What Constitutes a Lowball Offer and Consequences

Question

I am a real estate investor and a licensed realtor. Occasionally, I assist fellow investors in finding suitable properties.

I have two clients who are business partners who are interested in making lowball offers on various listings. They aim to have the seller cover the buyer's agent commission as part of their strategy. Their approach resembles the BRRRR method.

For example, we have a 3-bedroom, 2-bathroom home in fair condition (requiring less than $20K in cosmetic repairs) that has been on the market since August 2024. The price reductions have been minimal, and the current listing price is $300K. My clients want to submit an offer of $230K.

Btw, this is a Texas market.

As a seller’s or buyer’s agent, how would you respond to this situation?

I have an experienced opinion on the matter, but am seeking outside perception and strategies, if any.

Additionally, what are the implications of the NAR Settlement regarding this strategy if any?

JD Martin · Answer

Well, if the FMV of the house is at or near $300k based on reasonable comps, and there's no legitimate benefit to the client's offer (i.e. all cash, fast closing, no contingency, whatever), I'd probably quit working with them because there's really little to gain working with cheapskates and bums who just want to steal other people's property. Hell, they don't even want to pay you, so you're working for free.

Don't deal with the dregs of society. "Buyers" like that will only frustrate you and leave you working for nothing. I'm going to ask my buddy @Russell Brazil to chime in here as he's golden on situations like this.

Russell Brazil · Answer

Thanks for the tag @JD Martin.

@Henry M. Shotgunning a bunch of low offers is a waste of time, and will only hurt both yours and your clients reputation for not being a serious buyer.  Now that doesnt mean lowball offers arnt sometimes proper. Ive certainly purchased properties at serious discounts to the listing price....but it wasnt just random shotgunning of the offers.

What I usually start with when trying to see if a lowball offer is appropriate is having a conversation with the listing agent first. I say hey, I have a buyer who is interested in the property, but at a significantly lower price.....can you check with your seller to see if it is even worth of time to putting that offer on paper. 95% of the time the answer is No. Occasionally the answer is Yes.

NAR Settlement has zero to do with this situation. Either you get to an acceptable net price to the seller, or you dont....just like any other offer.

Rick Albert · Answer

There are a couple of things to consider:

1. It's been sitting on the market and they want to offer only $70K less? That's not horrible.

2. Reputation is everything. If all you do is submit lowball offers, it could be your reputation as well as the investors. I knew a buyer who thought he was the world's greatest negotiator. I sent him a pocket listing of mine but purposefully told him $100K more than what the Seller really wanted. The result? His wife was so mad they lost the last house they offered full price on my pocket listing.

3. If you are lowballing, focus on homes that have been sitting on the market. Anything new to the market it would likely be a waste of time.

4. Presentation is everything. The other day an investor told me, "I need to buy this for the lowest price possible." My response, "Well my Seller wants the highest price possible, so we need to meet somewhere in the middle." I would be transparent and explain the numbers. That way you are justifying your lower offer. I have a property under contract with a house hacker for $50K under list and I just showed why. Got accepted pretty quick.

Good luck

Charlie MacPherson · Answer

They seem like the textbook definition of time wasters and as an agent, time is your most precious resource.Unless they want to pay you a strong hourly rate for submitting - and let's call them what they are - garbage offers, tell them to lose your number.

Lisa Choi · Answer

On to the next buyer! That's a CRAZY low ball offer! Good luck! <3

Henry M. · Answer

Love the response.

What Constitutes a Lowball Offer and Consequences

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