Home Buying in Washington>Question Details

Dee Brown, Home Buyer in Washington, DC

What is low-balling? What percentage of the asking price is considered low-balling? Is low-balling offensive or disrespectful to the seller?

Asked by Dee Brown, Washington, DC Sat Feb 9, 2013

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Low-balling is an offer that makes no economic sense to the seller. The purpose of an offer is to enter into negotiations or a conversation with the seller. If your offer isn't even acknowledged then you have done yourself a disservice.
Percentages are difficult to assign as this is more art than science. Fifty percent is a definite low-ball offer and completely useless. Do you want to know where in that 1-10% range isn't low-ball? It will depend. The price of the property comes into play because a seller has more wiggle room the higher the price.
Are you insulting or offending the seller, well it just depends. Investors who make offers on ten properties to get one are secure in their business model and the seller or seller's agent knows this is a business decision and nothing personal. Typically they are taking blighted properties and improving the locality. It becomes offensive when the offer is out of line with previously settled properties in the same neighborhood, same condition. It's offensive when the buyer has no understanding of, or wish to understand, the mechanics of maintenance, improvement by a homeowner or the right to a profit by anyone.
I'm not suggesting that everyone's listing price is valid but there are aids to help you get a feel for what should be valid. If you're getting a mortgage, your lender will not be allowing wild speculation. You'll have one or even two appraisals. Your agent will have comps for list and sold prices in the area you're considering so you can see the spreads and concessions. No good buyer's agent wants his/her client to pay too much but neither does he/she want to share an ego trip. The best negotiation is when neither buyer nor seller is completely happy.
1 vote Thank Flag Link Sat Feb 9, 2013
"Low-Balling" is when the proposer has no justification for a lower priced proposal. Usually when the offering is commanding the seller to accept a lower than asking price for the property without the aid of a Value Added Realtor, it can be construed as very offensive and disrespectful. What property are you making an offer on, DBrownof DC?
0 votes Thank Flag Link Sun Feb 10, 2013
Flag Sun Feb 10, 2013
All real estate is local, and so is negotiating--depends on the area. I don't know of a rule of thumb to define a low-ball offer. However, I can say that at least in the closer-in Northern Virginia areas, most properties sell for 97% or more of the list price--and sometimes they're selling above the list price. Moreover, we have less than 2 months' supply of properties in inventory, meaning that we have seller's market now. So a lowball offer could be 90% of the list price. A lowball offer isn't a personal assault on or insult to the seller, but it is unlikely in this environment to get you the property. It is also unlikely to engage the seller in a "negotiating conversation" with the ultimate goal of reaching a contract; the seller may well simply reject a lowball offer, or overreact by countering with the full list price. In this area an aspiring buyer intent on making lowball offers is likely to be an unsuccessful buyer, watching prices and interest rates creep up without nailing anything. If one aspires to acquire a property at a super-low price, hunt up foreclosure auctions and try to get something on the courthouse steps.
0 votes Thank Flag Link Sun Feb 10, 2013
Wow! Maureen provided an exceptional description. Of special note is the 'if your offer isn't even acknowledged' at the end of the first paragraph.
One reason a home seller hires a professional is to be the shock absorber between them and the buyer. It is our task to neutralize the emotions. We have prepared the seller to expect low-ball offers and even 'dirt-ball' offers. The seller has been preconditioned to the buyer 'fishing' expedition and the clinical approach of investors. Be aware, it is highly likely that the seller and agent have an agreed upon, automatic 'curb-kicker' in place.
An offensive, disrespectful offer often receives no response (my preference) or an unofficial 'get real' response that is $100 below list price. What the buyer does next could very well be the tree falling in the forest. The conversation was opened, and if disrespect and offensive behavior persist, this dance is over. The 'token' response was courteous recognition of the fishing expedition.
In direct response to your question, the seller is expecting and anticipating a low-ball (Not dirt-ball) offer. They actually already know what your offer will be. You should image the agent and seller exchanging the 'high five' when the scripted story unfolds.(we know where buyers are getting their decision making data) The seller understands that as a buyer you are obligated to come in low. As an agent, I want the seller to have more than one offer from which to choose. You would be well advised to recognize this structure when low-balling a new listing that you actually want to buy. You may end up watching the home disappear in the vapors of what could have been.
I hear the DC market is HOT! In a hot market, desirable homes in desirable communities do not have down trend lines. The real estate professional working with a buyer really needs to assess if their buyer is serious or not. A buyer defying reality is a waste of everyone's time. A reality may be that desirable homes are selling at 99% of list or ABOVE list price. A buyer, wanting to 'low-ball' in such a hot market is in denial.

Best of success in buying your home.,
Annette Lawrence, Broker/Associate
Reamx Realtec Group
Palm Harbor, FL
Movie Tour
0 votes Thank Flag Link Sun Feb 10, 2013
Look at the percent difference between the list price and close price of recent sales. You can include seller subsidies in the calculation. If you're within that range +/- you're not low-balling. if the list price is completely out of line (much higher) than recent comparables, your realtor may want to include or reference the comparables in the offer summary.

good luck
202 552 5624
0 votes Thank Flag Link Sun Feb 10, 2013
Anything less than List Price with concessions.
0 votes Thank Flag Link Sun Feb 10, 2013
If a home is priced properly and a low-ball offer is put forth many times the seller will not counter and the buyer has lost the opportunity to purchase the home. It is very important to have your buyer agent pull comps and review with you prior to placing an offer.
0 votes Thank Flag Link Sun Feb 10, 2013
Hi dbrown. sellers may get offended if the price is too low and may not counteroffer ruining your chances of being accepted
0 votes Thank Flag Link Sun Feb 10, 2013
Low-balling is a price-discovery technique when a buyer comes across a property that nobody else wants at the listed price. If you do find such a deal, then you can go as low as you want. As low as 2% of the listed price? Sure. It's possible, if you really know what you're doing. Sometime it does insult, but investors of all stripes make a living identifying these deals.

Of course in practice, deals like that are incredibly rare these days. (The best time to low ball was during 2009-2010.) If you can even manage to find a decent deal that has fewer than 5 offers, then count yourself lucky to buy it at the list price. Once in a while, you might come across a deal where you can swing a 10% discount if you buy it with cash on the spot.

You really have to know the market conditions and where you stand to know when and how much to low ball. If you low ball at the wrong time and place, you'll likely just waste time with your offers and maybe provide the sellers with a good laugh. Sellers won't feel insulted when they have dozens of better offers.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Sun Feb 10, 2013
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