Question Details

Sonia, Home Buyer in Glendale Heights, IL

Are lowball offers common in this market? How do I make a lowball offer without 'insulting' the seller?

Asked by Sonia, Glendale Heights, IL Wed Jul 23, 2008

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Don't worry about insulting the seller. Not unless your name is Emily Post. You make an offer based on what works for you. Period.

Are lowball offers common? Depends on how you define "lowball." Some sellers already think they're giving their homes away, so any offer below the listing price is considered "lowball" and insulting. Tough. Other sellers are motivated, and are delighted with offers of 10%, 15%, even 20% below their initial asking price.

So that brings us to: "How do I make a lowball offer without 'insulting' the seller?" As we've discussed, it's not your concern whether the seller is insulted or not. And you're not a mindreader; you don't know what will, or won't, insult the seller. So, don't worry about it. And as we've discussed, there's no uniform definition of "lowball."

Look, Sonia. You figure out how much the property is really worth. Have a Realtor run a CMA (competitive market analysis) for you. Second, how much are you prequalified for? Third, how much are you comfortable spending? You take the LOWEST of those three numbers (real value, prequalified, and comfort level). That's the most you should spend for the house.

Notice we haven't even looked at the listing price. Why not? Because it has absolutely no bearing on the property's value...on what you're prequalified for...or what your comfort level is.

Now we've got our first number: The lowest of: (1) value, (2) prequalification, and (3) comfort level. At this point, take a look at the listing price. If the listing price is lower than your first number, your offer should be at or below the listing price. If the listing price is higher than your first number, your offer should be at or below your first number.

Example: House's value is $300,000. You're prequalified to $350,000. Your comfort level is $325,000. In this case, you select the lowest number--house value of $300,000--and that's your "first number."

Then look at the listing price. If it's $325,000, but your "first number" is $300,000, then the lower of the two--$300,000--is your maximum offer. If the listing price is $290,000 and your "first number" is $300,000, then the lower of the two--$290,000--is your maximum offer. Use the listing price only if it'll lower your offer.

Remember: We're identifying the most you will spend. Your initial offer should be less. How much less? That depends on your strategy. Let's say your maximum offer number is $300,000. The listing price is $310,000. Using the "split the difference" strategy, you'd offer about $290,000. With counters and back-and-forth, you'll end up around $300,000. Useful negotiating tip: Don't use round numbers. Your offer shouldn't be $290,000. It should be $289,755...or $291,050...something like that.

Or you can do a "best and final" strategy. Your maximum number is $300,000. They're asking $310,000. You offer $298,500 and it's "best and final." It's as strong as you can make it. And it's "take it or leave it." Your agent makes clear to the listing agent that this is a one-time offer. There will be no counters. And your offer expires soon. They either take it as is, or they lose out.

Or, of course, you can actually lowball...however you define that term. The numbers above aren't lowballs. But if the house is listed at $360,000 and your maximum number is $300,000, then you have to come in fairly low--say $297,000. Maybe that's a lowball. Maybe it isn't. If they counter, you know you've got a live one.

Or maybe your maximum number is $300,000 and there's a property listed for $300,000. But you want a real bargain. Maybe your agent's informed you that there's a lot of equity in the property. Or maybe the owners are really motivated. Whatever. You offer substantially less. Maybe $250,000. Your odds of getting the offer accepted are less, but if it is accepted, you've got a nice deal.

Final time: Don't worry about insulting the seller.
1 vote Thank Flag Link Wed Jul 23, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
Good question. If you are shopping for a deal, look for a short sale or bank owned. Keep the emotion out of it, and just make the offer.. If you can accept the fact that your offer might be rejected, then go for it.
If it's a standard sale, look at how long the house has been on the market. Have your agent tell you how much is currently owed on the mortage and if the house is vacant. All these are factors in you final offer.
1 vote Thank Flag Link Wed Jul 23, 2008
Yes, low ball offers are common in todays buyers market, however, depending on location, condition, days on market, and of course price, the property may or may not justify a low offer. Your agent should provide you with a CMA of the tract or immediate area and perform ample research to bring you up to speed on whats happening right now in your area. Due to high numbers of short sale and bank repo listings, regular listings must price themselves competitively or sit on the market quite some time. If a property is highly improved and in a great location, it may sell somewhat higher than others, and should. However, properties in need of upgrading and in mediocre locations are forced to price at or below market in order to generate offers. Most agents will have the expertise to advise you if they feel your suggested initial offer would be insulting or not. I like to call the listing agent up prior to writing up an offer and discover the sellers motivation and plans after the sale. I then weigh it against my buyers goals, motivation and time frame and come up with the best strategy possible for negotiations, a smooth transaction and closing.
1 vote Thank Flag Link Wed Jul 23, 2008

One of your Realtor's job is to negotiate a great deal for you and how they handle the situation can help soften the blow to the seller.

