Getting Ready to Lowball (negotiation, housing, agreement, percent)

[ShannonMilligan]

Originally Posted by VivaLaEvie

We are not lowballing just to lowball for fun. We want a house that we love for a price that is right. Prices have run up like crazy over that last many, many years. This pushed us to the sidelines during the frenzy. We have been patient and now we feel like the timing is right to be on our side for a change.

And no, our agent is good and understands that it will take work. Some sellers may be willing to take a low offer - we are highly qualified, won't ask for little petty repairs, will give seller complete flexibility in move out date, etc. Prices have gone up so much in the last few years, each of the sellers will do just fine compared to what they paid, even with the discount.

In general, we are looking to pay about 04 or 05 prices for a house today. I think prices will go down or flat for another year at least, and given the run-up, I don't think it is entirely unreasonable.

BTW - sorry you had to take a haircut on your place. I know that must hurt! My parents had to do that too in the last down market in the early 90s.

well, if the comps support what you are offering, then by all means do.
thanks-no big deal on the haircut though. i mean, it sucks, but it is what it is. we are just happy to be out.
where in philly are you looking? i have lived in both chest county and bucks county

[VivaLaEvie]

Originally Posted by leavingbyron

So what does he say about lowballing?

And why (if he's such a great agent then) did you come seeking others advice on the subject? I'm sure he has advised you what your odds are in this market...
(No, I'm not an agent)

I am new to this board (just found it) but I find the variety of perspectives here fascinating. Getting feedback from people with personal experience can be valuable..... And help inform my decisions.

[Captain Bill]

Originally Posted by VivaLaEvie

You see - this is exactly the problem. Real estate agents rarely represent buyers!!! If you are my agent when I am buying a property - you are supposed to get me the best deal possible. However the entire system is rigged to try and keep prices as high as possible. Agents make more money the higher the price is paid for a property.

You're correct, the job of the buyers agent is to get the best deal possible for the client. However, realtors have a code of ethics that require them to be honest with everyone associated with the transaction.

When you lowball, how can I honestly tell the seller that this offer is a reasonable offer that they should accept? I cannot do that and remain ethical.

Buyers keep repeating the mantra that agents want to get the most money for a house because they make a higher commission.

Sellers on the other hand say their agents want to reduce the price so they can sell the house to get their commission.

Neither is correct. The difference in the commission between the listing and selling price is miniscule. The agents job is to negotiate a deal that is acceptable to the buyer and seller. That takes an ethical agent that has the skills to negotiate on a win/win basis so that a deal can be made to the satisfaction of BOTH parties.

Right now you are the buyer, and you want a steal, so you're seeing things through a different set of glasses.

Once you buy a home you will be a seller, and your attitude will change. If a buyers agent comes to you with a lowball offer, you will want to throw him/her out of your house for insulting you.

However, I suspect that most agents who present lowball offers do not ask to present the offer to the sellers agent and the seller at the same time; and for good reason. It's probably much safer to fax the offer to the sellers agent and avoid the wrath of the seller.

I have a home for sale in California, and it's listed with an agent there. I currently live in Arizona.

Recently my agent forwarded me a fax with a lowball offer. The home is listed in line with the comps at $1,348 mil. The lowball offer was at $990k. Here is what the buyers agent wrote:

"Here's my client's offer -- see what you can do."

The agent was not being dishonest. But he did not do any work. He did not do any negotiating, nor attempt to justify the price. He couldn't because he was in a very weak position. We countered at full price, and they walked, as we expected.

That was the second low ball. The first one came in at 1.050. Again, my property is priced in line with the recently sold comps and the active comps.

The offer was faxed in the same manner, and I asked my agent to arrange a conference call so the agent could explain to me why he felt that I should accept this offer.

The agent did not know I am a real estate agent. He first asked if I was aware of the California market. I said no, tell me about it. He gave a general gloom and doom picture that included the areas of CA that are worst hit, but did not include the area where my property is located.

He said the market is down and that his client is looking at what the value will be one year from now. I asked why don't they wait until a year from now and make an offer if the home is still on the market. He said they need a home now. I asked him what comps he had used. He said: "we used comps all over the area". Well I lived there for 30 years and know every house in the community, and the comps we used were of like houses in the same community. He flat out lied. (violating the required ethics of honesty) I asked him to send the comps to me and he didn't.

Doesn't that sound like great negotiating skills? First he misrepresented the market to me, (no honesty) not knowing that I was well aware of the market in that area; and then his only defense of the offer was that his buyers expected to buy my home today at what they guess the price will be one year from now.

