Why Some Lowball Real Estate Offers Work — And Others Don’t

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In the more than four years of the real estate recession, many wanna-be homeowners have been hunting for houses way above their realistic price range, banking on the hope that they can make a lowball offer and get it accepted. Even some die-hard renters have spotted a listing they like and wondered at least once: “Why not just throw a lowball offer on the table? What do I have to lose?”

While the definition of a lowball offer is relative to the market and the expectations of the parties, there are a core set of factors that seem to position some offers for success and doom others to failure. In my experience, lowball offers that get accepted usually have more than one of the following factors in their favor.

(PHOTOS: 12 Things You Should Stop Buying Now)

  • The offer price has some basis in reality. The best lowball offers are those based on the facts, specifically the going prices for similar homes that were recently sold in the area. On the other hand, offers based on the buyer’s fantasy deal don’t work and are (correctly) construed by sellers as out of touch with reality and disrespectful of the fact that this home is the seller’s largest asset.
  • The offer is presented to the listing agent or seller along with the facts supporting the price. Beyond simply having a basis in fact, the best lowball offers are presented with a list of comparable sales that, in the buyer’s opinion, justify the offer price. This is one way in which a buyer can communicate to the seller that the lowball offer is made with all due respect, not out of an attempt to take advantage or flex the buyer’s superior bargaining power, but out of a reasoned, logical attempt to pay what is fair for the property. Providing your comps with your lowball offer also empowers the listing agent to discuss with the seller the possibility that the home won’t appraise in the realm of the list price in any event. And that, in turn, makes a seller more likely to take a lower-than planned price for their home.
  • The seller’s inflated idea of the home’s worth have already been corrected by the market. Lowball offers have a better shot of being accepted when the property has been on the market for a long time with no offers or only offers that are similarly low. Agents often say that sellers whose homes have lagged have been “educated by the market” as to what the actual fair market value of their home is. Once a seller has tested a market and either received no buyer interest or only lowballs, the seller is more likely to accept a lowball offer.
  • The seller is both highly motivated and able to sell at the lowball price. A seller who owns the home free and clear might not want or need to sell badly enough to let it go at a song. On the other end of the spectrum, a seller with a mortgage on their home might not be able to afford to sell below their break-even price, because they simply don’t have the cash to make up the difference between what they owe and the lowball price, and they need to avoid a short sale for financial or credit reasons.

In fact, the vast majority of lowball offers I’ve seen have failed due to one of these two simple reasons: the seller can’t or doesn’t want to take a low price for the property. Buyers do better to make reality-based offers based on their target home’s fair market value, and relish in the low price they’ll likely pay on today’s market even without having to squeeze the seller.