Home Buying in Gurnee>Question Details

Michelle, Home Buyer in Illinois

What is considered a low ball offer when bidding on a house?

Asked by Michelle, Illinois Fri May 16, 2008

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Bill Eckler-Florida,’s answer
Michelle,
Simply stated, by checking the recent comps for homes sold in your target home neighborhood, you will achieve a clearer understanding of what "ball park" you need to be in to successfully administer your "low ball" offer.
Good luck,
The "Eckler Team"
Century 21Alamr and associates
Venice, Fl 34285
ecklerteam@comcast.net
941-408-5363
2 votes Thank Flag Link Sat May 17, 2008
BEST ANSWER
That is a question many are asking... it really depends on the location, desirability, and relative scarcity of the type of property you are looking for. In some markets there are properties in which an initial offer 15% below asking price might still be too much while well priced, desirable properties garner closer to asking prices. Working with your Realtor, you should be able to find what the average discounts have been in recent months for similar type properties to establish a baseline to work from. Here in Florida (Boca Raton beach area) where I work, the average discount has been 13.38% discount from asking prices (and the range was a low of 3.37% to a high of 31.71%) and that helps my clients when figuiring out out negotiating strategy. Remember though, you can bid/ask what you want but you might not get what you want - this holds true for both buyers & sellers.
1 vote Thank Flag Link Fri May 16, 2008
Michelle,
If you take a look at what the homes have been selling for in the area that you are interested in buying and make an offer considerably lower (-15-20%) than the recent sales that would be considered a lowball offer. Do not worry about putting in a low offer, the seller can only say no or counter your offer. At this point in time many markets throughout the country are looking for qualified buyers to make an offer. If you find a home that you truly want to buy, set your maximum amount to purchase the home and stick to it.
I wish you the best in finding a home to purchase!

Charles Coachman
2 votes Thank Flag Link Fri May 16, 2008
There isn't a definitive answer to that question. Some would say anything more than 10% below list price but in this market, that seems to be fairly common. I would think 15 to 20% would be considered by most a low-ball but others may differ with me.
2 votes Thank Flag Link Fri May 16, 2008
WOW this is an old question. Only thing to add that the best answer missed was average numbers are deceiving. Whether avg sold price or avg days on market, those stats are useless as a basis to say where to come in at on a specific property. Some homes sell in 5 days, others sell in 200 days and some never sell making an avg of 156 days on market.
1 vote Thank Flag Link Sat Jul 2, 2011
Hi Michelle
Any update on if you found a home to make a bid? I have two listings in Gurnee closing in the month and know better than most bidding strategy for the subdivision you are considering. Call me if you are not already working with another agent. If you are working with another agent, ask them your questions!
1 vote Thank Flag Link Wed Jun 29, 2011
Now JK, you're lying when you say the realtors gave answers you'd expect from people who make their commission based on selling price. ONE AGENT mentioned 4-6% below asking. The other answers went as low as 25% below asking.

Michelle, the amount you bid on a house has nothing to do with the percent off the ASKING PRICE. If the asking price if 50% higher than FMV and you offers 20% less, how is that a bargain? Thebest thing for you to do is educate yourself as to what other similar homes have sold for. The easiest way is to hire a buyer agent to do it for you, but if you're a do it your selfer and not in a hurry you can find out for yourself also. Base your bid on what comps have sold for, not on what a house is listed for.
1 vote Thank Flag Link Sat Jun 7, 2008
Michelle, good question. Each situation is different. I have sold quite a few foreclosed homes (REO) that the bank took over. In these situations, initial offers of 25% below list price are not unheard of. But in a 'non-distressed' situation where the property being considered is unique and competitively priced, an initial offer may need to be made in the 3%-5% range to be considered.
1 vote Thank Flag Link Tue May 27, 2008
The important thing when making an offer is to make sure it's justified. I'll explain by looking at the seller side first. If homes in your neighborhood, just like yours, were all selling between $400,000 and $410,000, it'd probably make sense to ask $415k - $425 and expect to negotiate. However, if you asked $450,000 most likely buyers just would think you're delusional. It's much the same way when you make an offer. If the home is worth $400k and you start 4% - 6% below what it's worth (not what they are asking) that's ok. If you are trying to buy the home for way under value, it'd be best to look for a bank owned home, a pre-foreclosure, or a relocation home. If you would like a free list of these homes, please feel free to contact me. I hope this helps a little.
1 vote Thank Flag Link Fri May 16, 2008
Hi, It really depends on how well the home is priced compared to other recently sold homes in the immediate area. that is one part, the other is what you feel the home is worth to you after conducting your thorough research of the activity in the area. Do you feel like you are getting a good value? Are you just shooting in the dark hoping for the deal of the century? I prefer the eductaed offer method because if the seller counters we can state how we came up with our offer price. Otherwise it would be obvious we are just trying to see how low they will go and that can deter a seller from negotiating any further with you.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
914.406.9023
0 votes Thank Flag Link Wed Jun 29, 2011
There's no single answer to this question. I'd consider it a lowball if someone offers more than 10% below current market value.

