Aggressive low balling...is that a good strategy?

Asked by Fat Franky, Torrance, CA Sun Sep 14, 2008

My wife and I are first time home buyers . We have good jobs and have managed to save a decent amount. Our families have told us that this is a buyers market and to drive an extremely hard bargain because we are in no rush to buy. However, this advice sounds like a realtor's nightmare because we are going to push prices down as far down as possible. Is this true? Are realtors willing to carry out this strategy? Also, we have excellent credit and can easily close a deal fast so what are some things we should think about as we enter the market?

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17
Keith Sorem, Agent, Glendale, CA
Sun Sep 14, 2008
BEST ANSWER
Fat
I like your question. You are being honest. So you deserve an honest answer.

The market is re-pricing itself. So buyers are expecting prices to fall further. Will they? I don't know the future, they could? Sellers don't want to lower their prices. Will they? I don't know that either, particularly if they do not need to sell.

Are interest rates going up, down, remaining the same? Rates see to be going up slightly, however the COST of financing is going UP, particularly tied to credit scores and the percentage of down payment.

I have some clients like you. They make offers based on what they think the TRUE market value is or shortly will be. We've been working for six months and they are still renting. There are buyers who are paying more than my buyers are comfortable paying, so they have not had an accepted offer...yet.

So I would pose the following thoughts:
1. You need to find a Realtor that understands your point of view and will work with you. I have sat down with my clients and we have an understanding, in writing.
2. I only work with clients who are serious. Serious means I that they can verbalize their parameters, and that I agree.
3. In the current market about 20% of listings are priced correctly and sell within a few weeks. The other 80% are overpriced and sit there. So to some extent, making an offer less than list makes sense, as long as you can justify it. I warn my buyers that just because they may be right about the value of the property, someone may still be willing to pay more because they HAVE TO BUY.

If you are renting you need to talk with your CPA regarding what is costing you to rent. The US tax code is designed to benefit home owners. If you look at what you will pay in taxes, versus what you will pay when you own your own residence, you might be surprised at the amount of savings. So run the numbers. In most cases it is smarter for a renter to buy than to wait for prices to fall further. But don't take my word for it. Run the numbers, then decide.

We do not know at what point the market will turn around, with prices heading back up. In the areas I monitor we see less inventory, more homes selling than last August. Is the market going up? Maybe. I suggest that you treat each property as a unique case. Run the numbers, then you decide. Remember that averages are just that, averages. Each property has a different owner and set of circumstances. So you MIGHT be able to get a "good deal" on a property by lowballing, but you need to make your case.

Good luck
0 votes
Sheyenne Sch…, Agent, Torrance, CA
Mon Oct 27, 2008
Hi Fat Franky! ...I have info for you...and since I'm here in the SouthBay with you...I truly know our market here..for the SouthBay is a unique pocket of real estate. Our pocket is one of the strongest for buying real estate that has retained it's values here in CA. The prices in the southbay have gone down but not half as bad as other markets like San Bernardino/Riverside and Palmdale/Lancaster..etc.
Your family is right on one thing though...that this is a BUYER"S MARKET...big time! And since it is..that means you can get an extremely GREAT deal by buying now instead of waiting like most folks who want the MEDIA to tell them it's ok to buy..by that time...other folks like you have come out in droves....giving first time buyers...more competition for the same properties.
I represent alot of buyers and most of them first timers....you guys get the best incentives right now...like a first time homebuyers tax refund or credit of up to $7500 when you buy your home..before July 09.
Since I deal with alot of buyers and represent them...there are 2 ways to look at that...
If a home we find has sat on the market a while ..then it's probably over priced...hence we can then go in lower..and see if they want to deal with us and get rid of it..some will...some won't...but there is a point in
making people angry with really lowball offers..to the point where if you were really interested in that property, then you would only result in making them so mad, they wouldn't even counter offer you....Ask yourself, is it really worth doing that to a property you REALLY want? The prices here in the southbay are already as low as they are going to go...I can give you many statistics and articles that prove that we have already reached rock bottom a month or two ago and prices are stabilizing and in some cities they are starting to go up...
If a property just came on the market and it is priced right..then don't even think about lowballing it...you will only waste your time and lose out on the deal. I am getting into many bidding wars and multiple offer situations here where we are going sometimes 100,000 to 200,000 over the price if it is underpriced.
Ex..there was a home listed in Torrance walteria area for like $381,000 a few wks ago...unheard of in this part, and hence received well over 18 offers in 72 hours and sold for like $550,000! And this was still a good deal, in that area homes were still selling for in the $600,000's range...
The fact that you have excellent credit...really, really helps! It's a godsend...and the fact that you can close fast is also a big plus...when we make offers and let the other side know we can close in less than 30 days..that is extremely attractive, and makes you look strong..this is good in making offers...seems the only thing left you have to do is..."go shopping"! lol
I urge you to listen to yourself ..YOU are the one buying the property and making the payments and living in your new home...so YOU have to be the one who is happy with your purchase...if you listen to everyone else...you will not only lose out on the home you really wanted...but still be a renter instead of a homeowner in the home of your choice. ( BTW..I am not telling you to disrespect your parents)
If you are a first timer..here are things you absolutely need to get a good deal:
1)An aggressive, knowledgeable agent that does this ALL DAY LONG...day in and day out!
2)an awesome lender who knows loans forwards, sideways, backwards, and upside down..who can get you the best programs in more than 5000 loans out there....from zero down, and 3% down and all your closing costs paid..etc...I have this lender in Torrance.
3)Get pre-approved...it's worth it's weight in gold..for this is what we need when we go shopping...it's 10 steps above a pre-qualification and makes you stronger in negotiations and shows you are serious when making your offers...easy to do...
4)Be aggressive in your search...have someone actively searching 7 days a wk for the property that fits your criteria and who will alert you asap when they find it ..so you can be the first to see it and jump on it...
5)If you do these things...you'll succeed in getting some of the best deals out here in a long time...
And I'm sure you know...a buyer's agent does not get paid by you...you owe us nothing...the other side pays me in a transaction...I would be honored to help you and your wife...if you'd like you can give me a no obligation phone call to learn some valuable information in your homeshopping process...
Need to buy? Just call Shy! lol 310-429-4170 or email me at shy@shysells.com thank you for your time!
Web Reference:  http://www.shysells.com
1 vote
Debra (Debbi…, Agent, Livingston, NJ
Thu Oct 21, 2010
2+ year old question.......and still being answered................
0 votes
Tom and Joan…, Agent, Boston, MA
Thu Oct 21, 2010
Fat:

