Don’t offend me with your offer
I was at a meeting earlier today where a listing agent was complaining about the offering price of two “low ball” offers on the same property. The offers were so low, his sellers wouldn’t counter them. The agent knew in advance they were going to be low ball offers. He therefore, warned his sellers they would be getting multiple low ball offers.
Real estate agents listen up, say goodbye to the term “low ball offer”. Hear me now- an offer is an offer. I don’t care if it is thirty percent under the asking price. An offer is an offer. By using the term low ball offer, we are setting ourselves and our clients up for the fact that it is not a real offer.
Deals are not happening because agents are afraid to write offers. Deals are not happening because agents are afraid to present offers. The job of a real estate agent is to make deals happen, not prevent them.
What is an offer? A starting point for negotiation. Pure and simple. I have found that most buyers are willing to pay more than they offer, even when they tell me it is their highest and best offer. Often times, sellers will take less than they say is their absolute bottom price. Sometimes they won’t (or can’t), but you don’t know and they don’t know until you get into negotiations.
Regardless of what people say, you don’t know how much a buyer will be willing to pay nor how much a seller is willing to sell for until until you start to negotiate.
Agents have gotten lazy
Agents have gotten lazy over the last few years. They haven’t needed to negotiate. The listing agent would throw up a sign and waits for offers. The buyer’s agent would wait to hear how many other offers are coming in and then see who can win the contest- almost like an auction, blindly throwing out bids.
It is time for real estate agents to start working. Get off your chair and make deals happen. Don’t be afraid to write an offer. Be reasonable, be smart, but get your buyers to write an offer.
Don’t position your under asking price offer as a low ball offer. Is your client serious? Are they qualified? Can they perform? If so, it is a real offer, a starting point for negotiations. Listing agents- prepare your clients that they should expect that any offers will be under asking. You can’t tell them how much under asking that might be- the market and the buyers will tell them that, but explain -IN ADVANCE- that it is always a good idea to try and negotiate on ANY offer.
What is an offer? A starting point for negotiation. Pure and simple. Start negotiations and you might find you have put together a deal.
Vicki Moore
September 23, 2008 at 3:22 pm
That’s pretty funny. I had a seller say: We’re not answering THAT! I said oh yes you are – they ended up ratifying and closing with that buyer. Buyers want to feel that they got a deal. Sellers want to feel that they got the most money for their house as possible. How is either going to know that if there’s no negotiating?
Steve Simon
September 23, 2008 at 3:38 pm
Ginger,
In Florida unless you have been instructed by your client, the seller assuming a single agency situation, not to convey offers below a certain amount you are required to convey all offers.
When I covered this in class (over the last twenty-two years, and before about twenty five thousand students) they used to love saying, “What if this … and What if that…”
I would laugh at their sometimes amusing contrived low ball and other oddity type hypothetical offers, and then tell them the law:
You are required to convey all bona fide offers. Then I would expand with, unless you have been told you should not convey certain types: under a dollar amount, or those with seller financing, etc.
Then I would tell them, “You better have the instruction not to convey those types of offers in writing and signed by all the owners…” and I would add, “If it were me and I had been told not to convey low ball or whatever type of offers, I would still convey, apologize for bothering them and convey the offer anyway!”
They would usually laugh and I am sure some disagreed with me; but the concept is sound.
You never know when the personal, and or business circustances that your client is in have changed. Their previous instruction may no longer be in their best interest at the time this offer is made. Best to convey, period…
Just my thoughts 🙂
Steve Simon
September 23, 2008 at 3:49 pm
Ginger, followup:
I had a broker student tell me they gave the seller an offer that was so low, that the seller instructed the broker to increase the asking price by $5,000 and convey that back!
For those who wish to read more:
In the land of contracts:
An offer is an offer until accepted.
If an offer is accepted by the offeree and that acceptance is communicated back to the offeror then you have a contract (which may or may not be enforceable depending upon the type of agreement,certain contracts require they be in writing and carry valuable consideration in order to be enforcable).
If the lowball comes in, and the seller counters with a higher price it is simply a new offer (commonly called a counter-offer) and the seller who was the offeree by virtue of the counter offer has now become the new offeror.
