Last updated on May 1st, 2024 at 03:57 pm
Buying a house can be extremely stressfl, especially when you have to make an offer.
If you are looking to buy a home and want to save some money, lowballing might be the way to go.
But before you start drafting that offer letter with a price way below asking, you need to know what you’re doing.
How to determine what’s fair, and what contingencies can affect your offer?
We’ll also discuss factors that influence the seller’s decision to accept or reject a lowball offer and how to prepare for counteroffers.
We’ll provide tips on how to structure your offer for success and avoid common mistakes that can ruin negotiations.
Remember though, most types of these offers will only work in a buyer’s market.
With inventory low like it has been since 2021, seller’s agents aren’t going to respond to low offers you in many cases.
What is a lowball offer in real estate
A lowball offer is when a homebuyer proposes an offer significantly below the asking price.
Although it can be a tactic to secure a better deal, it could also lead to rejection by the seller.
Market conditions and research before making a lowball offer in real estate.
- Approximately 1 in 5 homebuyers (20%) make a lowball offer on a house (Realtor.com, 2019)
- The average lowball offer is 8% below the listing price (Realtor.com, 2019)
- The success rate of lowball offers is around 20-30% (Realtor.com, 2019)
- In the United States, the average lowball offer for a condo is $15,000 (Source: Redfin)
How low is the lowball offer in real estate
A lowball offer is typically considered to be an offer that is more than 20% below the asking price for a particular property.
This can vary depending on market conditions and geographical location.
What price to offer someone
To make an effective offer in real estate, researching comparable prices in the local housing market is mandatory.
Taking into account the condition of the home and potential repairs can help you come up with a more accurate list price.
Having a strong understanding of your budget and priorities will give you an upper hand during negotiations.
Although lowball offers can be beneficial for buyers in low demand markets, it is best done with caution as it may lead to no counteroffers from sellers.
Using real estate comps to determine a fair offer
Analyzing recent sales of similar homes in the same locality while making an initial offer. You can find recent sales by checking your local MLS.
It is a good idea to consider various factors such as condition, upgrades including appliances and closing costs when deciding on your bid.
How contingencies can affect an offer
When making a lowball offer, keep in mind that contingencies like inspection, appraisal, and financing can impact the final deal.
Inspection contingencies allow for repairs or price negotiation based on issues found.
An appraisal contingency ensures the property’s value meets sale price, while financing protects buyers.
Another example of a contingency in a contract are the number of option days a buyer has.
Consider these contingencies when making informed lowball offers. Get creative if you can.
Factors that influence the seller’s decision to accept or reject your number
Other reasons someone selling a house may have an interest in your offer at a price is if the property is in a bad neighborhood.
When making an initial offer on a home, there are several factors to consider that can influence whether a seller accepts or rejects it.
This might include the seller’s motivation to sell, the condition of the property, market conditions, and the buyer’s ability to close quickly.
If you can pay cash, this means you can close fast!
Additionally, careful consideration of contingencies related to financing, inspection, and appraisal can also impact the likelihood of a your offer being accepted.
Remember work with an experienced real estate agent, buyers can increase their chances of successfully negotiating a good deal on their dream home.
Financing options and their impact
Buyers must consider various financing options available in the real estate market.
When negotiating with the seller, keep in mind the listing price and the seller’s financial position.
Does the seller need to sell fast?
To make your offer attractive to sellers, get pre-approved for a mortgage or providing cash upfront.
Some sellers love home cash buyers because they don’t need financing.
But also be ready to negotiate using tactics such as concessions or a higher down payment. Remember a short option period works wonders.
Should you work with a realtor when making a low offer
While working with a realtor can help, choose a realtor who understands your goals.
They can save you time.
Remember to research local market conditions and comparable sales data to support your offer.
A lowball offer may not be accepted, but it can initiate negotiations leading to a successful purchase.
How to prepare for a counteroffer
If you want to prepare for a counteroffer on an offer in real estate, research is key.
Almost all sellers are going to counter your offer.
Did you leave yourself some wiggle room?
Think about how you can address contingencies like financing or repairs in your bid.
Maybe you tell the seller you will purchase the house “as-is”
Negotiation tactics such as explaining why you made the offer can help too.