It really depends on your market area and it can be great to can really hurt your position in the community. Best
0 votes
Dorene Slavi…, Agent, Torrance, CA
Thu Oct 21, 2010
Dear Fat Franky,
It's a good strategy if you are not emotionally involved and you are just taking a chance that yours will be the best offer.
I work extensively with buyers and I can tell you the market is not what you might think. There is tons of competition for good property, and well priced homes will sell very fast. Normally the highest offer with the best down payment and credit get's the deal...or the ALL CASH buyer. Somthing to consider before entering this market.
Will we work with you..Sure!
0 votes
Harold Sharpe, Agent, LAKE HAVASU CITY, AZ
Wed May 26, 2010
Fat Franky
I would venture to guess that it may not be the best idea to aggressive low ball at the bottom end of a market anywhere. If you are not looking at the bottom end of the market in that area then that may be different.
I will say this when you aggressively low ball a house in an area you lower the property values in the area. Your astute neighbors are going to love you for that. "Hey Fat Franky thanks for lowering our values 15%!" On the other hand it is up to you and the agent you choose to try and get the best deal possible. I've done deals similar but it is difficult in tract areas.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomesrealestate.com
http://www.socalhomesrealestate.com
California Department of Real Estate License # 01312992
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Wed May 26, 2010
Well Fat Franky - you asked this question well over 1 1/2 years ago.......if you're still out there - did you ever buy a home?
0 votes
Ronda Allen, Agent, Plano, TX
Wed May 26, 2010
You think this is our nightmare??? You don't know us. A good real estate agent is a chameleon. We ride the real estate market like a surfer rides a wave. Sometimes, it's recessionary times and we're working short sales and foreclosures. Sometimes, it's high times and a housing boom, and we're selling new construction like crazy. Other times, it's pretty mellow and we're just rolling along helping people sell or buy, or lease, non-distressed 'normal' housing inventory.

Not only can a good Realtor find you the right property that is ripe for your strategy, they will know their inventory well enough to point out some normal resale deals or builder specs that may just be a huge value for your investment dollars.

Unless your relatives are Realtors, they are just well-meaning loved ones. A good Realtor won't let you be the one taking charge of this transaction. They will control the situation. They aren't just your bus driver, opening doors to a variety of homes and asking what you might want to offer. They know what you might offer and what is insulting and what might just get a positive response. They'll tell you where to offer, and tey will educate you on the housing market and make you a great client for life. (Yours and theirs).

There is only so far you can 'push prices down' before the seller will tell you to go pound sand. Don't be surprised if a seller refuses to sell to you if you don't follow your Realtors' strategy. Comparative sales are reality. Base your offer in FACT, based on timely sales activity, and you'll make a great buy.

By the way, there is a seller somewhere in Torrence, CA who is a VERY motivated seller. They came to Prosper, Texas six weeks ago to meet their new Grandbaby and now they just cannot get to Texas fast enough. I'd say they will work you a very good deal to get here sooner rather than later! You never know what a seller's story is, and how motivated they might be to make the deal work for both of you.

