Low-ball offers are sometimes necessary when buying property but knowing exactly how to win in this financial race can be key to whether you’ll own your dream home or not.
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What is a low-ball offer?
Picture this: you’re ready to purchase your dream home with nothing in the way of getting the keys you so desperately want. Except for the money part.
Whatever the reason, making an offer on a house below the asking price may just be in your best interest. This is called making a low-ball offer.
A low-ball offer is when you offer less money than what you think the property may be worth. This is a common strategy used to compromise on a selling price.
Depending on your situation, offering less money may actually work, but in most cases, there will be an ample amount of pushback. When you find that a low-ball bid will not be accepted, you can try negotiation from there.
Sellers tend to reveal their hand with how much their counter offer is in response to your low-ball offer. From there, you can gauge if you want to continue to do business with them, how much you can negotiate, and how cooperative the seller is.
When to make a low-ball offer
Knowing when to make a low-ball offer is just as significant as what you plan to propose. Depending on the area you are looking to live in, making the offer sooner rather than later may actually be a bad idaea.
In areas that have many options and few buyers, investors tend to make low-ball offers to see if they’ll get away with it. Making a reasonable offer may just cost them money that they could have saved.
If you are looking at your dream home, there’s not as much space for cushioning. Personal circumstance and market activity are the two more important factors to consider when deciding on how much to offer for a house.
If the property you are considering is in a property market where homes are being scooped up quickly with strong demand, making a low-ball offer may kick you out of the running, especially if it’s your opening bid.
On the other hand, in a slower market with struggling properties, people looking to offload their property may be more willing to hear you out. It is also important to consider the timing of your bid. Newly built homes or homes that are fresh on the market are less likely to be bought with a low-ball offer.
How to know how much to offer for a house
There are a few scenarios in which making a low offer may hurt you more than help you. For example, if the market is up and popping, your offer may be a joke that’s laughed off by sellers.
Another way to know how much to offer on a house is by looking at the overall desirability of the home. If it is drawing the attention of many people, consider all the people who will not be low-balling; they’re your competition.
If the home you are considering is rare for some reason, it most likely will be sold at a significant amount as well. Homes with higher bids tend to be less flexible with the budget than sub-par homes.
How low is too low
Knowing how to make an offer on a house can also determine if you can get away with your low-balling proposition. First, you need to look at the list price.
If the home’s price tag is significantly higher than what it’s worth, you can start looking at a 5% or 10% discount. If you think it’s your lucky day, though, some have gotten away with asking for 25% off of that price tag.
You can look for a Statement of Information to find appropriate listing prices and go from there. It is important to remember that every market is different.
Your low-ball offer should be justifiable or at least understandable to the seller. A few factors to consider are the local area’s asking price, how long the home has been on the market, if the property has ever been discounted, and the current market’s activity.
Tips for making an offer on a house below the asking price
A low-ball offer is most likely going to prompt a bit of pushback no matter how much you want the discount to be. It is important to uncomplicate all areas that can be uncomplicated.
By asking for a reduced price, you are already pushing at the seams, so asking for more such as unsavoury settlement terms can create a tense relationship between you and the seller.
In case a vendor accepts your offer, make sure that you are not spreading your eggs in too many baskets. If you’ve been making many of the same offers, you may find yourself in a sticky situation if you’ve had more than one acceptance.
Lastly, always make sure you know what other prospective buyers have offered. You can do this by asking the real estate agent about previous bids and the reasons why they haven’t been accepted yet.
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