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Why Low Ball Offers Aren't A Good Idea


Blog by Matt Carre | September 4th, 2012


Every now and then a buyer suggests that they will just write a “low ball” offer and see what happens.  This rarely ends in their favour.  First let me clarify what I mean by a low ball offer.  If a home is listed at a reasonable price and an offer is written significantly lower than the list price, that is a low ball offer.  However, if a home is over priced and an offer is written that is at market value that is not a low ball offer, it’s market value.  

Determining market value is a key part of the process.  When I have buyers decide that they want to write an offer on a house the first thing I do is a Comparative Market Analysis (CMA).  I research similar properties that have recently sold and review the sale prices and the different pros and cons of each home.  From there I can determine a reasonable price range for what the home they want to buy should sell for.  Once we know that, we can then create a negotiation and offer strategy.  If that home is priced much higher than where it should sell for, our offer may be much lower than what the seller may expect, but we have recent sales that support our price.  If the home is priced within the market and the client wants to write way below market value we are now in “low ball” territory.  

Let’s put on our seller’s shoes now (this shouldn’t be hard for a lot of buyers because many of them have sold a property at some point), how do you feel when you get a “low ball” offer?  Probably annoyed, let down and more than likely insulted.  A seller isn’t all that motivated to work with someone who is annoying and insulting them.  I had this happen to one of my sellers this past weekend and all it did was get his back up.  Our counter offer to the buyer was only $700 off of list price.  Had that offer been more reasonable the counter offer would have likely been thousands of dollars off of list price.

I’m not suggesting you have to make an offer that will please a seller and cater to their needs, I’m simply saying that you have to take into consideration how the sellers may react to your offer because that will contribute to your negotiating power.  If you make a low ball offer, insult the seller and then decide that you are ready to work with more reasonable numbers you will be fighting an uphill battle with the seller because you started the relationship negatively.  The seller can get into a mode where they start to say things like “if they want this house they have to pay at least $XXX,XXX”.

When I meet with my sellers we review market value at length and we continue to keep an eye on the market throughout the listing process, the sellers therefore have a very clear understanding of what their home should sell for so the chances of successfully closing a low ball offer are not good.  

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