However, the bottom line is it all depends on how much you want the house.

If your goal is to get the lowest possible price and not care about whether you get the house or not, then go ahead and make a low ball offer. .

However, if you do really want the house, then make a low, but still reasonalbe offer. Yes, a seller can be offended, especially if it's not handled right, and you might lose the house. Make sure you do not regret if you do lose the house.

1 vote Thank Flag Link Wed Jul 23, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
lowball offers are common but from mostly investors who would be purchasing the home with cash...
if you will be using a lender than you should consider a reasonable offer instead and negotiate with the seller any repairs you would like to have them fix or ask them to come down on the price as is....
lowball offers may insult the seller so it's best to put yourself in their place when making an offer.
check with your lender to see if you can ask for a seller assit 3% or 6% of the sale price, this will help you to pay for closing cost.... ask any Realtor/Agent or Lender and they will explain seller assit to you...
Good Luck!
1 vote Thank Flag Link Wed Jul 23, 2008
I'm not sure what constitutes a low ball offer to you but I think if you write up an offer in this market and show that you are a serious buyer (pre approved, decent downpayment etc...) the sellers would probably be willing to start negotiations. If the home has been on the market for a considerable amount of time, it just shows that it is probably over priced, however, if it just got listed, the sellers will probably want to wait for a better offer. Hope that helps!
1 vote Thank Flag Link Wed Jul 23, 2008
A little market research goes a long way with this. Look up current comparable sales and calculate the List/Sell "Ratio". Use the Average, High and Low as a starting point to determine what to do. Don't get hung up on making sure you get the property as far below asking price that you can. Some buyer's will not ever pay asking (or above) price yet some of the best deals may be at or above asking price. Are you looking for the "best deal" or just the lowest below asking price? They can be 2 different things.

If your research determines the asking price is way too high then don't worry about offending the seller, you are not there to make them happy. If you determine the asking price is way too low then don't worry about offering lower, you may consider offering high. In other words the asking price can be insignificant to actual "value" and a buyer determines value not a seller.
0 votes Thank Flag Link Sat Apr 26, 2014
There are several hundred foreclosures in this area. When you are dealing with a bank, they just want to get rid of the house. When you're dealing with a seller, they think their house is worth a lot--because they paid too much. Maybe you can look at some of the foreclosures. The best thing to do is to wait to buy. Housing prices are still declining, and probably will for several years. Good luck
0 votes Thank Flag Link Mon Jul 28, 2008
So we went ahead and made an offer on a home that was 35K less than the asking price. The seller counter offered with only 3K less than his original price! What gives?? Should we even both counter offering?
0 votes Thank Flag Link Sun Jul 27, 2008
In our market many seller's are happy to see a low-ball offer. Our prices are down 20%+ over a year ago and many prices are still at last years prices. Each property is different so don't apply numbers across the board if you are serious about obtaining a property do the research and see what's selling and at what price. If you are not serious and can take it or leave it, toss a number at them and see what sticks!
Web Reference:
0 votes Thank Flag Link Thu Jul 24, 2008
Wait another year, save another 20%.
0 votes Thank Flag Link Thu Jul 24, 2008
Thank you for all the responses! They were so helpful! On a recent home we are interested in, we are planning to make an offer 10% - 12% less the asking price. Hopefully, this will give some incentive for the seller to counteroffer, and we can go from there.
0 votes Thank Flag Link Thu Jul 24, 2008
Low ball offers go no where. The seller would rather lower their price on the MLS and thus get multiple people lining up to pay their low ball price and then they may be able to bid it up a few K. There is a thing called market condition and prices in the area. You WONT get a home 50k less than the recent one, it just doesnt happen.
0 votes Thank Flag Link Thu Jul 24, 2008
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