As a seller, it is easy to have your feathers ruffled by an offer on opening weekend that comes in 20% below your home’s asking price. However, taking offense or admonishing the potential purchaser for his low-ball bid accomplishes little. It also moves you further from your goal.
Focus instead on dissecting the information from the low offer to get your home sold.
Sure, some buyers are unrealistic. However, all low-ball offers are a data point for you to file away for future analysis. Even if it’s a one-sided conversation, the market is talking to you. If the deal is salvageable, you will need to get out of judgment and get into curiosity.
For example, who submitted the offer? Is it an out-of-state investor or a local pre-approved buyer who has toured all of the inventory in your neighborhood?
In Phoenix, it is common for investors to swarm new real estate listings under $250K within hours of MLS launch. They bring cash, a quick close and no-hassle inspection periods. The not-so-glamorous part is investor offers are commonly offering 20%-30% below market value. Many come in the form of templated Letters of Intent, which are weaker than committed written offers to purchase. In most cases, the investors have never even walked through the home. They are essentially trollling for a bite.
The investor offers are usually clean, but are not accurate reflections of fair market value because the investor needs to make money on the deal. On the other hand, offers from owner-occupants will likely be closer to market value, but may have contingencies like financing, appraisal and inspections that could prevent a quick closing and add layers of complexity to the transaction.
Look for underlying reasons. Ask questions of the buyer and agents and get answers.
Move your negotiations away from price. You might have information to offer the buyer in exchange for a higher bid.
With a little elbow grease, low bidders can sometimes turn out to be a solid option if you need to move quickly.
I sold a West Valley Phoenix rental property listing recently in 24 hours for my seller. The neighborhood was rough and the home was vandalized during the listing period. The seller was motivated to sell immediately and cash out. We had 4 offers on the first day.
The $183,000 home was in a state of serious disrepair. Three of the four offers were from investors. Bids rolled in at $130K, $161K, $178K and an owner-occupant offer at $184K ($1,000 over the asking price). The middle two bids (both investors) averaged $169,500.
In the end, the seller logically selected the highest net offer at $184K from the owner-occupant. Closing took almost two months. In retrospect, after inspection findings and mandatory FHA appraisal repairs, we could have sold to the $178K investor and closed much more quickly without expensive repairs.
In my experience, here are the most frequent merchants of low bid offers. Understanding their perspective and goals is key to getting the deal closed:
Don’t completely ignore the offer. There are no advantages to letting a buyer twist in the wind. Stalling is fine. Avoiding any communication will draw the ire of the buyer and close the door to any future negotiations.
Don’t use shame to coax them to into increasing the bid. That’s great if you are selling carnival tickets, but purchasing a home is an emotional experience for most buyers. They might just walk away and never show you their best offer.
Don’t shoot the messenger. Your Arizona real estate agent is required by law to present you in a timely manner with all written offers to purchase your home or condo.
I have received many low offers in my real estate career. Here are a few strategies that I have employed with successful outcomes:
The term “lowball” comes from railroad parlance. The ball signal was a manually-operated device that predated electric signal lanterns. It was used to signal train engineers of impending danger or traffic ahead and to control track crossings. A bright red weighted orb (about the size of a beach ball) was suspended on a rope pulley. The ball would be lowered by track crew to stop rail traffic or indicate a hazard. A raised ball signaled a clear track ahead.
Have you received a lowball offer on your home for sale? Leave me your story below in the comments.
Everything is negotiable. Whether or not the negotiation is easy is another thing.
– Carrie Fisher, American actress who portrayed Princess Leia Organa of the Rebel Alliance in the Star Wars franchise
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