As a first-time homebuyer, you might toy with the idea of making a few lowball offers on homes that interest you. After all, who doesn’t like to save money? But there’s a trick to making a lowball offer: you can’t make the offer so low that it offends the seller.
In this article, we’ll help you better understand this homebuying technique and whether lowballing your offer is right for your situation.
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What are lowball offers?
A lowball offer in real estate is when a buyer makes an offer significantly below the seller’s asking price. Buyers typically do this to get a great deal, especially in a buyer’s market where inventory is high. However, if the offer is too low, it can tick off the seller and shut down negotiations before they even start. Some sellers may counteroffer, while others might reject it outright or ignore it.
Typically, lowball offers are somewhere between 10% and 30% below asking, but that can change depending on the market, the home’s condition, and how long it’s been sitting on the market. In a buyer’s market, where there’s more inventory than demand, the offer might be more acceptable. But in a seller’s market, where homes are flying off the shelves, a lowball offer could cost you the property.
Regardless of the current real estate market, there’s a right way and a wrong way to make a lowball offer.
What not to do when making lowball offers
After weeks or months of searching for your dream home, you’re ready to submit an offer — a low offer, at that. However, before making a proposal, make sure you haven’t committed these common mistakes.
Don’t make your offer too low
When you’re submitting a lowball offer, you need to make sure it isn’t too low because it could offend the seller, who may not even want to entertain any other offers you want to make. Beth Pretty, a seasoned real estate agent in Midlothian, Virginia, says how low you can go depends on the price point.
According to Pretty, if a home’s sales price is already low, you need to be more careful about a lowball offer than if the home is priced higher. “For example, if you have a property listed at $200,000, you’re probably not going to want to go in at $50,000 to $75,000 under that price — versus a $500,000 house, you might get away with that.”
Don’t believe paying in cash deserves a discount
You might think that paying in cash is a good reason to have a low offer accepted, but that’s not how the seller sees it. When the contract has been signed and the house is sold, it’s money in their bank account either way.
Sellers may appreciate the speed and certainty that a cash offer brings, but they’re still focused on the price they want for their home. While cash offers can sometimes make a deal smoother, they don’t automatically guarantee a lower price. It’s important to remember that a seller’s priority is often getting the best price, and a lowball cash offer might still be rejected if it’s too far below their expectations.
Don’t be aggressive
One would think that if you want negotiations to go in your favor, you have to be aggressive… but that’s not the case with real estate. When you’re making an offer on someone’s home, you aren’t just purchasing a piece of land with a house on it. You’re purchasing a house that someone turned into a home filled with memories.
Yes, the seller’s ready to move on, but the sentimental value can make letting go a little harder. Respect that.
Don’t get angry if your offer is rejected
It’s not uncommon for people to get upset when an offer is shot down, but you can’t throw a hissy fit and walk away. If the seller rejects and gives you a counteroffer, consider this a perfect opportunity to negotiate.
If the seller rejects your offer outright, you can put that house on the back burner and see if it’s still on the market in a couple of months. If it is still available, the seller may be willing to accept the offer — or at least be open to negotiating.
Don’t use old comparables as a negotiation tool
Typically when you’re trying to make an offer on a home, your agent isn’t the only one who will look at comparable sales in the area to see if the asking price is in the same ballpark.
“Appraisers are typically tasked with finding comps that are only three months old,” explains Pretty. “If there’s not enough, then they have the discretion to go back six to twelve months. If it’s a very unique property — for example, a farm, equestrian property, something on the water or a golf course — they can go back as far as two years to pull that information.”
All the same, using outdated comps can be risky when making a lowball offer, as the market can change quickly. It’s essential to rely on recent sales to get an accurate picture of the home’s true value, especially in fast-moving markets where prices fluctuate frequently.
When should you make a lowball offer?
Making an offer that’s significantly lower than the asking price can be tricky, but that doesn’t mean you shouldn’t consider it. There are a few scenarios in which your offer may get approved, including:
The listing price is too high
Sometimes sellers will list their home for a lot more than it’s worth. You can’t blame them because they put in a lot of blood, sweat, and tears into maintaining their home and making it… well, a home. So, of course, they are going to want as much as they can get.
