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Since a few people have made references to the fact that they hate it when lowballers pull numbers out of the air, I thought I would give a little more context to the research I have done and where my offer numbers will come from.
I have an MBA and studied real estate finance and macroeconomics. Some of my favorite books on the subject are Timing the Real Estate Market (Hall) and The Real Estate Game (Poorvu).
I have also studied the Japanese real estate bubble from the 1980s as well as the US real estate bubble of the late 1980s that burst in the early 1990s. Due to lack of market liquidity, the cycles are very long and prices can take more than 5 years to recover.
As for the comps – of course I have looked at the comps. I have studied recent, last summer and year-ago comps. They show that very, very little has sold recently and that prices are headed down. I have examined these things in the context of the broader economy. I follow the Wharton Business School reports on real estate in the Philadelphia area.
As for each individual property, I know not just recent comps (as Captain Bill says to look at), but what the comps from 1-2 and 10 years ago are. I know exactly what the seller paid for their house, I know what their neighbor paid for their house. I know what sold on their block in ’75 and ’01 and ’05. I know the circumstances of the seller – why are they selling? Divorce, transfer, etc. I know how much money they put into the place – have they done any upgrades? How much work will I have to put in? It is based on these numbers that I will come up with a carefully formulated offering price that just happens to be much lower than current list price.
Last I checked, there were over 100 homes for sale in the area that met my general criteria (bedrooms, bathrooms, price range, etc.). I predict further market price depreciation and flat prices for at least the next 5 years. Therefore, I am not will to pay any more than these “lowball” offers that I am prepared to put forward.
I simply cannot understand why people would find this offensive or insulting. This is a business transaction. If a seller wants to pass on my offer, I am fine with that. If they can find someone else that is willing to pay them more money than me, then good for them. They won’t hurt my feelings. Some other seller may be happy to take the money and run, rather than take the risk that it will get continue to get worse and worse.
That's exactly how I feel. Bravo, Evie! Why pay more if you don't have to? You're right...it's a business transaction and I'm not going to let pity for a seller who may have made insanely stupid financial decisions dictate my offer.
i am done with this thread. no need to argue a moral stand point-we all believe different things. I will just say this:
if the OP didn't think her offer was a lowball (and I define that term as offering WAY less than the comps dictate) then why did she post as "getting ready to lowball"?
Also, my point on the starving child was missed. To say you don't care and that is not problem are easy statements to say...one should think about that statement and what it really means and that was my point with the illustration of the starving child.
I believe "might doesn't make right" and I am fine if no one else believes that. I am comfortable with myself and the life I lead. Just b/c you can try and take advantage of someone (like offering way less than what the comps dictate in an hope to find the desperation in someone who might just take $100K less than what the home is worth) is wrong in my opinion. That is my stance and it won't change.
And DALLAS: I am getting into real estate and I will run my business with the highest of ethics. I will not work with someone who just wants to pull a number out of the air and try to bring the seller to their knees when the comps show otherwise. I believe I will succeed in my business b/c of this. Honestly, I am getting into b/c I have an eye for staging, good at sales, and am great with people...Something I found lacking when I was looking at agents. I have bought and sold many times in the last 5 years (all due to relocation...maybe 4 times) so I know this is business. But what is behind business is what people forget: people.
No, what is behind this business is a commodity, i.e. housing. Without that commodity, we'd have no need for residential real estate agents.
No offense, but with that attitude I would never, ever choose you to represent me as a buyer's agent. I do not care about a seller's financial circumstances and I don't have pity for them. I care about my own bottom line and getting the best possible price for a house. I care about writing a smaller mortgage check every month so I can put money away for braces, college, etc. I'm not interested in bailing out a seller or contributing to their bottom line. I don't care about their bottom line. I am not interested in financing their retirement, bailing them out of impending bankruptcy/foreclosure, financing their kids' college education, or making it possible for them to get that pretty new Mercedes they've had their eye on. I'm interested in getting the best possible value for the money that *I* go out and work hard to earn.
Any real estate agent who tries to make me feel bad for that is one who doesn't deserve my business. I also do not think it's ethical to present sob stories like that to pressure buyers to offer more for a house than they originally would have.
People continue to feel a sense of entitlement regardless of the situation. They felt entitled to double digit gains in the market, and they feel entitled to retain those gains when selling. Some speeches have equated those who "lowball" akin to deceit, treachery, or subhuman behavior. Sounds similar to the same rhetoric that permeated when renters were told by their homeowning counterparts to buy buy buy. In some rare cases, there was a feeling of social exclusion for renters. My single friends who rent would even in some cases be ashamed to inform their love interest of their renter status for fear of being labeled as a loser.
Now that first time homebuyers and fence sitters are in the driver's seat, capitalism has been spun by the burned as cruel and inhuman. It's ironic that the once labeled jealous renter can now sit pretty and label the homeowner jealous for not getting the same deal they could get.
Yes, this is me! When my colleagues and I started work together in summer 2006, I got all sorts of "you are a loser" sentiments from my married, male, home owning colleagues because I am single woman and a renter. Now they are facing reality that their homes aren't going to sell in a 2 week time frame with amazing profits when we all leave this city next year. Instead they are telling me that maybe I'm better off since I'll just pack my bags and leave when my rental contract ends.
So in the meantime, does one walk to work while waiting for the "perfect" car at the "perfect" price? Some folks prefer the convenience of their "almost perfect" car. And maybe they could have bought it cheaper the next year, but not knowing if the interest rates would be going up, and wanting to get on with life, they chose to buy it now. Unless they sell the car next year, they'll still make money when they sell the car in three to five years - plus they will have had that extra year of not having to walk to work.
Funny - I know someone who is a habitual lowballer. Every house he has bid on has sold for around his original offer to another buyer - many months to a year after the offer was rejected by the sellers.
He says he has become used to being right about the price, but wrong about the timing, a day early in effect.
Last 5 houses I made offers on were turned down. Each one sold for less then I offered. (one of them at a 40% discount)
Yeah, you'll find those that lowball for the sake of lawballing. My agents think I'm crazy by making such offers, but I do know the market, and what properties in my area are selling for. More importantly, I know what properties will be selling for in 6 months, something sellers dont want to hear until is to late.
Perhapse I'm guilty for helping to make the seller feel that a "reasonable" selling price wont happen and they take the next offer that comes along, but then their agent should simply have kept my phone number as I'm willing to close tomorrow at the price I provide.
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