Let’s talk about lowball offers
In this article, we’re diving into the world of lowball offers. When you’re buying or selling a home, the one topic that can quickly stir up strong emotions is the infamous lowball.
Whether you’re a seasoned home seller or a buyer navigating the market for the first time, understanding these types of offers will help you stay one step ahead in the negotiation process. Buyers might see it as a clever negotiation tactic, while sellers can take it as an insult. So let’s get into it!
We’ll cover these buyer concerns:
- What is considered a lowball offer?
- Will the seller be offended? If so, what happens then?
- What happens if the seller rejects the offer?
- Is there a general rule for how much below the asking price should be offered?
- What is the strategy for offering a lowball?
- What factors justify making a lowball offer?
And these home seller concerns:
- Why did I receive a lowball offer?
- Should I respond?
- If do reject it, will that discourage other buyers?
- Does a lowball indicate a problem with my house?
- Should I lower my asking price after receiving multiple lowball offers?
Buyers want to figure out how to get the best deal without alienating the sellers. Sellers are trying to understand how to navigate low offers without losing potential opportunities or undervaluing their home.
What is considered a lowball offer?
A definition of lowball offer is subjective but considered an offer significantly below the
seller’s asking price: around 20% or more off the list price.
Will the seller be offended?
This is specific to the situation. Some sellers aren’t going to be offended. Some are. It depends on how low the offer price is, the expectation of the seller, and how the
seller’s agent manages the conversation of the lowball.
What happens if the seller rejects the offer?
Buyers need to be cautious with their offer price. If the seller considers it to be too low, they could be offended to the point that they won’t deal with you anymore.
So, as a buyer, you have to decide if offering a lowball is worth it. How disappointed will you be if you don’t get the house and the seller says “talk to the hand”?
Sellers do not
have to respond to an offer. They can simply ignore you. If they do, you can wait a day or a week or a month – whatever you deem appropriate – to try again. That’s, of course, if the property is still for sale.
So the price offered has to be considered seriously. If it’s the last and final offer, then fine. Throw it out there. But if there’s a chance of offering a higher price, and the seller is offended, there might not be another chance.
Is there a general rule for how much below the asking price should be offered?
The best way to figure this out is by consulting with your agent. A knowledgeable local realtor is going to be able to tell you where the line is in offending a seller. Some buyers have the “throw spaghetti at the wall” strategy, which is fine. As long as you’re prepared for the likelihood of disappointment.
What is the strategy for offering a lowball?
Strategy depends on what your goal is. Do you want the seller to take it or leave your offer? Do you want them to respond with a counter offer?
This conversation is also one to have with your agent.
What factors justify making a lowball offer? And: Why did I receive a lowball offer? These are the same answer to the buyer.
Buyer thinks the house is overpriced.
Buyers may submit a lowball offer indicating what they believe the house is worth. The longer buyers are looking in a market, the more educated they become. It can get to the point where they know their market better than the agents.
Their opinion can be based on comparing similar homes in the area, looking at recent sales, and considering market trends. By offering less, they’re adjusting for what they see as inflated pricing.
It is overpriced because of its condition, location, or both.
A buyer might view a home as overpriced due to factors like poor condition, outdated features, or being located in a less desirable area.
The buyer feels that the asking price doesn’t accurately reflect the cost of improvements they’d have to make or doesn’t account for the limitations of the location.
The buyer is testing the waters to see what the seller will take.
Some buyers might not necessarily think the home is overpriced, but they want to see how flexible the seller is. In this case, a lowball offer serves as a starting point to gauge whether there’s room for negotiation. This strategy is often used in slower markets where the buyer feels that the seller might be more willing to lower their price.
The house has been on the market “too” long.
How long is too long depends on the pace of the market. When a home sits on the market for an extended period, it can raise red flags for buyers. There might not even be any issues with the house.
Buyers think
something is wrong with it – even though there might not be.
If a house has been on the market longer than average, buyers might start imagining issues that don’t actually exist. They could be worried about hidden problems, such as foundation issues or legal complications, leading them to make a lowball offer as a way of mitigating perceived risks.
If they’re going to imagine something is wrong with the house it’s going to be big. Like a foundation, roof or plumbing.
Buyers might assume that the seller is getting desperate. A lowball offer in this situation is often made with the belief that the seller might accept just to get rid of the house.
Maybe the seller is getting a divorce, or is maxed out by paying their current mortgage and another on the new house. Negotiations will be tough if there’s any indication that the seller is in a difficult situation.
The buyer is short on funds but submits an offer anyway.
This is sort of like your eyes being bigger than your stomach at Thanksgiving dinner. Some buyers go out looking at houses before they actually know their budget. Then they’ll rationalize why the house isn’t worth what the seller has it listed for.
Sometimes, buyers genuinely like a property but simply don’t have the budget to meet the asking price. Rather than walking away, they may submit a lowball offer in the hope that the seller is motivated enough to accept less.
Should I respond?
Responding to a lowball is a personal decision depending on your reasons for selling. If your need to sell is urgent or the house just went on the market you’re more likely to think about it.
The longer the house is for sale, the more likely a seller won’t be offended and will consider it.
If do reject it, will that discourage other buyers?
It may discourage other buyers to write an offer if the buyer’s agent thinks you’re being unreasonable. The real estate community can have a small town attitude.
If the agent thinks you’re making a mistake and believes you should have taken their client’s offer, they’re probably going to talk about with other agents. Not only to share their disappointment but to verify that you’re wrong.
Does a lowball indicate a problem with my house?
The problem could be the length of time on the market and not with the house itself. It also depends on when you receive the offer. If the house has been on the market for an extended period of time, then there’s a problem. It’s up to you and your agent to determine what the problem is and how to deal with it.
Should I lower my asking price after receiving multiple lowball offers?
Potentially. The decision to
reduce the price has to be evaluated based on your personal circumstances and the status of the market.
Paul Sian advises,
Two common reasons a home does not sell is due to being overpriced and the condition of the home not being in move in ready shape for today’s buyers. Especially with today’s higher mortgage rates, pricing on a home is a top concern for buyers. Condition issues with a home can always be dealt with through proper pricing as for every home there is a buyer when the price is right. Buyers are more educated and informed these days on the current condition of the housing market with all the information and technology available at one’s fingertips. To counter the mistake of pricing a home too high the home seller needs to make the right price reduction in order to bring in the buyer who is ready to make an offer.
Conclusion
Whether you are a buyer or a seller, it’s important to remember this is a business transaction. It involves a lot of money, a lot of stress, and a lot of decisions.
If at all possible, try to
remove your personal feelings from the process. Distance yourself from what having a house means to you or the memories you’ve made there. Think of it as a commodity. That will help you make better financial decisions.
