lowballing

[PerryChase]

sdrealtor is right that lowball offers are generally not productive. To me, the best way to get a deal is to window shop (so you know the products) and not buy until there’s a discount sale. It’s like not buying any consumer goods throughout the whole year and buying only during the Black Friday sale.

The key is to control the itch to buy and buy only when the deal is too good to pass-up. If everyone did that, sellers would have to adjust their pricing drastically downward. I don’t recommend this strategy to everyone because it would kill the economy.

[an]

Well, I know that the best deal I get in life is when I put sellers against each other. Example is price match. I would get a price from Best Buy, bring it to Circuit City and say can you beat the price, they usually do beat it by a few percent. Same with my internet bill, I call up, tell my cable company I’m considering switching to DSL because of the price, but I like the Cable’s speed and service. I ask them if they can beat it, they did, and I end up paying less than I would have w/ DSL for fast speed. I can go on with more examples, but you get my point.

sdrealtor, your job analogy is not really what would happen in real life. However, in real life, company would tell you they narrow it down to 2-4 people and you’re one of them. You can then either tell them why you think they should pick you or move on. On the reverse of that, you can go out and have 2-4 interviews and 2-4 offers. Then you pick one that you like the best, tell them you would really like to work for them but you have a better offer, and ask them if they can do something about the salary. That usually work and they either match the salary or give you more stock option or bonus.

Bottom line is, I don’t see why you have to settle for just one offer when you have so many choices. When you say pick what I like best, well, like I said, what if those 3 are exact same floor plan w/ the exact same upgrades from the builder. What do you do then?

[justme]

Per the sdcellar scheme, we are not “falsely proposing
to buy” anything. All the offers will state that we
are putting out 5 offers and will pick from the ones
accepted after 48 hours. And we WILL pick one of them.
There is nothing false about it.

Also the 20%*50%=10% chance of closing: After 48 hours,
the chosen seller WILL know, and the odds are back to 50%.
Why is that any worse than the wait that buyers have to go
through before THEY know whether they are the 1 in 10 buyer
that will go into contract. Seems the same to me.

All I want to do is to even the playing field, because
it has always been tilted in favor of the seller.

By the way, the online services like zip and redfin etc
really ought to look into this scheme. Sdcellar, I smell
a “business process” patent war coming up (just kidding).

[justme]

sdrealtor:

False analogy. What we propose is equivalent to
the employer needing 48 hours to pick among the
accepting applicants. They wouldn’t ask anyone
to quit their job.

Reference:

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?

[justme]

Re: Perry/discount sale,

The problem is that the discount sale hardly ever happens,
unless there is a stalemate were no offers
get made at all, and then it still takes time.
It also takes discipline among ALL buyers.

I think reverse multiple offers and under-list/lowball
bidding is exactly what is needed. This makes the sellers
know that there are buyers out there, just not at their
listing price. Most sellers need a clear message that
price sells real estate (as opposed to “good agents sell
real estate”, which is what NAR wants them to believe).

[Chrispy]

sdrealtor: That analogy is a little off – no one is making the seller move out (“quit their job”) before the purchase (possible job) takes place.

On the other hand, I have gone to group interviews where the best candidate gets a second interview – I think that is fair. I’m still working meanwhile.

[no_such_reality]

Most sellers need to realize that their home is pretty much cookie cutter.

Personally, I think most sellers won’t play nor their agents. If you look at the agent offer forms, they are really about protecting the agent, their brokerage and their commission commitment. They aren’t about protecting the buyer or investor.

If three homes are similar enough that you like them all and they are the basically the same, same neighborhood, same floorplan, etc.

Lowball one. The price you want to pay minus 10-20%. If they don’t negotiate, move on. If they counter, counter back, if you think you can get to the price you want. If not, move on to property two after a week or so. Repeat. Move on to property three. Let them sit a couple months, meanwhile, find three more homes you like, repeat. If still no sale, if move one or go back to property one now that they’ve had a chance to make another three or four monthly payments and had a couple looky-loos breeze through, submit your original offer minus 9-12% (the current monthly fall rate of sold homes.) They’ll probably brush you off, move on, repeat.

[PerryChase]

I’m all for a “revolution” in real estate. 🙂

I’m willing to give new ways of buying/selling a try. Disruptive change they used to call it during the Internet age?

[Chrispy]

NSR – you forgot the rinse cycle. Otherwise, I like your thinking and your tactics. For us buyers, time is on our side. Not so for some sellers. I can hear a lot of “I should have taken that first offer” moans in the future. A friend of mine said years ago (1996): “Your first offer is your best offer.” She got a $430K offer on a Santa Monica condo – list price $460K – she passed and ended up selling it six months later for $370K.

PerryChase – I think this might be one of those “new paradigm” shift changes, much as I hate that term.

[no_such_reality]

Chrispy, I tried to correct that with an edit, but something got lost and it errored me out.

my rinse cycle was the advice to check the public records to verify last sales price and the outstanding loans and liens against the property.

Many of the homes we’re starting to see, literally, can’t be sold for less than their asking price, the sellers are upside on the loan. They aren’t motivated, quite the opposite, they may be desperate, disgruntled, angry, and irrational due to the stress of their financial trap, but not motivated by anything less than their asking price, because they literally can’t close the deal at less than the price. About the only thing that gets them out of the house is foreclosure or the return of price appreciation.

It’s why prices get sticky going down. Sellers that can afford to sell don’t because prices are falling and the market is flooded while those that are trying to sell, can’t afford less than their asking price or less than the built in negotiating room on their price (10%)

[Chrispy]

I thought the rinse cycle would be when you laundered your money.

Thanks for the clarification! As far as the asking price rationale, I understand why sellers are stuck in a time warp with only one price in mind (the “won’t lose my shirt” price) but it still rankles me that they would prefer to stay in an unsold house that leaks equity than sell at a small loss earlier rather than a large loss later. I don’t see why buyers would be motivated to buy in that situation – to help someone stay solvent?

I’d just as soon check the prop records and Zillow to find out the last sales price, tax info, etc and make an educated offer to someone who has been in the house long enough to make it worthwhile on both of our parts – rather than buy from a desperate seller who still insists on “his” price.

[waiting hawk]

I like Chrispy’s wearing that housing bubble T shirt idea to open houses. I look at it like this, you can’t shake these sellers to wake up from the “I’ll quit work and just buy a house” idea. So lowball is something to pass the time (and get good laughs from).

My website tracking Temecula and South Riverside County

[sdrealtor]

I have no problem with what NSR propsed and it would be alot more successful than the 5 parallel offer strategy. I’m involved in the process and have a little better perspective of what would actually work. There is nothing wrong with negotiating like a bastard. I’m all for it. I just was trying to point out that the 5 parallel offer strategy would likely not work very well.

[an]

Then how about this scenario, negotiate like a bastard on one, find the lowest they will go, then take that price to the next and see if they’ll beat it, if so, take that to the 3rd and see if they’ll beat it. If not, take it back to the first to see if they’ll beat it. If not, then buy house #2, if yes, then rinse and repeat? How’s that for a strategy?
BTW, you don’t have to let the seller know you’re negotiating w/ other at the same time. I still don’t see why having multiple negotiation at one time not work?

[waiting hawk]

A while back I was thinking about a MLS for buyers to post for area, sqft, year built, and how much they would pay. Then with buyers ready sellers would post their homes to them and the buyer would choose the best for them. Silly idea but you never know. I would post on this for a small fee. Start it free with advertizers and then charge buyers a fee.

My website tracking Temecula and South Riverside County

[Author]

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