Low-ball Offers

[JC]

Just out of curiosity is anyone actively submitting low-ball offers on properties right now?

If yes, would you mind sharing the average % off of list that you are offering? (I’ve seen a few that I would offer roughly 40 to 50% off list price knowing that I will likely be rebuffed for quite some time).

Additionally, if you are submitting low ball offers, would you mind sharing whether you have had any trouble finding realtors to work with you? (I attempted this last year with very modest low ball offers and the realtors I spoke with were appalled that I even suggested such a thing).

I realize it may be a little early in the cycle to discuss, but I was just curious.

Thank you!

[kev374]

i’m not submitting lowball offers because the price I usually have in mind is 2000-2001 prices and that’s like 30-50% off the current price. Most sellers will not budge more than 3-5% off the price, many don’t think rationally in this regard and consider it an insult to their manhood!

For instance there is no valid reason the median price in Orange County should be anything more than $320-350k considering fundamentals, and that itself is EXPENSIVE!

[temeculaguy]

I e-mailed a realtor with a 25% off lowball, I know that an e-mail is not an offer but she didn’t even contact me and I gave my phone number and said I was unrepresented. It was actually a pretty reasonable offer, I am suprised that I never got a call or an e-mail. The property was a bank repo, was listed at 399k, reduced a week later to 389k, new stuff at the same sq ft from the bulder next door is 310k after incentives, but the repo had a better lot (but not that much better). I just explained the prices of the neighboring builders and if i was unrepresented that would save the seller about 12k, would they consider something around 300k, no call no e-mail. There is a 30 month supply of resales in it’s zip code, I can only think she never got the e-mail. Too late now, I signed a lease.

[JC]

Thanks for the responses. The REOs I’ve been watching are averaging a 5% drop in price every 2 to 3 weeks, but I suspect I would not get a response to a 50% off offer even though they will be there soon enough. (Oh, and these properties have been on the market a looong time).

I guess the sense of urgency to unload will change in due time.

Thanks again.

[Arraya]

I have been renting in a never lived in condo developement in Hillcrest since November, which was extacly when the finnished developement. My landlord was an investor and recieved 3 of the 12 units of which he cannot sell for 5 years. Needless to say they were having trouble finding buyers. Apparently the main developers looking for business asked him to see if any of his renters would be willing to buy.

Long story short. He approached my fiance and I to see if we were willing to purchase and that he could work a very good deal. I agreed but said we would need to get a good deal off list due to the market conditions and not wanting to be underwater. They were listing @ 660, which was IMO about 30-40K to high in the 1st place according to comparibles.

I worked up a price that was the same mortgage payment as our rent minus HOA and 1/2 taxes. That put a purchase price right around 400K. They actually countered to 500K plus 20K incentives. Keep in mind they did sell the 2 one bed room units, smaller by 150 Sq ft and one less bathroom for 550 and 570K. So I thought that was very indicative of there stress level.

Anyway they have since started renting them out along with the other 37 unit building they have on the otherside of town that just completed construction.

[salo_t]

"would you mind sharing whether you have had any trouble finding realtors to work with you?"

About a year ago I was submitting some serious lowball offers on homes that had sat on the market way to long. The offers were much lower than they were asking but realistic at the same time taking into consideration what the home would normally rent for. I wish I had kept some of the voicemails of the venom spitting agents basically telling me to go to hell.

Come to think of it I really wish I had kept those voicemails they will be considered collectors items of a bygone area pretty soon.

