Have You Made A Low Ball Offer?
Last week I mentioned that we were shopping for a summer home again.
We’ve identified a resort we think would work out well, and my in-laws are going to check it out next week. (They are pretty familiar with the vacation rentals that we’ve liked and the ones we’ve hated, so they should be able to screen out the ones we wouldn’t like.)
Once we identify the right place, we’re preparing to go in with a low ball offer.
We’re already the proud owners of a home we overpaid for (our current home which was custom built at the peak of the real estate boom), so we have no plans to pay one penny more than we need to for our summer home.
In addition, I’m paying close attention to Shiller talking about the possibility of a double dip in home prices. Whether or not he’s right we won’t know for awhile, but we’re keeping it in mind as we want to come out of this transaction with the best possible deal.
Have You Made a Low Ball Offer?
Have you written a low ball offer before? And if so, how much lower did you price your offer than the comps? How did it work out?
I’m trying to remind myself that this is strictly a financial transaction. However, I also don’t want to make anyone uncomfortable or cause anyone stress, which I know low ball offers tend to do. So, we’re trying to find a good balance between the low ball offer that shuts the seller down and the low ball offer that the right seller might actually consider.
We are prepared to make plenty of offers and walk away from each one until we find one that accepts a great price. Besides willing to be patient about it, what else do you have to consider with low ball offers? We want to make sure we do this right!
Tell me about your successes and failures with low ball offers.
Update: Readers Share Tips for Making Lowball Offers on Homes
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I’ve made a few low ball offers during my lifetime, mainly for when trying to purchase a car. There are a few techniques that I won’t go into but mainly I am only willing to pay what I think the product is worth or a bit less what I think it is worth. I’ve upset a few people, but who cares, I think they were trying to rip me off. In my opinion it is better to give them the opportunity to accept an offer rather than never receive one. With that said, I’d be pissed off if I continuously got low balled. But such is life.
I’m purchasing my next house this month, even though I haven’t sold the current house. I generally offer 10% less then asking, assuming the comps are solid and current. In this case, it was accepted by the seller, but they declined to make repairs or lower the price based on the home inspection.
I wasn’t planning on looking at other houses until mine sold, but stumbled onto a great opportunity to live on the Delaware Bay. No yard work! The house needs updating and a better heating source for year round use, which will be a big expense, but it’s so worth it!
I have offered as much as 40% below comps with success One thing that works is add on contingences you don’t care about but allow the seller to negotiate them out giving the feeling of accomplishment. Seller financing is a good one as well as seller paying closing cost/mortgage points,repairs etc.
I also start with an offer 10% below comps to test the sellers response/counter.
I will add in immediate costs/issues which may bring that up to 40% below asking.
As long as your numbers are back by reasonable data you will not appear delusional or insulting.
I second Stanley. I get the land value from the local property tax authority, and start with that as a base. I take detailed notes in the walk through – looking at age of stuff, windows, floors, any mecanicals, any thing that might need to be replaced. I put that into a pot and start at 10% below comps if everything is perfect. If the house is 30 years old and the kitchen cabinets are 30 years old with drawer paper on them, take money off. If there are windows that have busted seals, and you have single/double pane glass windows, etc. If your furnace/hot water heater are 15 years old, etc. These are all things I take value off of and then I make my offer.
The offer should not be offense, and the way I measure that is simple. How much would it cost for me to replace this house from scratch. If this house were burned to the ground, how much would it cost for me to have this house build exactly the same, new, at builders cost (plus cost of land). That should be the lowest you go (regardless of neighborhood, because you made an insulting offer).
What is the worst they can say, “No”? When they come back with a higher offer, come back with one that is like okay .. I will come up a few grand, but then I will get this capitulation in the closing (2 grand for a new furnace). I have started on a low ball bid and told the owner my list, my research and they agreed it was right and gave me at 35% below asking price (I did not use a real estate agent, I used theirs – which saved them 3%).
My husband and I are looking to purchase a house right now and we have been debating the same thing… low ball offers. I’ll make this short cause i’ve got to run, but i think one of the most important things to have on your side are legitimate bases for lowering the price below the other comps. Is there a need, not only for renovations and repair, but for strictly cosmetic updates? This is important for resale value. Also, does the seller propose to reserve significant things like certain rights (i.e. mineral rights)? This is also a reason to come down on price. Try to identify as many things as possible as reasons the seller should come down on price.