Low Balling Offers- Why Do Buyers Do it?

By
Real Estate Agent with Munson Realty Southern California Real Estate

Low Balling Offers-Why Do Buyers Do it?- It's really important for Buyers to understand how and why they make their offers. Often I find buyers make offers based upon what they've always been told buy their parents or others. For example: "Always go in with your offer at least 10%(or what ever formula they were given) under what the seller is asking".

The problem with this is that there is no real basis for this "formula" other than "low balling for the sake of Low Balling Offers". I can see if the property is overpriced to begin with, but that's just bringing the seller down to earth on their overpriced home.

I completely understand everybody wants the best deal they can get. Of course, who wants to over pay for a home?So really, the questions buyers need to ask themselves is why am I buying a home?

Ask yourself this:

Am I buying because I intend to live in my home for 5 or more years, interest rates are great and I can afford the payments?


                     or...


Am I an "investor" or "trader" who intends to "flip" the property for a quick profit?

Both of these Buyers make their offers differently because they have different motivations and are looking for different types of homes.

An Investor is typically looking for "distressed" sellers and homes that need a great deal of improvement. Investors often are contractors or can do the work themselves and save a lot of money doing the improvements the home needs with the intention of putting the home back on the market for a quick profit. These are the investors are in a position to make "low ball offers". They don't care if they get the house or not, it's all about the numbers.

on the other hand...

If you are the buyer looking to purchase because you want to live in the home for 5 or more years, your motivation is completely different. Believe it or not, although price is important, terms may be MORE important.

For example:

  • Are the payments acceptable to you?
  • Will the seller take your FHA offer?
  • Do I want the seller to pay my closing cost?
  • Is it better to buy something that is "turn key" or close to "turn key"rather than find a great deal and pull $30K out of the 401K and have no money left for an emergency?

Your Stratagy Should Be Different

  • Write Offers Based on Market Value: If there are NO offers, there may be some "wiggle"room in the price. If there are multiple offers, be prepared to go "at or above" asking price.
  • The more concessions you want (closing cost, repairs etc..) be prepared to write a stronger offer.
  • If you are going with FHA, be prepared to write stronger offers.

The bottom line here is if you are a buyer who intends on living in your home, make fair and reasonable offers that are a "win-win" for you and the seller. I've seen many people "low-ball" themselves out of homes that would have otherwise been PERFECT for them.

And remember this: If you are in fear of overpaying, then Fear Not because you are protected by the appraisal. If the appraisal comes in “under value” renegotiate or move on!

Copyright © 2010 By Stephen Munson,Munson Realty,homes for sale pasadena ca*Low Balling Offers- Why Do Buyers Do it?*

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Re-Bloggged 13 times:

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Location:
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first time home buyer

Comments 84 New Comment

Rainer
6,589
Stacy Nelson
Keller Williams Realty, Temecula

Buyers are as good as their buyers' agent - It's our job to give them all of the information possible to make the right decision.  Run the comps and see what the home is worth and then add a little gravy if they really want the house.  Their offer should reflect not only current market value but how much they really want the house. Low ball it if the comps support the claim but don't expect to get it. Compromise if it's "the one". 

September 14, 2010 03:42 PM
Ambassador
1,009,649
Harry F. D'Elia
Investor , Mentor, CSSN, Radio Coach, REOs, ABR
Precision Real Estate Inc.

Investors and primary home buyers have two different mind sets. Investors are driven by numbers. They always want a great deal in my experience.

September 14, 2010 06:02 PM
Rainmaker
169,728
Wendy Hayden
Chesterfield, Richmond & Powahatan
Photographer, Home Stager, ePRO

Just spent 2 hours on the phone with a client having this exact conversation.  The home is assessed at $228,000 listed at $187,000 and not a short sale but is facing foreclosure.  He wanted to offer $164,000! Finally he came around and offered $184,000 with $7000 in closing costs.  The sellers accepted and he is getting an amazing house at an unbelievable price.  If he had made his $164,000 offer they might have just let it go to foreclosure and written his offer off.

September 15, 2010 01:29 PM
Rainer
15,001
Rayna Mckay
RE/MAX Real Estate Advocates

I personally find that when I cannot reason with a buyer and talk them out of a low ball offer they end up paying more for the home in the end.

September 17, 2010 05:17 PM
Rainer
143,700
Victor Zuniga
Berkshire Hathaway Home Services California Properties

Here in San Diego low ball offers aren't working any more. Prices have increased for 13 months straight July to July 09-10. If a buyer want to low ball I tell them they can do that but not expect to get a response much less the home.

October 13, 2010 05:07 PM
Rainer
140,501

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