Why Buyers Should Avoid Making Lowball Offers
A buyer’s market occurs when the supply of something greatly outweighs the demand for that same thing. Much of the Tallahassee real estate market is presently a buyers market. Buyers know this. They also know that when it comes to making an offer on a home, they have a lot of leverage. What they don’t always know is that sellers are only willing to bend so much on what they’ll accept in the way of an offer.
Lowball offers occur when a buyer makes a substantially lower bid on a home than the list price. To be clear, this can work with homes that are in short sale or foreclosure situations. But in those situations, a bank has the ultimate say in what an acceptable price is. A bank has no interest in owning homes. They are more willing to accept below-market prices in order to get rid of a home as quickly as possible.
Homeowners, on the other hand, tend to be emotional. They have also most likely been educated by a real estate agent as to the fair market value of their home, backed by data from comparable homes sales. If a home is priced at a fair or below-market price (by motivated sellers), they will be less likely to come down on price.
Buyers may think that a lowball offer will help them get a better price on a home. In reality, lowball offers only serve to put sellers in a defensive mode. I recently had sellers who received an offer 21% below the list price on their vacant home, which they had already dropped well below what we believed the fair market value was. The sellers wouldn’t even consider the offer. To them, it was an insult. At a great inconvenience, they’ve decided to move back into the home.
If you’re a home buyer and you’ve found a home you really like, avoid making a lowball offer. A seller will be more willing to offer concessions in the way of price, closing costs, and repairs if an offer is reasonable. If you do make a lowball offer, make sure you have price data on your side and really good agent to deliver the bad news to the sellers.