Everyone has heard on the news that home prices have fallen since about 2005. This is certainly true in many areas. Though there are some sellers who are still living in the past and have their homes prices way above their current true market value, most in my area are pricing their homes correctly. If they do not, I decline to take the listing.
A big problem can occur when buyers make initial offers that are ridiculously low, often 25% or more below the asking price. To add to the problem, buyers go on to ask for home warranties, help with down payments and closing costs, and the inclusion of personal items in the sale. Now these could be fair requests when the money offered is also fair. However, when these requests accompany a dollar amount that is WAY too low, sellers frequently become hostile.
In the past two months I had two sellers who were offered lowball offers and in irrational retaliation, they refused to budge one cent from their asking price. They told me flat out that if the buyers had submitted a more reasonable offer, they would have come down a few thousand. But they felt insulted by the low offer and refused to move from the original price. That is not wise, but it is their choice, and it often happens when a buyer tries to lowball.
Something people have to keep in mind is that prices have not plummetted everywhere. Here for example. The condo market took a hit and condos that sold for $170,000 during the boom are now selling via foreclosures or short sales for $50,000 or less. Houses in some zones as well have dropped, sometimes, 30% to 40%. On those distressed properties, lowballing is less a problem. Banks do not take things personally. But on other homes one has to tread more lightly when making that first offer.
This is especially true in our 55+ subdivisions where prices have been far more stable than in other areas. We have not seen deep discounts take place in this special type of market. If you try to lowball here, you will very likely be rebuffed outright. You could even be banned from making subsequent offers. Some people just get that insulted. Ask your REALTOR to give you a list of recent sales in that subdivision and base your offer on that. Don't just think that since the whole area has dropped 40% that you can go into one of these 55+ areas and offer 40% less than the asking price. It could be very likely that the asking price is right where the price should be. In that case, your offer is going to get the cold shoulder. On the other hand, if the REALTOR's information shows that the home is way over priced compared to other homes in the area, then take a chance. You have nothing to lose. You may not get the home, but at least you will not over pay.
Of course, the sellers can accept the offer. But in my experience this is not very common. More often than not, the sellers can be insulted by such low offers and respond in a negative manner. Not only that, but the sellers' agents can also become less than cooperative since in a way the low offers are challenging the prices that they placed on the homes.
Insulted sellers may not only refuse the offer, they may give their agents orders not to deal with a particular buyer again and to automatically refuse any future offer that he or she may make in the future. Even if the sellers do decide to counter, they may be less likely to make concessions, and might only drop their prices minimal amounts. If the initial offer had been more reasonable they might have been willing to concede quite a bit more. But now that they are feeling defensive, they are in no mood to give ground to someone they feel is not being reasonable.
Buyers should look to their agents for advice. Your REALTOR is more "in tune" with what the local market is doing. He or she can tell you if the seller's asking price is out-of-line or is actually quite fair. If it turns out that you are dealing with a greedy seller, or one that is not living in the "real world", then certainly go ahead and make a low offer and see what happens. You have nothing to lose. If the sellers tell you to get lost, so be it. You would not want to buy an overpriced home anyway.
However, if your agent advises you that the asking price is not bad, then make your offer accordingly. An offer that is somewhat below the asking price is acceptable in our current buyers market. An experienced agent can help you decide where to begin. Work with him or her so that your offer will be appealing to sellers and will get them to engage in good faith bargaining.
Though sellers are still currently at a disadvantage (though that is slowly changing), do not make the mistake of over playing the advantage you have as a buyer. If you do, you could very well be shooting yourself in the foot. In successful negotiations, both parties should come out feeling more-or-less satisfied with the outcome.
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