Real estate transactions are not all the same. There are always cases where a buyer really needs (or wants) to buy a specific home. If that is the case, they buyers should always present an offer that is very enticing to the seller. However, some buyers approach home buying more as an investor than a home buyer. When working with these clients, I am usually faced with the challenge of writing an offer that is not considered offensive by the seller, and also one that will be seriously considered by the seller.
Since most sellers think their homes is the next best thing to sliced bread, that can be a real problem. Successfully writing and negotiating a "low ball" offer is actually a fine art! Granted, there will always be offers that are just plain rejected, and sellers that won't make it past the words "no deal" no matter what your approach. But if you are a buyer, or investor, and time is on your hands during the house hunt, homes can be purchased below market value and used as great investment vehicles.
The absolute best time to submit a low offer is in a slow housing market. The real estate bubble is deflating, or has completely burst, in some parts of the country. That makes negotiating low ball offers much easier in some parts of the country. But, in the Murfreesboro, Brentwood and Nashville Tennessee area, our housing market has remained solid and we have not experienced the huge rise and quick fall of housing prices. This makes negotiating a low offer on a home more difficult. However, sellers here realize that there is a lot of competition in the current market for homes. They do not want to lose a buyer who has an interest in their home and realize that some buyers are hesitant to purchase homes in what some people feel is a soft market. That will at least open the door to submitting a low offer. If you are considering purchasing a home, or an investment property, and want to implement a "low ball" technique, there are a few things that will make your offer successful.
Remember EUC! Emotions Under Control! Try your best to keep all emotions out of the transaction. This is much easier for a true investment property buyer. For homeowners that will be buying a house as their own home often bring emotions into the deal. There is absolutely no room for emotions when you are trying to negotiate a deal with a low ball offer! Think of the property as a house, house, house, and not a home!
What's The House Worth? Now that you have your emotions in check and have found a home you are interested in, pull the comparables for similar homes to see how the home is priced. If the home is already priced competitively, you will have a harder time negotiating an extremely low offer. I always find it amusing when someone tells me they know someone who bought a house for $10,000 below asking price and really got a steal...when the comps show that the home was actually priced $15,000 over market to start with! The buyer truly paid $5,000 too much! This is where working with a knowledgeable and qualified realtor that you trust is crucial!! You can't negotiate a good deal, or even submit a "low offer" until you now what the true market value for the home should be!
How Long Has The Home Been Listed? Check to see how long the home has been on the market. Don't make the mistake of simply looking at the days on the market on the MLS sheet! I see this happen all the time! Make sure that your Realtor has done a complete and thorough search of the MLS to see if the home has been expired, withdrawn, or listed with various realtors. What was the original list price of the home? Has it been reduced? If the history shows the home has been on the market for 265 days with no price reduction that is a big red flag you that probably have a seller who is not interested in negotiating the price! If the home has been reduced multiple times and the home is already under market, the seller may already be at their rock bottom price.
What Does The Seller Owe? Determine that the seller owes on the home and how much they will need to net from the home in order to sell it. If it is a distress sale, the seller may simply be willing to accept an offer that will allow them to close and walk away, even if they do not make a profit. However, most sellers are not willing to sell at a loss, and some are not capable of selling at a loss simply because they would not have the cash to bring to closing. In these sad situations a foreclosure would take place before the seller could accept an extremely low offer. Motivated sellers who have lived in a home for a long period of time and have established equity, and who truly NEED to sell, are the best candidates for a low ball offer.
Why is the seller moving? Determine if there is a need for a quick sale or if they are simply wanting to move. Do you see the wording "bring all offers, motivated seller, need quick close" in the advertising materials? There is a big difference in needing to move and wanting to move. Has the seller been relocated, is there a pending divorce, are there financial reasons for the sell, have they already closed on a second home and have two house payments? This information is not always known, but if it is, it certainly helps in the negotiating process. If the seller falls in the "want to" move category instead of the "need to" move category you will be best served to move on to another home when hoping to negotiating a low offer!
What needs to be done? Determine what changes will truly NEED to be made to the home to bring it up to par. Be realistic, but thorough. Will you need to replace carpeting, repaint, renovate out dated cabinets and bathrooms, repair plumbing, roofing, or electrical items, does the HVAC work property? All of these items should have an attached value or depreciation amount. Make a list of all of the items and the estimated cost to replace or repair these items. This can be submitted with your offer so that the seller can at least see where you are coming from with your low offer.
Be prepared for negotiations! That means have your absolute top dollar in mind, but don't start off with that amount in your first offer. Occasionally a take it or leave it offer will work. Especially if the home can be closed quickly and with cash funds. But most offers will need to be negotiated and may go back and forth between buyer and seller several times. Be prepared to be patient and negotiate!
Think of Alternatives to Money! There are many items, other than the price, that can be negotiated. Closing dates can mean "cash" to the seller if it saves them from paying additional interest on house notes and equity lines. Buying a home "as is" puts the burden or repairs, and their expense, on the buyer. This can be critical to sellers who are short on cash or time to make necessary repairs. Date of possession can be priceless to some sellers. If they are moving into another home that will not be ready to a specific period of time and you can allow them to remain in the home, it can be worth a LOT of money to the seller to prevent them from moving twice. Perhaps they are an older homeowner that needs the extra time after closing to vacate the home, or maybe they are a family with children that needs additional time in the home in order to finish up schooling or sports. Time is money in closing dates and possession dates!
Be Respectful! This may sound crazy since you are trying your best to buy a home below market and point out all the negatives to the homeowner. But, if you work with a professional Realtor and keep emotions at bay, your offer should be presented in a respectful manner. Keep in mind that ALL sellers think their home is worth more than the buyers do. You should be considerate and present your offer in the best way possible. If possible, attach a letter to the seller thanking them for allowing you to view their home. This can go a long way with keeping the communication lines open with the seller! State that you are aware of their list price but would like to respectfully submit an offer of "x" amount of money because of the following reasons. List that the kitchen remodel will require at least $40,000, or a new roof is estimated at $14,000, or the market comps simply do not support their asking price, etc. List all of the repairs and estimated costs in writing for the seller. Remember that your time and labor to make the repairs is also worth money! When offers are presented in a professional way and negatives are addressed in a business like manner with facts and figures attached, it takes the emotion out of the offer.
Hopefully, the seller will see your offer as a business proposal and respect the time and effort you put into making the offer. It helps them see how you got from price A to price B and make them more willing to negotiate. When a "low ball" offer is just thrown in their lap it can often be offensive to the seller and those offers are quite often just rejected. The goal is to open the lines of communication and start the negotiating process. Low ball offers are certainly not the norm for your average real estate buyer and are not always accepted. However, if you are a home buyer that falls into this category, these tips may help lead your next "low ball" offer to a successfully closed sale!
For more information on real estate in the Murfreesboro TN, Brentwood TN, and Nashville Tennessee area, please visit http://www.soldontn.com/ or contact Sherri Wellborn at 615-566-3789.
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