Is this a rational offer or am I lowballing?

Question

Hi everyone,My partner and I are in search of our first home and came across a property that we like. I was hoping some experienced purchasers would be able to advise me on an offer I’d like to make. I’m in New York. The relevant information is below.

About the property: Built in 2015, listing price is $499,000 (this listing price is DOWN from $550,000 earlier in the year).

Sq ft: 895 ($558/sq ft)

Rooms: 2 bedroom 1 bathroom

Days on the market: 95

About the neighborhood:

Median listing price: $530,000 (down 5%)

Median $/sq ft: $483/sq ft

Home supply: up by 5%

Average time on market: 161 days

Comparable property:

Another unit in the same building just sold last week for $450,000. That unit was 950 sq ft but was only 1 bed room 1 bathroom. It also had a decent sized balcony and a nicer setup generally speaking. It’s $473/sq ft.

What I want to offer and why:

I want to start my offer at 420,000 (around 15%-16% lower than listing price and would bring it to 469/sq ft). This is a lot to ask off but I’ve seen other units in this building sell for 8% to 10% off listing price in the last year. My goal is to get the property less than 440,000, ideally 430,000 because that would bring us to almost exactly what the average $/sq ft that the neighborhood is currently seeing. One problem is that $430,000 would be a 14% departure from the listing price and historically the most I’ve seen is a 10% departure and that was just a studio.

My questions:

Is this a reasonable analysis?

Are the numbers that I provided relevant? How much weight do people really put on $/sq ft, price of other units sold and neighborhood stats?

I’ve never done analysis and the numbers I found here are from an hour or two of research. Is there anything else I should be looking into?

Thanks in advance.

Corby Goade · Answer

This is a pretty common tactic with new investors..the truth is you can't "logic" a lowball offer with a seller, you'll look like a jerk and you'll never get a property that way.

I'm not saying that it's impossible to get someone to accept a lowball offer, but those situations are anomalies and it's totally random.

Your time is much better spent networking and looking for opportunites in your market that come through those relationships than blindly throwing out offers that have little to no chance of getting a response, let along acceptance. It'll take some time, but as you build relationships and get deals done, your pipeline will start to pay off in spades.

When you make random lowball offers, you don't build relationships and often others in your market won't take you seriously, which has the opposite effect.

Best of luck!

Scott E. · Answer

My mindset is that you shouldn't be listening to people on reddit.

I don't want to come across as being mean or too aggressive so just know this feedback is solely because I care about helping you out and I feel like somebody needs to tell it like it is.

It is extremely irresponsible to invest nearly a half a million dollars of your hard earned money based on the feedback of a bunch of people from reddit, especially considering many of those people have probably never even bought a house before.

Get off of reddit. Keep asking real estate questions on biggerpockets because that's what this forum is solely focused on but still take everything that every one of us says with a grain of salt (myself included). We're all just a bunch of strangers on the internet.

Stick to your initial underwriting. It does not matter if you offer 18% off of listing price. It does not matter if you offer 70% off of list price. You need to offer what makes sense and what the house is worth to you. Which you have already established is $430k.

Dan Thomas · Answer

@Jay Hawlader

This is alittle different than an investment property. The numbers (other than whether or not you can afford it) don't really matter. The question is whether or not you want it for the price listed.

You don't know the sellers situation (probably). It is complelty plausible they are sitting on an offer at 490k and are trying to squeeze extra money out. If you want to live there offer what it is worth to you, don't just try to get a "deal". Ive lost too many opportunities trying to get a deal and have had to learn the hard way. It is important to not over pay but will you feel good about it seeing it sell for 490 or will you be satisfied knowing it sold more than you were willing to pay? Only you and your partner can answer that question.

Scott Johnson · Answer

I'd put in the offer, tbh. If $440 is where your numbers lie then that's where your numbers lie, and you always want to set a low anchor.

If the seller 'poo poos' it and doesn't counter, then you can wait a week or two to see if it's still on the market and submit the offer again. I never worry too much about what the other person will think. I'm sending in a $700,000 offer on a property that's listed at $1.175 million because that's what the numbers justify.

Theresa Harris · Answer

If a 1 bed in the same complex sold recently for $450K, then $410K is a low ball offer and if I was the seller, I may not respond.  What does your realtor suggest?

In a different market, but similar price point that I'm familiar with a 2 bed unit sells for about $30-40K more than a 1 bed unit.  There is a lot of variation in price within each of those.  Right now two 1 bed units are listed $20K apart-difference is one is ground floor, other is 4th (top) floor).

Scott E. · Answer

Great analysis for your first home. Nice job.

I say submit the offer. The worst that can happen is they either say no, or they don't respond at all. That's the worst that can happen. So why not submit it and see what happens? The home has already been on the market 95 days so clearly they are priced too high, and they should know it.

If your realtor is good and their realtor is good, they will work together to get a deal done.

Your realtors job will be to explain to the seller realtor why you are coming in so low.

And their realtors job will be to get their seller to come down on price, within reason.

You never know the sellers circumstances. Sometimes you'll find a seller who just wants the place gone, and the only reason they are priced so high is because their realtor misguided them and priced the place too high right out of the gate.

Jay Hawlader · Answer

Thank you for the advice. I’ve decided to send a slightly higher offer based on all the feedback I’ve received. Likely 440k.

Jay Hawlader · Answer

Thanks for commenting. This is the sentiment I have been receiving on other forums as well. Didn’t really approach it from the sellers side. To answer your question: yes if it sold at anything above 470k I’d be okay with it. I wouldn’t want to spend more than 450k. Will try to change up the approach going forward.

Mohammed Rahman · Answer

Hi @Jay Hawlader - I'm noticing no one has brought up how your offer is actually structured.

I'm an investor and broker, and can tell you the offer price isn't the only thing that's relevant.

Where is the unit located, in Manhattan I assume?

Making an offer for $420k with 10% down is different than making an all cash offer with a 7-day close for $420k. Same number, different terms.

Making an offer for $420k with 25% down and no mortgage contingency is different than making an offer for $450k with 25% down and a mortgage contingency.

And so on.

Although you can justify your numbers, you can't logic your way into a seller's mind if they're not desperate.

Put yourself in the seller's shoes, if you see a unit in the same building as you recently sold for $450k, and median prices are $530k... AFTER you reduced the price by $50k... and then an offer comes in for $420k - what are you thinking?

If I'm in the listing agent's shoes I'd present your offer but would put it at the bottom of our pile unless we were desperate and the seller had no other options.

Good luck!

Is this a rational offer or am I lowballing?

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