Have a blessed day!
Ronda
0 votes
Home Hunting…, Home Buyer, Torrance, CA
Wed May 26, 2010
My husband and I are looking in Torrance too. To be honest, if my hubby doesn't need to be close to his job in Torrance, I rather buy a house in Sherman Oaks, Studio City, Encino or Woodland Hills, 700K+ can get us a very nice home in about 2500 to 3000 square feet in brand new remodeled condition here in the Valley, whereas in Torrance, it gets us very old junky small houses built in the 40s and 50s. Many homes are close to the refineries, railroad track or the South Bay galleria...or they are just townhomes in crowded complex that has many units, which are no good. A lot of homes in central Torrance with 90503 don't have the good curb appeals like the homes in Sherman Oaks or Studio City. I really think Torrance homes aren't great values for the bucks people shell out.

My husband is always emotionally driven when we see the houses and is always willing to offer the listing price. But I usually compare the comps of recent similar sales and look at the property's sold price in 2005 to 2007 or a similiar property's sold price in 2005 to 2007. If the property's listing price now is similar or just a few thousands lower than its peak 2005 to 2007 level, I will knock 15-20% off the listing price when I make the offer, depending on the location of the property and its condition. Your families are correct. All the numbers and math tell me that Torrance prices haven't reached bottom yet. I also rely on some more math to help me see whether the same amount of money will generate better or the same return in the property comapred to other investments. If the asnwer is the same (even not better) but I like the house, I will make an offer. Otherwise, I will adjust the price lower and lower to the point where it makes sense for me to make an offer.

We haven't made any offer yet after we had seen like 8 properties in Torrance. Just none of them exicted us enough to make an offer so far. Yes, many properties will have many bids and multiple offers becasue a lot of people still don't know what it takes to get a loan before they offer. I had seen many of the"sold homes " fell out of escrow and went back to the market only months later. Most sellers like to pick the one that submits the highest offer but they don't understand it's the offeree's downpayment amount and his montly income and credit score that determines whether or not they can qualify a loan at the price they bidded. Only the buyers who got enough money and money making power can get financing to close the deals. Multiple offers don't mean anything. So go for a low ball offer if the low ball offer makes sense to you.
Web Reference:  http://www.starrjudson.com
0 votes
Scott Godzyk, Agent, Manchester, NH
Tue Oct 21, 2008
If yo have a buyers agent and you are up front what you are looking for, in most cases the buyer agent can give you information of what each property is worth in todays market so you are not just throwing out numbers. i have investors with your type of purchase plan, they lowball every new listing i get. maybe they get 1 of 20 and sometimes 1 out of 15 but it does take alot of time and work. each house is different, each owner is different, you need to make sure the seller is in a finaincial condition that allows them to take less. some sellers cant go lower. ask a few questions such as this and it will save you lots of time. good luck in your search
Web Reference:  http://www.ScottSellsNH.com
0 votes
NonRealtor, , 23456
Tue Oct 21, 2008
Wait another year to buy, save another 20% on the price. You'll be happy you waited. Good Luck
0 votes
x, , Redondo Beach, CA
Mon Oct 20, 2008
Fat Franky.

Your thinking is similar to many of the buyers I am working with right now. This is one of the biggest investments you will make in your life. Who can blame you if you try to get the best possible “buy” for you and your wife? There is nothing wrong with aggressive low balling, especially since you are a buyer with great credit and a decent down payment. Buyers like you who can actually close on the loan are rare right now. Use that to your advantage. I wrote almost 20 offers for my last client before we finally closed on a property. We worked together for almost a year and they’re really happy with their purchase. I’m really excited that they’re happy.

Yoshiko Oest
Shorewood Realtors
yoshiko@shorewood.com
0 votes
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Sun Sep 14, 2008
Dear Fat Franky:

A year ago, it seemed that the only part of Torrance that would lend itself to your strategy was the LA Strip. Now, in the 90503 zip there are about 46 properties in one phase of foreclosure or another. That lends itself to your strategy, even if the home in not one of these 46. People who need to sell will want a clean, fast, closeable escrow, before the bottom totally falls out. They will be more concerned with "can they close" than with how much you are offerring. Some of these people have been through one or more escrows that feel apart and just want out.

Now the only question is, what are you looking for and do you mind being out bid a few times before you get a home? I am working with a number of buyers using your strategy and we can write 14 - 20 offers before someone is even willing to counter back.

