Why not low ball when you know the seller is motivated?
united states · Member since 2016 · 3 posts · 9 votes
Why not low ball when you know the seller is motivated?
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Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
6yIf you lowball too soon the seller will just announce there is an offer in the table and drive up the price. You’ll be a tool to their success.
88 Replies
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes6y
OK, I am a broker. I wouldn't make a low-ball offer on a fresh listing unless you want to leave it open-ended which I wouldn't recommend. You just get too much activity and the listing broker is probably a little too proud to admit he didn't price it right.
Now, if it has sat for a while and is still listed (especially with price reductions) then I would have a problem making a low offer -However, do what you can to make it sound like you can make it happen if accepted (like proof of funds aore resume of local props purchased).
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes6y
MEANT - I would NOT have a problem making a low offer
- Real Estate Agent · Oakland, CA · Member since 2019 · 37 posts · 40 votes6y
@Alex Kehaya Being a broker in the Bay Area myself, It depends on several factors..
If the listing is new and been on the market for only a few days, I would not put in a low ball offer. It will most likely not be taken serious as sellers want to see multiple offers and take the best one once everyone has seen the property is for sale.
Now, if the property has sat on the market for a while, and has seen one or several price reductions with no interest, then go for it! Definitely put in a low offer with POF and it will be looked at seriously. You may want to look for off-market deals also through your agent, I have been able to get clients good deals through pocket listings.
- Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes6y
If you lowball too soon the seller will just announce there is an offer in the table and drive up the price. You’ll be a tool to their success.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes6y
@Alex Kehaya Low Ball all day! Keep in mind the seller wants the highest and best. There is only two factors that play the price popularity and an actually buyer that will fork up their offer. I am an agent and investor it might be a bad strategy but I low ball every time and do it for my clients as well maybe because I’m offering in a rental side of the city but I get refused 19 times out of 20. I also setup reminders to go back around in 1 month. If the listing is still active I go in and refresh the seller agent’s mind about my low ball offer. I always say to my clients the agents that bad mouth my low ball offers there is plenty fish in the sea! It’s funny some of the properties that I low ball, have already 2-3 other listings on the same street, so just go to the next one......
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
If the seller is doing a 1031 exchange, it is likely they are a savvy real estate investor. As an investor, would you take a low ball offer? Investors know the value of their property. If they are motivated they will drop their price. If I get a ridiculously low offer, I would just get annoyed and not want to work with you.
Is there any harm in low ball offers? Technically it is true all they can say is no. So if you are insistent on this, just tell your agent to make the offer or you will find a new agent. They are required to act on your behalf.
From the agents perspective, they are probably trying to give you good advice and not waste time. They may also be protecting their credibility and your credibility. People who make crap offers get a bad reputation and before you know it, agents are telling their clients to avoid you.
Ultimately none of us know how low ball your offer is. Is it 5% below value or 50% below. If is it crazy low, then the seller is just better off using price drops to get better offers. You are not dealing with an ignorant seller if they are doing a 1031 exchange. Low ball offers work bets on people who don't know the value of their property or people who are desperate.
One final thing to consider, do you know for sure there is a 1031 purchase pending? Often properties are advertised as being part of a 1031, but the new property hasn't been selected. That could affect their motivation.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes6y
@Joe Splitrock you have a ton of valid information and very great points. Like I mentioned I seek and low ball offer homes that would be considered a rental. I do not receive avoidance in my local area because the word on the street is "if Arsen is offering or his client then its closing" there is a lot of investors and you know who you are, that bought a house in 2008,09,10 for less then a car, made tons of rental income for the past decade, did nothing to improve the property value. Put an agent that sells houses to the finish customer and puts a price that will never sell. On the side lines you have sharks "investors" that would take that house in a heartbeat if it was priced as a rental. Now if the house was a total rehab then no word said and no low ball offer. Those properties are not the ones I'm after. My posting seems a little misleading it sounds like I low ball every listing that comes in and that's not the case I pick out homes that will never sell for the price they are asking for. Deal after deal I get the phone call from a offer I submitted 4.5.6 months ago that the seller will take it now, really?? Didn't know I was their secretary.....j/k. I guess I have been in the market for so long that when a newbie seller is seeking top dollar for their property I can spot them right away. As for the offering it depends on how the agent or the seller priced it. There is no way I offer 50% below the list price. But I always , always go in at below 15% if the property meets all criteria points, ROI, COC, I go lower it's all a deal by deal study. This way the seller works back up and usually the sweet spot would be 7 to 10% below list. Now on the other hand sellers that don't care (desperate) to sell and we see it on the market we offer list price in cash, but those are very rare once or twice a month type of deals and the prices are way below then what they need to be. All of my clients love the way I deal but again my clients are investors their not home buying for their primary. I can go on and on but why would you pay 25 cents more per gallon on gas when you can go down the street and pay less. A saying my dad would say all the time. Agents would hang up the phone to my dad with his low ball offer my dad would always say I'll just buy the cheaper one down the street.
