lowballing

[LookoutBelow]

Offering 400K on a 450 listed price is NOT lowballing.

 

You can ALWAYS go up in offered price, but you can NEVER go down. 

[BikeRider]

When we bought our last home around 1997 (on the East Coast), the seller (a Builder, spec home) was asking 180K. We offered $145K, about 20% under their asking price. Now, we aren’t in any kind of bubble area, so we were dealing with what is probably normal pricing. The realtor told us it was an insult to the seller. I said “what do I care, I don’t live with them and they aren’t going to be paying my mortgage.”. The realtor took them the offer. The builder countered with $155K. We liked that number, but we countered with they pay the closing costs. I was like, what the heck. The realtor said “Sellers never pay closing costs in this price range.”. I was like, I don’t care, I want closing costs. I had gone to the county, found out when the builder got his final inspection. I knew how long the home had been sitting on the market. Knew that he was paying his construction loan and hoped he was hungry. He accepted our contract. As someone said above, you can always raise your offering price, but you can’t lower it once the countering starts. Go REALLY low on the first offer. Say 20% below what would be a non-bubble value and work up from there. If the seller wants to sell, they will start dealing. I am still blown away that people ever get into a bidding war for a home. It’s like Ebay I guess, they just don’t want to lose and go crazy. I think sometimes people could have built new homes for what they ended up paying for an older home after the smoke cleared from the bidding war.

[Peace]

Submitted by LookoutBelow…

“Offering 400K on a 450 listed price is NOT lowballing.”

I would agree with you but my friend is offering what she thinks is a fair price.

There had already been a full price offer on the contingency of selling buyers’ own house. But of course that sale fell through when buyers couldn’t sell their house.

Get ready for a lot of these types of contingency sales – I can remember them from the last crash. That’s where we (those of us without contingincies) come in and “save the day.”

“You can ALWAYS go up in offered price, but you can NEVER go down.”

Oh yeah, who says so? I’m surprised that a couple people on THIS list would believe that.

If this property is still sitting in 6 months or a year, I have a feeling my friend will make another offer for less. This property is “special” and I refrain from identifying it until after all is said and done.

[sdcellar]

Maybe anonymity might be one of the benefits of working with a selling agent. I agree that an offer that’s too low might alienate a seller, but as long as the buyer remains sight unseen, it should help. And if you have a good agent he should be able to convince the seller’s agent down the road to stay out of the emotional stuff (i.e. do you want to sell your client’s house or not?).

Also, I understand the notion of “special” properties, but in San Diego, I find it hard to believe there’s one that’s listed in the $400,000 price range. What does it have, granite from another planet? (say it out loud, sounds kind of cool…)

[sdrealtor]

Personally I doubt you would have much success with 5 parallel offers. If I had someone submit something like that, I would counsel my client that this was not likely a serious buyer and wasnt really motivated to buy their property. Most people with a good piece of property would probably react the same way and what you would likely end up with is a lousy piece of property at a good price. Certainly not the optimal result if you are looking for a nice place to live. If you are looking for an investment there are better ones out there than real estate and will be for a long time to come.

The best way to handle things is to find the house you like best and negotiate firmly. You can always walk if you dont get what you want, but at least you will be taken seriously. Trying to play the strong arm 5 parallel offers is not likely to provide optimum results in my opinion. The same goes for verbal offers. Unless you are willing to put it in writing it’s pretty much an unqualified frivilous offer. There is alot more than price involved in evaluating an offer and a verbal price offer generally will be met with indignation.

There is a right and a wrong way to handle business. Much of what you are advocating is vengeful, mean spirited and most important UNNECESSARY!

Find what you like, make an offer and move on if you cant get what you want. Its that easy and will work much better. No one wants to be involved in a business transaction with an a$$h*le. Trying to be one will result in the seller psychologically charging you a price for being one.

BTW, if you choose the 5 offer path there are so many outs for a buyer in the standard purchase agreement that you could go into escrow on all 5 and walk away without financial penalty on any of them. Not an ethical thing to do but the CA RPA (California residential purchase agreement) protects you automatically for at least 17 days unless negotiated differently and until you release your contingencies in writing).

[sdcellar]

sdr- Even though I put forth a “strategy” for a multiple offer deal, I think you’re absolutely correct that there’s no point in putting something like this together and don’t see how it could really benefit a buyer (but it’s fun to think about)

I am interested in your thoughts on how low is too low on a traditional offer, and now I’m being serious, so I don’t mean like offering half of what somebody’s asking because I don’t see how that could ever end up where you want it.

Also, thinking about it, that’s a pretty tough question to answer in a broad sense since every deal is different, but any insight you might have is welcome.

