It’s a buyer’s market. We all know that. And only in a buyer’s market are lowball offers even considered.
Because the market is on our side and we are in no hurry to rush into just any house, we’re planning to make a lowball offer on whatever house we do decide to make an offer on (be it House #1 or another house we find).
I’ve been researching how to make a lowball offer so I go into it prepared instead of over-emotional like I was when we first started our home search.
Here are some big things I’ve been seeing:
- Keep it clean. Make a clean offer, meaning not a whole list of contingencies and other “ifs, ands, or buts”. Go in strong and firm.
- Keep yourself out of it. Don’t base it on your situation (your income, amount you can borrow, etc.). No one cares that you want to buy a $400,000 house, but were only approved for a $250,000 house.
- Don’t walk away after the first counter. Don’t walk away when they counter. This is basically known in the real-estate world as just an invitation for the buyer to make another counter offer.
- But know when to walk away after that. Go into the situation knowing what your max price is and be prepared to walk away from the deal even if your heart is broken.
- Explain your offer. Sellers will probably feel shocked, and maybe angry, when you offer $275,000 on their home that’s priced at $350,000. But, explain you’re reasoning. Don’t just say “it’s a buyer’s market”. Say “this house doesn’t have a finished basement or granite countertops and the house across the street that sold for $40k less does.”
- Be financially ready. Make sure you’re pre-approved for the right amount and have the amount you plan to put down for earnest money, closing costs, and down payment ready to go.
- Don’t delay closing. Set a quick closing date (especially helpful for those motivated sellers).
- Don’t stray below 85% of the asking price. This varies among different articles, but I think this is a good percentage. I think anything lower than that could just result in a rejection.
Here’s more reading on the topic:
How To Make a Lowball Offer [WSJ]
The Art of the Aggressive Offer [MarketWatch]
How Low Can You Possibly Go On A Real Estate Bid? [MSN Real Estate]
Have you ever made or received a lowball offer on a house? What other tips would you add?
Thanks for the tips – this could come in handy for me sometime in the future!
Hey nice tips! Now that I’m killing my debt and have been working at my great job for almost 6 months, I’m starting to warm up to the idea of home ownership. I don’t think I’ll be looking to buy soon (I’m definitely waiting until my lease is up at my apartment in August, 6 months from now) so hopefully it stays a buyer’s market for awhile.
It will be a buyers market thru 2013 after the Fed’s recent announcement that they’ll keep interest rates low! You don’t have to rush, which is nice.
One of the rules of negotiation is needing to be able to walk away from a deal at any moment, which is hard to do for an emotional purchase like a house… but there are some great tactics here. Good luck on your search!
Fun fact: $275K is 79% of $350K.
Here’s a comment from a seller’s perspective. When selling my father’s home in mid-2010, if an offer had come in at 79% it would have been roundly rejected – no back and forth, no rationale, no explanation would have been considered. We had priced the house exactly right, and sold it in 2 weeks (middle of July, in a very slow market) at 98% of list price. Your tips might – perhaps – work fine on the buyers side of the equation, but not all sellers are so desperate to sell that they’d undercut their bottom line so much. We were quite prepared to say no if an inadequate offer was submitted (which at 79% would certainly be). That insults the seller and is unlikely to end up as a positive transaction.
I agree with Carol. I recently sold my apartment here in Oslo, Norway. We are totally in a SELLER’s market so I was amazed some people would still come with ridiculously low offers. I mean what do you think? I don’t care you don’t have enough money 🙂 I was not desperate at all so I ended telling my real estate agent to systematically turn down all offers under the asking price. I ended selling at a whopping 30% OVER the asking price 🙂
Closing ASAP is key. I made a lowball offer on a house which was accepted. Signed the papers and was waiting for them to sign on their end and get to closing. Someone else swooped in and made a better offer and they walked away from my deal. It burned me for weeks, but that’s life! Now I can’t drive down that street without feeling the pain.
We’re they penalized on defaulting on a signed contract? Because they can’t just do that after you’ve signed your contract and before closing…
I was wondering about what my legal recourse was. They accepted the check but didn’t cash it and accepted my signed contract. I didn’t get one back from them that was signed. At the least I think that the guy acting as a dual agent should be pinged. I have to find out more.
Great Article! I particularly like the first point about keeping the offer clean – We have just had our offer accepted and put it in on the basis that we would get no ‘extras’ with the house. Worst case scenario, we get what we thought the house was worth. It turned out well for us – the range cooker, fridge and dishwasher are going to remain. This was in addition to a room length wardrobe – we are delighted. These items were obviously inconvenient / not suitable for the current owners new house, however if we had previously discussed these items, she would have known we had an interest (we did in the cooker and the dishwasher) and be in a better negotiating position. Keeping quiet usually has some benefits. It is worth finding out from the selling agent where the current owner is moving to, so that you can plan your strategy. In our case, we knew the owner was down-scaling, so we kept quiet. 🙂
How is the house hunting going?
Sometimes it’s a heart and head situation. Your heart is tugging at you saying you really want that house. On the other hand your head tells you the property is too expensive, you can’t afford the repayments, it needs too much to repair etc.
We are selling our home in a upscale neighborhood right now offers are in and they look good. we used someone who tried to low ball us to get buyers we knew had the money off their buts.
Sure we countered the low ball offer after making the very annoying and clueless one waite until other offers came in, then we gave the low ball offer party the shocker we countered at 100 dollars below asking price boy were they upset.
I could care less they wasted my time comming to my home over and over, sitting in my beautiful living room for hours with their whole clan discussing where they were going to build their pool house.
Not to mention the 4 other times they came by to view leaving us out of our home at all hours.
They wasted so much of our time showing them the house when all the along they knew they could not afford our home. we wanted to pay back the favor and it was a pleasure.
If a buyer can not afford the real price don’t make a lowball offer that is stupidity imo. Just because it is a buyers market does not mean home owners are going to give you their home for nothing and we too have all the time in the world not every seller needs to sell their home and many of the buyers out there are just clueless and selfish..
I like bobs fun fact :
Fun fact: $275K is 79% of $350K