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How low can you go on a real estate bid?

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Institutions may be more open to lowball offers
If the seller is a financial institution, rather than a private homeowner, the risk of insult may be lessened, according to Ian Maker, an REO specialist with RE/MAX Gold in Rancho Cordova, Calif. (REO, or real estate owned, refers to homes that have gone through foreclosure and are owned and sold by lenders.)

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"My job is to get offers on their desk. I present them with the facts, and it's their choice to decide what they want to take," he says.

Homebuilders and investors also may be less emotional than homeowner sellers -- but not always. Some builders "put their heart and soul" into each home they build and "become emotional" about lowball offers, Bernstein says. Other builders "can afford to wait until they get" the price they want, she adds.

Buyer may offer more if seller responds
The new thinking for sellers is similar. While a lowball offer may be unwelcome, it could be an opportunity to open a dialogue with a buyer who "ultimately may give (the sellers) what they want," Bernstein suggests. A seller who has "a bad reaction" to a low offer, "may lose a good buyer who could make a deal," she says.

The objective is to keep the lines of communication open.

The outcome could depend on the real estate salesperson's willingness to negotiate, a task that not all agents greet with enthusiasm. A lot of brokers "dismiss the offer as too low" when they should say, "Yes, it's low, but let's discuss it and let's see how much more money this person has to give you," Bernstein says. Some buyers come in with a low offer, but then "come up huge amounts if they really want to buy the house," she adds.

Some sellers respond to a lowball offer with a counteroffer that cuts only a nominal amount off the asking price. Others refuse to counter at all or counter at a higher price just to make a point to the buyer. Bernstein suggests an alternative approach that aims to create goodwill: Thank the buyer for the offer and indicate that a counteroffer may be forthcoming if the buyer will "come up with a little more" at the outset.

Lowball offers: 'You just never know'
The bottom line on lowball offers is that each real estate deal, like each house, is unique. That means buyers and sellers need to know the strengths and weaknesses of their own and each other's negotiating positions. If a seller's home is in prime condition, has only just come on the market and is attractively priced, a lowball offer may be rightly dismissed from a position of strength. But if that same home is still on the market with no takers six months later, a motivated seller may be more inclined to give a lowball offer a second look.

Maker offers a good tip for buyers and sellers: "Don't let (the deal) die on your end." If the seller wants to sell the property, every offer deserves a counteroffer, and if the buyer wants to purchase the property, every counteroffer merits consideration. The objective is to keep the lines of communication open until a deal is agreed upon.

Bankrate.com's corrections policy -- Posted: May 1, 2008
 
 
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