As I said before, if you want to lowball, have at it, but I won't be your realtor (by mutual agreement, I know). If my clients want to negotiate a fair price within a reasonable within the ball park of the current market value range, I will work to get them the best deal I can. But I won't go and lowball 8 homes with them. No commission is worth my being dishonest.

It is easier for you to close the deal when the offer is higher. So, you take the easy way. This should be against the law.

So you think it should be against the law to abide by a code of ethics that requires all parties be treated with honesty? Interesting.

The Realtor Code of Ethics states: "When serving a buyer, seller, landlord, tenant of other party in a non-agency capacity, Realtors remain obligated to treat all parties honestly."

In your case the realtor is representing you in an agency relationship which requires other fiduciary duties including honesty. The seller is in a non-agency capacity with your realtor and s/he is required to treat the seller honestly.

If your agent tries to negotiate a price for you and states to the seller that the current value of their property is less than it actually is, then that is a violation of the code of ethics.

Being dishonest could be construed as misrepresentation, which may amount to fraud, and I would not be willing to risk being sued by a seller for fraud for being dishonest and misrepresenting the value of their property, all just to get you a lowball price and earn a commission.

I bet you had no problem telling a buyer to pay 20-50% more for a property than it had just sold for the year before during the boom years. I can picture it now, "that's the market."

You're absolutely correct. What transpired a year ago has no bearing on today's value, no matter which way the market has changed.

The market is what it is at as of any given day. I do not tell people what to pay, or what to sell for. And I cannot tell people that they should pay last years price when the market value today is different.

Just like all realtors, I check the comp's to determine today's market value and work from there. What the market did last year, and what it may do next year has absolutely no bearing on today's current market value.

My job for a seller is to determine today's current market value and get the highest possible price within a given market range (the exact price is difficult to determine) in the minimum amount of time (which is usually the average days on market for the homes that sell).

My job for the buyer is to locate and negotiate for a home at the best price within a reasonable market range of today's market value.

Because I cannot be dishonest with buyers when I'm representing a seller, I cannot tell them that the (overpriced) listing price is in the current market value ballpark.

Consequently, I will not accept a listing for a home that is drastically over priced, for some of the same reasons that I will not work with a buyer that is intent on lowballing. I have a Realtor code of ethics that I am obligated to comply with, and a personal set of high integrity standards that I intend to operate with.

So just as a seller will add a 5% or so range above the market value, in order to leave room for negotiating, a buyer should negotiate from a bottom range.

Over pricing a listing and lowballing are the same in my opinion. Both are unreasonable and I want nothing to do with either.

[/quoteLuckily for us we finally found a real estate agent that understands what it means to represent the buyer. He thinks we deserve to get the best possible price -- when there are 8 we like and likely to be many more to come over the next 6 months. We will take care of him for it - make sure he is fairly compensated for his work, because we know the system won't.[/quote]

Good for you; I presume you have signed a buyer/broker agreement with him so he is guaranteed to be compensated properly.

Bill

[nativeDallasite]

Originally Posted by twinmma

didn't you read the next couple of sentences? I said it doesn't mean she should overpay but to LOOK AT THE COMPS for the area.

edit to say: i also said i didn't know the condition of the properties either. all i am saying is just don't go in with numbers that you pull from the air b/c it seems low and worth a try-go in with an offer based on comps. the do unto other is: would you want someone just offering any number just for the heck of it? i think not-wouldn't you rather have someone make an offer based on comps and such? just don't insult to insult. if those numbers the op put are the comps, then go for it. i would rather give an offer based on comps and one in which the seller will be most likely to work with.

I sold a house earlier this year and had a "have a go" offer which I refused. I didn't take it personally; can't blame 'em for trying. Someone else may have accepted a lowball offer, but I wasn't that desperate...yet!

[DavePautsch]

First of all...PRICE is not the only component to a reasonable/acceptable offer. I completely understand the point that you want to pay for the house what you want to pay...and by some definitions that IS market value (the price that a qualified buyer is willing to pay). However, finding other elements that might make your low-ball offer more palatable to the sellers is a way to find the win/win type scenario. For example, closing date (find out when the seller wants to close and accommodate them); inspections (make it clear in your offer that you won't ask for the seller to make any repairs - but you should still keep your ability to reject the report in the event of something catastrophic); these are only two examples, there could be HUNDREDS more.

Secondly, when I counsel my clients on this (buyer OR seller) I always ensure that THEY know what their walk away is...the price that, regardless of the outcome, they will sleep well that night. Sellers need to understand that even low-ball offers are a business proposition that opens the door to negotiation.

Lastly, if I were representing either party in a case like this (buyer or seller), my criteria would be as to whether or not the parties were willing to negotiate in good faith or were, in effect wasting my time...its a business for me too.

