“It’s in the Dirt” – The Low-Ball Offer

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I consider myself a ‘casual’ baseball fan.  I watch a couple of games a year on TV and maybe take in a minor league game every once in awhile.  While most guys attend games to watch balls fly out of the ballpark (“Chicks dig the long ball!”), I’m more cerebral and love a good pitcher’s duel.  There is nothing like watching a pitcher that has total control over his pitches as he nibbles at the corners of the strike zone trying to get a batter to swing at a bad pitch, or if they make contact, will weakly dribble it into an infielder’s glove for an easy out at first base.  However, there is a fine line between nibbling at the corners and just throwing a pitch away.  It’s hard to define, but you know it when you see it.  The same applies to submitting an offer on a listing.  There are some offers that cause the seller to take a good hard look at (and occasionally take a swing at) while there are others that are real head-scratchers.  As in baseball, the low-ball offer that is a waste of everyone’s time is hard to define, but I know it when I see it.

Over the past year or two, buyers have had the upper hand in most real estate negotiations.  But having the upper hand in negotiations and throwing spaghettii against the wall to see if it will stick, are two different things.  Consider the following guidelines if you are a buyer or buyer’s agent and you’re looking to make an offer (perhaps even a low-ball offer) on a property:

1. Back-up your offering price with factual data not fictional fluff
       
   There is no faster way to having your agreement end up at the bottom of a trash can than to use the “Low-Ball, Bad Market Formula” (ULBMF).  It goes something like this:  deduct 10% off the asking price -then-subtract another $10,000 for good measure -then- ask the seller to pick up $10,000 in closing costs.  Huh?  Before submitting the offer, did you take the time to look at comparable market data from the area?  I have to admit, that there are some sellers out there who have ignored that we are in a challenging real estate market.  They have priced their home as if it has appreciated 12% over the past year.  But if the listing agent has done a good job of educating her seller, she has reviewed comparable data with them and perhaps the home is already listed at a fair price.  Using ULBMF on the latter seller will do nothing but send the negotiations South in a hurry.
       
   When putting together an aggressive offer, compose a cover letter to submit with the offer that explains exactly where the number came from.  Cite comparable sales, detail the amount of existing inventory in the area and list any other pertinent facts that went into your decision to submit the offer that you did.
       
2. Understand the seller’s motivation for selling (if possible)
       
   Every seller is in a unique place in their life.  No two are the same.  A seller that is going through a divorce or is in the middle of a job transfer will negotiate differently than a seller who is retiring and is downsizing.  Other factors to keep in mind:  how long has the property been on the market, has the seller purchased another home and now owns two (or multiple properties) and what the local market conditions are like.  If possible, try to find out what all these factors are before structuring your offer.
       
3. Prepare for rejection or negotiation
       
   The two factors that all buyers should keep in mind when making any kind of offer is that you run the risk of upsetting the seller or losing out on the property if you are in a competing situation.
    
   Sellers have fragile egos (don’t we all).  They may have lived in their home for years – perhaps raised their children there.  In many cases, they have fond memories of their home.  If you throw a low-ball offer at them they may take if personally and mentally withdraw from further conversation and negotiations with you.
       
   As an agent working with a seller that receives a low-ball offer, try to be a gracious as possible toward the potential buyer or selling agent.  Keep in mind, there are lots of buyers and agents out there who haven’t shown any interest in your home or submitted an offer.
       
   Agents who are working with buyers always want to get their client the best deal possibly.  Buyers naturally want the same thing.  But if you submit a low-ball offer that has no hope in being accepted and are just poking the seller to find out what they will take, you might lose the property.  I always ask my buyers the question, “Will you be disappointed if your agreement comes back rejected and you find out that you lost the property to another buyer?”  If the answer is “Yes”, consider strengthening your offer.