Real Estate Blog - Writing a Lowball Offer in this Changed Real Estate Market

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Writing a Lowball Offer in this Changed Real Estate Market—How Low Does a Home Buyer Go?

When is a lowball offer insulting? 10% less? 20% less? 50% less? And is it the percentage less than the original list price or the current asking price?

limbo house Well, my answer is it depends.

As a Realtor working in the north and east Twin Cities metro for the past several years, I have seen my share of sellers who were insulted by a buyer's offer. And not just in a market where buyers have the upperhand either. A few years ago, anything but a full priced offer was insulting. Buyers were afraid to request a few thousand toward closing costs lest the sellers would balk and accept the next offer in line.

However times have changed. Sellers throughout Anoka, Washington and Chisago Counties are anxious to sell. They know that they are competing with new construction homes and foreclosed homes. Few home owners with "for sale" signs in the yard are expecting a full priced offer in this changed market.

In fact some situations may lead buyers to believe sellers will take ANY offer. But in reality most sellers won't accept just "ANY" offer. An offensive lowball offer could put the buyers' dream home purchase in jeopardy.

How to Coming up with an Acceptable Starting Point:

Ask your Realtor to do a market analysis for the home. In this market, I always pull the comparables to see what has sold recently in the neighborhood before my buyers decide what to offer on a home. Many sellers are listing homes at or below current market value. If the home is properly priced, anything less than 10% of the current asking price could be considered an insult. By looking at the neighborhood comparables, my buyers better understand what offer will be considered reasonable.
Consider the original list price. If someone has come down 25-30% of the value of the home already and now the market analysis shows the home is priced fairly, offering 10% less could be considered insulting. If this truly is THE home for my buyers, it might make sense to make an offer closer to the asking price.
The Overpriced Home. If the market analysis shows the home to be significantly overpriced and the offer will be more than 10% less than current the current asking price. I provide the comparables to the seller. Sometimes when the offer is accompanied by documentation to back up the offer, the seller is less offended.
Buyer's Plans to Remodel and Update. Be careful when using documentation for changes that reflect cosmetic and personal taste. Many sellers will be insulted when a buyer's offer indicates that they are offering tens of thousands less due to paint, carpet and other cosmetic changes that a buyer wants to make. If the updates are necessary due to age or wear, make note of the fact. But slamming a well maintained and updated home to justify a low offer is insulting.
Avoid Considering Price Paid for Home. Many buyers think that if someone purchased a home 5-10 years ago they have a ton of equity. This can be true but not always. Many sellers have taken the equity out of their home for improvements or for other reasons. Keep the negotiations focused on the fair market value of the home.

Most sellers are in waiting impatiently for that non-contingent buyer to write an offer on their home. In most cases, they understand the market and have worked hard to prepare their properties to entice an offer. But buyers must think through their offers; the perfect starting point for negotiations must contemplated thoroughly. Discussions can go south very quickly between buyer and seller when the initial offer is deemed rude.

Need help coming up with that perfect starting point for your home offer? If you are buying, selling or relocating to Minnesota and need help from a professional Realtor, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

If you are buying, selling or relocating to Minnesota and need help from a professional REALTOR®, give me a call or visit my website for a FREE Relocation Packet, Homebuyers Success Packet or sign up for Listingbook Twin Cities Home Search. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Buying a Home? Check out my new HOME BUYER'S BLOG!

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Posted by Teri Eckholm, REALTOR® Anoka County Acreage & Lakeshore Homes on 04/29/2008 01:41 AM

Comments (52)

anoka county, buyers market, home buyer, home seller, lowball offer, minnesota, mn real estate market

Originally posted at: Twin Cities Real Estate Blog: Writing a Lowball Offer in this Changed Real Estate Market—How Low Does a Home Buyer Go?

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52 Comments on Writing a Lowball Offer in this Changed Real Estate Market—How Low Does a Home Buyer Go?

APR

2008

Great points, tips and advice Teri! It's insulting when a home is priced right, very clean and lots of upgrades....and an offer comes in 100k lower.