[sdrealtor]

Unfortunately there is no hard and fast rule. In my book the name of the game is getting as much information as you can and using it to your benefit. Many people would consider me ruthless in the way I negotiate as I conduct a lot of research into the seller to determine where they are and more importantly where they are going. I look for every edge I can find and use the information discreetly so as not to personally offend someone. A seller must not only want to sell at a given price but must be able to in today’s market. So if they own $500K and are asking $500K, your $400K offer is not likely to succeed as the person is more likely headed toward foreclosure or a short sale.

It’s also very important to understand that a sellers motivation does not come from where they are but rather where they are going. Learning that someone is headed for divorce (i.e. both names on title but only one’s clothes in the closet) is valuable to know. There are lots of other tricks of the trade just as valuable and that’s what my clients hire me for.

[justme]

Parallel offers:

I don’t think it is mean spirited at all to make five
parallel offers, and it does not make the buyer an
a$$h*le. Nobody says the same about sellers that are
entertaining multiple offers with a deadline.

Why do we never hear about sellers being a$$h*les, and
agents being afraid of insulting the buyers? It is always
about the sellers and their delicate sensibilities.

It just goes to show that the whole real estate industry
panders to the buyers 99% of the time, and just pretends
to be helpful to sellers.

Industry humbug, but my opinion is not an attack on
sdrealtor. He is just saying that the method may not be
productive under the status quo. What we need to
do is to make multiple offers to buy
a common occurence and part of the status quo!!

[Chrispy]

I’m all over that, justme! Lowballers and multiple offerers unite! I can understand sdrealtor’s points also, but the ball has been in the court of the sellers for far too long. They need to bat it back over the net gracefully.

[an]

I don’t why buyers who low ball or give multiple offers to similar houses be labeled as a-hole. If they are labeled that way, then sellers who accepted multiple offers and sell it for higher than list price should also be labeled as a-hole too. I’m here to get my money’s worth, I’m not here to make friends. So if I need to be an a-hole to get the best deal, well, so be it. I got what the seller need, which is my $, and they have what I want, which is their house. It all comes down to who need it more. I’m pretty sure at this point in time, they need my $ more than I need their house. I know I can wait for many years and readjust my buy/rent calculation dynamically. Can all sellers wait indefinitely?

[sdrealtor]

Justme,
Its a two way street and sellers can be a$$h@les too. You can do what ever you like, it really doesnt matter me. If you have to get the best house, the one you really want, at the best price parallel offers wont likely get you there. If you want to have fun at someone elses expense, it will get you there.

One thing that bugs me is when I hear sellers have had it so good for too long, they’ve been sticking it o buyers, its their turn to get screwed etc. It’s as if the people saying this believe that the seller is same person everytime. That’s just not the way it is. The seller could very well be someone that got caught up in multiple offers , overpaid and is trying to get out as whole as possible. They could very well be getting it on both ends.

As I said, you can do what ever you like though I’d never represent someone trying that strategy as I dont think it would work.

For the record, I have no problem with lowball offers which can be effective.

[sdrealtor]

AN,
Here is the problem with submitting multiple offers vs accepting them. A seller puts his home on the market and people submit offers. How many come in is not under their control. A buyer submitting legal offers to purchase a property is falsely proposing to buy something. If everyone accepted your offer would you buy them all? Of course not! My point is that you dont need to do this to negotiate the best deal and to the contrary you will be percieved as less than desireable.

Someone evaluating your offer as 1 of 5 will analyze it as a 20% chance of acceptance followed by less than a 50% chance of the you completting the purchase. Thus they are looking at the highly probable outcome of your offer (a less than 10% success rate) as undesireable. If you are going to submit multiple offeres I wouldnt tell them I was doing so, it will hurt more than help.

[an]

sdrealtor, I have a question for you in regards to multiple offers. What if there are 2-3 houses in the same complex with the same floor plan. So I love them all the same. How would you go about getting a buyer like myself the best price for one of the 3 houses? If you just submit to one and a price is agreed upon, what if one of the other 2 seller might have gone lower? Wouldn’t in that case, it would be wise to submit lowball offers to all 3 and see which one is willing to work on the price more?

[sdrealtor]

Here’s a good analogy for Chrispy and Justme,
You apply for a job and are given an offer. The employer says that 4 other people have the same offer. You are told to quit your current job and show up for work the first day. When you show up, you are told one of you may actually get the job. How does that sound to you?

[sdrealtor]

AN,
Pick the one you like best and negotiate the best deal you can. If you arent satisfied with the price move on. What happens when you buy a car and the rebate goes up next week or you buy a TV and it goes on sale next week. Its all part of life and you can only control so much.

BTW What you are suggesting is a “reverse auction” which was attempted in numerous internet models during the hey day. To my knowledge none of them were terribly successful.

[Author]

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