By: Anna Platz
Hoping to take advantage of the distressed real estate market and get a great deal on a new home? In many parts of the country, there are more homes for sale than there are potential buyers, putting you squarely in the driver’s seat when looking to purchase a house. There is no precise definition of a “lowball” offer, but it is generally understood to mean a price that is substantially below the asking price or even market value.
To help you find your dream home at a discount, consider the following tips for making a lowball offer:
Take a look at the length of time on the market.
A seller who has just listed their home isn’t likely to consider drastically cutting their price. Less obvious though is the house that has been on the market seemingly forever. This property also might not be a good candidate for a lowball offer as the owners might not be serious about selling, or willing to come down much in price.
If the sellers have bounced around from listing agent to listing agent, this is also a red flag that they aren’t willing to do what it takes to get the home sold and may turn up their nose at your below-asking-price offer.
Don’t get too attached.
If your goal is to get a great real estate bargain, you need to try as hard as you can to remove your emotions from the equation. You might need to make several offers before one is accepted, and even then there are plenty of things that can derail the transaction before closing.
Don’t imagine your children running through the backyard or start picking out paint colors until it’s a done deal. Otherwise it will be much tougher to walk away if the numbers don’t work in your favor. If you’re truly after a deal, remind yourself that it’s a buyer’s market and there are many other properties you could be happy in.
Work with a real estate agent who isn’t afraid to submit a low offer.
Some real estate agents will enjoy helping you hunt down the bargain and using their negotiating skills to close the deal. Others will object to submitting an offer that is more than a certain amount below the asking price (for one agent that number could be 5 percent, for another, 10 percent) out of fear of insulting the seller and getting into an uncomfortable situation with another agent.
Have some reasoning behind your offer price.
Don’t just pick a number because it’s way below asking, or because it’s what you feel like paying – spend some time with your real estate agent researching the market, and what similar houses in the area have sold for recently. You can also look at how long properties have been staying on the market on average. Then come up with an aggressive, but reasonable price to offer. Your agent may even want to include some of the data you used to come up with the number to support the offer.
Look for motivated sellers.
Sometimes the words “motivated seller” will be right there in the listing description. Other times your agent might be able to get some background from the listing agent, like for example that the seller has already bought a new home and is anxious to get the property off their hands. A vacant home is also a good indication that the owner has moved on and may be hoping to sell quickly.
Don’t take “no” personally.
[Mortgage Help: Get your free credit report and see if your credit score is mortgage qualified]You may have offered less than the sellers owe on the home. They might not be overly anxious to sell, but have their property listed in case the right buyer is out there. They might firmly believe the home is worth every penny of their asking price. Whatever the reason, if your offer is rejected (or countered without much of a price reduction), try not to be insulted. (Just as hopefully the seller isn’t insulted when you submit a low offer.) If you are still interested in the house at a higher price, keep the negotiations open with a counter offer. If not, move on and keep looking.
Save some money for repairs.
If you agree to a rock bottom price, the sellers may not have a lot of wiggle room when it comes time to negotiate any necessary repairs that are identified in the home inspection report. If something major is uncovered that alters the value of the property, it might be a game changer, but if the suggested repairs are only minor, you may be better off handling them yourself than pushing the seller to the point where they may walk away from your offer.
Make the rest of your offer very attractive.
The sales price is only one piece of the offer to purchase a home. Increase your chances of having a low offer accepted by making the other aspects favorable to the seller. Include a letter from your mortgage lender showing you are pre-approved for financing, offer a substantial earnest money deposit, and don’t ask for lots of concessions or contingencies beyond what is typical.
Anna Platz is a home financing expert based in Wilmington, North Carolina. She works as an Editor for ForTheBestRate.com, a website where consumers can research mortgage rates and mortgage programs such as investment property loans, condo financing, and FHA mortgages.
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