What is considered a lowball offer in this market?

Asked by Susan, San Francisco, CA Fri Nov 30, 2007

It seems like there is a lot of talk about buyers making lowball offers and worrying about offending sellers.

If the area is in a downward cycle, and the house has been sitting on the market for 1-6 months with only modest price adjustments, and a buyer makes an offer for what they think the house is worth (which may be as much as 20-30% off the list price), why is this considered lowball? Isnt it just being realistic?

I would assume a seller would be "offended" by any price offered below listing, otherwise they would price their house correctly and it would have sold already. When the prices were going up 2001-2006, did sellers care about offending buyers when they rejected offers that werent above asking? I dont think so.

Should offending a seller even be a concern for the buyer?

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8
Lorie Gould, Agent, Duluth, GA
Fri Nov 30, 2007
BEST ANSWER
In Georgia, our median home sales price has increased also but this is not because of appreciation. It is because higher end homes are selling more than lower and mid range homes which has raised our median home sales price. This does not mean that sellers are getting list price and Georgia is still appreciating. You have to look at the area in which you are buying. Based on your question I am assuming that you are also in a strong buyers market. Most areas in the country are experiencing a strong buyers market and prices are still correcting. With that being said Susan, I have to say that I really agree with your comments.

This is a tough market for sellers but it is also a stressful market for buyers. Interesting right? It is a great time to buy! At the same time buyers are nervous...they are worried prices are going to keep dropping after they close giving them a bad investment. Who wants a bad investment, no one!

A homes value is not determined by what a sellers owes, what a seller wants, what a seller needs to pay off mortgages, what a seller needs to buy their new home. A homes value is determined by current market and market predictors. If the experts (agents) in your area are predicting the market to continue on a downward path than you would want your offer to reflect that information so that your investment is better protected. Market value is determined by supply and demand. The more supply the lower the prices, the lower the supply the higher the prices. I would not overpay for a home in this market! You want to be fair but you have to be fair to yourself and protect your investment. This market is not going to create to many win/ wins for the seller when it comes to the dollars they earn on their homes. Sellers are already feeling like losers because their homes are not selling, sellers are already feeling like losers because they have to keep reducing their prices to grab the attention of the buyers. I just do not think that a buyer should overpay for a home because the seller is losing money. That will put the buyer in the position to lose money. Buyers are not to blame for the market.

As for your comment ,"When the prices were going up 2001-2006, did sellers care about offending buyers when they rejected offers that werent above asking?", The individual Seller was not to blame for the lack of inventory then just as an individual buyer is not to blame for the current market now. Many of the sellers now were buyers then... just imagine their pain. Do have compassion.

So don't pay more than what a house is worth but also bring forth your offer with many postives about their home.

If your offer is supported with recent comparable properties that have sold and data supporting market predictors than present your offer.
1 vote
Deborah Madey, Agent, Brick, NJ
Sat Dec 1, 2007
Whether I am representing a buyer or a seller, I do my best to avoid offending any party to a transaction (or potential transaction.)

Yes, a buyer should do his/her best to avoid offending a seller, as it can break down negotiations. That does not mean that a buyer should not make the offer that he/she believes is appropriate for the circumsatnce.

WHAT IS A LOW BALL OFFER? One in which the data supports a higher number, but the buyer is hoping the that the seller is sufficiently motivated by personal circumstances to accept number that is lower than comps, trends and inventory suggests. Simply because an offer is far removed from the ask price does not make it a lowball offer, in my opinion. Rather, it may be an overpriced property.

SELLERS AGENT - As a sellers agent, my job is to get the property sold for highest and best, and usually in the shortest period of time. There is an abundance of documentation to support that properties sell for higher prices and better terms when they are new(er) to the market. As a sellers agent, I will advise a seller when it is in their best interests to lower their price. My advice is not always well received. It is certainly not my intent to offend my seller, but I am remiss in my job if I do not deliver a realistic message. That is often a process of time. Most people need time to move off of an established belief or position. Sellers need to fully believe that my recommendations are made in light of their best interests. If I offend my seller, chances are less that they will be receptive to my message. If I simply allow a seller to remain on the market overpriced, I am not helping them. It becomes a dance of time and trust. Flat fee listing companies have less incentive to coach a seller about market data and proper pricing.

BUYERS AGENT - As a buyers agent, my goal is to get the best price and terms for my buyer. If my presentation of an offer is done in a manner that offends the seller, I am likely to foster resistance and antagonism. I will present offers with sufficient documentation to support my buyers offer. This will also include trends data, and time line adjustments for comps when appropriate. There are times that an offer far off the list price will be offensive to the seller. I ask to present offers in person, although am often denied that oppty. When I do, I will also extend efforts to explain that lower offers are driven by the market to diffuse any offense.