Bottom line: Low-ball offers, even ridiculously low are fine in this market as long as you are realistic about the outcomes and are operating in good faith.

[brook2ga]

Lowballing just for the sake of lowballing is wasting everyone's time. If the realtor (buyer's) feels the house is well priced, then a lowball offer isn't appropriate, imo. If the house IS priced right, it will sell, but to someone else. If a seller is desperate to sell, then a lowball offer may be entertained. Since the OP has so many options, I suppose eventually that tactic may work. If I find a home that is perfect for my family, I wouldn't go that route, but of course, that's just my opinion.

[AnthonyB]

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.

[cynwldkat]

Originally Posted by AnthonyB

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.

Funny, I know someone like that too! Our friend has done this 3 times and each time the home he bidded on sold for close to that price or less 8 months to a year later. Could it be the same person or are there others like this out there?? We recently sold our home in CA but did take $40,000 less then we were asking. But we were lucky--today that house is probably worth $150.000 less. We sold in March 2007. Just for the heck of it I have been watching the area and the comps.

[GLS]

Originally Posted by VivaLaEvie

You see - this is exactly the problem. Real estate agents rarely represent buyers!!! If you are my agent when I am buying a property - you are supposed to get me the best deal possible. However the entire system is rigged to try and keep prices as high as possible. Agents make more money the higher the price is paid for a property. It is easier for you to close the deal when the offer is higher. So, you take the easy way. This should be against the law. Can you imagine if lawyers were paid that way? How inefficient.

I bet you had no problem telling a buyer to pay 20-50% more for a property than it had just sold for the year before during the boom years. I can picture it now, "that's the market." If you cannot represent a buyer's best interest (which is to negotiate the lowest possible price) you should not represent a buyer and make money off it.

Luckily for us we finally found a real estate agent that understands what it means to represent the buyer. He thinks we deserve to get the best possible price -- when there are 8 we like and likely to be many more to come over the next 6 months. We will take care of him for it - make sure he is fairly compensated for his work, because we know the system won't.

I agree completely. During the "Boom" years I encountered realtors who were too busy to return phone calls, arrogant about what offers they would present, gleeful in promoting bidding wars, etc. While realtors certainly didn't cause the downturn (see greedy buyers, uninformed buyers, predatory lenders, etc), you exacerbated it by inflating market value. These habits by unscrupulous and incompetent realtors, and there were quite a few, caused the market especially the buyer to lose trust in your representation.

Buyers are not only worried about TODAY's market value, but projected market value in 6 months, 12 months, and yea, long term. Here's an anecdote: Last March I offered $280K for a house listed at $335. My research told me the house was listed for over both current and projected market value. The sellers realtor was adamant about not wanting to present the offer because "they will be insulted". I was pressured about being a "lowballer". Since this realtor projected her feelings to the seller, there was no counter offer. Today, the bank owns the property and current market is about $275K. The realtor's intransigence resulted in a Lose/Lose situation.

I had plenty of properties to chose from so I don't really care that much. However, I wonder how the "insulted" seller feels now with the bank owning their property? You don't see the cocky realtor around to pick up the pieces. It certainly confirms that what I was willing to pay was not a lowball offer, but a fairly realistic estimate of market value in a downturn.

So here is one suggestion if you can rise above the perceived insult that for good reason buyers don't trust realtors to honestly represent them. I suggest the Seller pay for a reputable and unbiased appraisal AND the Buyer get their own objective appraisal. If you do your due diligence in selecting the appraiser, the average of the two should be a starting point for negotiation. Until you start at some point where conflict of interest is not suspected, you can keep your sanctimonious assumptions about "lowballers" to yourself. If you are too arrogant to consider all offers, you deserve today's declining market.

PS When the market does turn positive it would be wise not to return to the self-righteous indignation displayed in the past.

[AnthonyB]

Originally Posted by cynwldkat

Funny, I know someone like that too! Our friend has done this 3 times and each time the home he bidded on sold for close to that price or less 8 months to a year later. Could it be the same person or are there others like this out there?? We recently sold our home in CA but did take $40,000 less then we were asking. But we were lucky--today that house is probably worth $150.000 less. We sold in March 2007. Just for the heck of it I have been watching the area and the comps.

This is in NJ so presumably there is more than one out there. I think the market is speaking, but most sellers don't want to hear it. There are also a lot of potential buyers out there who don't want the hassle of lowballing but will never pay the inflated asking prices and are willing to just let things drift down to realistic levels before they make an offer.

The big trouble with comps right now is that the market is falling - comps tell you what was, not what is or will be and are fairly unreliable in many areas that are dropping quickly. I think there is a percentage under comps that people are comfortable with, an offer less than that gets blown back.