The point is to tell the “Low Baller” how the contract law works before they have you insult the other side. Low Ball can be met with Highball!
Highball, reminds me I’m about due for my Rye & Ginger:)
Matt Wilkins
September 23, 2008 at 4:33 pm
I agree that many sellers seem shocked by the initial offers they receive. I renetly negotiated an offer for a buyer (deal is closing next week). My client made a “fair” initial offer. Upon first convo with listing agent to get sending instruction I was told a similar offer had just been rejected by the seller. I sent it anyways and the seller countered with a ridiculous “highball” offer. After negotiations both sides cane to an agreement. I will say though I take the philosiphy that price is not everything in an offer and other factors make up an acceptable offer to the parties involved.
Missy Caulk
September 23, 2008 at 4:41 pm
Ginger, we started saying several years ago in Ann Arbor,”there is no such thing as a low ball offer”. I prep my sellers to expect it first go round. So they are not shocked. Only had one seller refuse to counter, the buyer walked.
Mariana
September 23, 2008 at 4:54 pm
Interesting that a seller (in this current market) would still balk at an offer … regardless of how “low” it was. If someone was willing to take the time to WRITE an offer, a Seller should acknowledge it – even if they counter back at full price.
Nick Bastian
September 23, 2008 at 4:56 pm
some times, multiple “low ball” offers = an over priced listing. 🙂
Bob
September 23, 2008 at 4:58 pm
You can use a little common sense here as well. Asking the buyer’s agent how they arrived at the offer price can tell you a lot about the buyer and the agent. If they are clearly just bottom fishing, I’ll direct them to a different pond. Not very offer warrants a response.
Chuck G
September 23, 2008 at 5:36 pm
It’s simple….keep the ball in play. If the seller in this instance refuses to counter, they have killed the discussion and the opportunity. Always make the OTHER side have the last word!
Bob
September 23, 2008 at 5:56 pm
Not everything is an opportunity. We get $300k offers on $800k listings. We get offers from people that think Carlton Sheets is the Albert Einstein of real estate and want the seller to carry paper on a short sale. That isn’t a discussion that leads anywhere close to an opportunity. That is what is referred to as “patently absurd”.
Lowball has to at least be a pitch that is in the ballpark.
Chuck G
September 23, 2008 at 6:32 pm
So? Counter them back at $795k and put it back in their court. That takes all of 5 minutes of your time, and that serves to flush out 100% of the offers that weren’t serious in the first place.
Mack
September 23, 2008 at 8:05 pm
When you have a $400K listing, the seller and buyer are $400K apart in the negotiation. When you receive a 350K offer the buyer and seller are now 50K apart. Look at how much closer you are to completing a transaction instead of how far apart you are. It’s the old “Is the glass half full or is the glass half empty” comparison. If you portray a positive attitude about it your client will take it in that light.
Ginger Wilcox
September 23, 2008 at 10:37 pm
Vicki- I love that you pressed them to take a look. You did your job.
Steve- I hope you enjoyed your rye & ginger. You are clearly a knowledgeable instructor. I like the highball strategy!
Matt- Price isn’t everything. I recently lost a multiple offer situation where my buyer was significantly higher than the other offer because my buyer had to have financing and the other offer was cash. Terms do matter.
Missy- a seller who isn’t willing to try is shutting out a potential buyer, pure and simple. You have to start somewhere.
Mariana- amen sista!
Nick- exactly what I thought. Come on. If you have two nearly identical low offers that = current market value.
Chuck- I play the game the same way you do. So what if it takes a little extra time to write a counter, keep the ball in play.
Bob- Sometimes the out of ballpark pitch is just to test the motivation of the seller. I think it is always worth a shot to try and get the ball back in the ballpark. It may take extra effort, but if you don’t have other offers beating down your door, what do you have to lose by trying?
Mack- yep, a lot easier to resolve a $50k difference than a $400k difference. An offer is just a starting point until it is accepted.
Ginger Wilcox
September 23, 2008 at 10:38 pm
I would like to point out that I have written at least three offers in the last few months that a seller refused to respond to. In all three instances, the seller later came back and offered to accept the buyer’s original offer. Too little, too late, the buyers had moved on.
