Low-Ball Offer???

[Smiling JOe]

I would like to add that many properties are over-priced, so an offer at 83% might be realistic. HOWEVER, there are properties on the market which are priced to sell and will sell fairly quickly, much closer to list price. There are two strategies for listing. 1) price the property to sell quickly, which means not leaving much room for negotiation. or 2) over-price the property, hoping that you will get an offer, knowing that most buyers will try to low-ball you, working to a place in the middle. The problem with #2 is that you won't attract as many lookers and potential buyers. The problem with #1 is that most everyone still wants to haggle even if the price is right, because "haggling in real estate is what you are supposed to do." When you submit your offer, you will quickly find out that there won't be much haggling from the extremely over-priced properties, or the ones which are really priced to sell.

In summary, not all low-ball offers are the same. It all depends on the property itself and the list price.

 

[Franny]

IMO owners and sellers always think their property is priced to sell! :rofl:

Why is it a train wreck? I have too much scotch & german blood in me to ever offer the listing price, but consider a little back and forth negotiating to be part of the process to get a price both buyer and seller are happy with.

I would never recommend making an offer for the list price and negotiating the price is standard practice. The train wreck occurs when you have a buyer and seller $100,000 apart and no one will move up or down....it is rare, but does happen.

 

[Smiling JOe]

IMO these are big enough potential cans of worms that they shouldn't be sacrificed for a good deal!

BIG HUGE mistake to ignore those!

I completely, agree. An additional 10% discount wouldn't be worth the risk for me, unless I knew everything about the property and my financial ability to purchase. That would not be the case about most properties (I don't know everything about them.) I only post that because the question was asked.

 

[Franny]

I would like to add that many properties are over-priced, so an offer at 83% might be realistic. HOWEVER, there are properties on the market which are priced to sell and will sell fairly quickly, much closer to list price. There are two strategies for listing. 1) price the property to sell quickly, which means not leaving much room for negotiation. or 2) over-price the property, hoping that you will get an offer, knowing that most buyers will try to low-ball you, working to a place in the middle. The problem with #2 is that you won't attract as many lookers and potential buyers. The problem with #1 is that most everyone still wants to haggle even if the price is right, because "haggling in real estate is what you are supposed to do." When you submit your offer, you will quickly find out that there won't be much haggling from the extremely over-priced properties, or the ones which are really priced to sell.

In summary, not all low-ball offers are the same. It all depends on the property itself and the list price.

Exactly!! Thanks SJ

 

[Smiling JOe]

I would never recommend making an offer for the list price and negotiating the price is standard practice. The train wreck occurs when you have a buyer and seller $100,000 apart and no one will move up or down....it is rare, but does happen.

Not everyone thinks the same. There are cases when I would recommend paying full list price, and in some cases, even more. Personally, I have paid more than list price, and would have never been able to purchase the property otherwise, because other offers were at full list price. Depends on how much you want that particular property. If a property is priced at an exciting price to buyers, you can expect some big motivation, urgency, and competition from the buyers, and should expect to see multiple offers.

A few months back, a customer of mine made a reasonable offer, which was considered by the seller. The price of the property was unbelievable because they wanted a quick sale. The seller had three offers on the property, and a fellow SoWaller's customer purchased the property above list price. There was a mini-frenzy on the property. What is the difference on $20,000, when the list price is $100K below market?

 

[Cork On the Ocean]

Cash is king. About half of the reported single family home sales in South Walton for the month of July were reported as cash sales. In addition, the fewer contingencies you write, the less you are protected, but the more likely you will go to close, and the less time you will need to close.

A few things to help the informed buyers for a serious look at low offers:
Cash, with no financing contingency.
Non-refundable earnest money deposit of substantial amount (2-3% of purchase price)
Close within two weeks.
No feasibility study.
No contingency on insurance, inspections, etc.

Obviously, buyers writing no contingencies, should be aware of all of the risks which they take. There are many risks involved, but many people are willing to risk it for the lower price.