 

 

[bob007]

why are realtors so concerned about the price ? they get paid 3% of the selling price ? 3% of selling price is better than $0

[temeculaguy]

Venom from realtors right now is understandable. Their world is crumbling, they have essentially been fired from their job yet they still have to go to work, but now without pay or hope of a payday. What is worse, many drank from the punchbowl themselves and are unable to pay their high priced car lease and are having their own arm reset. It’s Randolph and Mortimer screaming “turn the machines back on.” You piggy’s with your rent to price ratio fundamentals are the cause of all their pain, you are ruining everything. I’d be pissed at you too. As an industry they went to the payday advance check cashing place on the corner. They earned three years pay in one year, pissed it away and now they realize they actually should have banked the big money from 2003 to 2005 because that was it, no soup for you. What makes it worse is they actually got used to it and convinced themselves that they deserved the income they earned in the boom, so having the beemer repo’d and taking that job at home depot would have been easier if they had never had a taste of the good life in the first place. The easiest way to be poor is to have always been poor.

[Eugene]

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted … would you go ahead and buy??

Let’s take this home as an example

http://www.zillow.com/HomeDetails.htm?zprop=16813847

4br/2ba in SW Poway, 1695 sq ft, listed for $589,000 ($348/sq ft). Sold in 1998 for $235,000 ($139/sq ft), resold in 2001 for $358,000 ($211/sq ft). Has been listed on MLS since May.
Suppose you offer him 350k and he accepts.

On one hand, 350k for a 4br in Poway is a very good deal. On the other hand, it’s still no pocket change. 4br houses go for a lot less in Temecula or especially in Houston. Finally, no one knows where the bottom will be. Maybe what looks like a very good deal will turn out to be a waste of money. Maybe sellers will weather the storm and houses never drop to 2001 levels.

Thoughts?

[donaldduckmoore]

I have offered a 5-6% off the asking price this year and the seller did not seem to be very interested. 40-50% off will not work for sure at the current market condition. Good luck.

[Bugs]

Here’s a thought. The time to buy is after the sellers have all been thoroughly brutalized by the collapse. It’s after they have come to accept that there is absolutely no hope, no light at the end of the tunnel, no cavalry coming to the rescue, not even a 2×4 to hang onto in a storm-tossed sea. (that enough analogies for you?)

We’re not there yet. We still have knuckleheads who think that things will level out in 2008 for a couple years until wages catch up to prices. We still have would-be sellers taking personal offense at offers to purchase because they’re too low. In effect, these people still blame the buyers for their problems and haven’t yet accepted the idea that their problem was their purchase, not their sale.

You just need to allow the market conditions to do the tenderizing for you. That way it’s not your fault they’re losing out. Once the sellers are softened up enough to cooperate they’ll sell.

BTW, as a group the sellers are but a small subset of property owners. There are lots of property owners who can and will hold. They aren’t part of your transaction and as such you really don’t care what they think. It’s just the marginal owners who are compelled to sell that you want to see become demoralized. It sounds kinda mean until we acknowledge that prices are a function of market activity in the macro, not buyer malicousness in the micro.

[Raybyrnes]

esmith

Your statement dow not make a lot of sende to me becasue you are comparing apples and oranges. Poway is not Houston. Real Estate is Regional.

[SD Realtor]

Ray you have made a key point. I have made a few lowball offers in the past year in the 5-10% range under the asking price. No takers at all… only a small subset even countered.

I have found much more reluctance for lowball offers in the more desireable regions as well. It has been a nogo for my clients in 4S, in La Costa Valley, in RP, RB and Sabre Springs. It did work for my client off of Olivenhain but that took awhile.

As you transition into the more desireable region the psychology/distress level changes rapidly. As Bugs pointed out the mindset is not even close to being where it needs to be, especially in those regions.

SD Realtor

[stockstradr]

The time to buy is after the sellers have all been thoroughly brutalized by the collapse.

Words of wisdom!

I totally agree with this post. Sit back and wait for things to “ripen”
I don’t see any blood in the streets yet. Eventually, it will be knee-deep, then it will be time for bargain-hunters like us to go house shopping.

[stockstradr]

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted … would you go ahead and buy??

Assuming that Poway home is in good part of Poway, YES my wife and i would buy it at 350k.

I have no idea how low it will go, but my instinct is that a house like that will never fall below 350k.

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