I'm apparently in the minority here, but I agree 100% with Michael: "Okay, are you an investor/home buyer or an ettiquette coach? In most areas of the country, this is a buyer's market. Don't worry about offending the seller." (Michael: I've used the line about not worrying about offending the seller; is it OK if I adapt your first part about an ettiquette coach? I really like that!)

First, determine what the house is really worth. Forget the list price. Get your Realtor to run a CMA. Establish the value. That's step one.

Second, determine what you can reasonably afford to spend. Not what you might be preapproved or prequalified for, but what you feel comfortable spending. That's step two.

Now, take the lower of the two numbers: (1) the true value of the home, and (2) what you can comfortably afford to spend. That resulting number is the most you should spend on the property. Notice we haven't even looked at the list price yet? There's a reason: The list price up to this point is totally irrelevant.

Third, now take a look at list price. Is the list price lower than the number you came up with in step two? If so, then you lower your maximum to the list price. Is the list price higher? If so, ignore the list price.

You've now determined the maximum you'll spend. The question now is: What offer do you make? Do you offer close to your maximum? Or do you offer less? You can peek at the list price again. Recognize that the American form of negotiation is usually to split the difference. It's not a good strategy, but that's what people expect.

So, let's say, hypothetically, that your maximum price on the house in question is $190,000. There are two schools of thought. The "split the difference" one would suggest making an offer around $180,000. After going back and forth, assuming they feel like negotiating, you'll probably end up around $190,000. The other common strategy is to go in close to $190,000 with a strong "best and final" offer, probably supported by your comps. You include that nice letter saying how much you love the house. Oh, and even if you're prequalified up to, say, $230,000, get another letter from the lender with a prequalification at $190,000. You present it pretty much as "take it or leave it."

There are other strategies, too. Michael and Jacki are right: The seller's motivation, if you can determine it, will play a major role.

But no one can tell what will "offend" the seller. Not unless you're the Amazing Kreskin. In some cases, a penny under the listing price is offensive. In other cases, offers of 10%, 20%, or even more under the listing price will be eagerly welcomed. You just can't worry about what someone else may, or may not, find offense. What you have to worry about is what the house is worth and what you can afford.

Hope that helps.

Actually here is another question to go with this one. What if the house is left in disrepair and the sellers expect to get a fair price for the property? The house in question needs more work than the other houses in the neighborhood, how can the seller reasonably expect to sell the house for the market value? Does the selling agent take that into account in this situation when trying to sell the house? I can't see how an owner would be offended by the offer if they trashed the house they are trying to sell.

Brandie, let me tell you my story, I bought a house from a relocation company in the martin farms neighborhood and they were asking 299,999 for it. I offered 250,000 for the house and at first they said no but my realtor wanted us to get the house, so she sent them papers on houses that had the same sq ft. to make a long story short, the house sold in 2005 for 380,000, I picked it up for 256,000 and they payed my closing cost. If you are looking for a one or two year home for around 200,000, come out to otsego, and you will find your home.

Part of an agent's job is to inform their client as to the level of risk in any scenario. Then, it's up to the client to decide what level of risk they are comfortable with. If you are willing to risk the seller getting ticked off and rejecting your offer out of hand, go for it. That's the worst that could happen. I'd say since it's been on the market for 180 days, you may have a shot. Your agent is trying to help you understand that too low an offer might not get you what you want. I have buyers that want to be very aggressive when writing offers. I'm willing to do that, but I have to know I have some leverage in doing so. If they send me in to play hard ball, I don't want to go it with no equipment. Buyers need to be willing to let it go if it's not going to work. Generally, buyers have looked long and hard and when they find the house that works for them, they are not willing to play TOO hardball. But, it's the buyer's choice.

Your Realtor has no opinion? Interesting...Is it a dual agency situation? If you and the seller are both working with agents who share a broker, then that makes sense. But if you have signed a buyers agency agreement for representation, he/she should have an opinion and share it with you.

Ask your Realtor to provide a market analysis for the home. The home sold at auction should have information available. If it is not in the tax record yet, that can take a few months depending on the closing company and county, ask your agent to contact the auction company for what the home sold for.

In my opinion, no seller should be insulted in this market. Most sellers are greatful for an offer as a starting point to the negotiation!

I recently posted an article on my blog in regard to lowball offers it looks at several scenarios. I'll post the link below. Maybe that would help to give a starting point.

Good luck!

Your buyer's agent should definitely be advising you on this specific to your location. In my area, anything less than 10% under asking price will most likely be offensive. I am a real estate agent and a seller right now with 2 properties for sale, priced right. My personal home has been on the market for only 3 weeks, been shown 7 times (which is very good for my market) and I got a low-ball offer 20% below list price. Yes, even knowing the market and dealing with this all the time, we were insulted AND were much less willing to negotiate-- knowing that they were just "fishing" for a deal and not serious. We also have vacant land for sale that is in a subdivision where several other, less desirable properties are for sale, and for more money. We actually got a half price offer about 3 weeks ago. In both these instances, the buyers were just "fishing" for a deal and got bad advice from non-professionals that "everybody is low-balling these days".... If you were my client in my area, I would advise you to offer what it is worth to you. If you feel that you are going to offend the seller, then you are probably right! If you love the house, then be prepared to come up to what they are asking. As long as you never regret, feeling like you've paid too much then it will be worth it. You will definitely regret it if you love it and you lose it because you were just fishing for a deal. Good luck!