Did you know that a lowball offer can be countered by the seller with a higher price.
Keep in mind that walking away may be necessary if the seller doesn’t budge on their asking price.
What are the common mistakes to avoid when making offers
- Avoid offering an amount that may insult the seller and negatively impact negotiations.
- Not researching fair market value, and provide evidence to support your offer is a big mistake.
- Avoid unreasonable demands or contingencies that may further decrease the chances of a successful negotiation.
- Don’t insult the homeowner with an excessively low bid or overpay for the property.
- When you come in low; give their realtor or the seller the reason why
By keeping negotiations open and understanding your leverage during counteroffers, you can ultimately secure your home at a low price!
How to handle rejection and keep negotiations open
Sometimes you just won’t be able to secure the property at the price that makes sense for you.
If you can’t get the house under contract, it’s time to move on.
It is much worse to buy a house you cannot afford or has so many issues.
You will regret it immediately.
Move on and know that there is always another property coming up on the market.
Avoid pursuing properties with multiple offers or in high demand as this reduces your bargaining power.
Most buyers who offer under asking won’t win the house with multiple offers.
Present yourself as prepared and willing to negotiate by justifying your lower price with data-driven insights.
Using outdated comparables to come up with a number
When considering a lower offer on a home purchase, it’s important not to rely on outdated comparables.
Making an excessively low offer can be off-putting to the seller and harm your chances of obtaining the property.
However house cash buyers in cities like Austin have to bid low in order to make a profit.
If you are working with a realtor, they should all of the information regarding the latest prices.
Remember your agent is probably working on commission that they will split with their broker.
Moreover, you should never overlook important contingencies like inspections or financing.
During negotiations with homeowners or their agents remember that flexibility always works best for both parties involved.
What are some tips for making a successful low offer
Understanding the seller’s motivations and crafting a well-supported purchase offer that includes contingencies for inspections and financing, you can stay competitive in today’s high-demand housing market.
Something homebuyers can do is make an offer in cash, that means that there won’t be a loan or an appraisal.
- Be respectful:Remaining professional while negotiating with homeowner or their listing agent is also important for making serious offers that could lead to a great deal.
Remember people like doing business with people they like.
- Justify Your Offer: If the property requires significant repairs or has been on the market for a long period of time, these factors can be leveraged to justify a lower price.
Many properties have foundation damaged, need a new roof, or a new HVAC system.
- Stay Competitive: Including fewer contingencies, proving pre-approval of home loan, or proposing a faster closing date can make your offer more attractive.
- Use a Real Estate Agent: If you’re unsure, it’s best to work with an agent who can guide you through the process,
Timing plays an important role during slow periods or if properties have been on sale for long durations.
Slow times indicate a buyer’s market, and this can give you an edge.
Adding value with oprion money or a personal letter
When making an initial offer on a home, it is important to consider various negotiation tactics to ensure success.
One such tactic is to offer a short option period.
Paying cash is always preferred and includes a quick closing.
A higher earnest money amount can also show just how serious the buyer is.
Additionally, a personalized letter explaining why they love the property and how they plan to take care of it can make them stand out from other potential buyers.
It’s important to remember that negotiations should be respectful and not go overboard with a lowball offer.
Understanding your leverage and staying patient
Consider factors like the local housing market and the homeowner’s drive to sell.
Other leverage includes how much the house needs in repairs, how long houses sit on the market in the neighborhood, etc.
Final Take-aways
Lowball offers can be a great strategy for homebuyers looking to save money on their purchase.
However, it’s important to approach the process strategically and with an understanding of the seller’s perspective.
By using real estate comps, considering contingencies, and being strategic in your negotiation tactics, you can increase your chances of success.
Remember to stay patient, understand your leverage, and be prepared for counteroffers.
With over 15 years of unwavering dedication to the Texas real estate market, Andrew Reichek is your trusted partner in achieving your real estate dreams. As a licensed Texas Real Estate Broker, Andrew’s unparalleled experience and expertise make him the go-to choice for both buyers and sellers. His extensive knowledge of the local real estate landscape and commitment to delivering exceptional service have made him a recognized authority in the industry.