Urban Digs is talking about what a lot of buyers are thinking about these days: low ball offers. Here’s an excerpt:
For buyers, the BEST situation to submit a low-ball offer is when:
1. Seller has reduced the price for 3rd time
2. Seller reduced price two times within 4 weeks
3. Property has been on the market for at least 4 months
4. You show up to OH and apartment is empty with no names on sign in sheet
5. You find out that seller bought 5+ years ago
6. Imperfections are cosmetic NOT permanent
The WORST time to submit a low-ball offer is when:
1. Seller has not reduced asking price yet
2. Apartment is less than 4 weeks on market
3. OH and/or showings are crowded
There’s a lot more. It’s worth reading the whole post.
Here’s my main thought: the most successful sales tend to be those where both buyer and seller feel they are getting a good deal. An aggressive low-ball offer will work in some cases, but in many others it will make the seller–who is no doubt wise to the tactic, feel vicitimized. At the moment of the offer, it almost always enrages a seller. Urban Digs has put together a useful piece here but there are some holes. As someone who has for 15 years represented both buyers submitting “low ball” offers and sellers receiving “low ball” offers I would add the following comments, particularly for our current market:
- A “one time” low ball offer, as recommened by Urban Digs, is almost never taken seriously by a seller in my experience. It gives the appearance that the buyer is in the marketplace “fishing” for a steal and no seller wants to feel like they have been taken advantage of. I would recommend making a lower initial offer and leaving room for negotiation so that the seller has the sense (perhaps falsely) that they aren’t being screwed.
- When the seller purchased the apartment is not as relevant as their current situation and current market conditions. How much money they are making on the sale need not be a concern for buyers, and sellers often resent the buyer who presents an offer based on “what the seller paid X number of years ago.” Why and when they are moving is much more relevant.
- Basing a low ball offer on recent price drops is not wise in my opinion. Often a seller is more reluctant to negotiate further when they have already reduced their price multiple times. Again, I’m not suggesting that they shouldn’t negotiate further, but my experience is that sellers often respond by saying that they just reduced their price and want to see how it is received by the market (they feel like it’s new to the market at this new price).
- Open house traffic is not always a good measure of interest. I have taken buyers to open houses in which 50 people attended and no offers were submitted (by the way, often very difficult to get the honest feedback from the seller’s broker regarding “interest.”) I have also seen open houses where the one person who attended paid the asking price. Last winter, I had two open houses in the same building on a Sunday of mixed sleet and freezing rain. The same two people attended both. Each bought one of the apartments. Certainly not the norm, but it happens.
These are just some of the problems I have seen when buyers submit “low ball” offers but I am not suggesting for one minute that they aren’t sometimes accepted. I just think you have to have as full and as clear of a picture of the seller’s situation as possible as Urban Digs states. That said, many properties are more aggressively priced in today’s market and I am seeing a increase in sales volume the past several weeks. It appears however that the newer agents in the biz are struggling while the top agents are incredibly busy negotiating “fair market values.” I still don’t think we’re in a market where buyers should expect to get an incredible bargain.
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