Mike
0 votes Thank Flag Link Sat Jul 31, 2010
There is no set % that would define an offer "low ball". Really depends on the sellers piece of mind, what they owe on the property, how long it has been listed and etc. I disagree with "A property is worth what a buyer is willing to pay for it." As the other agent states, cause it is only worth what a buyer will pay, what a seller will sell it for and in this market, the most important part of the equation what it appraises for. The lender will not allow the buyer to borrow more than it appraises for anyways.
0 votes Thank Flag Link Sat Jul 31, 2010
Michelle-

My wife and I are looking in the Wildwood and Grandwood areas of Gurnee. During our first bid on a house we offered a VERY low-ball bid of 135K (with my realtors "go for it" consent) to their 189K asking price. Once it was in, our realtor handed me a report showing the recent sales in that area. I sat down with my trusty calculator and worked out the averaged differences between original asking price and closing price on 13 homes (included 1 foreclosure and 1 short sale) in that area. Similar to Tom Martinson's answer the closing prices ranged from 13.4% to 33% below original asking prices...and the the average was 13.9%. I also ran the math without the foreclosure and short sale in the mix and came out essentially with the same percent discount.

So I agree with Tom's assesment, although I am still going to offer what I feel is reasonably lower to get the best deal I can....It's our money...not the realtor's. You can always raise your bid to whatever you want as long as you stick to what you can afford. You can always put a time limit on an offer...say 12 - 24 hours...and they can always say NO...and risk not selling.

In the end our 1st offer on the house (29% lower than asking) got denied so we added 10k and that got denied...then another 10k with a request that we wanted them to reply with a counter offer. They countered a 9k discount and we walked away. We also found out the buyers did NOT "need" to sell, they had another house in Nevada.

My suggestions to your are to search each house address on websites like http://www.trulia.com or http://www.realtytrac.com (paid service with GOD info...even shows bank/lender name) to learn its sales history and other public record info. Ask your realtor to talk to the listing realtor to find out if ANY other offers have been made, for how much, and if any deals fell through. After your first visit, go back in the house WITH THE TENANTS AT HOME and just casually ask OPEN ENDED QUESTIONS like, "so are you moving out of state? Also, ask, "If you were to buy this house today, what would you need to do to it? Have them tell you stuff...ya they'll boast but you can find out a lot of info if you know how to ask questions the 'right way'.

