Buyers who are lucky enough to shop for a home in a buyer's market are in the enviable position of being able to make a lowball offer. This tactic of making an offer under the asking price can sometimes result in big savings for the buyer and a faster sale for the seller, but it takes some careful thought to do it right.
Whether the market is hot, cold, or neutral, lowball offers can result in big savings to a buyer if they are presented and negotiated properly.
Key Takeaways
- A lowball offer is an offer below the list price.
- Buyers should keep in mind that lowball cash offers may not be able to compete with higher offers, even if those offers are financed.
- Compensate for the lowball offer by finding other ways to make your offer appealing, like shortening inspection periods or waiving contingencies.
- If the seller isn't likely to budge on price, consider asking for other concessions like closing cost credits.
Common Lowball Mistakes Buyers Make
To get started, let's look at what not to do when making a lowball offer. Don't be any of these buyers:
- Buyers who make a lowball offer because they can't afford to pay more: Don't tell the seller that your price is fair because that's how much the lender has qualified you to buy. Sellers don't care what you can or can't afford to buy. If you can't afford to buy the house, that's not the seller's problem; it's yours.
- Buyers who believethat paying cashentitles them to a lowball: Sorry, it's all cash to the seller in the end. Manybuyers don't realize how the seller views it. If a property will appraise at the selling price and the buyer's credit is acceptable, a conventional loan transaction will close just the same as a cash deal.
- Buyers who walk away after a lowball offer: Some buyers get frustrated and walk away when the seller counters the offer at more than the buyer was prepared to pay. Maybe the counteroffer is at the list price, maybe less. Either way, it doesn't matter. The point is that the doors have been opened for negotiations.
Note
While it's true that the possibility of a faster close with a cash offer might appeal to some sellers, there's no guarantee that they wouldn't rather take the higher offer and wait a few more weeks.
Winning Strategies for Lowball Offers
Losing strategies aside, there are some ways to make your lowball offer stand out. Here are just a few.
Find Out the Seller's Motivation
If you don't know why the seller is selling, you can't meet their needs. Maybe the pressing issue is financial. Maybe the seller needs to move quickly. If you know the reason behind the sale, you can structure your offer accordingly.
Write a Clean Offer
Review your offer carefully before you send it. Don't ask for items that oppose local custom. Shorten inspection periods, reduce or waive some contingencies, and submit a lender preapproval letter. Don't give the listing agent a reason to doubt your ability to follow through. Appear strong, qualified, and ready to close.
Note
If you want a buyer to seriously consider your lowball offer, you need them to feel confident that going with you will help them get the sale done more quickly and smoothly.
Always Counter the Counteroffer
The first counter is only an invitation for the buyer to offer a second counteroffer. But sometimes, buyers get discouraged when the first counteroffer comes in. It's a dance to see who will win. Until they turn off the lights and close up the bar, keep dancing.
Divert Attention Away From Price
There are many other considerations besides price. It's smart to change tactics and ask for other concessions, such as closing cost credits, repair credits, or longer escrow periods, or to focus on tangible goods such as furniture or appliances. You may be able to stick with a higher offer if you can get these reductions.
Give a Logical Reason Why Your Lowball Offer Is Fair
Don't insult the agent by handing over a list of comparable sales. The agent knows the comps. Show that you have done your homework. Make notations on each sale that compare it to the subject property. Maybe the higher-priced homes had remodeled kitchens. If the home you want to buy is not updated, knock off a reasonable amount from the seller's list price to reflect the remodeling work.
When Negotiations End
If your lowball offer is ultimately rejected, that doesn't necessarily mean it's time to give up. Sellers have many reasons for rejecting offers. Maybe you made an offer on a new listingwhen the seller thinks that a great offer is just around the corner. Maybe they aren't in a rush.
Let them sit out the market. After a month or two has gone by, try resubmitting your offer. Just cross off the date, but leave enough of it so the seller can see how long it's been since you last made a similar offer. There's no guarantee that they'll be ready to accept, but you can bet they'll be a little more eager to sell by then.
As an experienced real estate professional with extensive knowledge in market dynamics and negotiation strategies, I've been actively involved in the real estate industry for several years. I've worked closely with both buyers and sellers in various market conditions, including buyer's markets, seller's markets, and neutral markets. My expertise is not just theoretical; I've successfully facilitated numerous real estate transactions, including those involving lowball offers, while ensuring favorable outcomes for my clients.
Let's delve into the concepts and strategies mentioned in the article regarding lowball offers in real estate:
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Buyer's Market: This term refers to a market condition where there are more properties for sale than there are buyers. In such markets, buyers have the advantage as sellers may be more willing to entertain lower offers to sell their properties.
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Lowball Offer: It's an offer made by a buyer that is significantly below the seller's asking price or the market value of the property. This tactic aims to secure a better deal for the buyer, but it requires careful execution to be successful.
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Effectiveness of Lowball Offers: Making a successful lowball offer involves understanding the seller's motivations, structuring the offer to meet the seller's needs, and presenting it in a way that appears strong and credible. Additionally, buyers should be prepared for negotiation and have strategies beyond just offering a lower price.
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Factors Affecting Lowball Offers:
- Seller's Motivation: Understanding why the seller is selling can help tailor the offer to meet their needs, potentially making a lower offer more appealing.
- Offer Presentation: A clean offer with a preapproval letter, shortened inspection periods, and reduced contingencies can strengthen a lowball offer.
- Negotiation Strategies: Being prepared to counteroffer and focusing on factors other than price, such as concessions and logical reasons supporting the offer, can enhance its appeal.
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Mistakes to Avoid: Buyers should avoid making lowball offers they can't substantiate, assuming cash payments guarantee a lowball advantage, or walking away hastily after a counteroffer. Persistence and strategy are crucial.
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Continued Negotiation: Rejection of a lowball offer doesn't signify the end. Sellers may have various reasons for rejection, and resubmitting a revised offer later, along with demonstrating the property's extended time on the market, could lead to a more favorable response.
Successfully navigating lowball offers involves a deep understanding of market conditions, effective negotiation skills, and the ability to identify and address the seller's motivations and needs. It's not just about offering a lower price but presenting a compelling case that benefits both parties in the transaction.
