If you’ve been in real estate long enough, chances are you’ve come across a low-ball offer. Maybe it’s that shockingly low number someone threw at one of your listings, or perhaps it was a client insisting you submit a way-below-market bid on a home they’re eyeing. Either way, low-ball offers are a part of negotiating, and while they can be frustrating, they don’t have to be deal-breakers. I’ll dive into precisely what low-ball offers are, why they happen, and—most importantly—how you can handle them like a pro.
What are Low Ball Offers?
Real estate agents see some crazy things and some days, it feels like you’ve likely seen it all—until you get an offer that makes you do a double-take. So, what is the meaning of a lowball offer on a house? It’s exactly what it sounds like—an offer significantly lower than the asking price. And while a realtor presenting a low-ball offer might feel like a punch to the gut for your seller, they happen more often than you’d think. Buyers might be trying to get a deal, test the seller’s flexibility, or simply see if they can score a bargain.
Here are some common characteristics of low-ball offers and what to look for:
- Significantly below asking price: Typically 10% to 20% or more below the listing price.
- Cash offer: Some buyers will pair a low offer with a cash payment to entice sellers with a faster closing process.
- Minimal contingencies: Often comes with fewer conditions, like waiving inspections or appraisals, to make the offer more attractive despite the low price.
- Request for repairs or concessions: The buyer may justify the low price by pointing out repairs. In another scenario, the offer may come in at the listing price, but they may ask for large credits at closing.
From the buyer’s perspective, it’s a chance to get a great deal. However, for the seller, it can feel like an insult. That’s why as a real estate agent, it’s important to understand the motivations behind lowballing a house offer and be prepared to navigate the negotiation process calmly and effectively. In the end, a low offer is just a starting point, and with the right approach to the offer, it doesn’t have to mean the end of the negotiation.
Example of a Low Ball Offer
Let’s take a look at a typical scenario to better understand what a low-ball offer might look like in practice.
Imagine your seller has listed their home for $500,000. The property is in great condition, in a desirable neighborhood, and priced in line with comparable sales in the area. After some initial showings, an offer comes in from a potential buyer—but it’s for $425,000, a full $75,000 below the asking price. That’s a 15% reduction, and understandably, your seller is less than thrilled.
So why would a buyer make such a low offer on a home that is priced correctly? There are a few possibilities:
- The market: If inventory is high and competition among buyers is low, the buyer might feel empowered to throw out a lower offer, knowing sellers could be more flexible.
- Perceived issues with the property: Even though the home appears to be in great shape, the buyer may have noticed small repairs or cosmetic updates that they believe justify a lower price.
- Buyer strategy: Some buyers approach every negotiation with a low-ball offer, assuming they’ll eventually land somewhere in the middle.
- Personal budget constraints: The buyer may love the property but simply can’t afford the asking price. Rather than walking away, they submit a low offer in the hopes that the seller is willing to negotiate.
In this case, the seller’s initial reaction may be frustration or disappointment, which is where your role as the agent becomes even more important. Your job is to help the seller evaluate the offer objectively, taking into account both the buyer’s motivations and the current market conditions. From there, you will guide the seller to the next steps—whether that’s submitting a counteroffer, declining the bid, or working on a compromise.
How to Handle a Low Ball Offer
Let’s be real—getting a low-ball offer can feel discouraging, not just for the seller, but for you as the agent too. It’s easy to start second-guessing yourself, wondering if you priced the home right, or whether you missed something in the comps. But after you get past that initial shock, it’s time to roll up your sleeves and find a way forward. Low-ball offers aren’t the end of the road—they’re just the start of the negotiation process.
Here are a few tips on how you can respond to low-ball offers and turn it into an opportunity to keep the deal alive:
- Stay calm and objective: Avoid emotional reactions—both yours and the seller’s. A low-ball offer is part of the negotiation process, not a personal insult. Encourage your seller to focus on the bigger picture and keep their cool.
- Evaluate the offer fully: Look beyond the price. Does the offer come with favorable terms like a fast closing or fewer contingencies? Consider the buyer’s motivations and assess whether the offer has potential beyond its initial low number.
- Communicate clearly with your seller: Have an honest conversation with your seller about the offer’s pros and cons. Use market data to back up the asking price or suggest a reasonable counteroffer.
- Propose a strategic counteroffer: Help your seller create a counteroffer that keeps the deal alive, whether by adjusting the price slightly or offering concessions like covering closing costs or handling repairs.