Teri - This is wonderful advice, and things a buyer's agent should be doing for their client. I know I do. It always amazes me when I receive a "low ball" offer and I ask them if they pulled the comps, more than likely the answer is no. Then their buyer is shocked when no counter offer is received and they lose the home...

Teri, this is a terrific post! I just received an offer on one of my listings this week and I had to take a deep breath and ask the buyers agent if she had pulled comps before she wrote the offer. Her only response - "Just send a counter". Sigh...

Teri~ this is really terrific advice. Unfortunately I've had a few too many buyers lately who think anyone selling these days must be desparate which of course isn't true.

Hi Terri,

Your posts are always so thought out and well written, especially from the consumer's point of view. In my area, the averable home is selling at about 92% of the original list price and 95-96% of the reduced price.

And of course they are exceptions I had one much lower this year and a couple that actually went over asking price...so go figure.

Teri - I just had the "how low will they go..." motto running through my head today. Almost wrote a post on it too! Hilarious. Anyways, I just heard Steve Nash tonight and he is saying that we are in for another drop yet in 2009.... it was a little discouraging, BUT, we'll see.

HI Teri, A very really good post that has the major points spelled out very clearly for Buyer's to understand and factor into their decisions. In a Buyer's market they are the ones with the money and when a seller has to sell they must subject themselves to the supply and demand issues of the day and how that manifests itself if an offer is made. Buyer's believing and not understanding their power of purchase often makes fools of themselves and it can cause a Seller to a shun particular Buyer. It happens all the time and those Buyer's with the cavalier attitude will generally be disappointed with the results of their efforts. They will often have to pay more than what the seller might have earlier agreed to if they felt the Buyer was more serious and not so insulting.

Teri, Wonderful post. I'm not afraid of presenting my clients' low offers, but sometimes they are so, so low and the clients think they know all there is to know about real estate. However, these type of clients, after a couple of tries tend to listen to me a little better.

APR

2008

Great article for your area. I will have to do that for my area too. You have some great info.

Teri, in Ann Arbor an acceptable offer years ago, was $5000.00 under asking price, now I rarely see that, Most often it is 10-15% under. The buyers are looking for the desperate seller, not a motivated one. Heck, they are all motivated.

I always tell my clients that the difference between asking price and purchase price has nothing to do with what is a good deal or not. A market analysis needs to be done to determine whether the asking price is high or low. True value is determined only by the difference between purchase price and recent SOLD comps. In many cases, even a full price offer is still a good price.

Hi Teri, you have made a number of excellent points. The bottom line is that buyers need representation by a professional and experienced REALTOR who will be able to do a market analysis and put things in perspective for them. The fact that the seller may have equity should have nothing to do with the offer, for example. If the seller has owned their home for 30 years and he owns it free and clear, should they sell it for $500? Buyers don't think about these things. And, they don't put themselves in seller's situation.

I guess the right offer is the one the seller accepts. The listing agents need to help in the process with all the press on low-ball offers we are sometimes put into a position of writing offers that won't be accepted but the buyer will buy lets work together.

When I get a low ball offer I always come back with a counter and carefully counsel my sellers to not take the low offer personally. But when I send the counter back, I will send comps back with it-supporting my counter offer. I will also include active listings and rely more heavily on those than solds since they can't actually go out and purchase the ones that are not on the market!

However, I'm not sure that all the buyers agents relay some of the "intel" back to their buyers for fear of looking bad.

That seems like one of the more challenging tasks these days. Trying to convince the buyer that if they insult the seller the counter will be full price. he does that line end between low offers and insulting offers?

How much to offer??? Wouldn't it be easy if there were rules for this??

I'd say it depends. It depends on

How badly does the buyer want the house?
How badly does the seller wish to sell the house?
How quickly does the seller need to sell the house?
Is there equity to cover the seller's liens and cost of sale?
What terms and conditions are important to the seller to compensate for low offer?

