We live in a real estate environment where two factors are true – one, it is a buyer’s market and two, values are declining. It is in this environment that “lowball” offers have become the norm. Buyers are always wondering what a seller ‘will take’. In addition, no buyer wants to purchase a home today at $200,000 only to watch the value decline to $150,000 within six months. This does not mean that we don’t see full price offers and even multiple offers, but the home has to be priced aggressively and the buyer has to be certain that this is a ‘good deal’ given the current market.
Given all of this, how do we, as Realtors, prepare our sellers for ‘lowball offers’. I ran across this article on Inman News and it addressed the issue perfectly.
5 TIPS FOR ASSESSING A LOWBALL OFFER
Know when to counter, when to ignore
By Mary Umberger, Wednesday, September 8, 2010.
Your house is for sale for $350,000, and you’re confident it’s well-priced. You get an offer, but it’s for $300,000, and you’re stunned and disappointed by how low it is.
If your first instinct is to feel insulted and to hurl an epithet — don’t, said Jeffrey Stanton, a real estate instructor based in Modesto, Calif., and Staten Island, N.Y. Stanton’s company, Your Professional Development, teaches courses in negotiation techniques.
That seller might still end up with an acceptable sale price, Stanton said: The key is being ready.
Five things for home sellers to know about lowball offers:
1. It’s critical in this market for sellers to be prepared for the possibility of an unacceptably low offer, Stanton said.
This is the job of the seller’s agent — managing expectations and emotions — and too often this particular educational task is overlooked, with uncomfortable, potentially time-wasting results for all, he said.
“Most agents wait for an offer and say, ‘Oh, shucks, now I’m going to have to present this to my seller,’ ” he said.
Not only should the agents tell the homeowners to be prepared for a low offer, they need to come to agreement on just what constitutes “lowball.”
“Each market is going to be totally different. In one, it may be 5 to 10 percent below list. In a different market, it may be 30 percent below list,” Stanton said. “That’s a unique conversation that has to happen between agent and seller.”
2. Lowball offers may have any number of motivations, and sellers shouldn’t automatically presume they stem from somebody’s desire to be insulting.
“A lot of times, a lowball may be all the buyers can afford,” he said. “It could be an investor or a buyer looking to steal the property, or a buyer who really likes your property and is just taking a shot at it, never knowing if you’re going to say yes or no.
“Just don’t take it as them disrespecting you.”
3. If the initial offer seems out of the question, should the seller just ignore it or make a counter?
Stanton said that some negotiators suggest making no written response at all, which tells the would-be buyer that the offer isn’t even being considered, in order to get across the point that the offer must increase considerably. The thinking is that the most powerful thing an individual can say is, “If it’s that low, I’m not selling,” Stanton said.
But he suggests that buyers in such cases make a counteroffer.
“You want to keep the negotiation lines open, so come back with something,” he said. “If the house is listed for $350,000 and the offer is $300,000, the seller may want to counteroffer at $345,000, just to see what the buyer is going to say.”
4. In such a case, the next move will be revealing, Stanton said.
“One of the signs in negotiations is how much of a move they make,” he said. “The smaller the move, the closer that person is to his goal.”
Take the aforementioned counteroffer of $345,000, he said. If the buyer responds to that one with $305,000, usually it can be interpreted as the buyer not having much price flexibility.
But if that (buyer) response is $320,000, that’s a big move, Stanton said. And if the countering continues but the buyer goes up only to $322,000, he’s probably near his limit, he explained.
5. Another technique right at the beginning of the whole process might save everyone time, Stanton said.
If the buyer’s agent tells the listing agent that he or she is going to present an offer that’s significantly below the asking price, “then I absolutely would require that the other agent present that offer in person — I’d say, ‘Be here tonight at 7 o’clock,’ ” Stanton said.
If it’s a true lowball offer where the buyer is just fishing for a price and the agent knows it, it might speed things along if the agent’s presence is required, rather than just faxing the offer, Stanton said.
“The buyer’s agent will say, ‘Let me get back to my buyers,’ ” Stanton said. “It’s called a problem transfer. I’m going to take my problem — that lowball offer — and transfer it to the agent. All of a sudden, that $300,000 offer has turned into a $320,000 offer.
“You’d be surprised how often that actually works,” Stanton said.
Mary Umberger is a freelance writer in Chicago.