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Things to Ponder Before You Submit a Low Ball Offer

Reblogger Melinda Pearson
Real Estate Sales Representative with Prudential Serls Prime Properties

Definetely helpful information for buyers and sellers...

Original content by Karen Crowson BRE#01732313

House in Shopping CartWhat was your first reaction when seeing this property?

Assuming that you’ve been there in person before writing an offer, the initial price must have been within your reasonable range, or you would have skipped it altogether. Was there something objectionable about the property supporting a lower price?

Is the home price overpriced or in step with the current market?

How does the price per square foot compare with others of equal size, location and condition? Is there a surplus of properties, or are inventory levels below average?

What kind of seller is in the equation?

If this is a foreclosed property it is likely priced below market value. The bank’s strategy is to get it off their books, and fast. Most times the house has been vacant for a substantial period of time and its condition can be less than ideal. If it’s seller owned, but a short sale, the listing agent may have priced it far below market to attract a quick sale to stave off foreclosure. That doesn’t mean that this low list price will actually be accepted by the short-selling bank. It’s simply a starting place to entice offers. If the home is an equity sale it may not be a distressed sale.

Are there many distressed properties comparable to this one?

One foreclosed property or short sale does not set a new price level for an entire neighborhood, although it may have altered buyer’s perceptions of such. If there are other regular sales in the vicinity, or a low percentage of distressed properties in the surrounding areas, that will carry more weight.

Consider the appraisal.

Let’s just say that you make a grossly below-asking-price offer and the seller accepts it. If the appraisal comes in higher, how likely is it that the deal will go through? If you’ve made a low offer that is supported by the appraisal, then you’re likely to have more bargaining power when returning to the seller for a price adjustment.

Is some recent home buying/selling experience influence your judgment?

If you recently sold a home and got beat up on price, you may feel justified in doing the same. If it was recently and in the same market, it may make perfect sense. But if this was a year or two ago, or in a completely different location, you may not be comparing apples to apples.

Do you love the house, and really hope you can buy it?

If your offer is deemed ridiculous, you take the chance of setting the tone with the seller, be it bank or otherwise, that you are not a serious buyer about this property, but just looking for a deal.

If your home was on the market and you received this offer, what would be your first impression?

Would you be angry, disappointed, insulted? Those are very often a seller’s first reactions. I’ve heard more than one state – I’d rather take it off the market than sell to these people. Perhaps you think it’s worth giving it a try and it very well may be. But…..

What do you imagine the seller’s response will be?

Accept it, counter it, or reject it outright? You may be expecting the seller to counter you, no matter how low the offer starts.  However, it’s always good to play the what if scenarios, and determine what your reactions to each possible outcome would be.

How will you feel if you don’t get it?

Is this the house you want the most of all you’ve seen? How long do you expect to live there? It’s a good exercise to run numbers through your mind. “If I get it for $10,000 less, I’ll love it even more!” “If I paid $20,000 more over the next 5 years that I live here, would I be ok with that?” Just some food for thought…….

Tom Robinson
Keller Williams Realty Kingstowne/Alexandria, VA Office - Fairfax, VA
Experienced Real Estate, Professional Serving No. VA and DC

A low ball offer means that the buyer is not really all that in love with the property to begin with.

Jun 11, 2010 01:56 PM
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

I agree with the above comment.  THe buyer that really low balls is only playing a game.  Not sure I want these people for clients.

Patricia/Seacoast NH

Jun 11, 2010 02:26 PM
Wade Kawahara
Dominion Real Estate Partners, LLC - Phoenix, AZ

I agree with you. Buyers are conditioned to think that sellers will fawn over any offer when it is just not the case in today's market.

Jun 11, 2010 06:25 PM
Melinda Pearson
Prudential Serls Prime Properties - La Grange, NY

I agree with that in most cases too!  However, I reposted Karen's blog because I actually experienced this situation twice in the past year when despite educating the buyer, they low balled and in one case, had the offer accepted and in another case, ended up in a multi offer situation.  Had they offered a higher amount, thier offer might have been accepted prior to a second offer coming in.  They did get their offer accepted when they came up in price but I like this post and when I refer clients to read my blog, they will be informed. 

Jun 12, 2010 06:07 AM
Not a real person
San Diego, CA

Are the days of appraisals matching the purchase offer over? Those were such a farce, but the banks loved them.

Sep 03, 2010 12:04 PM