move on.
This may seem like plain common sense, but you MUST include how you are going to pay for the home with your offer.
Be sure to include either a Proof of Funds Letter if paying cash or your Pre-Approval letter with your offer.
Offers that do not include either a Proof of Funds Letter or Pre-Approval Letter indicates a high level of DUH!
Most Sellers will not counter or even consider an offer until AFTER they have seen one of these documents!
Making a cash offer does not mean the buyers will automatically accept less than market value! However, cash lowball offers do have a higher probability of being accepted. Remember that probable does not always mean possible!
I am sure you have seen homes that have been on the market for a long long time. And it probably made you think about making a low ball offer.
However, this may not be the best idea. When a house has been on the market for a long time, it is possible the sellers are in no hurry to sell their house.
Or it possible the sellers owe more than they can realistically hope to get.
Or the seller is delusional and unwilling to negotiate or accept reality.
If you want a house, then make a fair offer based on reality. If the sellers cannot or will not accept reality, then walk away.
It is better to NOT buy a home than to pay too much!
You may not intend to insult the seller but emotions are involved when selling a house. Take a step back and contemplate if your offer is based on reality.
One key element that helps is how quickly you can close. This is why cash lowball offers can be more successful. Paying with a mortgage means waiting on inspections, appraisals, surveys etc.
Just remember the dates on the contract are not suggestions. If you cannot close or do something by a certain date, this gives the seller a way out.
Both the buyer and the seller MUST consider ALL of the offer and not just the price. Contingencies, inspections, dates, the type of financing and much more all can make or break an offer.
Many buyers want the seller to pay some or all of their closing costs. Do you think the seller is going to be willing to pay closing costs after you hit them with a low ball offer?
Price is just one part of getting the best deal when buying a home.
Serious buyers make serious offers.
Do not weaken your offer with lots of contingencies or reasons for the seller to say no. It is a balancing act between what to ask for and what to offer. There is an art to this that takes experience…
If you are making a low offer for a home, you should not expect the sellers to jump through any hoops.
Asking sellers to make repairs could be shooting yourself in the foot.
I am NOT suggesting you forget about having a professional home inspection. The contract can be written to cover your butt if the inspection uncovers any major issues.
There is a difference in how a bank selling a foreclosure will react compared to someone selling their personal home.
Someone settling an estate will also react differently to a lowball offer than someone selling their personal home.
Understanding who is selling and why can make a huge difference in whether or not an offer is accepted.
Counter the Counter Offer
Never make an offer if you cannot or will not counter the counter offer.
Your first offer should be a starting point. You should expect a counter IF you submitted an offer that encouraged the seller to negotiate.
Low ball house offers seldom work. In my experience, low ball offers cause more frustrations and wasted time than closings!
Everyone wants the best deal when buying a home. However, a low ball offer is not always the best strategy for getting the best deal!
The best strategy is to make strong reality based offers that cover your butt without insulting or angering the seller. Which is not always easy…
And that my friends is one of the reasons to have a Realtor in your corner when buying a home in Anderson SC!