Brad Coy
September 23, 2008 at 11:49 pm
>Too little, too late, the buyers had moved on
Hate when that happens. My approach is generally this. Listing price is $799K. You get an offer of $759K and you now have a $40K problem rather than a $799K problem. Getting rid of most of the problem sometimes helps to arrive to a solution.
…and when the buyers move on. They sure do move on, don’t they? 🙂
Rich Jacobson
September 24, 2008 at 1:57 am
So true, so true! The brisk, high end of the cycle always breeds laziness. And with laziness, the art & need for negotiation goes out the window. Who needs to negotiate when you’ve got multiple offers? Fortunately, the slower low end of the cycle restores the need for skilled negotiation and effort. My mantra to my clients – “Every offer is a serious offer.” PERIOD. Each offer contains multiple elements. Price is only one element among many. I have seen low-priced offers where all the other elements clearly overshadowed the low price. Why anyone would want to sabotage a starting point is way beyond me!
Bill Lublin
September 24, 2008 at 3:21 am
Ginger – Points well made – All offers give an agent the opportunity to sell the difference (between the lower offer and the acceptable offer) instead of starting at zero to sell the entire price.
I will tell you that I got a silly low offer yesterday on a property I own, and when the agent sent it to me it was covered with a note that said ” I don’ t want to insult you with this offer” to which I responded ” I’m not insulted, but I am amused ”
Gotta start somewhere…
🙂
Elaine Reese
September 24, 2008 at 7:27 am
Earlier this year I received a very low offer that was contingent on the buyer getting their home in contract AND it was “listed” as a FSBO AND they wanted 4 months to try to get it into contract AND they didn’t even have a pre-qual letter, let alone a preapproval letter. Plus, when I did a check of their home’s value vs the price they were asking, it seemed as though their home was grossly overpriced – as FSBO’s often are.
I convinced my sellers to counter, but the buyer didn’t respond because they found the seller’s offer to be “unacceptable”. Go figure!
Bob
September 24, 2008 at 9:44 am
“It may take extra effort, but if you don’t have other offers beating down your door, what do you have to lose by trying?”
I guess that is the difference. We are getting offers, so dealing with buyers who think they can buy at 50 cents on the dollar is not necessary. Worse is dealing with the agent who hasn’t done anything to educate the buyer about the market reality.
But I think you overlooked something I said earlier, and that is asking some basic qualifying questions of the buyer agent can go a long way in determining whether a counter is a waste of time and energy.
Justin Dibbs
September 24, 2008 at 1:32 pm
Exactly. Every offer is an offer! But when I represent the buyer I often include evidence to justfy my client’s offer. That usually helps quite a bit.
It all boils down to properly preparing the buyer or seller, right? 😉
Paula Henry
September 24, 2008 at 9:00 pm
Ginger – You are so right! There is no low ball offer – only an offer which warrants a counter offer. they don’t all work out, but it is a starting place.
Ned Carey
October 7, 2008 at 11:27 am
Thank you for a well thought out article. It amazes me that agents still get upset at low offers.
I’ll give you a different perspective. Many properties on the market need work. In todays market retail buyers have no incentive to buy fixer uppers. The market for fixers is investors.
Most agents don’t understand how low an investor needs to by to be profitable. Soft costs will eat you alive. Buying at about 80% of FMV is about break even. That’s assuming no work needed! Properties that need a fair amount of work need to be purchased at about 50 cents on the dollar or less.
What many agents consider a “low ball” offer, is often one that I consider high risk.
If an agent asked me to justify my offer I would be happy to.
Ned Carey
Tania
November 6, 2008 at 7:42 am
I made an offer of $315,000 on a asking price of $350,000. I was told by the real estate agent that my offer was too low and as there is no counter offer it will be up to me to make a higher offer.
That was two days ago and I will be walking away, as after some thinking time I can see much better properties than the one I put an offer on. If I had of got a counter offer I would have been prepared to go higher, however now I can see much nicer houses for sale and the one that I put the offer on has been sitting around for weeks and nobody else has been interested in it.
I think the seller let a sale go.
Vicki Moore
November 6, 2008 at 11:28 am
Tania – I think you’re right. There’s value in the seller giving a counter offer – just for the reason you stated so perfectly.