A low ball home offer is defined as: A deliberate offer for a property that is much lower than the list price &/or the value of a property than one intends to charge.
You may see this as a good strategy towards achieving your home buying goals, but it might not be. There are some disadvantages when making a low ball offer on a property.
There is always an unmentioned amount that will unintentionally insult or anger the seller. The seller may be understanding that you simply want the best price OR they could refuse to negotiate with you at all!
Things to Consider
Choosing a property that has been sitting on the market for a long time does not necessarily increase your odds of getting it for less. Sometimes homes sit on the market because sellers owe more money on it than they can realistically hope to get. Maybe a seller isn’t in a hurry to move because they are home shopping themselves. There are also sellers who are very stubborn and are unwilling to negotiate or accept reality.
Home buyers must understand that low offers can hurt a seller’s pride because they have invested an enormous amount of their time, energy and money into the home to increase its value. They have created substantial memories there, and just because they’re selling it does not mean their emotions suddenly disappear. Unfortunately, you don’t know a seller’s life story or why they are choosing to sell their home. To further complicate matters, some sellers may just pretend to be upset when in reality they’re happy they received an offer!
Often times, sellers will go through a period of transition when selling their home, which can be mentally and emotionally tiring. Many have heard that sellers should stage their home by removing personal items. This is beneficial so that a buyer can imagine the home as their own. The OTHER reason is that taking personal items out of the house will make it easier to start making the transition to a new location. This is a subtle way to make selling less emotionally stressful.
Occasionally, low ball offers come from those who are from other another country or culture. Some cultures do things differently when it comes to negotiating. In some countries, if the buyer doesn’t start low they are perceived as gullible or ignorant.
In a perfect world, the buyer and the seller would not let their emotions cloud their judgement or negatively affect the negotiations. They would view the strategy in negotiating price as normal and routine for real estate transactions.
If you are going to make a low ball offer…
We suggest including realistic, actual facts to go along with it. It is possible the listing agent has already tried to convince their seller to accept what their home is worth in the local market. It is also possible that the seller is thinking emotionally, or working with faulty information about their home’s value from inaccurate sources such as Zillow. Including recently sold prices of similar houses may help the seller to accept reality. If the home is overpriced, your low ball offer is actually a reality based offer! The listing agent could use your data to explain to their seller how your offer is both fair and legitimate. Also be sure to include a proof of funds or a pre-approval letter along with your offer so that the seller can see how you will be paying for the property. Money Talks!
Making a cash offer does not necessarily mean the buyers will accept less than market value for their property. However, low ball cash offers do tend to have a higher probability of being accepted. One key element that helps is how quickly you can close. This is why low ball cash offers can be more successful. Paying with a mortgage loan means waiting on home inspection reports, appraisals, surveys etc. If a seller is in a bit of a hurry to move, this definitely puts the odds in your favor!
The Basic Facts
Dates on a contract are not suggestions. If you cannot close or fulfill an obligation by a certain date, this gives the seller a way out of the deal.
Many buyers want the seller to pay some or all of their closing costs. The seller may be less inclined to pay closing costs after you present them with a low ball offer.
Including a lot of contingencies will weaken your offer! If you notice certain repairs are needed, the contract can be written to protect you if the home inspection uncovers major issues.
Your first offer is only a starting point. Be prepared to make a counter offer after the seller responds. Low ball offers actually encourage further negotiations. Never make an offer if you can’t afford to counter it!
Understanding a little bit about who is selling and why can make a HUGE difference in whether or not an offer gets accepted. There is quite a difference in how a bank selling a foreclosure, or someone settling an estate will react to a low ball offer versus someone who is selling their personal home.
Everyone wants the best deal when buying a home. However, a low ball offer is not always the best strategy for getting one. Making a realistic, fact-based offer that protects your interests without insulting or angering the seller is one of the reasons to have a Realtor in your corner when buying a home.