Home Sellers: Responding to Low Ball Offers
In real estate, we often find ourselves debating what constitutes a Low Ball offer. We don't consider any offer 10% below the asking price a low ball - however, some disagree. Assuming a home is priced reasonably close to market value, and assuming comparable homes nearby aren't "flying off the shelves" in 10 days or less in a hyper seller's market, we consider anything above 10% off the asking price to be a "starting point."
No... it's not an "ideal" offer - but it's certainly not an offer that should be dismissed.
When is a "Low Ball" Offer Not Too Low?
Technically speaking, a "Low Ball" offer on a home is an offer that is significantly under the true Market Value of the home, and the general consensus is about 10% or more under market value. However, many sellers (and sometimes, their agents) think a low ball offer is defined as anything significantly below the Asking Price - which obviously is not true if the home is overpriced to begin with when compared to nearby similar properties which have recently sold - or when the home has an asking price significantly higher than similar houses for sale. For example, if a home is priced at $500,000, yet all the comparables indicate a market value of $450,000, then the home is clearly priced above market value. Thus, one should expect fewer showing appointments, and if offers are received, for them to be significantly below the asking price.
In another common scenario, if the home seller's listing agent recommended "pushing the limits" with an initial asking price of $415K, yet a larger, but otherwise comparable home just came on the market down the street for $369K... guess what? - the home is now overpriced in a buyer's eyes, and it's actually helping to sell the other home first! If this describes your situation, and your home has already been on the market for 40-60+ days, you'd better be prepared to JUMP on the chance to work with any offer that is presented to you. Better yet, get with your agent to reduce the asking price to market value, now!
Sometimes a home is priced higher due to certain features - for example, a golf course, or greenbelt, a cul-de-sac location, a better view, higher-end materials and finish-out, etc. In these cases, if your home is more expensive than one which seems comparable to buyers, make absolute certain the listing agent is promoting these distinguishing features in the markting materials, and on the internet.
Negotiations: Just Part of the Home Buying & Selling Process
When representing home buyers, we would be doing a major disservice to our clients by being "afraid" to at least attempt to get a lower selling price out of the starting gate (assuming there aren't multiple offers in play of course). How on earth is one to know what a home might sell for, unless we ask the seller? How does anyone know what the seller's time-frame is, what their financial situation is, or how motivated they are to sell unless we ask?
We have found that more often than not, an initial "low" offer is simply a "test." And we know from experience, these so-called "low-ball" offers result in a sales everyday which are mutually beneficial to both parties. Are the offers upsetting initially? Perhaps in some cases. But by keeping the ball in play, the sellers at least have the opportunity to work-up the selling price and terms to the point where each party is satisfied. Conversely, when an annoyed seller counter-offers with the asking price, or just slightly below, they are essentially sending the buyer a clear message that "we do not want to sell our home - to you." And in our rule book, that's almost always a major mistake.
Low Offers May Be an Opportunity in Disguise
Understandably, most sellers have an emotional attachment to their home. Thus, when a so-called "low ball" offer is pitched to them, they can feel insulted, or think that the potential buyer is trying to take advantage. Unfortunately, it does also happen on occasion where the listing agent may reinforce the illusion that an offer either isn't worth "working with," or worse, that it deserves an "equally insulting" counter-offer. However, leaving emotion out of the equation, it is critical to keep in mind, that most low offers are likely opportunities in disguise. Absent any other attractive offers, we consider all offers to be an opportunity - a chance to negotiate to come to mutually agreeable price & terms, and to get the home sold!
Negotiations are the most critical times in any real estate agent's job (whether the listing agent, or selling agent - aka, "buyer's agent"). It is during negotiations that the agents on both sides of a real estate transaction work with buyers and sellers to help them write, interpret and negotiate all offers and counter-offers based upon sound market data and business judgment. Good instincts and a bit of intuition help as well. Remember... "Low Ball" offer or not, an offer is an "OFFER" - it's not a decree, or a take it or leave it proposition (unless they frame it that way of course).