Low Ball Offers In Seller Market

Dated: October 28 2016

Views: 340

As a licensed real estate agent, I have heard all the reasons from buyers for putting in an obscenely low offer for a property.  When a buyer asks “how long has this been on the market?” “why are the Sellers moving?” “I want a steal!”, I acknowledge it will be a long road ahead. Steals and deals are no longer $25K - $50K under market value. The deals of 2009-2011 have come and gone.  Recent statistics have shown foreclosures are yielding only 1% discount off list price and regular sales 3% below list price.

Image titleSellers can be ‘turned off’ by an offer that is $20K, $35K, $50K under the list price.  This leads the Seller to believe the Buyer is trying to take advantage of them.  The facts are out there: prices are rising and inventory is low (supply and demand).  If the comparables are showing that the list price is off by $5K or $10K, it would be reasonable to submit an offer to negotiate to the final proposed contract price.  However, if the comparables are at or even over what the list price is, negotiation would truly be hard to conduct based on price.  Yes, if there are material / physical damage or issues with the property, the price is negotiable for those repairs.  Most listing agents will have discussions with the Seller before listing the property on the MLS for those said issues.

Buyers must remember some Sellers will have an emotional attachment to what is (and soon to be was) their home.  The average homeowner has lived in their home for 13 years.  There have been plenty of births, parties, anniversaries, and major life events to have occurred in this property.  The Buyer should put themselves in the Seller’s shoes and asked themselves what they would do with such an offer.  There is a balance between emotional and business when it comes to settling on the price of a home for a Seller.

The counter argument for this concept is over paying for a property.  The Seller can believe their home is worth more than the comps, but the Buyer feels it is $25K under the list price.  The Buyer’s Agent’s goal is to get the Buyer into a home at the lowest amount the Seller is willing to let it go for.  No matter what, if this is a financed deal, the bank will dictate to us through a third party what the real price of the property is.  This information (number) is not shared with the Seller or the Listing Agent.  If the property appraised for $10K more than the offer/contract price, the Buyer’s Agent would let the Listing Agent know the property appraised and that is it. 

Image titleAnother issue is the Buyer assumes the Seller is willing to negotiate.  Some Buyers feel starting out at a low price is just ‘a starting point.’ Unfortunately, Buyer’s agents have gone through this process with negative results. The property is active and on the market; other potential Buyers are viewing the property.  Caught up with the sugary sweet ‘this is my dream home,’ Buyers lose sight that in a low inventory market with plenty of highly qualified buyers looking for a home in a good neighborhood with great schools will sell in less than 2 days.  The result of sending a low offer would be the Seller taking another offer from a different Buyer without negotiating any previous offers.  The Buyer gets double stung by assuming the Seller would negotiate from their low offer, but got a full rejection and the property was sold to someone else.   Of course, the Buyer will say ‘I would have gone higher,’ but the time for negotiation was over once the initial low ball offer was submitted. The wise choice would be to submit an offer closer to the Seller’s expectation to get the property they want.

The ease of the internet has allowed both buyers and sellers examine the real estate market on their own terms.  However, the internet can be harmful in the inaccuracy of facts of the market – particularly giving estimates on property addresses using comparable information.  Zillow has been one of the sites dealing with under and over inflated estimates on homes.  These realty websites do not have the latest up to date information for a consumer to review and make an assessment about what is occurring in the market.  This is where a truly professional buyer’s agent can guide and advise you with up to minute closing and pending information on neighboring homes, show you market trends in the preferred city and inform regarding how much the market has recovered.  A real estate professional will be able to perform a report for customers close to what an appraiser would do. This gives the best option for a true price for the property.

Between the actual comparable and the emotional ties, each property will need to be assess for the right price. Ultimately, the Buyer must be prepared to lose the property over this tactic of low balling.

-Michael Norris, Prima Real Estate Group, Sales Associate

Blog author image

Angelo F. Terrizzi Jr.

I am a New England native, born and raised in the Boston area. Growing up, I was always involved with extra-curricular activities through school and church. I spent 30+ years in Business and later in ....

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