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How low can you go on a real estate bid?

Homebuyers are looking for a steal; home sellers are looking for an out, and homebuilders and banks are selling homes at cut-rate prices. Combined, these conditions have triggered a wave of lowball offers to buy homes in distressed U.S. housing markets.

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Conventional wisdom claims that lowball offers don't work. Homebuyers are warned not to "insult" sellers, who are counseled not to counter offers from "disrespectful" buyers. Real estate salespeople are stuck in the middle, oftentimes unwilling to engage in prolonged negotiations that might not earn commissions.

But conventional wisdom doesn't always hold true. With a severe slowdown in sales, some experts now offer new advice.

What is a lowball offer?
The term "lowball" doesn't have a formal definition in real estate, though some salespeople suggest that any offer that's less than some large percentage of either the fair market value or asking price of the property is a lowball.

Wisdom for the current housing market
Homebuyers deserve to make lowball offers.
Home sellers should consider every offer no matter how low.
Realty salespeople should try harder to help buyers and sellers come together.

Karen Monsour, a Realtor with Exit Realty Properties in Coral Springs, Fla., says any offer that's 25 percent less than the asking price falls into the lowball category. By this definition, an offer of $220,000 to buy a house priced at $300,000 would fit the bill, as would an offer of $1.5 million to purchase a house priced at $2.1 million. If an offer is that low, the sellers "aren't going to be very happy, and most of the time, they aren't going to take it," Monsour says.

Others say the term "lowball" is more subjective. Miriam Bernstein, an associate broker with RE/MAX Prime Properties in Scarsdale, N.Y., suggests that just about any offer could be labeled as "lowball" if it provokes the seller to outrage or anger.

"The best definition I've ever heard is that 'lowball' is an offer that's so low the sellers can't contain themselves. They get angry," she says. "You can't come up with a percentage because not every property that comes on the market is (priced) high. It's very specific to each house."

Brokers' negotiating skills benefit buyers, sellers
Monsour says she encourages buyers to offer at least 85 percent of the asking price because anything lower than that is "an insult to the seller."

Yet her disdain of lowball offers doesn't preclude a little pre-negotiation negotiation between herself and the seller's representative in lieu of a formal written offer. The agents verbally agree on a price that's close enough to open a formal negotiation with the proviso that that price may be adjusted as the terms of deal, which Monsour calls, "bargaining tools," are discussed. This approach can move a lowball offer into a price range that's acceptable to the buyer and seller. The strategy works in part because Monsour, like most real estate agents in Florida, acts as a transaction broker who has no fiduciary duty to either the buyer or seller, but instead aims to bring the transaction to fruition.

Bernstein takes a different tack, but one that also can turn a lowball offer into an acceptable deal. Rather than discourage lowball offers, she believes buyers "should be able to put in whatever offer they want and provoke a discussion." After that, it's up to the broker to present the low offer in a manner that's friendly and nonconfrontational. Today's tough markets mean brokers need to be adept at "schmoozing" and negotiating with their colleagues, she says.

 
 
Next: "Don't let (the deal) die on your end."
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