Write a low ball offer: Biggest Mistake Ever

At the end of the day, the value of a home is what a buyer and a seller agree upon.  However, many times buyers believe that they should write an offer well below the list price, believing it’s a “starting point” in negotiations.  Sometimes these offers are referred to as a “low-ball” offer.  Although there is no definition of what is considered to be a low-ball offer, they are generally materially below fair market value or the list price. However, there is much more to it than that.

Having reviewed and written hundreds of offers over my real estate career, I can tell you that there is a psychological aspect to writing a low-ball offer.  In the end, low balling rarely works.  Here’s why:

1. It can offend the Seller:  Sellers are often taken aback  by a low offer and will not take it seriously.  More often than not, the buyer will either get a counter offer back at list price or not receive anything at all.  Everyone’s time has potentially been wasted.
2. You can lose a quality Realtor:  If a Buyer only submits low offers, he or she may gain a reputation of writing low offers and may struggle to find a top producing Realtor willing to work with them and write more offers.  Keep in mind, Realtors don’t get paid for the offers they write, they get paid for the offers that are accepted and the sales that close.
3. It can backfire on you:  With an offer in hand, even a low offer, the Seller and his/her Realtor can reach out to other perspective buyers to let them know an offer has been received.  That can create frenzy and if the Seller is successful in obtaining other offers, chances are the low-ball offer will be out and another one will be accepted.  And with multiple offers, it can often times drive the price up, making the Sellers more money than they would have had the initial offer been reasonable to begin with.

So, now that there is an understanding of why not to write low-ball offers, what does a buyer do if he/she wants to write a lower offer?  The answer is simple.  Do two things: 1) Keep the rest of the offer as clean as possible, making it so that the decision is only on the price and nothing else and 2) Prove your price.  If it is low, show the market analysis that supports the offered price.  There certainly are many homes on the market that are overpriced, but writing a low offer without support for the price usually doesn’t work.  Instead, by showing data that supports the offered price, the Seller may come to a realization that the offer is in fact fair.

Lastly, our market continues to appreciate, so as a buyer wastes time writing low offers, prices go up and the buyer writing a low offer may lose out on an opportunity to buy a good home now, which will appreciate once they own it.