However, if you do come across an overpriced house, be respectful when discussing why the home is overpriced. An example of how to approach this could be through the comps.
For example, if the comps used to price the home all have updated appliances and flooring, whereas the listed home could use an update, you can and should mention that when you make an under-asking-price offer.
The home needs to be updated
One of the biggest factors to consider when making an offer is the condition of the home and any necessary repairs or upgrades. While you can use this as leverage for a lowball offer, you might also explore alternatives, like requesting a seller credit to cover the costs.
Pretty advises, “Typically, what’s better is to ask for credit towards closing costs. If a price is lowered by even $5,000, that’s only about $25 less per month in mortgage payments.
Instead of lowering the price, a buyer can request to have those issues repaired, or they could request what’s called ‘credit in lieu of repairs.’ It’s in the buyer’s best interest to take credits towards closing costs.”
The housing market supports your number
The local housing market can be used to determine the best time to make an offer on a home. Ideally, you’ll want to make an offer when it’s a buyer’s market because the seller will be more willing to negotiate.
The time of year is likewise a contributing factor when deciding to make an offer. If you’re able, in most markets, waiting until the winter or holiday season to make offers can be a good time for lowball offers because the seller probably won’t have as many offers coming in as they would during spring or summer.
The listing is lingering on the market
If the home has been on the market for more than three months, the seller may be more likely to entertain any serious offers, even low ones.
“If it’s been on the market three months or more, they might be a little more desperate and open to a lower offer. If the houses just sits, sits, and sits, you could get away with 10% to 15% under list price,” Pretty explains.
Pro tip: Aside from checking how long the house has been on the market, research the median Days on Market (DOM) for the area you’re considering. Compare listings to see how long similar homes have been on the market.
The house is an estate sale or a foreclosure
If a home is an estate sale or a foreclosure, it’s often a good time to make a lowball offer. Estate sales typically involve heirs or executors who want to sell quickly, which can create an opportunity for buyers to negotiate a better deal.
Similarly, foreclosures are usually owned by banks eager to recoup their losses, so they may be more willing to accept lower offers just to offload the property. In both cases, these highly motivated sellers are generally more focused on closing the deal quickly rather than holding out for a top dollar, making them more open to lower offers. Just make sure you’ve done your research and are prepared for the specifics of these types of transactions.
How to get your offer approved
If you’re still considering putting in a lowball offer, it’s a good idea to choose an agent who knows the area and the profession well. A savvy agent will contact the listing agent and ask them questions to find out why, exactly, the house hasn’t sold. When you understand the seller’s motivation, you can tailor your offer so your offer — at least — is considered.
Pretty explains that your agent doesn’t have to say much at all. “If you’d be quiet and let them talk, they will just unload with lots of great information that you can then share with the buyer.”
And you might learn that a lowball offer is entirely off the table: “Sometimes the listing agent says ‘We’ve already gotten some lowball offers and my client was infuriated and won’t even consider them. So don’t come in low.’”
Perhaps the most successful tactic for getting a lowball offer accepted is to have compassion for the seller. Selling a home isn’t easy, especially if they’ve lived in the home for a long time.
Many memories have been made within those walls, and it’s important to honor that. Don’t present the seller with an offer that is ridiculously low — because it gives them the impression that you’re only concerned about saving money, without considering the seller’s situation at all.
Work With a Top Agent to Nail Down Your Offer
Most people only buy one or a few homes in their lifetime, but experienced agents help buyers all the time. When it comes to making a solid offer on your dream home, who you work with matters.
So should I make a lowball offer?
Deciding to submit lowball offers isn’t something you should take lightly because it could be the difference between getting the home of your dreams — or not. If you’re grappling with the decision, Pretty recommends pondering a situation where “…you wake up tomorrow and somebody else got that property. How are you going to feel about it?”
If you can live with that outcome, she suggests that you go ahead and submit a lowball offer. But if you already know that you won’t be able to live with it and you really want that house, “then be a little more reasonable and go in there with something stronger.”
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