Submitting a Low-Ball Offer
We all want to buy our new home or investment property at the lowest price possible, or at least get good value for our money. And of course the vendor wants the most he can get for his property.
Yet you now know that the asking price quoted by the selling agent will usually be more than the owner is willing to take for their home. It's just part of the real estate game, they expect to come down in price as part of the negotiation process.
So what price should you offer?
If you ask the selling agent what price you should offer, you're asking the wrong person. Remember, the agent is paid by the seller to represent them and to get the best price possible.
However it's usually still worth asking them what they would consider was a "fair offer" and then ask them to justify it with a list of comparable sales.
But most agents prefer an easy negotiation, knowing that sellers get offended when they receive low offers on their homes. This means they will probably recommend you make an offer close to the asking price.
So unless you use a buyer's agent to help you negotiate, you are really going to have to rely on your own research to work out what the property is worth.
By the time you end up at the negotiation table, you should have put some of these into practice, looked at many homes and gotten a pretty good idea of what similar homes in the area have sold for.
Remember, it's the sale price, not the asking price that you need to focus on when you're doing your pre-negotiation homework.
In most markets (other than during boom times), houses sell for less than there asking price.
So the asking price is just the starting point for the negotiations.
If you pay what the seller is asking you could be wasting money. The trick is to know how much less the seller will accept.
Here are some things you should try and ask or have asked if you are using a buyers agent:
Have there been any other offers made?
This lets you know if you have any competition and how serious the vendor is about selling their home for a reasonable price.
How long has the home been on the market?
If it's just been put up for sale, the seller may not be anxious to accept the first offer. If the home has been on the market for several months it's more likely the seller would be ready to accept your offer.
Why is the vendor selling?
Are they going through a divorce? Do they have to move interstate urgently? Have they already bought another home that would put them under pressure to sell their current home? This will let you know how motivated the seller is.
Has the asking price been reduced during the time the property has been on the market?
This will tell you whether the seller is really keen to offload their home and also let you know that you might have a motivated seller on your hands and perhaps greater bargaining power.
A lowball offer, one that's significantly lower than the listing price, is often rejected by sellers who feel insulted by the buyers' disregard for their property. Most listing agents try to get their sellers to at least enter negotiations with buyers who make a low offer, but some sellers choose to reject the offer completely. As buyers, you can take steps to increase the likeyhood that your lowball offer will be accepted, or at least that negotiations can take place, and they should be as unconditional as possible.
