How low can you go on a real estate bid?
|By Marcie Geffner
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.
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.
conventional wisdom doesn't always hold true. With a severe slowdown in sales,
some experts now offer new advice.
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|
deserve to make lowball offers.|
sellers should consider every offer no matter how low.|
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.
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."
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.