The main problem is that sellers are trying to keep the price to not lose on the deal, and we are trying to buy at a good (if not low) price. Good luck.
Web Reference: http://www.trulia.com
0 votes Thank Flag Link Tue Feb 2, 2010
Michelle,
A property is worth what a buyer is willing to pay for it. Previous sales in an area tell you what other buyers have paid for like kind property. Comparable sales are simply a guidepost that has been used by folks to determine the approximate price range as established by other buyers. As a Broker, I avoid using terms such as "Low Ball" - it only serves to create an adversarial type of negotiations. We have been in a stagnant to deflationary marketplace and values have been going down in many areas. The caution on Comparable properties is when looking at them, be sure they are very recent - as something that may have closed 3-6 months ago, maybe not reflect today's value of like-kind homes in the market. Egos are sensitive in this marketplace - some agents are very worried about how they may be challenged by the sellers as they assured the sellers of the value and the buyers are painting another picture. Given the complexity of this marketplace - the challenges with financing, the huge inventory I encourage my clients and my colleagues to remember this is a business transaction and to keep cool heads and maintain objectivity. A properly crafted offer on a property is an "expression of interest". Additionally, when considering an offer, i encourage my buyers and sellers to consider the value of the property through the eyes of an appraiser or the bank. If the bank doesn't agree with the value of the house - it presents another hurdle in the transaction. Therefore, I feel it is critical to do your research and work with a Realtor that will assist you in presenting your offer in the most professional manner. The deal ultimately is between the seller and the buyer - agents are merely the facilitators.
0 votes Thank Flag Link Mon Jun 16, 2008
There is no specific limit - if you are a buyer you need, with help of your agent, determine market value of the property (CMA). Depending on the market condition and market area, offering 15% below estimated true value of the property would be a low ball offer and would ,probably, be rejected. In most cases, the seller would not reply. Offering between 3% and 7.5% below asking price may work.
0 votes Thank Flag Link Sat Jun 7, 2008
A low ball offer is one that really angers the seller. They can work against you sometimes. You just need to decide what type of strategy you are going to go in with. You may end up losing a home you really love.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sat Jun 7, 2008
Michelle, Your question was quite simple: what is considered a lowball offer. you didn't say you were buying or selling or whether a lowball was effective in a given marketplace or anything else. You received a lot of good, if unsolicited advice and a wide range of responses. They didn't strike me as being motivated by the fact that Realtors work on commission. Go back and read them again and if you want advice that is better suited to your particular situation, you need to get much more specific. I engaged in 42 sides of transactions last year. I am always very aware of whether I'm working for the Buyer or Seller and give advice accordingly that reflects the realities of the current marketplace. Most Realtors I know do the same but knowledge & skill levels vary. The web is a good place to begin gathering information but it is no substitute for a trusted professional who can help you interpret and understand information and how it pertains to your situation.
P.S. My office is located in Gurnee and I believe you are getting inaccurate info on selling prices vs. listing prices if you think the ratio is 84%. That information is readily accessible thru the MLS and it is consistently in the mid 90's. Whatever site you are using or how you are accessing the info is not accurate and basing decisions on mis-information is not in your best interest. Good Luck.
0 votes Thank Flag Link Sat Jun 7, 2008
I see many of the realtors gave an answer you would expect from people who make their commissions based on a percent of the selling price. Why would a buyer start with an offer of only 4-6% less than the asking price? Unless you are buying in a "hot" market, with multiple bidders, that is too high for the starting offer!

Check online websites to see what homes have been selling for RECENTLY, say since the beginning of this year. I have used the sellers tools on the Baird Warner website and find it very useful. Each month they give you a report on homes sold during the previous month, as well as the last 30 homes sold where you are looking.

We are looking in a northern Illinois suburb, not too far from Gurnee (where the question was asked), and average sale price over the past 3 months has been about 84% of list price. Two-thirds of homes sold in the suburb we are looking at sold for LESS THAN 90% of list price. So, as a buyer where we are looking, we would be overpaying to begin the negotiating at 94% or 96% of list price.

We recently sold a home in Michigan for 25% less than we had put into it- that was $100,000 we lost in only 2 years of owning the home. It was only 8 years old and in perfect condition- very unlike the homes we are seeing here in Illinois. But it was the price the market could bear and we knew we had to keep the buyer or they would move on.

Realtors have a duty to educate the sellers as to what homes are really selling for. Buyers are educating themselves and will not over pay in this market. There is an over supply of homes in almost every market. Buyers can and will walk away and bid on the house down the street.

Sure, starting your bid at 20-25% below list could be considered a low-ball offer. Understand the market you are buying in and place your bid accordingly.
0 votes Thank Flag Link Sat Jun 7, 2008
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