Homebuyers: Thinking About A Lowball Offer? Think Again.

Mortgage and Lending with iLoan


If you are under the impression that the Minnesota real estate market is still a buyer’s market, it may be time to put away the bell bottom hip huggers and burn the flower power polyester pullover.  Okay, that may be dating back a bit too far but you get my point.  Let’s time warp to 2013.

Long gone are the days of putting in a lowball offer and hope it sticks.  It won’t and it doesn’t anymore.  I know, I know…your friends, family and colleagues who purchased homes just a few years ago still boast that they got their home for $20k less than list price.  And perhaps they did.  But it’s a new day. 

In an analysis of the Twin Cities real estate market, there are several key trends that have occurred in the most recent 2-3 years.  This is important stuff!  It’s all about strategy, which I’m going to get to.

Month’s Supply:  This is a measurement of how long it would take for all homes in a particular market to be sold.  The greater the number means there are more sellers than buyers.  Hence, a buyer’s market.  Sellers are competing at a much higher degree to attract the fewer buyers out there.  In turn, buyers have more leverage in negotiating what they want.  An interesting stat:  In 2010-2011, the month’s supply in the Twin Cities market was generally about 7.  Today, that number hovers around 3 in most of the suburbs, including Minneapolis and St. Paul.  That means there are a lot more buyers than there are sellers.  Guess what?  You are in strong competition with your fellow buyers in the market.

Percent of List Price Received:  Another interesting statistic.  In 2010 and 2011, sellers in many areas were getting only upwards of 90% of list price.  Compare that today and sellers are receiving an average of 94-96% of list price, generally speaking.  Guess who has the leverage now?  Yep, you guessed it…sellers do.

Average Sale Price:  Average sales price of homes in the Twin Cities real estate market are climbing, upwards of 15% higher in some areas.  What does this have to do with lowball offers?  I’m going to come back to this in just a minute.

I’m putting on my MN Mortgage Mom hat for to say, “Don’t even think about putting in a lowball offer in this market unless you are prepared to wait a very long time to purchase a home”.  You will get discouraged and I will have to bring out the Kleenex box and bandaids.  This is not a happy plan.  Rather, it’s time to get strategic.

1.     First and foremost, listen to your real estate agent.  He/she is not telling you to put in a stronger offer just to get a higher commission.  That’s hog wash.  They are telling you this because they know the local market, study the trends and are trying to save you from buyer frustration.  Most importantly, they want YOU of all competing buyers to get the home that you just fell in love with.

2.     If you are not prepared and willing to put in a near or full list offer, then perhaps it’s time to reevaluate your true maximum purchase price.  Let me give you an example.  Let’s say you are approved to buy a home for $150,000.  You look at several homes in that price range, offer $20k less than list and lose out on every one of them.  If this has been your experience, then you should really be looking at homes in the $130,000 range.  In other words, don’t look at homes of which you are not willing to pay at or near list.  By buying down, you will be much more comfortable paying the price you wanted all along AND be prepared to put in that full list offer.  In the long run, you will find a home much faster and avoid being continuously beat out by your competition.

3.     Work with an agent and loan officer who work as a team.  A great team effort can literally help you get the home that you want.  In the very least, it can put you at the top of the list of all bidders.  An agent who has a great partnership with a loan officer can synchronize communications, letters of recommendations and typically get this at a moment’s notice.  In a seller’s market, you need a TEAM working on your behalf because you may be up against a lot of buyers all competing for the same homes.

Finally, you may be wondering…”Why would a loan officer care about what I offer on a home”? Because I also have your best interests in mind. Remember, once you are approved, the clock starts ticking. Credit reports expire in 90 days. After that, the approval is null and void. Time is of the essence. And not to mention changing guidelines and increasing interest rates. Let me put this very bluntly. Remember that preapproval of $150,000? Well, you danced in the market for 3 months getting blown away by your competition and never getting your offers accepted. In the meantime, rates have gone up (as they have been for the past several months). To add salt to the wound, you were approved for FHA financing and now the new mortgage insurance rates kicked in. The final TKO...those average home prices keep on creeping up (I told you I would get back to this). Approved for $150,000? Nah, it’s more like $140,000 now. You are frustrated and I’m getting out the Kleenex box and bandaids. That was not a happy plan.


The MN Mortgage Mom’s final recommendation? Be strategic, be bold, be focused and stomp your competition.


Comments (20)

Kelly Bogan
Equinox Real Estate - Eugene, OR
Your Gateway to the Emerald Valley in Lane County
Sherri, what a way with words! As a very fresh agent, I'm surprised at how quickly the market is changing. I'm getting a great education in trends! Looks like it's the same across the country. Almost has ME thinking of selling.
Mar 23, 2013 03:51 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

What a smart loan officer to have this deep understanding of the present day real estate market. 

This reinforcement from a loan officer when we agents refer a buyer for pre-qual or pre-approval helps convey the sence of urgency needed today for buyers to compete for a good property for sale.

Mar 23, 2013 08:43 PM
Mark Lebkuchner
Warwick, RI
Personal Lines Consultant

This is an incredibly well-timed post.  What is keeping the market from become an absolutely amazing buyers market (other than enhanced mortgage regulations) is the mentality of most that sellers are desperate.  This does not help.

