Ralph Gorgoglione wrote a great blog this morning Low-Ball offers: How do YOU handle them? and it got me thinking. We have all worked with buyers who want to "simply throw out a low-ball offer" and then see what happens. If this is a property they do not care much about, or if it's something that might work...if you can get it for a very low price...then that might make sense. But if this is a home you are serious about, I always advise against this tactic.
We all love a deal....a sale, a discount, a coupon. Of course we do! But when writing an offer on a home, you might be doing yourself a great disservice by low-balling....especially if it's just a first "throw out" and you are willing to come up higher. I hear things from buyers like "I just want to try" or "let's just see what they come back with." But a quick read just on Active Rain shows that the industry has an ongoing debate about whether they should advise the sellers to even respond at all. If the offer is extremely low, I normally council my sellers to counter with the full list price.
The problem for the buyers is a lowball offer diminishes them in the eyes of the seller and that sets the stage for the entire process. As a listing agent, I need to tell the seller that they have an offer, even when I tell them it's very low, they do get excited. I never let them stew....I give it to them over the phone, but it's always met with first with disappointment and then with annoyance. The problem is that the annoyance is what sticks with them. They are insulted!!! This is not the way you want to start a negotiation on a home you actually want. I find this often backfires on the buyer. Generally:
1) The sellers do not counter/settle for as low a sales price as they might otherwise because they are annoyed and feel the buyer is trying to take advantage of them.
2) The sellers often dig in their heels when it comes to concessions and repair requests....again, they tend to feel the buyers are "users."
I always recommend that a serious buyer avoid the temptation to low-ball on a home they want....it might end up costing them more in the end.
Karen Fiddler
Broker/Associate
www.great-western-realty.com
| KAREN FIDDLER |
Dre no. 01494165
Broker/Associate |
| HÔM SOTHEBY'S INTERNATIONAL REALTY |
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M 949.510.2395 |
| Karen@SothebysRealtySoCal.com |
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21 Comments on Low Ball Offers.....When You "Throw Out" An Offer, It Might Just Be "Thrown Away"
Karen - I worked with a buyer who wanted to low-ball every house she liked. I went along with it once, just to make a point that it doesn't work. After that I decided it was a huge waste of my time.
This happened recently on one of my listings. The process was exactly the same. The Seller was excited, then annoyed and insulted. He did not consider them serious even when they came up to a reasonable price thereafter. He just didn't "trust them" and would not budge on the price. He felt that they were capable of pulling a fast one during inspections or before closing.
Karen, this is so true and good advice for buyers to keep in mind.
I have sellers right now who would have lowered their price by $20,000 to get a deal. A buyer low-balled $80,000 under asking price. My sellers dug in their heels and now we are in escrow at $5000 over asking price.....makes the point.
Karen - Even though I mostly represent buyers, I love the tactic of sellers countering at a full price offer - what a great message it sends. This tactic immediately weeds out the game players who weren't serious about buying the property because a full price counter will insult the game players and they will just walk and try and find some other sucker to take their ridiculously low-ball offer they throw out there hoping to catch something.
However, the serious buyers will get the message loud and clear and hopefully, their second offer will be much more reasonable. I speak from experience (indirectly) when I say this. I have seen so many of my buyers who wanted to do the "I just want to try" game or "let's just see what they come back with" strategy. When they quickly learn that this game strategy usually doesn't work, then they get more realistic and they put in the offer that their Realtor suggested the first time.
One final note, all this is irrelevant for the obviously over-priced listing (yes folks, they're still out there). When a reasonably priced offer comes in on a over-priced listing and the sellers counter with a full price offer, this will insult even the serious buyers.
Karen,
I agree with everything you have said here but I think it depends on the area that you are in. We have buyers seeing here on a daily basis offers coming in very low and being accepted by the sellers or working out to an agreed upon price. We have had homes listed for $500,000 sell for $250,000. I'm a top listing agent here and all my sellers are made aware up front at the listing appt that this could happen so dont get offended or think it means your home is trash because its just the market were in. I dont agree with with some of the buyers "thinking" but with all the short sales and foreclosures I can definately see why so many offers come in low. Just my thoughts.
Catina....definitely true. We are in a multiple offer market here and most homes are selling very quickly and over asking price. So the low-ball offers here are really just annoying.
Karen, They are definately annoying here sometimes as well:-) The market is picking up here but homes arent selling quickly or over the asking the price....OH I PRAY FOR THOSE DAYS AGAIN!! Do you have alot of foreclosures and short sales in your area?
I agree it is not wise to low-ball an offer on a home you want. The Seller may get insulted and feel like they are dealing with someone who is trying to take advantage of them. It is easier working on a deal when it's a win-win situation for both the Buyer and Seller and everyone feels satisfied with the numbers.
Karen * same thing when prospect callers want me to lower the rent....it just tells me they can't afford the property....NEXT!!
I never let my client be the one to throw away an offer.
As much as we coach clients that this is a business and they should not take low offers personally, emotions will get the best of most human beings. I've been on both sides of it, and it is out job to help them find common ground. That is what brokerage is for.
I advise my buyers that they need to make an offer that forces the seller to be nervous not to sign it. Don't make it a no brainer for the seller to reject it.
I've never been a proponent of low ball offers on either side. The seller usually does exactly what you've pointed out and the buyer looses the house they may have truly wanted. What is the point? There is no and generally, at least in our area, they end fast and just take up time and energy. I learned all about dealing with these puppies from my very first broker (1987) - and it works to this day....I guess I should give him a call and say thanks again for training me up right!
Featured in BananaTude
Karen, so true, but there are still those buyers out there that think the sellers really need them desperately and they should be grateful for the offer. I just got through with a client like that, I had to ask them if they thought a seller should drop $60,000 off the asking price for them then look at over 7% in real closing costs to the seller to accommodate their low ball, and would they do the same? It finally sunk in and they got real and got their house.
Good point. Many sellers will counter back to full price than the buyers power of negotiation is lost.
Just because you can doesn't make it right. The buyer tries to make a point, the seller tries to make a point and both parties are no closer to a successful sale. Seems like a true waste of everyone's time. In my area we have 2 market prices, the REO bunch and the regular seller bunch. Every buyer just looks at the low end never even considering the other higher priced homes that ultimately they are wanting to buy that don't need oodles of repairs. How convenient to only look at the low side until they themselves become sellers!
I always tell my kids...."just because you can doesn't mean you should" exactly right. And the buyers are really the ones who lose in the end. They set a bad beginning and sellers dig in.....too bad.
Karen- I am dealing with a client right now that really likes a house, but the listing is very overpriced. The buyers are really torn because a market analysis shows what price range the house should be in, but that would be what some might consider a "lowball" offer. The agent that has the house listed is known to have overpriced listings, but that doesn't mean the seller knows that! I just spoke with my client about all of the potential scenarios that you and others commenting have mentioned. They really have a lot to think about!
Jen...there is no reason to overpay for a home, though. Or at least we have to make sure the buyer realizes they ARE overpaying....I've made that decision myself in purchasing a home I really wanted, but if they are over priced, then it's not a lowball. good luck
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