There are times when a buyer and seller cease their negotiations, and one party might attempt to renew those talks a few months down the road. Leaving the table agreeing to disagree does not have to leave a bad taste or ruffled feathers. The results and attitudes of the parties can be impacted on how presentations are handled.
1 vote
Susan, Home Buyer, San Francisco, CA
Fri Nov 30, 2007
I dont only go by those stats. The reason median home price went up in the bay area is because higher end luxury homes are still selling, which is a small percentage of buyers, but all others arent selling; therefore, pushing up the median value. Those statistics are misleading for the average consumer. A smart buyers agent would explain that.

All I can tell is in my area there are tons of homes that have been sitting around for months which I believe havent sold because they are overpriced and there are fewer qualified buyers right now.
1 vote
Gail Hiebert, , KCMO
Sat Dec 1, 2007
Good Question Susan. There is an unfortunate downside to the national news. The human mind tends to generalize news it hears or reads in newspapers, which means that if the newspapers are howling and screaming (in a sense) about the condition of the market, the downturn of the economy, and the dastardly conditions of the housing market, the average consumer, will take that to mean that this condiiton, which is local to the newspaper or news cable, is actually a condition of the overall market. This causes a lot of misunderstandings in the village square. To set the record straight, that few people will do for you, the housing downturn is about real estate markets in FL, GA, AZ, CA, CO and some Eastern Cities, which has not really suffered a downturn in acual numbers. They have suffered a 'regression' from their previously highly inflated prices of the last 2 year (balloon) where prices accelerated by 60-70% in 2 years and are Now, going back to retrench to 30% - Well if you look at the actual percentages, you would think that the market fell 30%. Wow. That is significant. But the truth Susan, is that this 'fall' has only affected the major southern -coast states. In the Midwest for example, our prices have remained stable, and in October, our area grew by 2%. So would you, as an informed buyer, or seller, ever think about accepting or providing an offer that is 20-30% below market values. Of course not. Ther reason is that most sellers would be highly offended. The time-days on market- issue is related to the number of buyers out in the market buying, with some cash reserves to buy, (the real problem right now) and not related to pricing. While a few properties in a stable market may be slightly overpriced, the majority of them are priced at market. That is in a stable market. So the key here is to kknow where you're buying. If you're buying in a 'hot market' or a stable market, you will not find the 'deal' you're looking for. Hope this explains part of the marketplace to you? I hope this helps...
Web Reference:  http://www.9723nflora.com
0 votes
J R, , New York, NY
Sat Dec 1, 2007
You are right, sellers didn't care about offending buyers when the prices were going up, but it was those buyers who BID the prices up. Many time you would have a couple loooking at houses and they'd be bidding EACH OTHER up! "Well, we'd pay 499, right?" "well I would go as high as 505 if we had to" "well if we HAD to I'd pay full price!" Meanwhile they put in their full price offer while another buyer was putting in their full price offer. Seller's had a lot of help when it came to pushing prices up, Susan.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Nov 30, 2007
Sorry, Susan, forgot to connect my answer below to your question -

Will S.F. sellers be offended if you bring in an offer 20-30%? Perhaps or perhaps they will just laugh it off (sorry, that's the good scenario). Hope your agent is one of those who will help the seller to look at low offer positively and work ithe deal through.

But my point is, you have to know the local market before you decide whether you want to make a low ball offer or not.

Sylvia
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Nov 30, 2007
Hi Susan:

You are looking for homes in the San Francisco Bay Area, and as you should know by now, real estate is local and this is especially true in the Bay Area. Here is the stats from CAR (California Association of Realtors) just came out on 11/28/07

Statewide, the 10 cities and communities with the greatest median home price increases in October 2007 compared with the same period a year ago were: Santa Barbara, 24.4 percent; Arcadia, 21.3 percent; Redwood City, 20.6 percent; Newport Beach, 18.4 percent; San Ramon, 14.4 percent; Cupertino, 11.7 percent; San Carlos, 9.5 percent; Redlands, 8.8 percent; Redondo Beach, 8.7 percent; and Sunnyvale, 7.6 percent.

Northern Cal -
Medium Price for 10/07 $373,790, -3.5% change from 09/2007, -3.6% change from 10/2006,
Sales Change from 09/2007 +20.5%, sale change from 10/2006, -16.8%

San Francisco Bay Area
Medium Price $810,490 price change from 09/2007 +3.3%, Price change from 10/2006, +8.95%
Sales change from 09/2007 +9.0%, Sales change from 10/2006, -41.5%

As you can see for certain locations, the price did not really go down much, but actually went up. You can also see that the sales volume for 10/2007 is actually higher than those in 09/;2007 - consitent with what I have observed during my countless open houses (yes, almost weekly)

This is not saying other areas is not decreasing, but interesting thing is that the sales volume is actually up for most of the areas during the last month.

If you want, I will email you this article.

Best,
Sylvia
0 votes
Durenda Fach…, , Coastal Tampa Bay area. Pinellas and Pasco Counties.
Fri Nov 30, 2007
A lowball offer is one that is significantly below the fair market value of the property.
0 votes
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