Lowball Offers
Buyer's Market vs. Seller's Market
When it comes to real estate, there are basically two types of markets; a buyer's market and a seller's market. If you happen to be shopping for a house when the market is favorable toward buyers-when there are a lot of houses on the market and prices are very competitive-then you are more likely to have a lowball offer accepted. Should the market be a seller's market, then houses are at a premium and they sell fast. If you are house-hunting in a seller's market, the best way to find a situation where a lowball offer is possible is to find houses that have been overpriced and have been on the market a long time. This type of seller may be more inclined to consider a lowball offer just to unload the house.
A lowball offer is one that is considerably less than the price the seller is asking. Depending upon the marketplace, the percentages can vary, but generally speaking a lowball offer is 10 percent or more below the list price. Making a lowball offer also requires strategy in the negotiations, so you will want to have a great agent working for you.
Common Mistakes People Make With Lowball Offers
Some of the common mistakes people make when extending a lowball offer include simply talking too much. Telling a seller that the reason you are offering so much below the list price is because you can't qualify for a larger mortgage is like shooting yourself in the foot. The seller doesn't care what you are able to afford. If the seller's house is out of your range, then it's your problem, not his.
Offering cash to purchase really isn't that big a deal, either. At the end of the day, the money is cash in the seller's hands anyway. That point seems to escape many buyers. The only real advantage to offering to pay cash is that it removes the loan contingency and the right for the buyer to walk away if the loan doesn't go through. It's just not a big bargaining tool.
There are buyers who get their knickers in a knot if their offer isn't accepted right away, or if it is countered by the seller for more than the buyer was prepared to pay. A counter is really an invitation to negotiate. The uninitiated and inexperienced walk away from an opportunity like this.
Setting Yourself Up To Win
There are strategies for setting a lowball offer up to be a win. First of all, it's good to know why the seller is listing their house. Sometimes it's a distress sale-a divorce, financial problems, a need to move quickly-so find out why they're selling. If you know the reason for the sale, you can shape your offer to fit their needs.
Come out of the gate strong. Write your offer in a clean fashion. Don't be greedy and ask for items that are outside of the norm. Submit a pre-approval letter from the lender and make it as easy as possible for listing agent to see you are serious and able to perform.
If there's a counter offer, counter it. The first counter is really just an invitation to get into the fray so don't allow yourself to become discouraged. Dance the dance until the lights are out and the doors are locked. Rather than asking for a drop in price, negotiate on other concessions such as closing cost credits, repair credits, or focus on tangibles like furniture or appliances.
What If Your Offer Is Rejected?
If your offer is rejected, don't give up. Hold on to the offer and allow the property to sit for a while. Sometimes it's a case of having just listed the property and the seller is hoping his pot of gold is around the corner. If the house doesn't sell quickly, then resubmit your offer later on down the road. Just cross out the date, so the seller can notice how long it has been since you made the initial offer. Put in the new date and who knows-your lowball offer may be just what the seller is wanting.
