Let’s talk about making lowball offers when making an offer on a Windsor property. In a buyer’s market, it is more common for a buyer to make a low offer and have it accepted. In seller’s markets, lowball offers are more difficult to negotiate because homes sell quickly and there is little to zero competition.
When clients want to make a lowball offer in a seller’s market, the best way to even have such an offer considered is finding a home that has been sitting on the market for a long period of time. Often, these sellers are very motivated and may be encouraged to negotiate if they have very little traffic coming through their property.
But there are mistakes that can be made when making a lowball offer that every buyer should be made aware:
1. Sellers don’t care what you can or can’t afford. If a home is reasonably priced and is new on the market, a lowball offer based on your budget or how much you have pre-qualifed for won’t make the sellers like your offer any more. If you can’t afford the property, then it may be best to look at other homes and see if this particular house is still on the market in a few months or if they drop their price.
2. Paying cash. Think about it. For a seller, it ends up being all cash anyway, so if you feel you can lowball an offer just because you are paying cash, it really doesn’t affect the seller all that much.
3. Buyers often are insulted when a seller comes back with a counter offer that is much more than they intended to pay, so buyers will often walk away. If a buyer really wants the home, then I always suggest to continue the negotiations. The door has been opened, and when buyers walk away, then they are losing the property for good.
Because we are slowly emerging out of a buyer’s market, though we are not in a seller’s market either, making a lowball offer takes a certain strategy. Here are some of my tips to determine if making a lowball offer can work:
1. What is the seller’s motivation? Why is the seller unloading their property? Do they have financial problems? Maybe they have a job transfer and needs to move quickly. When this happens, and you can find out the reason behind the sale, you can work your offer to fit that purpose.
2. When making a lowball offer, make sure it’s a clean one. In other words, don’t be greedy and ask for items that aren’t necessary or oppose customs. Provide a letter of pre-approval and perhaps shorten or reduce some contingencies. Make sure your offer is strong and shows that you can close the deal in a timely and efficient manner.
3. Negotiate: Remember, your first offer will most likely lead to a counter offer. Don’t walk away if the property is what you want. Negotiations can be discouraging, but work with your real estate agent and see what the seller comes up with. There are times where offers go back and forth, but in the end, they often work out very well. If your agent feels the seller won’t budge, then it’s up to you to determine if you want to go any further.
4. Take into consideration that it’s more than the price of a home. There are other tactics, such as repair credits, closing costs, longer escrow periods or including appliances or furniture. If a seller doesn’t budge to your offer, then consider other concessions that they may consider. Again, your real estate agent should have plenty of suggestions.
5. Explain why your offer is fair. If a home has not been updated, if it needs lots of repairs, then it’s fair to make an offer that reflects the costs of making improvements. Let the seller know what you are making a lower offer.
If a lowball offer is rejected and the seller has ended the negotiations, they may feel another great offer is right around the corner. This is usually what happens when a home is new to the market. Again, wait a month or two and resubmit your offer if the home is still available. The seller may be more inclined to accept your offer once several weeks have passed by. Often the reality of the housing market hits a seller when a home is not selling and buyers stop making appointments. Once a house has been on the market over 30 days, it loses some of its appeal. So mark your calendar and make an offer once a suitable amount of time has gone by.