How Low of an Offer is too Low? I don't want to be written off

7 Replies

Hi again everyone!

I'm putting together an offer in a slow market.  I'd like to offer 20% less than asking, but I don't want to be so low that I won't be taken seriously.  I'd take it for more than that, but I know that you make your money when you buy.  Any words of wisdom on how low to go?

Thank you!

The last place we bought, it was to live in not rent or flip, was on the market for $359,000. My wife asked how little I was going to offer and I told her I was thinking about offering $275,000 =/-. She talked me into offering $287,635, all cash, no inspection (we had his inspection report and he'd only owned it a year) 5 day closing. Owner countered early the next morning at $306,000, but that it would take 10 days to close.

NOTE: I had looked at the county records and knew the owner had bought it one year earlier. I used a criss-cross directory and asked 3 neighbors what was wrong with the house that they were selling so early. They told me nothing but the guy was a youngish doctor and he was having trouble getting a practice established but had been offered a teaching position at a medical school back east. Doing my homework helped.

I once bought a place that was on the market to settle an estate, elderly husband and wife died within a few hours of each other, it happens more often than you'd think. It was on the market for $59,900. When I looked at it a few things jumped out at me; it looked like a manufactured home but it was stick built, adding to the look was a 1 X 6" molding between the "skirting" and the house proper, that was painted a clashing color, it was a 2/1 but there was an 8' X 14' laundry room that was crying out to be a 1/2 bath. 

I offered $38K, all cash, 5 day closing, no inspection but they had to pay for termite treatment. They had T-111 skirting that was to and below grade all around and the termite damage was obvious. The Realtor called me two days later and said my offer had been REJECTED! That had never happened to me before. Before I could reply to her she told me to listen carefully to what she had to say; "the sellers, two sons, want you to know that they are reducing their asking price to $42,000." I told her to up my offer to $39,750. She repeated her previous statement and I said OK, I'll offer $42,000. "Done" she said.

I bought Hardi panels and cut them to replace the skirting, found a suitable 5 gallon can of "whoops" exterior paint at HD, bought a toilet for $5.00 and a faucet for $5.00 at a yard sale and a discontinued pedestal sink at Lowes for $20. I probably paid another $25.00 for PVC, toilet flange, roof jack and other miscellaneous stuff I didn't already have. I lived almost 4 hours away but I'd drive up on Monday morning with my supplies and work the 4 cities close to that house, and sleep on my air bed, during the week. Saturday morning I'd head home with a list and the following week I'd head back up.

The second people that looked at it bought it for $58,500, $3K down at 8%. They weren't in a position to refinance at then end of 5 years so I kept extending the term and here we are 15 years later still collecting. If all goes to plan I'll collect until I'm 85, if my cancer gets worse I'll try to sell the note while I'm above ground to prevent my wife from having to deal with it.

That's a long answer to a short question but NO, I don't consider 20% to be too low, depending on conditions. Also a good agent knows that the first offer is often the best.

If you're in the SF bay area don't try this strategy!

Thank you @Frank Adams !  There's a ton of wisdom in your experience here.  Thank you for sharing!  It's very helpful!

I use what is the Ackerman bargaining method and it works great. Find the number you are willing to pay. This is the number that you walk away if it goes $1 over. 

So let's say they are asking $130,000 for the property but running your numbers you can't pay over $100,000. 

You would start with a $65,000 (65% of max) offer. This usually gets a pretty strong reaction but that's ok. We expect this. They will want to negotiate. They may throw another number. Doesn't matter what it is unless it's something you want to agree to. Let's say they come down to $120,000 your next offer is $85,000 (85% of max). If they counter your next offer is $95,000 (95% of max). Depending on where they are your final offer will be your max allowable. But you will offer a non-round number. So like $100,134.57. 

This method gives the seller the feeling that they are squeezing you for every last penny. I've had good success with this method. 

If they don't accept your final offer you have to be willing to walk away. Don't overpay.

So 

65%

85%

95%

100% Non round number

A system like Franco suggests should work. Remember you can never come in too low provided you are prepared to walk away. If you want to play the negotiation game do as Franco suggests. Keep in mind you need a agent that is 100% on your team. If all he cares about is his own reputation in the market he will only hurt your position. You will need to find a better agent.

If you are in a market where you need to make 50 offers to get one accepted offer the number that works for you firm and final. No point in wasting time with negotiations.

Such a helpful response @Franco Vallejos !  I can't thank you enough.   I outlined my strategy with these percentages exactly.  My agent is putting together the first offer.  If you ever make it up to Seattle, let me know so I can buy you a drink!

@Dan Cumberland That's awesome let me know how it turns out. I will definitely hit you up when I am in Seattle next. 

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