When should I write a lowball offer?

January 12, 2013 16:30

In a seller's market, the seller dictates the terms.  In our local market of Portland, Oregon we are in a full scale seller's market right now, and lowball offers are scarce, and getting one accepted is even more rare.

A lowball offer may cause a negative reaction from the seller, so if you are thinking about doing this be careful to follow these steps.  Otherwise you might insult the seller and close the door forever.

I have been selling Real Estate in Portland Oregon since 2003, and I have written my fair share of low offers. Most low offers get rejected because the seller is looking to get a certain price, but once in a while you get one accepted. Here are some things that you can do to make your lowball more appealing to the seller:

     Put down a large amount of earnest money.
     Make your earnest money non-refundable and immediately available to the seller.
     Schedule the closing ASAP.
     Eliminate contingencies, for example, eliminate the inspection contingency.
     Don't ask for any special favors, for example don't ask for a home warranty.
     Show the seller that you will be able to financially close the transaction.
     Take on the seller's problem, ie., accept the house with all of its defects.
     Be very careful writing a letter that "explains" your lowball offer. You might insult the seller.
     Respect the seller's needs, for example, allow him to rent back for a while if needed

Write lowball offers on properties that have motivated sellers, for example, vacant properties, properties that cannot be financed and properties that have been on the market for a long time.  With regard to the letter that "explains" your lowball offer, the only time that I was successful, I wrote an offer for my client that explained that the buyer really loved the home, but it was beyond their reach financially. I explained that they could afford a certain price and nothing more, and it worked!

If you are humble, respectful and empathetic when you write the offer, you will get a better result. Furthermore he said that your offer should convey the fact that you are willing to take on all of the seller's problems when you write the lowball offer, and all the seller has to do is sign the papers.

You may have to write more than one low offer before you get one accepted, but this is a legitimate way to negotiate a lower price on a property. You just have to have the stomach for it. You may also find yourself playing ping-pong. That is: offer, counter offer, counter to counter etc. This can be a huge waste of time, but as long as there is movement on the part of the buyer and seller, it is probably worthwhile to continue.

A few don'ts would include:

     Don't write more than one offer at a time, unless you plan on purchasing more than one property.
     Don't try justify a low offer by sending the listing agent "comparable properties". I tried this... once.
     Don't insult the seller or disrespect the property; you will just burn bridges.
     Don't write a low offer on a new listing; you will be wasting your time.
     Don't write a low offer on an underpriced listing.  You might loose the opportunity to pick up a steal.

3 Comments

March 25, 2011 21:19
Ned Carey said:

This is really well written. Great advice for homeowners but a lot of investors need to read this also. I would love to put this on my blog with full credit to you and a link back from my site. If that is OK e-mail me back and let me know if you want me to link to the main site or the bog. Ned Carey

October 26, 2011 12:16
sellerinwisconsin said:

There are limits, when your on the other side and someone makes an offer on your home thats over 20 percent under the already reduced asking no amount of wording or concessions are going to sell the deal, you are going to offend the seller no matter what. really check your comps , if you offer that percent under all the comps in the area you are just asking to have doors slammed in your face.

November 08, 2011 19:25
Brian Porter said:

Hello Seller in Wisconsin, You make a very valid point. Lowball offers sometimes get shot down in a big way. I am thinking about writing a blog post about "How to respond to a lowball offer". Being on the receiving end of a lowball offer can really suck, but a seller can sit on the lowball offer and hopefully encourage another buyer to write a better offer. After all, the seller is under NO obligation to accept the lowball offer.

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