Lowball Offer


Lowball Offer

There is considerable debate surrounding the term “lowball offer”.

Some individuals use it to describe an offer that falls significantly below the asking price, while others use it to denote an offer considerably lower than the market value. For our purposes today, I will adopt both as the definitions.

Dealing with these types of offers can be disheartening and exasperating, but there are strategies to manage them effectively. Here is our top advice:

Understanding the buyer's motives before responding is crucial to grasp the motivations of the buyer. Typically, lowball offers originate from buyers in one of the following scenarios:

Bargain Seekers: Some buyers, often opportunistic or investors, are on the lookout for a great deal and aim to acquire a property below its market value. They employ lowball offers as a tactic to identify sellers who may feel an urgency to sell.

Budget Constraints: Occasionally, buyers fall in love with a property that exceeds their budget. Although they recognize the property's value may be $1,000,000, their budget is limited to $800,000, so they submit an $800,000 offer, hoping for a favorable outcome and often feeling like they have nothing to lose.

Renovation Plans: Some buyers intend to renovate a property and deduct their estimated renovation costs from the asking price. This scenario is more common than you might think. A buyer might adore a $1,200,000 house but plan to replace the kitchen and bathrooms, so they offer $1,000,000. However, they may not realize that their personal renovation plans do not necessarily impact the property's market value.

Negotiation Strategy: Certain buyers relish negotiation and use lowball offers as a tactic to shift the balance of power during negotiations. They may indeed be willing to pay market value but prefer to engage in protracted negotiations first.

Lack of Knowledge: Many buyers rely on their real estate agents to help them gauge a property's value. Often in a seller’s market, the buyer wants to “try” the first few times with lower numbers, only to lose out to another buyer.

Genuine Concerns: While you may not necessarily agree with them, some buyers may genuinely believe that your property's value is significantly lower than your asking price.

Understanding the buyer's motivations can aid in more effective negotiation and potentially increase the chances of a successful sale.

Is Your Price Justified? Are there recent strong comparable sales—similar homes in the vicinity that have sold recently—that support your asking price? Have you considered the prevailing market conditions?

Remember - do not Take it Personally! It is natural to feel personally affected by a lowball offer, but it is essential to remember that the buyer is simply seeking the best deal for themselves. I have witnessed sellers react emotionally to lowball offers and refuse to negotiate. However, if you can refrain from becoming defensive, you will enhance your chances of success.

Counter their offer realistically when faced with a lowball offer. It is crucial to respond with a counteroffer based on objective factors. Consider the current market conditions, comparable sales in the area, and any improvements or renovations you have made to the property. Your counteroffer should be grounded in these considerations rather than driven by emotions or a desire to outmaneuver the buyer.

And be Prepared to Walk Away If the buyer is unwilling to negotiate and presents an offer far below a fair price. Some lowballers are solely interested in securing a bargain and have no intention of ever paying market value.