A housing transaction, at the most fundamental level, includes one person who wants to sell and one person who wants to buy. Once the terms are agreed upon, voilà! . . . You have a win-win situation.
However, if the seller is miserable with the final terms or feels like they had to settle for a lowball offer; the deal is likely to unravel or turn ugly. And if it does fall through, that causes aggravation and costs valuable time and money for everyone involved.
Here are five facts that a buyer can use to prevent submitting lowball offers:
1. Market temperature matters.
The temperature of the market affects everything, from how buyers shop to what the “right price” is for a home.
One way to do this is to show the percentage difference between the actual list and sale prices for the properties in your neighborhood. It speaks volumes about the current market’s activity. Comparing list vs. sale prices also provides a strong indicator of which direction the market is moving and how much less or maybe even more, than the asking price a buyer should offer.
2. Apples are apples.
When analyzing the comps, make sure the buyers see an apples-to-apples match to their home candidate. Any similarities or differences should be explained to help the buyers see how to analyze the characteristics in the prospective homes. Putting the potential new property head-to-head with the other properties on the market today or those that have sold within 60 days can help buyers understand how key details like square footage, amenities, lot size, age, condition, and others can affect the price.
3. Time is money.
Data from the National Association of Realtors® shows that the typical home search takes 12 weeks. If a buyer starts to lean toward lowballing when it’s offer time, it is critical to point out important time facts like how long inventory lasts and how many hours, days, and weeks you both have invested in finding the right property. Saving time can be a serious motivator for buyers, especially those who have endured a long three months of hunting.
4. Sellers are people too.
If the sellers purchased their house between 2005 and 2009, chances are that property has lost value. They are not happy about it and, whatever their reasons for selling, they are already very frustrated at having to sell at a loss. The sellers are already losing money and will push very hard not to lose any more. Selling your home is an emotional decision all on its own, in addition to factoring in that the property is being sold at a loss.
As a buyer’s agent, it is important to remind the buyers that when people sell their property, they are selling a piece of themselves. A house is the setting of someone’s life. For the seller, its value includes what it represents, not just what it lists for. So while submitting a lowball price sounds like a great way to get a cheap deal, it can start the negotiation process on the wrong foot. A seller and a good seller’s agent will not take that offer seriously. In fact, even if they do respond, that seller now does not want to sell the home to that particular buyer and will do almost anything to encourage another buyer to step up.
5. The wrong offer can cause buyers to miss out.
When I started buying property, I came across a little 1950s Creole Cottage that was about to go on the market at $40,000. It was a fixer-upper and, at that price, it was a very good deal. Although I would have been willing to pay the asking price or close to it, I wanted to see if I could lowball and get it for less. Against my better judgement, I offered $20,000. I thought they would come back with a counter and that we would ultimately close the deal at $35,000. Well, they did counter, but with another potential buyer whose initial offer was $30,000. They were so offended by my low offer that they initially refused to sell it to me at any price. With a little begging and pleading, I was able to acquire the property at an acceptable price by all parties involved.
Most buyers today are smart. With the right data and encouragement from their real estate agent, they will normally agree to submit a reasonable initial offer.
For more information on this blog or any real estate question or need. Contact Alicia Lagarde @ AliciaLagarde@myNOLAhome.com or visit www.myNOLAhome.com