Finally,

Is the buyer more interested in negotiating or finding the best house? In which case, they probably need another agent.

Great post! Thanks for sharing! This information is a great reminder that nothing is for certain in this market and that a little bit of Buyer and/or Seller education can go a long way!

very nice article, thanks for sharing

It is one thing to try for a bargain, another entirely to try to "steal" a home. Good post, Teri.

enjoyed your post...I agree with what you wrote....it all comes down to one thing..Do the buyers really want the house.

Hi Teri,

Great advice! It seems that many of the buyers here in the Southeastern Massachusetts area feel that any seller should accept every and all lowball offers. The buyers feel like they are in complete control and if they do not get that particular house then they will simply move on to another. Buyers just don't seem to get as emotionally involved nor are they in any rush. I provide comps and they still feel that they have the right to pull a magic number from the sky. UGH!!!!

Teri, Something we have experienced several times over the lasy 6 months is buyers feeling cheated if the offer goes together without several counteroffers. It is almost like they know it is a good deal but they have to know in thier mind that they tried and if that doesn't work then they are OK and will right a more "Normal" offer.

Brian Bartley

Teri -- this is an important message. I always counsel buyer clients before I decide whether or not to work with them. If someone is looking for an agent that will make unrealistic offers, then I let them know it is not going to be a good fit. I am finding more reasonable buyers, but very unrealistic sellers in my market area. They are remembering what they might have gotten 3 years ago! They simply are unwilling to negotiate - especially when their septics have failed or they have deferred maintenance. So it goes both ways.

Teri, I gravely disagree with your blog posting. Why would a buyer worry about "Insulting" the homeowner?? You're making it like the homeowner is the one holding all the chips. In this market it's the buyer that has the power. Look at it this way - They have ONE HOUSE that they NEED to sell....you have THOUSANDS of houses that you can choose from to buy!

BESIDES...HOW CAN AN OFFER INSULT SOMEONE?? If someone sends me a lowball offer on one of my properties, I simply ask them to explain how they came up with that figure. Iff they're just picking numbers out of the sky then it's obviously a bogus offer..HOWEVER, if they have some valid points that I may have overlooked, well then, maybe that is an appropriate price to sell at.

When I'm buying properties I NEVER PAY ANYWHERE NEAR RETAIL..and you know what. I've never offended anyone with my offer..I actually have tons of testimonials from these individuals. "Insulting A Seller" with an offer sounds so absurd to me..:)

The nature of the buyer is to get the very lowest price possible. The nature of the seller is to get the highest, creating a fun atmosphere to do business! I am a huge believer that real estate, in essence, has very little to do with houses and prices, etc. It, in fact, has much more to do with human psychology. And, frankly, humans are sometimes not very rational. Ah, the joys of real estate....

Greg..You're 100% right..:)

I also tend to send comps with my buyers' offer if the house is overpriced. Most of the time, I get a snotty response back, but in the end, it has to appraise. We can contract whatever price we want, but if it doesn't appraise, the seller still doesn't get that price. Who's going to overpay for a house these days?

Nice reminders. A CMA for a buyer has always been part of the process with my buyers. Buyers also have to realize that the seller has goals too.

Hi Teri, Great comments on the pitfalls of offering too low - I completely agree. We all need to remember that if negotiations start out "ugly" that attitude can linger all the way to closing. Buyers and sellers have many things to work out between contract and closing. It pays to be smart up front. Thanks.

Sally--Absolutely it is...but there are times an offer that is significantly lower is approriate too. The key is knowing the difference.

Sandra--Some client's just don't care about the comps...They heard the media mantra about falling prices and think sellers will accept anything in spite of the comps. Some will, some won't. If it is their dream house, they need to work with the sellers to that win-win number.

Lisa H. --See above. :) Some agent's don't care about the comps either...or their clients don't. We have to present even if the seller is insulted.

Lisa R.--If it is an obvious relocation or something of that nature, sellers may indeed be desperate. But like you said not all are. It is important in this changed market to work with a knowledgeable agent to understand the difference.