Mar 23, 2013 09:12 PM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

It's a new day in deed. Armed with the explanations provided in your post, home buyers would be well positioned to get the home that they want without having to suffer a few losses first.

Mar 23, 2013 09:13 PM
Greg Miller
Ruoff Home Mortgage - Sarasota, FL
Florida Home Loans - Conventional,FHA,USDA,VA

Excellent post Sherri, very informative and spot on with your advice. We are in the same type of changing market here in northern Indiana. Most of my applications lately have been purchases for list price.

Mar 23, 2013 09:20 PM
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Eighteen Years Experience in Brevard County

Listen to your agent....great advice.  I recently ran into a situation where "friends" were the experts and I was the door opener. I guess if the friends are the experts it lessens my liability!

Mar 23, 2013 09:58 PM
Joel Weihe
Realty World Alliance - Wichita, KS
Helping you to use your VA home loan benefits

It's like that here to and sometimes a client has to lose a house or two before they realize I'm not just being a salesman. The housing market really is coming back, and with a vengeance. Maybe even to fast.

Mar 23, 2013 09:59 PM
Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Sherri, you need to blog more...that was really a great blog!!

thank you,

Eve in Orlando

Mar 23, 2013 10:08 PM
Rob Lyszczarz
RE/MAX Properties Unlimited - Westfield, NJ

Sherri,   That is so true.  It is unfortunate that the buyers are always behind the curve on the buyer/ seller markets.   Buyers have so much information at their fingertips, however, they often fail to notice the balance.  Great blog

Mar 23, 2013 10:13 PM
Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

Same there here Sherri.  It's no longer a buyer's market.  I can completely understand that buyers still think that it is because of all the media, etc.  

Mar 23, 2013 10:44 PM
Ron Barnes
Associate Broker at Berkshire Hathaway Home Services Georgia Properties - Jasper, GA
"Most agents claim they're #1 - I THINK YOU'RE #1!

Ditto for the Georgia market. Metro Atlanta was never as hard hit as most of the rest of the state, but they are enjoying a dramatic turnaround. Our area a little north is a little slower to change, but we are at 3.2 months of supply in the lower price ranges.

Mar 23, 2013 11:08 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Great post... exactly what I'm discussing with my clients here in the Charlotte metro area. Problem is that many home buyers haven't seen this type of low inventory market and don't have a clue how to deal with it now that we are short rather than long on inventory.

Mar 23, 2013 11:24 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Sherri, buyers who think they can put in a low offer will have a long wait for making a purchase in a sellers market. Good point about the 90 day time frame and the buyers ability to qualify for a lesser priced home.

Mar 23, 2013 11:25 PM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

The subject bears repeating and discussion...If you want something, you need to go get it. While you are counting pennies, someone is counting nickels....

Mar 23, 2013 11:35 PM
Andrew Mooers | 207.532.6573
Northern Maine Real Estate-Aroostook County Broker

The one size fits all forecast of the real estate market does not work. Many watching talking heads that try to generalize don't get the way it is in the local market. That is your, my job to broadcast with our recess voice what is happening here. That low ball, hello, is a waste of time. 

Mar 24, 2013 12:12 AM
Sherri Sherpy
NMLS #287770

Thank you so much, everyone!

Richie, I love this!  Michael, my point exactly.  And then they get frustrated and start counting pennies, just like Richie said.

Nina, you are absolutely right.  At least in MN, generally speaking buyers are still thinking this is a buyer's market.  What an awakening!

Ron, it seems that way in so many areas of the country.  3 months supply?  Wow!  Low, low, low.

Christian Team, yep good ole media.  Maybe it's time they start looking at stats too!

Rob, oh gosh the saying goes something like this...they hear half of what is said and listen to none.  Until they've been burned a few times, right?

Eve, thank you so much!  You made my day.  :)

Joel, so true!  Sometimes people have to learn the hard way, huh?

Gary, oh gosh if I had a dollar for everytime a family member or friend became the "expert" on financing, I wouldn't be blogging anymore.  Maybe pina coladas in St. Maarten?  :)

Greg, your clients are ahead of the wheel!  That's awesome!

Charita, it really is a new learning curve for buyers and interesting how we now have to bring these issues in right from the beginning.

Mark, SO true!!!  In MN, we could have probably coined sellers as desperate in 2010 and 2011.  Not anymore.

Lenn, thank you so much.  This is exactly why I try to stay on top of the real estate market.  As a team, both the RE agent and LO can really deliver the message.  And sometimes, that message being reinforced by a LO helps to do away with the notion that the RE agent is just being a "salesperson".

Kelly, I know, right?  :)  Almost makes me want to sell, too.  But then again that would entail cleaning out my closets.  Yuck!

Mar 24, 2013 12:20 AM
Sherri Sherpy
NMLS #287770


Mar 24, 2013 12:23 AM
Steven Brand
Hancock Mtg Partners - Stillwater, MN
NMLS# 261849

Great job Sherri.   Glad to partner with you!!

Mar 25, 2013 08:06 AM
The Williams Team
Keller Williams Realty - Mandeville, LA
985.727.7168 www.TheWilliamsTeam.com

Great blog post Sherri! 

Next time my clients want to submit low ball offer, I'm going to refer them to this blog post. I feel like real estate agents are like the clients mom--- we can tell them over and over again what is or is not a good idea, and they won't listen.


-Louis Williams 

Mar 26, 2013 02:30 AM