- 6yDave FosterBusiness MemberQualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
@Alex Kehaya. The only pressure with a 1031 exchange on the selling side is if they have already found their replacement and are under contract for it. If they've just found a property they like you'r lowball will have no impact. They''ll simply adjust their numbers on how good a deal the replacement is if they sell for your price.
If they're under contract then they can do a reverse exchange and mitigate the pressure. The reverse exchange is relatively expensive but may not be as expensive as accepting your offer. I'm all for buying low. But find the actual level of that pain point so you can adjust your offer accordingly.
The 1031 Investor5137 Reviews - Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes6y
Originally posted by @Arsen Atanasovski:
@Joe Splitrock you have a ton of valid information and very great points. Like I mentioned I seek and low ball offer homes that would be considered a rental. I do not receive avoidance in my local area because the word on the street is "if Arsen is offering or his client then its closing" there is a lot of investors and you know who you are, that bought a house in 2008,09,10 for less then a car, made tons of rental income for the past decade, did nothing to improve the property value. Put an agent that sells houses to the finish customer and puts a price that will never sell. On the side lines you have sharks "investors" that would take that house in a heartbeat if it was priced as a rental. Now if the house was a total rehab then no word said and no low ball offer. Those properties are not the ones I'm after. My posting seems a little misleading it sounds like I low ball every listing that comes in and that's not the case I pick out homes that will never sell for the price they are asking for. Deal after deal I get the phone call from a offer I submitted 4.5.6 months ago that the seller will take it now, really?? Didn't know I was their secretary.....j/k. I guess I have been in the market for so long that when a newbie seller is seeking top dollar for their property I can spot them right away. As for the offering it depends on how the agent or the seller priced it. There is no way I offer 50% below the list price. But I always , always go in at below 15% if the property meets all criteria points, ROI, COC, I go lower it's all a deal by deal study. This way the seller works back up and usually the sweet spot would be 7 to 10% below list. Now on the other hand sellers that don't care (desperate) to sell and we see it on the market we offer list price in cash, but those are very rare once or twice a month type of deals and the prices are way below then what they need to be. All of my clients love the way I deal but again my clients are investors their not home buying for their primary. I can go on and on but why would you pay 25 cents more per gallon on gas when you can go down the street and pay less. A saying my dad would say all the time. Agents would hang up the phone to my dad with his low ball offer my dad would always say I'll just buy the cheaper one down the street.
It also depends on your market. There is not a lot of cheaper properties available down the street in my market. At least not the streets I want to be on. It also depends on how the property was priced to begin with. One of the best deals I have gotten in the last few years, I paid $100 over asking. That is because asking price doesn't equal fair market price. In some cases you could get 15% off asking and it would be a bad deal. But generally speaking, usually start out low as you said so you can negotiate. Never offer the price you want to pay, because there is almost always a counter offer. When there is not, I kick myself for not going lower haha.
It really boils down to the definition of low ball. I don't consider 15% off a super low ball. It is low, but not so low that there isn't room to work with the offer. If someone is offering 30% or 40% off asking price, that indicates the property was either grossly over listed or the buyer is ridiculously low.
- Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes6y
Low ball offers are a thing of the past unless you are in area that is not easy to sale .
- Lender · Temecula, CA · Member since 2011 · 43 posts · 20 votes6y
@Alex Kehaya I’m an investor and I never offer my max with my first offer. If your competition is offering max the let em have it. You’ll get one at a better price. If you don’t have the time to find off market properties you’ll probably be stuck overpaying until you get lucky.
- Lender · Temecula, CA · Member since 2011 · 43 posts · 20 votes6y
@Alex Kehaya does the property need repairs? Don’t see many sellers selling at that kind of discount with little to no repairs needed.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes6y
@Billy Smith love your curve ball reply :)
Low ball is always a deal negotiating tool, but I guess you are the 1st person I have meet that just goes to a used car dealership and pays the price written on the window, besides that I never meet anyone else like that.
@Alex Kehaya all good points and we can all agree that offering on any properties there is a lot of variables.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes6y
@Arsen Atanasovski I forget who said it but it always stuck with me: a true lowball is when you offer much less than the property is worth to you.
I think what they were going for is the idea that you are not trying to get a deal done you are just randomly shooting in the dark and professionals hate it. Doesn’t mean you might not hit something occasionally.
Doesn’t sound like that’s what u are doing at all and agreed about the 4-5 month call back. Think we are going to see more of it these days too.
- Investor · UT · Member since 2020 · 84 posts · 91 votes6y
As realtors, how do you advise your buyers when the seller offers financing? How much does this change things as far as offer price, etc? I am looking at a property that I can buy for cash but I'd rather save it for something else. I know that the seller really wants to be done with it. There is also about $20,000 in eventual repairs so I don't think it will appraise-the seller financing offer has made me take a second look. Thanks for any thoughts...