If you are looking to add a strong negotiator who knows the area to your home acqusition team, please feel free to contact me. We can sit down, strategize a bit, and then get going writing offers on anything that fits the strategy. Let me know how soon you want to start and Dare to Dream

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes
Tisza Major-…, Agent, Upland, CA
Sun Sep 14, 2008
Hi Fat Franky,

You asked if aggressive low-balling was a good stragegy and I would have to answer... that depends... It depends upon who is selling the home (private party, lender, or corporation), what the seller's circumstances are (do they want to sell or do they have to), what their financial situation where that property is concerned is (do they owe more on the property than it can be sold for, do they own it free and clear or are they just trying to recoup as much of their investment as they can allowing for current market conditions).

A good Realtor will be able to find out most of this information for you. As for it being a "Buyer's Market", I would say that it is once again, depending upon what you are trying to purchase. Generally, a Buyer's Market occurs when there is more than 6 months of inventory available in the desired market area. When supply exceeds demand than the buyer should be able to benefit. However, in our current market where the preponderance of homes available are in some form of distress (Bank Owned, Pre-Foreclosure, Short Sales) and when there is strong demand for these homes (multiple offers, investors willing to purchase all cash with no or few contingencies, seller's demanding an "as is" purchase and saying up front that no repairs will be done or credits will be given) that sounds a whole lot more like a Seller's Market to me.

Are you in a good position potentially based upon what you have shared here? Yes, it would seem so. Can you as for concessions from the seller of the home you want to buy (like paying for your closing costs, buying down your interest rate for you, credits for repairs)? Yes, you should be able to, depending upon the specific circumstances of the desired property and how you structure the request.

Also, a good Realtor should not view a client who wishes to get the best price that they can for a home purchase a "nightmare". When I work with a client before we ever walk into a house to view it, I have already done a considerable amount of research on that property to get a feel for how close the pricing of the home reflects current value. I share this information with my client so that they will have a better understanding of what odds we might be facing before we ever write a contract.

I try to help them structure an offer that the seller can accept and I send the seller all the information we used to arrive at that dollar amount if we are offering less than listed price. A good, clean offer which does not insult the seller and still gets the buyer what they need to make the deal comfortable for them is, in my belief the best strategy to pursue and the one that has the best chance of being successful.

If you need any additional information or have any other questions, please feel free to get in touch.

Take care and have a wonderful day!

Tisza Major-Posner, Realtor, IVPG Realty (909) 837-8922 or (213) 392-4084 tisza@homesbyisza.com
Web Reference:  http://Route66Living.com
0 votes
Karen Lindho…, Agent, Boca Raton, FL
Sun Sep 14, 2008
Hi, Fat!
Well, I just sold, I'm a Realtor, a bank owned property, in Florida on an island, for $502,000 that was appraised in 2006 for 1.6 mil. My customer found me on the net. I had every detail in place & was familiar with the "stacking" order for the Bank. Our initial offer was $488K, the listing price, which I researched & determined was basically current lot value. Within 48 hours, we were given another 24hrs to submit our highest & best offer as there were other offers. My customer asked me what to do & I told him to offer just over 5. He got it!
At the closing, the bank said there were 11 other offers, standing by to close if we didn't. So, some banks are very in tune to what the pricing should be to sell and have employees that know what they're doing proactively. And- I think there are many buyers who don't know where the bottom is and low ball, losing great prime properties.
Karen Lindholm
Red Reef Realty, Inc.
AIM: redipad
561-866-5743 voice
0 votes
Scott Godzyk, Agent, Manchester, NH
Sun Sep 14, 2008
Your first job should be to find a buyer broker to look out for your best interests. you should be able to negotiate before signing so that they get paid by the selling agent through the conbroke fee offered in MLS. Then they can search out the properties in your price range.

as far as lowballing you will waste alot of time and energy offering on every house, your best bet will be a bank owned home as most sellers owe more than your offer will be. decide on an area and have the broker give you what the average selling price is. then you can guage your deal from there, take some time and do some research and find out what they owe, that will keep you from wasting time on offers that will never or can never be accepted.

if you choose to go to a bank owned listing, know you are buying it as is, do your inspections prior to bidding, be ready to close in 30 days, make sure your deposit is at least 1% of the sales price and in certified funds, dont ask the bank to fix anything and if you need money back to close, add that to your offering price as otherwise your bid may not be accepted. good luck with your purchase
Web Reference:  http://www.ScottSellsNH.com
0 votes
Michael Barr…, Agent, Irvine, CA
Sun Sep 14, 2008
Hi there Fat, This is a great time to buy, The statistics do show this.
When you work with Realtor they have a Fiducary realtionship to work for you and to have your best interests at heart. With the number of foreclosures and the banks flooding the market with REO properties there is little that we can really do unfortunately. It is out of our control. Getting great deal also depends on the type of property that you are looking to buy.
If you drop me a line I can explain all this to you

Kind Regards
Michael Barron
Realtor/ MBA
First Team Real Estate
(714) 552-6817
Michael-barron@sbcglobal.net
0 votes
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