Low ball offers can offend ALL parties of the transaction if not done with sincerity and reasonable expectations. No reasonable buyer wants to "steal" anyone elses home and no reasonable owner wants to "give" his home away. As an Accredited Buyer's Representative I advise my Buyer's in the following way. I first determine how low to go within reason. I like to know as much about the property and owners as possible. I research how much the owner paid for the home by accessing the local tax record of the subject property. I then assess the improvements made by the owner since ownership and research the rate of appreciation in the neighborhood as well as the zip code. I find most owners want a "reasonable offer" for their home, a sincere person purchasing their home, a buyer with reasonable expectations during the transaction. I do not fail let the owner know that the buyer can only pay up to what he/she can qualify for. Don't forget the cliche, "You can catch more flies with honey". You can purchase a great home with sincerity, reason expectations and an Accredited Buyer's Representative who has the buyer's interest in mind low ball offer or not!

Andrea Gaume
Prudential Woodmont Realty
Brentwood, TN
agaume@realtracs.com

The best way to approach a home with a low ball offer is to first find out what is owed on the home. If there is enough room to negotiate, present an offer with a pre-qualification letter stating that you qualify only for the amount you wish to purchase the home for. (Lenders can always qualify you for more, but never know the ins and outs of your budget.) Present the offer with sincere desire for the home and let the Seller know that it is your best offer and you wish you could do more, but can't afford to. Most Seller's want someone who will love their home and if you can't "qualify" for more, they will usually make accomodations if they can. I had one client recently get over $50,000 off a home listed at $365 using this technique.

It is my opinion that you should strongly consider the advice of your realtor to be careful not to offend the seller. While it is true that most of the country is in a Buyer's Market, this term is different for every location. I am from Valdosta, GA, we have a strong economy yet we are in a Buyer's Market. What that means here is that sellers are reducing their price by approx. $5-7 thousand dollars where a year ago it was $2-3 thousand and buyers now have 5-8 homes to choose from where a year ago it was 2-3. Sellers absolutely become offended and think that you are insulting them by a low offer. They believe their home is worth more than market value and too many times let emotion get in the way. Be careful, and ask your realtor what the trend is in your area, then check public records to see what homes in the neighborhood have sold for in the past 3 months. Good luck and I hope you find the perfect home!

You can search public tax records to find out how much the auction property sold for... it is public information. Why are you making a low ball offer? Just to "feel them out?" What kind of seller??? A real human or a bank?

If you really want the house, you should start with something reasonable based on what the house is worth... regardless of what it is listed at. If that happens to be a lowball, so be it.

Buyers are in the driver's seat, but a lot of them seem to want to suicide themselves when writing an offer so low that it has no basis in the comparables.

One thing to consider is what the motivation of the seller is. If they have to sell because they are in financial trouble they should not be insulted by a low offer. Another thing to consider is how long they have owned the home. If they purchased it in the last few years then they may owe more than it is currently worth. The price that they paid is public record,so your agent can find that out. You also need to consider how the current market is in your area. If homes are selling rather quickly, making a low offer is not a great strategy. Your agent should provide you with an analysis of the comparable homes that have sold,what they sold for and how long they were on the market. Also, she/he should show you what is currently for sale that compares and how long and at what price those homes are. There are alot of things to consider! That being said, if your market is not thriving and the sellers have to sell, I would start your bid around 10-15% below asking price.

Offending the seller...Okay, are you an investor/home buyer or an ettiquette coach? In most areas of the country, this is a buyer's market. Don't worry about offending the seller, you can check public record to see how much they owe on the property and bid accordingly. You may want to place yourself in their postion for a moment, how would you react to a low offer, but at the same time, the market is declining, so give a low ball offer a try. Writing a letter doesn't really make a difference. Their motivation to sell does. Find out their motivation. The larger the earnest money deposit, the more likely your are to get their attention. Make your offer, no one know what the bottom line is until the offer is bottom lined by all parties. If the house is bank owned, most banks can only accept offers within 10% of the list price. They have to get their superiors to sign off offers that exceed the 10% range.

Hey, Brandie....I'm a potential buyer as well. In relation to your question, I'm curious to know what a low ball offer would be on a a $200,000 house? I'm currently looking at coastal properties in Cape Hatteras, NC and they apparently are selling at 85% list value. So, I've been wondering what a low ball offer might be. 20%? 30%

Was just curious. Thanks.

- patrick