1.26.2012

Mistakes Homebuyers Make with Low Ball offers....

For some home sellers, 2011 was a long year without a home sell....that means some buyers are smelling desperation & may feel that they can get in and get the deal of a lifetime.


Before you decide to put in a LOW BALL offer, don't risk your chance of getting an acceptance by avoiding these errors:

1. Not understanding the Market

Your Real Estate agent should do a comparative market analysis (CMA)to determine the Fair Market Value (FMV) of the home. I always give my buyer clients a clear definition of FMV which is "the most likely sales price of this home, in the current market". Once you determine the FMV, you compare that to the list price of the home. There is no secret formula to what to offer....i.e. The 90% Rule. I have heard many times from buyers "your first offer should be 90% of the list price" or some other percentage. You don't want to offer 90% of the list price if the list price is 20% higher than Fair Market Value...I also wouldn't hesitate to advise a client to make an aggressive offer if the price is at or just above FMV.

2. Not picking a good agent or picking one that is a terrible negotiator

Some agents caution buyers on making an offer so low that could offend the sellers & halt negotiations. My opinion is this: I always try to prepare & PRESENT and offer so it well-received by the sellers...no matter how low it is. Most offers I prepare for buyers are accompanied with a cover letter or sometimes an email that may address why we are offering what we are offering & always include positives about the home. I feel I am really good at this part of my job!

3. Not backing up your price

Again, this is all about how an offer is presented & providing back-up for you offer price is critical! If you don't back up your price with comparable sales in the neighborhood...you are making a mistake and could certainly start negotiations off on the wrong foot. Sellers want to know why you are offering so low. There is no better way to back-up your offer than to show cold hard facts or SALES.

4. Not Knowing what your walk away number is

Today's buyer have a strong desire to not pay too much & get the best possible deal due to fear of home values falling even more. Sellers also have limits which is usually determined by loan payoff and/or amt of equity they have in the home. A buyer should have limits but, try not to put limits on your first offer by saying "highest & best" when you are in fact willing to go up a few thousand dollars. Don't say highest & best unless you mean it!

5. Not making a clean and easy offer

When you make a low offer, you want all the other elements to be attractive to the seller: little to no contingencies as possible, have finances in order before you offer (provide a loan commitment letter or proof of funds statement w/ your offer) & don't ask the seller to pay fees & closing costs outside of the norm.

6. Cash is NOT always KING

Don't assume that the seller is going to accept your low offer b/c its cash. Today's seller (even banks) want more money for the home. I have certainly experienced with my cash investor clients, they are getting beat out by homeowners who are getting mortgages and paying a bit more.

Bottom Line is make sure you are well-advised when putting in low-ball offers. Your relationship with your real estate agent is so important, so pick a good one!