For those who frequently browse the Facebook Marketplace like us, encountering a lowball offer while selling items or searching for furniture is not uncommon. However, before diving into home decor, let’s delve into the world of home buying first.
Navigating the process of buying a home, submitting offers, and dealing with the complexities involved can be daunting, whether you’re a first-time buyer or an experienced one. But fret not, as we are here to guide you. This article from Redfin aims to demystify the concept of a lowball offer, providing clarity on this aspect of home buying.
Table of Contents
Understanding a Lowball Offer
A lowball offer occurs when a buyer proposes a price significantly below the asking price of a house. Typically ranging from 10-30% lower than the listing price, the actual discount depends on various factors such as market conditions, property value, home condition, and duration on the market. In a seller’s market with high demand and low inventory, even a slightly discounted offer might be perceived as a lowball offer.
Pros of Making a Lowball Offer
For buyers, the main advantage is the potential to purchase a home below market value, resulting in significant savings.
Sellers may view a lowball offer as a sign of interest, which can be encouraging in a slow market or generate buzz that attracts other potential buyers. In situations where sellers are eager to sell, a lowball offer might expedite the closing process, preventing prolonged delays or no sale at all.
Engaging in a negotiation process, even if the initial offer is rejected, allows both parties to reach a mutually agreeable price.
Cons of Making a Lowball Offer
Buyers considering a lowball offer should be aware of potential drawbacks. Such offers can offend sellers and harm the buyer’s credibility, possibly leading to a refusal to negotiate and losing the opportunity to purchase the property. Additionally, a low offer might prompt the seller to counter with less favorable terms, such as reduced repairs or flexibility in closing.
From the seller’s perspective, receiving a lowball offer can be perceived as insulting or personal, causing emotional distress. While a low offer could result in a closing, engaging in negotiations may consume time and cause missed opportunities for better offers from other interested buyers. There’s also a risk of feeling pressured to accept an undervalued offer, irrespective of the urgency to sell.
Choosing the Right Time for a Lowball Offer
- The listing price appears inflated: If you believe the price is unjustifiably high, working with a real estate agent to assess the listing price and ensure market support for your offer is crucial.
- Property requires updates: In cases where the house needs repairs, a lowball offer can compensate for these expenses. Sometimes, sellers may not adjust the price to reflect the property’s condition adequately.
- Property has lingered on the market: A property unsold for an extended period may indicate an overpriced listing or lack of interest. After a few months without a sale, sellers may be more receptive to a lowball offer.
- Estate sale or foreclosure: Motivated sellers in estate sales or foreclosures may prioritize a quick sale, making them open to significantly discounted offers or negotiations. Prior research is essential before submitting an offer in such cases.
What to Avoid When Making a Lowball Offer
When considering a lowball offer, exercising caution to avoid offending the seller is crucial. Even if the initial offer is declined, following these guidelines can enhance your chances of successful negotiation.
- Avoid excessively low offers: Limiting the offer to no more than 30% below the asking price, considering market conditions and other factors, is advisable. An overly low offer could discourage the seller from further negotiations.
- Conduct thorough research: Prior to making a lowball offer, comprehensive research on comparable sales, market conditions, and other relevant factors is essential. Ill-informed offers may portray you as inexperienced or unserious to the seller.
- Consider the seller’s circumstances: Being mindful of the seller’s situation is crucial. Timing your lowball offer appropriately, especially in competitive markets or early listing stages, can impact its reception by the seller.
- Include a thoughtful offer letter: Particularly for significantly below-asking-price offers, a well-crafted letter explaining your rationale can improve your chances. Providing context can help the seller understand your perspective and enhance negotiation prospects.
- Avoid excessive demands: Combining multiple demands with a low offer may deter the seller and hinder negotiations. Choose your requests wisely to maintain a balanced approach.
- Maintain professionalism: Regardless of the outcome, maintaining a professional demeanor is essential. Selling a home is an emotional process, and a lowball offer can be perceived negatively. Act with grace and kindness, knowing when to walk away if needed.
Frequently Asked Questions
- Approval of a Lowball Offer: A lowball offer is accepted when the seller agrees to the terms. Given the rarity of such approvals, consulting a real estate agent for guidance is recommended.
- Responding to a Lowball Offer as a Seller: Handling a lowball offer professionally and objectively is key. Evaluating the offer thoroughly and choosing to either reject or counter it based on your circumstances is advisable. For personalized advice, consult with your real estate agent.
- Decision to Make a Lowball Offer: While the choice is yours, assessing your situation, market dynamics, and seeking guidance from a real estate agent are essential steps before proceeding with a lowball offer.