- Know when to walk away: If the buyer refuses to budge, don’t hesitate to walk away. Advise your seller to remain patient and wait for a better offer, especially if the market supports their pricing.
- Leave the door open: Even if the offer isn’t acceptable, stay professional. A buyer may return with a better offer later on.
Tips & Strategies on How to Negotiate
With the right approach, you can often turn a low offer into a win-win situation for everyone. Here are some practical tips and strategies to help you negotiate effectively:
Tip 1: Understand the Buyer’s Motivation
Tip 1: Understand the Buyer’s MotivationBefore jumping into a counteroffer, take a moment to assess why the buyer made such a low offer. Are they trying to snag a deal because the market is slow, or are they genuinely concerned about the property’s value? Understanding their motivation will give you valuable insight into how to proceed and what kind of concessions they might be willing to make.
Tip 2: Present Solid Market Data
This tip allows you to use facts to your advantage. Provide the buyer with comparable sales (comps) that justify the listing price. Show recent sales in the area that back up your client’s asking price. Grounding your counteroffer in solid data strengthens your position and makes it harder for the buyer to argue against it.
Tip 3: Highlight Unique Selling Points
Make sure the buyer understands the true value of the property. Highlight features that set it apart—whether it’s a newly renovated kitchen, an excellent school district, or a rare architectural style. Reinforcing the property’s unique value can justify a higher price and encourage the buyer to reconsider their offer.
Tip 4: Focus on the Big Picture
Remind both parties to keep their eye on the end goal: selling the home. If the buyer is motivated, they might be open to making other concessions, like waiving contingencies or adjusting the closing date, even if they can’t meet the full asking price. Flexibility on non-monetary terms can often close the gap between the two sides without either feeling like they’re giving up too much.
Tip 5: Use Time to Your Advantage
Sometimes, time can be a powerful negotiation tool. If the buyer is dragging their feet or playing hardball, use that to your benefit by giving a deadline on your counteroffer. A time-sensitive offer can create urgency and encourage the buyer to come back with a more reasonable offer. On the flip side, if the market is slow and your seller is in no rush, being patient could eventually drive the buyer to raise their offer.
Tip 6: Offer Incentives or Upgrades
If price reduction is a sticking point, offer smaller incentives or upgrades instead. For instance, propose leaving high-end appliances, offering a home warranty, or handling landscaping costs. These incentives can add value for the buyer without significantly reducing the seller’s net proceeds.
Tip 7: Focus on Long-term Value
Help the buyer see the property as a long-term investment. Discuss how the home might appreciate in value over time, the benefits of building equity, and the potential for future resale value. Framing the conversation around the property’s future benefits can help the buyer justify spending a little more upfront.
Tip 8: Keep the Negotiation Environment Positive
Remember, people are more likely to negotiate fairly when they feel positive about the process. Keep the tone friendly and stay away from negative terms that agents should never use. Look for ways to inject optimism into every conversation. A positive environment can reduce the stress of negotiations and make both parties more open to compromise.
Pro Tip: Handling low-ball offers professionally can boost your chances of generating future seller leads. Successfully guiding your seller through tough negotiations builds trust, increasing the likelihood of referrals and repeat business.
FAQs
What percentage is considered a low ball offer?
A low-ball offer is generally considered 10% to 20% or more below the asking price. However, the exact percentage can vary depending on market conditions and local norms. In highly competitive markets, even a 5% to 10% drop might be seen as a low-ball offer, while in slower markets, a 20% reduction might be more common.
How common are low ball offers?
Low-ball offers are fairly common, especially in buyer’s markets or when a home has been on the market for an extended period. Buyers often try their luck with a lower price to see if they can strike a deal.
Can low ball offers turn into successful deals?
Yes, with skilled negotiation, a low-ball offer can lead to a mutually beneficial agreement. Often, buyers expect a counteroffer and are open to adjusting their bid if the terms work for both parties.
Bringing It All Together
Handling low-ball offers can be frustrating, but they don’t have to be deal-breakers with the right approach. You can guide your seller through the negotiation process by staying calm, evaluating the offer objectively, and responding strategically. Remember, low-ball offers are often just the starting point for productive discussions. With a focus on communication and a little creativity, you can turn even the lowest offer into an opportunity to reach a favorable outcome for both parties.
Do you have any tips for how you handle low-ball offers? We’d love to hear them!
Tell us about you so we know what to send.
Add comment