Lynda--Thank you. I think in our market homes priced correctly will be about 95% of current list price but I have seen many at up to 25-30% off of original list prices. When priced correctly, homes sell closer to list price.

William--You understood my point here...It is about the psychology of the offer if you really want the home. Making that correct first offer might not be a lowball offer in this market.

Mana--You have to do what your clients ask. I have had to do that too. Everyone needs to live and learn sometimes.

Russ--Thank you!

Missy--Is that 10-15% off of original listed price? I know several homes have sold in our area at 25-30% off of original list. But a well priced home in excellent condition is getting about 95% of list around here. The key is "s it well priced?"

I think that ANY low offer in this market should be countered by the seller at least once. Some Buyers are just trying to figure out what the Seller is considering their lowest price point.

Matthew--Exactly! The media tends to lead buyers to believe that sellers will accept anything. This is my effort to explain that is not always true. If a buyer insults a seller on a home they really want, they might lose their dream house to a more realistic buyer.

Marzena--Funny that buyers don't always put themselves in the sellers shoes...Even if they have a home to sell. Everyone wants a deal. But a good deal can be a full priced offer if the home is priced correctly. A good Realtor can help buyers understand the difference.

Terry--I have been on both sides of the low ball offer. As a listing agent I prepare my sellers for the possiblity but some cannot help but be insulted. As a buyer's agent, I caution my clients when I think the starting point is unreasonable. Sometimes it will work but often the negotiations just stop as the sellers don't take the buyers seriously.

Jim--I do the same. Before any offer comes in in this market, I caution my sellers that no matter what it is don't let it bother you. It is a starting point. When we counterback, I don't pull the comps but I offer to as I agree that it is doubtful whether they will make a difference to most buyers. They have been out in the market and know a well priced home without me sending anything. They are just taking their shot at getting a better deal.

Gary--I don't know where that line is either as it will all depend on the buyer, seller and property. There really is no one answer here. :)

Lenn--You understood my message exactly. This localism post points out there is no one right answer but when a buyer finds that right house, they need to think this through to that win-win conclusion. The starting point for negotiations is very important.

I agree totally with Lynn - in fact I had one of these last week that I have been working with for almost a year. Known this kid for most of his life but he knew more that I did and I had to write 3 low balls for him - by the time I got to this 3rd one I had wasted so much time I just lost patience. I just let him go - and though my business is slow and I would like to prove to him I really do know what I am doing it's not worth it! Thanks for a great blog - you really got some action!

Posted by Kathy Carson, RE/MAX 1st Olympic, Lynchburg, VA

If the home is priced right I don't get many buyers that will submit a low ball offer. Most of the time there are multiple offers over asking sometimes.

One thing that needs to be done is disconnecting value from list price. Some properties are a great deal at or above list price. Other properties aren't worth half of the list. For my buyers, I always work up a CMA and then we make the offer based on their needs. I have buyers offering 20% less than list, and offering full price.

But I am always able to back it up with comps.

On the seller side, we always counter... let the buyer decide not to move forward. Of course, sometimes the counter is full price. And when an offer comes in that seems out of line, I always ask the other agent for the comps they are basing their offer on. Seldom do I get a reply.

Kent--And a smart responsible Realtor can help a buyer figure out the difference! Thanks!!

Michael--If it is THE house, the buyers need to take the time to come up with the right number to start negotiating on...Comps are a great place to start. Glad you enjoyed the post!

Cidalia--Buyers have that right absolutely but sellers can and do say NO! It is a changed market, both buyers and sellers need to understand where the other is coming from if they want a win-win on a particular house.

Brian--Some people love the "Game" don't they? Buyers and sellers alike. And others absolutely hate it! If a second buyer steps in, the game play ends much more quickly. That has happened a few times in the past few months when the houses are priced correctly.

