Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I think this may be where a lot of buyers get confused when they submit lowball offers.
You can't just pick a number that you'd like to pay and expect a positive result. You have to have comps - real comps, that are very similar in size, condition, age, features - that support your lowball offer. And you have to hope (or know) that the seller's agent hasn't provided them with comps that support their asking price.
In other words, do your homework (with the assistance of your agent) and if you're going to lowball, make it a lowball based on reality, not wishful thinking. Just as the seller should set their price based on reality, not wishful thinking, come to that.
I think this is a great post. A lowball offer that is just a number out of the air is insulting and a waste of time. A lowball offer that is based on facts that can be presented is a wise move.
If you find 10 homes that are what you like and you offer 15% less you will get at least 1 offer 20% less to begin with.
While I can imagine that this MIGHT work in some glutted market of nearly identical homes I can assure you that this is NOT a sure-fire strategy by any means.
Actual event:
Very nice young couple relocated to suburban Chicago last fall ('07). Sold home in the Boston metro area summer previous, so they have nice big downpayment and no regular contingencies. Have three young boys (eldest is now in 1st grade). They are renting from a custom builder for a fair (discounted) rate, but REALLY would be happier owning, even though that would mean a "wash" as far as total housing expenses factoring deductions/taxes. They have seen literally EVERY one of the dozen or two homes listed in the town/school district. Least expensive that met their needs (4+ bedrooms, normal sized yard, newer construction with upper end features) listed at $1M, most expensive approximately $1.6M. Differences include lot size, more deluxe appliances/cabinets, greater concentration of luxury flooring et cetera. These home are represented by probably 6 or 8 different real estate offices. They made simultaneously offers with exclusionary acceptance contigency on the TOP 10 houses all at 12% less than list. ALL were rejected with NO COUNTER. They are STILL RENTING...
I suspect that had they focused on the situations of the builders that own these houses they MAY have found one that was a bit itchier than others and if they made an offer at say 8% or 9% less than list they would have at least gotten a counter and probably closed at 93% of list.
The reality is that many of the truly shoestring builders got wiped out QUICK. More than a few of the builders sitting on unsold inventory have a pretty good track record of putting up places and probably have decent handle on their long term cash flow. They are not going to give away custome built homes for huge discounts.
Lauging. I think proper punctuation will clear this up.
If you find 10 homes that are what you like, and you offer 15% less, you will get at least 1. Offer 20% less to begin with.
Bear in mind that I am just clarifying his post. I am not agreeing or disagreeing withthe content.
Thanks Bill. AONE, for the record, I disagree with the "lowball approach" as usual. 15-20% less is ridiculous at this point. So if a home is $500,000, you're suggesting offering $400,000 and expecting to get 1/10 at $425,000? You wonder why our real estate market is such a mess. Is this the kind of buyers that are out there, at this point in the game? Does any buyer not realize that the $500,000 price tag would likely have been $600,000 just 2 short years ago? Geez- another reason this market can't "fix itself". Everybody wants a home for nothing, in retrospect. Give me a break!
I disagree. Just tell the seller that you have X number of dollars to spend, and ask them if they would consider selling it for that much. Its polite to say that you wish you could offer more, but thats as far as you really need to go.
As a buyer, you don't need to grovel at their feet and justify your offer. Either they'll take it or they wont, and it never hurts to ask.
agreed. you've got nothing to lose. also, if you are in a hard hit area,(it sounds like you aren't though), be sure to remind them that while the amount you have is low, it might be the only offer they'll get.
With all the various advice, it's really this simple. If MOST homes are 15% more than you want to spend, you're shopping in the wrong neighborhood and pricerange. I do not know what state you're in or what the circumstances are around your real estate market, but as some will argue, many believe that many states and "neighborhoods" have already corrected and are at as low as their going to go. Just because someone says real estate has another "X" amount of "%" to drop, doesn't mean it will. NO ONE knows, and if homes are selling at certain price levels in this neighborhood you wish to live in, apples to apples in comparison, that's what they are selling for.
Besides the "mess" this market is obviously in, it is also exaserbated by "greedy BUYERS" who hope to get a home they would not normally afford, for a steal. In some cases, it's not happening. Whether this is the case in your targeted neighborhood or not, depends. But in the end, if the prices are 15% higher than you want or can spend, then shop elsewhere. On a $700,000 home, another 15% is big drop, considering we can all assume it's already dropped by that much to begin with (as said to be originally over $800,000). This is the unfortunate "expectation" buyers have come to "expect" in this type of market. They hear stories that homes that were originally selling for $800,000 can now be snagged up for $600, $500, Even $400,000 becuase it happened "somewhere" where prices were truly THAT over inflated. But in some areas, a home worth $800,000 is probably worth it, based on location and square footage and upgrades/ammenities, etc.... and the fact that it's "fallen" to $700,000 is because even if some markets didn't deserve it, they were hit by declines anyway, because of the "national assumption" that every place was "overpriced! It's wrong.
fmv, if i had listened to the real estate cheerleading brigade last year, i'd be a couple of hundred grand under water today. you're all still stuck in the bubble. have you not noticed that just about every bank is in some form of financial difficulty? have you not noticed some of our biggest employers are insolvent? have you not noticed credit tightening? have you not noticed all the job cuts which are being made? have you not noticed all the vacant homes?
Summer 2008, pretty much all of these houses were not "pure spec" -- the builders in my area are generally dealing with teardowns and tend to not start until they have a commitment from a buyer. The buyers that these houses were started for either could not get what they expected for their existing home OR had other setbacks that left them unable to complete the purchase of the new construction. The builders are savvy enough to not have every last dime they have locked up in the last house, they can stay current on their loans for quite some time...
Summer 2008, pretty much all of these houses were not "pure spec" -- the builders in my area are generally dealing with teardowns and tend to not start until they have a commitment from a buyer. The buyers that these houses were started for either could not get what they expected for their existing home OR had other setbacks that left them unable to complete the purchase of the new construction. The builders are savvy enough to not have every last dime they have locked up in the last house, they can stay current on their loans for quite some time...
Have those homes now sold to other buyers at the higher price point? If not, your client may get a call yet.
I know that if I am going to buy a place in this market, I am going to want some protection against the falling market. 15 - 20% off homes which have been sitting on the market for a while with no offers, does not sount so crazy to me.
FMV, I realize that you are trying to sell right now, and I understand your frustration. But perhaps your view will be different when and if you become a buyer? I can tell you it's a whole different ballgame from this side of the fence.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Very dependant on local conditions...
