"Can I Put In A Really Low Offer On This House?"

By
Real Estate Agent with Realty One Group Mountain Desert AZDRE# SA582422000

Buyers often ask me "Can I put in a really low offer on this house?"  The short, simple answer to that is that anyone can offer whatever they wish on a property.  What really matters is if the offer will be looked at...and even considered.  A few times I've had clients who really, really liked a particular home, but ended up heartbroken because, in their attempt to "get a steal" because "it's a buyer's market," they either poisoned the seller against them or wasted time in a competitive foreclosure market by offering w-a-a-y below asking price.

Lets take a look at a typical scenario:

Buyer A is approved for a loan that will allow them to buy a home priced up to $200,000.  The question comes up about the possibility of offering say $200,000 on a property priced at $225,000 (which is a 12.5% discount).

There's absolutely nothing wrong with offering that, if comparable properties in the area are going for the lower price.

In reality, chances are, that offer won't even get a response. Generally speaking in the Tucson market, prices being asked nowadays are fairly close to what the market is bringing. If the seller is asking more than what the market is showing, you can just about guarantee that asking for a discount like this is going to be met with rejection instead of a counter-offer back. If it is a bank-owned house, you don't have to deal with the "human factor" i.e. "ego" like you would with one that is owned by a human being - there's nobody that would take personal offense or get cranky about a "lowball" offer - but they have their bottom line too, and a rejection is a rejection.

In the Tucson real estate market of today, many bank-owned homes (aka REO, foreclosure) are underpriced and seeing multiple offers in the first week or two.  Taking the time to submit a lowball offer and wait for a response can often be an exercise in futility - with a more realistic offer (many times OVER the asking price, but within comparables for the area) snapping it up before another offer can be made.

Most often, a home priced above market IS owned by a real-live person who is still attached to their property emotionally, and either can't or won't face the reality of the marketplace. Many times, the home will have been sitting on the market quite a while (DOM or, Days On Market), and will probably remain there for quite a while until the seller either takes it off of the market or comes to grips with it & eventually lowers the price.

If you see a home that is priced at $225,000 and want to offer $200,000 on it - I have no problem putting together the offer...just realize that the likelihood of positive results are close to nil in today's market. We could get lucky, just don't count on it!

Something else to factor into an offer is whether you want the seller to help pay your "closing costs" which generally run about 3% of the purchase price ($6000 on a $200,000 home). Typically, sellers in today's market are willing to help out that way, but not with a large discount on the asking price included...it is like asking them for 2 discounts at the same time - similar to showing up at a resort offering "Locals Only Summer Rates" and wanting a AAA discount on top of it. You might get one, but not both.

I also work with investors who are market-savvy, looking at capitalization rates, market saturation ratios, historic vacancy rates & projected growth patterns...the principles work the same way:  If the property works for you, and you want it, messing around may cost you a good property.

Smart investors know where the market is & are willing to pay the price because it is right.  Amateurs, blowhards & wannabes "paper the town" with offers looking for "the steal of the decade" while others make money.

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Emmary Simpson 07/19/2011 05:13 PM
  2. Daniel H. Fisher 07/20/2011 01:20 AM
  3. Victor Zuniga 07/21/2011 10:37 AM
  4. Barbara Martino-Sliva, Top Producer 07/21/2011 11:15 AM
  5. Cara Marcelle Mancuso 07/22/2011 06:40 AM
Topic:
Real Estate Market Trends
Location:
Arizona Pima County Tucson
Groups:
Local Expert
Realtors®
The Lounge at Active Rain
Tucson Real Estate
Tags:
tucson market
lowball offers
foreclosures

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Show All Comments
Rainmaker
1,561,089
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

I always say the same thing..they are not giving them away so make a reasonable offer!

Jul 20, 2011 01:26 AM #1
Rainmaker
289,532
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Thanks for dropping by, Gary - just because it is reasonable doesn't mean a buyer isn't "getting a deal."

Jul 20, 2011 03:34 AM #2
Rainmaker
861,575
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

HI KENT!I love what you say - no problem putting the offer together ... we could get lucky but...!  Good info for people to know.  Now, if I reblog will I get a check in the mail like Emmary??!! ( I read your comment on her reblog!)

Jul 20, 2011 06:45 AM #3
Rainmaker
289,532
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Hi Gabrielle - have you checked your mail lately?

Jul 20, 2011 07:42 AM #4
Rainmaker
341,039
Samantha Smith
214.422.0729 www.SamIAmHouses.com - Rowlett, TX
Sam I Am Houses, Simply Texas Real Estate

You took the words right out of my mouth! I just had a buyer who was dead set on offering 15-25% less on houses that both him & his wife loved! Like you said, we can submit an offer... =BUT...! Thankfully my buyers got what I was saying on their 5th Offer!