Joan--I too have been on both sides of the issue. This is a localism post written for buyers...I have done similar ones for sellers. It is all about the psychology of the offer combined with how much the buyer loves the home and how much the seller needs to sell. There is no one answer here. :)

Rich--I am not certain what you strongly disagree with here. Is it that sellers are insulted sometimes by a low offer? I am not saying they should be insulted...I am saying that they can be insulted by a very low offer and then it makes negotiations more difficult. I didn't suggest that buyers never submit low offers...On overpriced homes they can and do make sense...submit the offer with back up comps. But a well priced home deserves a fair offer. And if it is the ONE house that a buyer wants, they need to ready for tough negotiations if they submit an extremely low bid. I counsel my sellers not to be insulted but they are people with feelings and it can happen anyway. I counsel my buyers to submit fair offers but sometimes they do not follow my advice and low ball on homes. Sometimes it works, sometimes it doesn't. This is a localism post to the public to explain that when you lowball, sometimes it can backfire and you need to be prepared. Thanks for your comments.

Greg--No one said this job was easy! :)

Donna--Absolutely! I have had to write offers and have submitted comps along with them as well. Not all agents are receptive as it makes it look like they did not do their job correctly. Those that did a good job but have unrealistic sellers will make good use of the comps as they know underwriters are giving those appraisals a very close look these days.

Jo--This is my way of educating buyers out there. And it is a great time to work with buyer representation so that you understand what to offer in the first place.

Teri Eno--I have seen it happen on more than one occassion...bad feelings from initial negotiations can cause a deal to fall apart on the way to closing. Win-win from the beginning is the best scenario.

Emily--Counseling the seller is very important. Buyers really don't know what to offer in some cases and don't want to overpay. But if a home is well priced and well cared for, the initial offer should be closer to asking than an overpriced home in need of TLC. A smart Realtor can assist a buyer in the process of finding that right number.

Kathy--Some people watch too many infomercials on buying strategies. Listen to your agent and find a good house, make a fair offer and the process to closing is so much easier!

Mike--Even when a house is priced right, there will be low ball offers. I had them come in in hot markets! There are more now with the national media touting gloom and doom. Offers should be fair and resonable. Sometimes that is low. Sometimes at asking. Ano on occassion it is over the asking price.

Lane--Sounds like we work with similar strategies! Thanks for the comments!

Excellent article. I read all the responses and don't have much to ad that hasn't already been said. Greg's response made me laugh. So true! LOL!

When I take a listing, I always warn my sellers that there may be "low ball" offers coming in. It gives them plenty of time to let it sink in and it leaves out the surprises. During our discussions, I advise them to NEVER reject an offer, no matter how low it is. There should always be a counter at the very least. Sure, it makes for more paperwork and time, but you never know what the end result will be unless you actually try. My clients are usually aware that Real Estate is simply a tennis match. It's just a matter of how hard you're willing to play.

On the buyer's side: I suppose it all depends on where the buyer is coming from. Is it a first time home buyer or an investor? I work with a number of investors and it's nothing but a numbers game for them. Eventually someone will say Yes. But if it's a real, emotional home buyer, they're afraid of going too low and usually put in a reasonable offer anyway.

Great Post!

Teri, This is wonderful advice and an excellent article. You are very right about possibly not having equity in the home. Congrats on a great feature!

This is great advice for buyers who want to do the right thing, but there are buyers who will make low ball offers no matter how persuasive and expert the advice their real estate agent provides.

All great points Teri, and I really like that while this post gives good advice to a wide audience of real estate buyers, you have made some really good, specific local points as well for your particular market.

Excellent balanced analysis Teri - And sellers need to just understand that even a low ball is something to work with and is better than nothing.

APR

2008

I the buyers are afraid to make low-ball offers.. fearing they may be accepted...

You absolutely need to look at the comparables and not what the sellers paid (unless it was recently).

Hi Teri,
Dealing with homeowners' ego can get touchy. So making a fair and reasonable offer is important, comparables are the answer and as we always say......real estate is local.

