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Defining the Lowball Offer in Phoenix Real Estate

Defining the Lowball Offer in Phoenix Real Estate

avatarthumbnail.jpgReceived an e-mail the other day where the idea of so-called lowball offers was mentioned. Because of the drop in inventory, the theory went, we ought to be telling our buyers that lowball offers won’t work anymore.

What’s a lowball offer, you might ask? Often that’s left to the interpretation of the seller and the listing agents.

For your typical buyer, no offer is too low. All the seller can do is say no, right? Which is absolutely true but also essentially useless if you’re serious about buying a home. As a buyer, what you ought to be searching for is the price at which the seller’s about equally as likely to counter or accept your offer. Go below that baseline mark, and the counter offer you receive will likely be for more than it would be if the seller perceived you’re serious about buying.

So what’s the magic number? It depends. I’ve been advising my clients to offer around 90% of list price, assuming the property’s priced aggressively, but there needs to be some flexibility in the formula. Aggressive offers on homes new to the market, for example, will not be as successful as for homes on the market for a while. And there always will be some differences in the negotiations required with a traditional seller versus a lender.

Last week, two of my clients put offers on different homes. The one where I’d expected the bank to be more flexible ended up selling for closer to the list price and the one where I thought the offer was bordering on just below that magic number was accepted. These days, it’s more art than science, more a matter of intuition based on experience than hard and fast rules.

Which is why blanket statements about “lowball” offers don’t make a lot of sense. Because at the end of the day, if you’re floating somewhere within 10 – 15 percent of list price, you really don’t know with much certainty what might happen. The only way to ensure you don’t get a house is to not make any offer at all.

[tags]Phoenix real estate, bank owned homes[/tags]

Comments

  • JD, well said and good advice. But I noticed something interesting you said about days on market.

    “Aggressive offers on homes new to the market, for example, will not be as successful as for homes on the market for a while.”

    And I agree completely with that statement and it’s why I always look at the history when helping a buyer craft an offer.

    The reason that I bring that up is that a discussion of days on market was how we first met years ago on the Internet. You have always believed that days on market don’t matter and I wonder if you’ve changed your mind on the subject.

  • Jonathan,

    It really is amazing that folks can sometimes get caught up in the “paralysis through analysis” syndrome. I find this more and more as rates on home loans here in Florida stay down near record lows. Folks are waiting for the magic number there, too.

    On the subject of Short Sale offers – I spoke tonight with a Realtor colleague of mine in Clearwater, Florida. She has numerous REO/Short Sale deals in the pipeline with banks – all offers by buyers were pretty much what the banks were asking for. Thing is – whether it’s backlog or whatever – the deals aren’t getting through the pipeline!

    Have you had the same problem? My question is this: If a buyer meets the bank’s offer, but the deal then sits on the bank’s desk for long enough for the home’s value to drop by say – $5,000 or more – is it wise for the buyer to renegotiate, or will this just extend the process further?