*for what it's worth, I SUGGESTED this to be a featured :)

Jul 20, 2011 08:00 AM #5
Rainer
164,185
Howard and Susan Meyers
The Hudson Company Winnetka and North Shore - Winnetka, IL

Good post Kent...Once again it is interesting to note that "everything real estate is local".  While we have the same general issue with buyer's desire to make "lowball" offers in our local market, an 87.5% initial offer is generally considered not a bad place to start these days. 

Jul 21, 2011 12:48 AM #6
Rainer
482,347
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Hi Kent: Nice article!  Seems so many buyers think they can "get one over" on the sellers... Interestingly, those same buyers are often "offended" when a low offer comes in on the home they are trying to sell.
Bruce

Jul 21, 2011 01:22 AM #7
Rainmaker
1,430,177
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Kent, there is a big difference between getting a good deal and trying to steal a property. The comps will tell if a deal is good or not.

Jul 21, 2011 01:51 AM #8
Rainmaker
289,532
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People
Samantha - thanks for the suggestion...looks like it worked! Much appreciated. Howard & Susan - you're right about things being local. The more "local" you get, the better the analysis (if there's enough data)...sometimes one neighborhood may have one trend going while another is performing in a completely different way. Bruce - it works both ways, doesn't it? Michael - you're so right. Comps are the real indicator, with the most recent and similar sales being the best way to "take a snapshot" of a particular market at a particular time.
Jul 21, 2011 03:12 AM #10
Rainer
62,831
Scotti Jowers
CENTURY 21 Shackelford French, Search West Monroe Homes - West Monroe, LA
Realtor - West Monroe, Louisiana Homes for Sale

Kent, great post! I quit working with some of these "town papering" investors over a year ago. I wrote 5 offers in a week for one individual. All of them 25-30% under the asking price. That was it for me. I'd rather spend my time with people who need to buy a house to live in!

Jul 21, 2011 03:24 AM #11
Rainmaker
718,263
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY
I am SO over working with people who seem reasonable and then want to low ball like crazy after I've taken them to 40+ homes. I am now playing a little game - "Let's guess the sales price." When I take them to homes, I ask them to guess based on the comps what it will sell for. I'm hoping this will get them thinking the right way instead of dreaming about getting something for nothing.
Jul 21, 2011 03:43 AM #12
Rainmaker
427,439
Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

Kent....sometimes a buyer has to lose a few to get reality. A house is a deal, or not, compared to what else you can get for the money. The list price and a desired discount has NOTHING to do with what the house is worth on any given day in the market. It's all about the comps.

Earlier this year a buyer's agent wrote an offer on a new listing that I told her that was going into multiple offer and that we already had an offer in. She wrote it under list anyways, and then complained that I should have priced it higher because I should know that people want to negotiate. They lost, of course. When we dumped the first buyer because their financing was squirrelly, we relisted and got 5 offers. The agent and her client wrote an offer under list AGAIN. They lost AGAIN. Her buyer called me at home to yell at me, and called my broker to complain I was underpricing homes because homes sell for 90-95% of list price.

Jul 21, 2011 05:14 AM #13
Rainer
317,619
Barb Merrill
Cactus Mountain Properties, LLC - Tempe, AZ
GRI, Associate Broker

This stands true for the Phoenix market, too!

Jul 21, 2011 05:22 AM #14
Rainmaker
706,515
Cara Marcelle Mancuso
Long Realty - Dove Mountain, Marana AZ - Tucson, AZ
Call a Marana neighbor, I'm THERE! LONG REALTY

Oooh, love this posting. Found it through Emmy's re-blog. Going to re-blog it myself just because I work with so many buyers that yearn to "capture the myth".

Jul 22, 2011 06:43 AM #15
Rainer
49,037
John Davison
Coldwell Banker - Cary, NC
Raleigh-Cary-Triangle NC

Good post Kent.  I always do extensive research and counsel my clients in matters like this.  Ultimately, if one wants to "low ball", I simply put them in the shoes of the seller.  When asked how they'd feel on the other side of the "low ball" offer, they usually reply "insulted."  The conversation always seems to end there.

Jul 23, 2011 08:23 AM #16
Rainmaker
156,354
Carolyn Kolba
Serving Mentor, and all of Lake County, Ohio - Mentor, OH
Keller Williams Realty- Mentor, Ohio

Kent:  I have seen it happen all too often that buyers choose to go against the advice of their Realtors and make a really low offer... and then end up so, so upset when they lose that home to someone who made a reasonable offer.  Oftentimes... they are even angry with the agent... saying that the agent should have made them offer more.

Oct 03, 2012 06:49 PM #17
Rainmaker
1,507,525
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

I understand buyers, but i don't understand agents who spend time writing low ball offers for home buyers who do want to buy the house but want 'to try'( p. s. investors are understandable, those will keep on writing low ball offers for everything).

Aug 20, 2014 05:00 PM #18
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Rainmaker
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