I have to agree with you on the Cash is king thing for sure. Both the Carillon and the Rosemary were cash offers but NOT quick closings. When buyers are placing a million cash down, they better do their diligence and inspections and the seller's agent needs to make their client realize that. After inspection, the buyer may still take the place without repairs but it could have structural issues, major mold issues etc so with all due respect, I wouldn't never recommend a purchase without an inspection. The rosemary home did have mold that was remediated before the closing.

IMO these are big enough potential cans of worms that they shouldn't be sacrificed for a good deal!

BIG HUGE mistake to ignore those!

I agree totally scooter.

I would never recommend making an offer for the list price and negotiating the price is standard practice. The train wreck occurs when you have a buyer and seller $100,000 apart and no one will move up or down....it is rare, but does happen.

Train wreck is getting the offer accepted and grossly overpaying or finding structural problems or termites because the buyer was too anxious. I agree that 100K is a bit of a difference but it all depends on the value. 100K is insurmountable for a $300K property but not necessarily a million dollar property.

I think we're all in agreement that every deal is different, every seller is different and every agent is different but what is for sure is that the buyer must feel that their agent is acting in their best interest.

 

[DuneAHH]

IMO owners and sellers always think their property is priced to sell! :rofl:

Why is it a train wreck? I have too much scotch & german blood in me to ever offer the listing price, but consider a little back and forth negotiating to be part of the process to get a price both buyer and seller are happy with.

Just curious... if you were the seller, and you had your property list priced at 80% UNDER current appraised value; then as the seller would you feel that the property is priced to sell? Or... As the seller, would you raise your asking price (in consideration & accommodation of those buyers who, as a matter of course, never offer list price)?

Should (or Does) a current appraisal matter to buyers?

 

[scooterbug44]

I think every seller thinks their property is 'priced to sell', just like every parent thinks their baby is pretty! Reality does not always agree!

If I was selling I would set a price based on what I want/need to get, then jack it up a little so that there is room to negotiate but still meet the price I need.

Appraisals are all over the place (especially these days) so I take it into consideration, but rely more on what I view as comparables than appraisal value.

 

[Cork On the Ocean]

Just curious... if you were the seller, and you had your property list priced at 80% UNDER current appraised value; then as the seller would you feel that the property is priced to sell? Or... As the seller, would you raise your asking price (in consideration & accommodation of those buyers who, as a matter of course, never offer list price)?

Should (or Does) a current appraisal matter to buyers?

That's a really good point Dune-Ahh. Unfortunately, what is "current" in a deflating market? I am one of those people who think we have hit the bottom or are very close to it but that $225 appraisal was 3 months old I think and the seller was convinced that their property was worth it. I believe we used the same appraiser because the buyer wanted the property so bad and the person brought it in at $215 3 months later. We all know that an appraisal is subjective.

Regarding list price being 80% under appraisal..... buyer's still want a deal and as SJ said, they are gonna come in lower so the question now becomes is another 2-3% enough to make the seller say "NO"? Only the seller can make that decision based on their particular situation and I know some seller's agents might not like it but we push the envelope every time because there are still lots of sellers that MUST take 75% of appraisal and unfortunately, this is gonna continue until every seller in trouble is forclosed upon.

SJ, I totally agree on sometimes offering more than asking. I remember in the heyday, there was a home listed at $799K, we recommended an offer of $815K. My buyer refused to go over asking. It sold at $815K and flipped for $1.299 in 3 months. My client wanted to kick themselves. It's rare in this market but can happen. The only good thing when that happens is there are many other good deals today if you lose one than there was 3 years ago.

Terms of Sale Report - this is for combined residential, 30A, for July 2008 only but definitely shows that cash (NONE) is king by almost 5%

Sales and Inventory History Report - "Average" sales vs listing price over summer has been 86%-87%

Gotta run, this was fun.

 

[seagrovegirl]

I agree that all offers should be submitted to the seller, in writing. Leave it up to the seller to ignore it, accept it or counter it. In my experience, some sellers have been quite persistant with what they are willing to take, and in those instances, I would counsel my buyer to make a better offer. If the buyer doesn't budge, fine, submit the offer and present it to the seller (if the agent has access to the seller) or the seller's agent with a positive attitude. Let the market guide the course.