Why Can’t I Lowball?
You all know a person like this. You might be a person like this. No matter the item, no matter the price, there’s always room for negotiations and they will never offer, and rarely pay, full price for anything. They are the friend that will let the server know something is done right so they either get a discount, a free dessert, or a completely free meal. It is the person in front of you at the register that brings the clerk’s attention to a spot on a piece of clothing that deserves a discount. And finally, the “Buyer” that feels that a Seller should be happy to get any offer, even if it’s 15%-20% less than what they’re asking, no matter the value.
Here are the challenges that arise:
- A Seller may be so offended that they may just reject your offer and not consider anything else from that “Buyer”.
- If a Seller decides to try to negotiate with the lowball offer, another (better) offer may come in and they may decide to work with the more reasonable offer instead.
- A “Buyer” may lose out on several properties and may be forced into renting, or not having the luxury of time on their side to make a good decision.
- A “Buyer” may lose all negotiating power during the due diligence portion if the Seller has come down in price and they may be stuck with a house in need of repairs or have to back out of the contract altogether.
- You may run the risk of your agent not working to represent you any longer. Most agents don’t get paid unless they sell something. If a “Buyer” continues to ignore the agent’s advice and continues to request to make offers the agent knows will not result in an accepted offer and closing, they may decide they need to spend their time with a client that is more motivated to buy or sell.
As you know, price is not the only factor that comes into play when evaluating a real estate offer. If you want to make a low offer more attractive, give the Seller something else to consider that may be a benefit to them. Is your offer a cash sale with no financing contingency? Can you close in 7-10 business days? Perhaps you can forego the appraisal contingency.
You also need to consider the overall market climate and how the house is priced as compared to similar homes in the immediate area. If it is a Sellers market, (demand is high and inventory is low) most Sellers know they can ask and receive a fair price and possibly get more than what they hoped for. Often times in Sellers markets, one house will receive several offers at once so sending in a lowball offer in a competitive market will likely not get you to the closing table. If the house is priced well to begin with, don’t think you are going to get a steal. Sellers are smart and are willing to wait a bit longer to get a reasonable offer instead of jumping on an offer that will probably be tough to negotiate and may not be a sure bet to sell their house. To put it in perspective, a Seller may be able to wait it out for 3-4 months, making mortgage payments instead of “giving the house away” and still make money on the sale. If a mortgage payment is $2500, the Seller gets an offer for $15,000 less than asking price, the Seller could make their payments for 6 months before paying $15,000.
I have put the word “Buyer” in quotes throughout this article. I did so because if you go into every situation in any scenario with the same “lowball” mindset, no matter the market and the advice that it’s not going to work, I would question whether you truly are a Buyer. Agents want to get their clients the best deal possible. However, they were hired to help negotiate the terms as well as handle all the legal paperwork logistics, and timeline of the transaction. If your only objective is to get a great house at a great deal, you may be wasting everyone’s time. So, if you’re going to lowball, give the Seller some other dangling carrot, otherwise, you may be sleeping in your car!
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.