Imagine getting your dream property at a killer price: You find the perfect house with just the right amount of space and a mesmerizing view. The asking price is a bit too high, but the seller is motivated to sell and you (being the perceptive and wise person you are) happen to find the price that pushes all the right buttons.
It’s the dream scenario, but you’re sure you can make a lowball offer happen.
The problem is you’re not the first to come up with a lowball offer, and you won’t be the last. There are plenty of ways to screw up a lowball offer where you wind up frustrated.
Here’s how to do it right.
What’s considered a lowball offer?
There’s no problem with negotiating prices. In fact, home sellers expect any potential buyer to send over a price that is below their list price. It really is just the name of the game.
How do you know when your offer is a lowball offer, then?
Unfortunately, there is no set guideline for a lowball offer. The seller could really consider any price below their asking price a lowball offer if the listed price is already at the bottom of what they want.
It’s generally accepted that asking for more than 15% off the sale price is lowballing.
But that doesn’t mean you shouldn’t do it. There are right instances where making a lowball offer is acceptable—and where both the buyer and seller are satisfied with the deal.
When to Make a Lowball Offer
Here are a few scenarios where making a lowball offer might be just what the doctor ordered.
Seller Wants Out
It’s always a good idea to talk to the listing agent before making an offer. This is a step you shouldn’t ignore or it could cost you the sale.
The listing agent will be able to tell you the circumstances surrounding the sale. Maybe the seller is in a tight spot financially and really needs to sell their property. Or maybe the seller inherited the property and wants to avoid the hassle of maintenance.
If the seller is motivated to sell, a lowball offer of anywhere between 10% to 30% off of asking price may be acceptable.
High Listing Price
Selling a home is an emotional affair. Many sellers place more value on their property than other similar homes in the area because they remember the hours they’ve sweated in the yard and just how many times they’ve replaced the plumbing.
When you encounter a home that is overpriced, tread lightly. Your lowball offer could insult the seller…or they might be relieved to get their first offer. Have your real estate agent test the water to see why the house is at that price and how the seller might react.
It may be tempting to assemble comparable sales in the area that are in the price that you want to pay and prove that they’re being ridiculous. But doing that is like giving the finger to the listing agent and will most certainly alienate you and your offer.
Rather than just telling them they’re asking for too much, point to specific things in the house that make the house overpriced. Maybe houses in the price range they’re asking for have updated kitchens and wood flooring, but theirs could use a bit of work. Point to that, figure out a reasonable dollar figure for the value that feature is lacking, and reduce your price by that amount.
Going back to that kitchen example, for instance, let’s say you do some homework and find that a new kitchen and hardwood flooring will add $15,000 worth of value to the house. Point to that as the difference in price, and offer $15,000 less than their listing price.
The House Needs Updates
If the house you’re looking at needs some TLC—beyond just a kitchen redesign, as discussed above—you may have a case for a lowball offer. Replacing the roof, updating flooring, gutting the bathroom, and other major, structural changes all come at a price. The seller may be willing to accept a lower offer rather than have to make concessions like making the repairs before someone will buy the property.
As with the overpriced house, it’s a good idea to come in with a dollar figure of the repair and updating costs. Before you do, however, make sure you speak to the listing agent to understand the circumstances. The listing agent may be able to give you a few clues about how low the seller is willing to go.
The Housing Market
The housing market will give you a good idea of what to offer when buying a home. If it is a seller’s market, lowballing is probably off the table. If you do decide to lowball in a seller’s market, the seller will throw out your offer while some other lucky individual gets the house.
A buyer’s market, on the other hand, might lend some room for negotiation. At the very least, in a seller’s market an appropriate lowball (no more than 30% below asking price) might get a counter offer, and you’ll be in business!
Length of the Listing
If the listing has been sitting on the market for several hundred days or has popped on and off the market, there may be some room for a lowball offer. The seller may be at that prime point where they are willing to consider any offer as long as it is a serious one.
Again, we cannot stress this enough: Before you make an offer on a house that has been on the market for a while, ask your real estate agent to speak to the listing agent. You may find the reason the house is still on the market is because the seller isn’t willing to budge a cent on price.
How to Make a Lowball Offer That Works
You’ve probably stumbled across this article to pick up a few tips before making a lowball offer of your own. But the best thing you can do to give your lowball offer a chance is to have your agent talk to the listing agent.
Gather as much about the sale as you can, and use that information to craft your lowball offer.
Common Lowball Offer Mistakes
Being Too Aggressive
One of the most common mistakes people make when they are pitching a low offer is being too aggressive. Aggressiveness can be a valuable trait in negotiating, but when it comes to buying a house, remember that the sale is more emotional. If you come across as someone who is only in it to get the best deal, the seller might feel like you are discounting the years that they lived there.
Another common mistake people make when they are lowballing is offending the seller. They’ll offer a price that is way too low, insist that it is fair, and then pout when the seller turns it down. Sellers are under no obligation to take your offer and would likely rather work with someone who values the home enough to pay a fair price for it.
Handling Rejection Poorly
When a seller rejects an offer, most buyers pack up and look for another house. This is yet another mistake that happens quite frequently. If the seller says “no” to your offer or counters it with another price, that doesn’t mean you won’t be able to make the sale, it just means you may need to work a bit harder for it.
If it’s a counter offer, continue to negotiate the price down until they either say yes or take a stand for their lowest price. This is an open door—so walk through it!
If your offer gets flat-out rejected, you may want to table it for a few months. If at the end of those months, the house is still on the market, resubmit your offer. The buyer may be willing to take it or at least negotiate at that point.
What to Do If You Receive a Lowball Offer
If you get a lowball offer, don’t stress. There always seems to be that one person that is out to get the best deal possible. If you get several, however, it may be time to consider your strategy. Have your real estate agent take a look at the market. Are other houses in similar condition to yours priced the same? What factors would make potential buyers want to offer less?
If the offer is near what you would consider accepting, you may want to counter with a satisfactory alternative. On the other hand, if the offer is way too low to even consider, reject the offer and back up the reason you are not accepting that offer.
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Need help negotiating the sale of a house? You need a top-notch negotiator like the real estate agents found at Clever. Clever agents are always willing to go to bat for their clients for a small flat rate rather than a hefty commission. Call us today at 1-833-2-CLEVER or fill out our online form to start.