- united states · Member since 2016 · 3 posts · 9 votes6y
WOW everyone this is so awesome. Thank you for all these thoughts and suggestions it is really helpful. He has reduced the price but it has only been on the market for 11 days. I am not sure how much time he has to move on it or how much repairs the property needs (I'm out of town) but I am going to have my agent and contractor go take a look.
Thank you everyone again for the suggestions. I'll probably keep watching the property and see if it sits on the market long enough to low ball.
- Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes6y
@Alex Kehaya Your agent doesn't want to make that offer for a handful of reasons:
- Reputation. They don't want to be "that guy" in the town making low ball offers all over the place. It will limit their chances of growing their business organically.
- If chances of being accepted are low (and they are with new listings), it is quite frankly a lot of effort by your agent when they could be making serious offers on other properties and making money.
- Relating to #2 above, a low ball offer is even less commission for the realtor making it harder to be worth their time.
My advice? Make the offer yourself. I doubt you need a realtor. Tell listing agent they get full 6% and don't have to pay a buyers agent.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes6y
@Cj Powderhorn I have purchased most of my properties with land contracts and to me personally it’s the best deal you can possibly do in real estate! (If the numbers work) Why! Seller makes money every month, every year LC payments with interest, you as the investor, no credit used, no banks involved and almost 90% of my LCs are less interest then what the bank offers. With land contracts you have unlimited amount of deals you can do again depends on the numbers. Good luck ....
- Investor · UT · Member since 2020 · 84 posts · 91 votes6y
Thanks! What kind of terms would you ask for in today’s market? It seems like it’s wide open as the seller is pretty anxious.
- Property Manager · Member since 2018 · 174 posts · 185 votes6y
I understand the motivation for low-balling, but if you are using a reputable Realtor, they will eventually stop working with you, as low ball offers are a waste of time. If the property is overpriced, by all means, offer a fair price.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes6y
@Cj Powderhorn like I said it depends on the seller, price, and economy times. Now with the pandemic sellers don’t care the anxious ones, you have a what I call “jackpot”. Not saying to take advantage but you can make some serious cashflow and have a very nice property for a very long time. In my LCs I offer 10% down, 5% rate, 10 year @ 25-30year amortization. Meanwhile what I have done in the past is divide the payments and calculate it to be completely paid off in the 10 year term. All of my properties are paid off and I use little leverage, I always use leverage though in land contracts. - Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes6y
Nothing wrong with a low ball offer. You never know.
Also a lot of sellers or agents can think it’s a low ball, but many times the property is already overpriced.
Example: I just offered $150k cash for a property that was listed for $269k. There has been not a single comp about $175k. They can think I lowballed them, but just Bc they overpriced their property doesn’t mean my offer is a lowball IMO.
- Investor · Marion, IA · Member since 2010 · 177 posts · 117 votes6y
Originally posted by @Alex Kehaya:
I've done a few BRRR investments and my strategy is to buy at 75% of the AVR including closing costs and repairs. I'm looking at a deal where the seller is motivated due to a 1031 exchange. I told my agent I wanted to be all in at the above numbers and she simply replied "Then this is not the house for you".
I'm confused because I don't see why I shouldn't just offer what I'm willing to pay so that the numbers meet my strategy. It seems like the worst thing that can happen is that the seller says no.
Is there something I'm missing here?Fire your realtor. She's obligated to offer whatever you want. Contact the listing broker directly. Explain you will be fixing up the house and need to get it at approximately NNN price. You don't need to take the time to draw up a formal offer. Just impart to the seller that you are a serious buyer. You never know the seller may come back to you after a few weeks or months to start negotiations.
- Flipper/Rehabber · Raleigh, NC · Member since 2018 · 76 posts · 67 votes6y
Originally posted by @Mike D.:
Originally posted by @Alex Kehaya:
I've done a few BRRR investments and my strategy is to buy at 75% of the AVR including closing costs and repairs. I'm looking at a deal where the seller is motivated due to a 1031 exchange. I told my agent I wanted to be all in at the above numbers and she simply replied "Then this is not the house for you".
I'm confused because I don't see why I shouldn't just offer what I'm willing to pay so that the numbers meet my strategy. It seems like the worst thing that can happen is that the seller says no.
Is there something I'm missing here?Fire your realtor. She's obligated to offer whatever you want. Contact the listing broker directly. Explain you will be fixing up the house and need to get it at approximately NNN price. You don't need to take the time to draw up a formal offer. Just impart to the seller that you are a serious buyer. You never know the seller may come back to you after a few weeks or months to start negotiations.
This nails it. Your realtor should be obligated by state rules that obligate every offer be brought. If you instructed them to make an offer and they did not, you should consider reporting it to the local licensure board.
- Rental Property Investor · Member since 2018 · 24 posts · 5 votes6y
@Alex Kehaya Get them to name their price first then start mentioning things you would need to do to the house and start mentioning how much it will cost to fix things. This is how I get the seller to come down.
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