The bottom line in this business, regardless of whether it is a "buyers" or "sellers" market is that buyers and sellers do not have the same goals. It is an adversarial relationship, not in the hard core definition, but never-the-less, oppossing sides. That is why each party should have their own representation.

If one is too low on the offer or one is too high on the asking price, they just may not get together, but will eventually realize that the market needs adjustments from time to time, and an understanding that most parties are not desperate.

Now is as good of time as any to sell or buy.

I love it when an agent presents a low ball offer, with comps, that justifies their price. Trouble is, they pick and choose what comps they want to use, but then neglect to include the other legitimate comps as well. I had this recently happen, where a buyer's agent told their client that a home was really valued at 28% below list price. When I looked at the presented comps, then asked the agent why she didn't use these other ones, her response was "you can't use those"...after some further questions, I proved how wrong she was. But the damage was already done..her buyer had it in their mind that the home was only worth the lessor value, so no matter what I presented to them to justify list price, they would not accept it. In my opinion, the agent killed the deal, not the buyer.

We just had this happen..... we got a 35% lowball offer and hated to take it to the selling agent! Then we did and they came down a bit, told our customer, they came up a bit, re-presented and the selling agent told us a price that his folks would not accept anything less..... can you believe the customers still want to present another offer and said to "just leave it out there for 30 days and maybe they will get desperate and take it".... they were instructed and taught better, but some people just won't learn.... they think our market has not flatten out all the way and is still going down, like it is in their state of MN....

This is really a sad problem, especially if the agent had the property listed correctly, and they did! I know we have to present everything we have, but some of these people are unreal! thanks for the info....

Jennie Moore, jennie@h2ohomesandland.com

MAY

2008

Chrystina--Thanks!! Glad you enjoyed it!!

Sheliamaria--It all depends on the motivation doesn't it? Thanks for the kudos!

Carole--In this changed market we can no longer make equity assumptions. Glad you enjoyed!

Rosario--People just want to take their shot and in a changed market, it is understandable. Sellers in this market just need to understand that it is the market...but it is hard not to take personally when you love your home.

Rebecca--Thanks...I write for my local market but many aspects do apply to other markets as well.

Steve--I agree, low or not, every negotiation needs a starting point doesn't it?

Robert--???Not certain what you mean. Why write an offer if you don't want a house?

Christy--A home's worth is what a buyer is willing to pay for it today. What the seller paid or owes on the home is irrelevant...or should be anyway.

Cynthia--Egos are on both sides as some buyers get ruffled when their low offer is not accepted too. That's what makes our jobs so interesting. :)

Don--Very interesting argument and I full agree. No matter what the market these situations arise. It is what why a Realtor who is a good negotiator is always in demand.

Jennifer--We work hard for our own clients do we? A good Realtor will remember not to just take the comps they like into consideration but use all relevant comparables. Skewing the results will be seen through in most cases.

Jennie--Hey I am in MN and our market is flattening in the Twin Cities not spiralling downward. Of course the people in this transaction may have a media skewed view as there are a few struggling areas due to the mortgage/foreclosure mess. The media does play on the psyche of buyers and they use this to justify their offers. Hard to change their minds anymore than a sellers. Thanks for your comments.

NOV

2008

Hi Terri,

Some amazing feedback. Bottom line, great post. You clearly are sensitive to the sellers trying to net the most in these market conditions. Someone mentioned retail price. What is that these days. The latest statistics clearly show a narrowing gap between lender mediated pricing and those that are not lender mediated.

In fact, it appears the more than 40% of the properties currently in foreclosure are truly not attainable anyways (JMHO). We're still seeing properties on the market without authorizations to sell them short and those properties are skewing our results. Imagine what might happend if we pulled all un-athorized short sales off the market?

Bank owned inventory will continue to rise, however non-lender mediated seller are becoming more realistic these days. Keeping them most informed is very important. Thanks for all you do in the industry. I'm going to feature this one as well for you Terri.

DEC

I have been writing a lot of low ball offers...most of them are realistic but every once and a while its hopeless.

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