Should You Ever Lowball a Home Offer?

We're finally starting to see the housing market cool down, but how much power does that actually give buyers?

<p>marchmeena29/Getty Images</p>

marchmeena29/Getty Images

By now, whether you’re shopping for a house or not, you’ve probably heard plenty about how we’re in a seller’s market. Over the past couple of years, the market has been driven by record low inventory and high demand, making it harder for buyers to find and purchase homes on their terms.

But now, it appears that the market is starting to cool off—and buyers may be gaining the upper hand again. For example, a recent Redfin survey reveals that the bidding-war rate has dropped to the lowest level since April, 2020. This is due, in part, because of the increased mortgage rates, which have influenced more buyers to put their plan to own a home on hold.

With the shifting market, exactly how much leverage do buyers have? Even as buyers gain back some power, should you ever consider lowballing a home offer? Depending on who you ask, a lowball offer can be anywhere from 15 to 25 percent and more below asking price, but several compounding factors can influence whether going low will be seen as acceptable or offensive. Below, we’ll walk you through multiple scenarios to consider.

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Proceed with caution

Before we even present the various situations in which you might consider lowballing a home offer, Bill Golden, realtor and associate broker at Keller Williams Realty Intown Atlanta, tends to warn against it as a general rule. “Being a realtor for many years, the idea of lowballing an offer is something I very rarely advise a buyer to do, especially in our current market, where homes are selling for asking price or above,” he says. “Most of the time, it only stands to waste everyone’s time, and if you’re serious about the property, it will start negotiations off on the wrong note, and will usually work against you.”

The housing market

There are always exceptions to the rule, and depending on the market, lowballing a home offer could make sense. “In a strong buyer’s market, lowballing can be an effective technique as many sellers may be happy to receive an offer, even if it’s significantly lower than the current list price,” says Tyler Forte, CEO of Freshbuilds.  However, he admits he would be hesitant to recommend it in a strong seller’s market—unless the seller and/or home fit the criteria outlined below.

The seller’s time and financial constraints

Sometimes, sellers are working on a short timeline. They might be moving because they need to relocate for work, or get their kids settled in a new school system, etc. Also, sellers who have already purchased a new home may not be able to juggle two mortgages for very long. “If the realtor (or the buyer) has specific knowledge that the seller is very anxious to sell for some reason, then a lowball offer could possibly work,” Golden says.

But, for this to work, he explains that the offer needs to have some sort of other redeeming qualities to make up for the low dollar amount. “Strategies like paying cash, closing quickly—if that suits the seller, or even closing quickly and letting the seller rent back at a favorable rate for a period of time can help to sweeten the deal,” he adds.

The property’s price

If the property is severely overpriced, Golden says this is another scenario in which a lowball offer could possibly work. As the market continues to shift, sellers are finding out that not a lot of buyers are willing to pay more than the property is worth. But again, he says you need to offer something else to sweeten the deal.Again, paying cash or closing quickly may mean more to certain sellers than a higher price,” he says.

Demand for the property

Supply and demand are everything when buying a home. “Placing a low offer is never a good idea when it’s a highly competitive property— doing that can come across as insulting and will signal to the seller that you are not knowledgeable or serious,” says Tricia Lee, broker at the New York City real estate firm Serhant.  But she agrees that there is a right time to submit a low offer.

“Last year, I contracted something on the buyer side that was 11 percent below the asking price, but it was still the most competitive offer,” she says. “We secured the contract because for this particular seller, it was still a strong number, a great ROI for them, and it was the most straightforward deal in front of them at the time.”

So, if there isn’t a lot of competition, and your seller is ready to sell, she says your lowball price may be accepted.

However, broker Kimberly Jay at New York City real estate firm Compass adds the following caveat: “Many sellers don’t want to list or reduce the price to where the market is today,” she says. “And if a property was just listed, it’s unlikely the seller is ready to accept or negotiate a lowball offer.” That’s because most sellers tend to believe there will be a lot of demand for their home, so it may take a while for reality to set in.

The property’s condition

When the market was on fire, some sellers weren’t even addressing the necessary home improvement projects before listing their homes. However, now, if a property is in need of work and has been in the market for a few months, Jay says the seller may be open to a lowball offer.

Keep in mind, though, that some houses in need of work are already priced to consider the cost of repairs.

“Before you view the property, ask your real estate agent to contact the seller’s agent and ask if it is worth it for a buyer whose budget is X amount,” Jay adds. “Sometimes, the seller’s agent will say yes. This strategy won’t guarantee your offer will be accepted if you like the home, but it will give you an indication of the seller’s negotiability.”

More to consider

Regardless of the scenario,  Jane Katz, an agent at Coldwell Banker in New York City, warns against going in blindly. “Before doing anything, you need to have your realtor or broker scope out the seller’s situation,” she says. For example, your rep may have a relationship with the seller’s rep. “If so, they may share information as to how the seller will react, whether they’ll give any hints regarding how low they can go, and if there are time and financial constraints,” she adds.

Katz also says there is a possibility that the seller won’t counter or engage in a discussion at all—even if you increase the price. There’s also the risk of competition, which is always a reality, even as the market cools down. “By making a low offer, you now pave the way for someone else who makes a more reasonable offer to scoop it up, without you having another chance at it.”

So, she only recommends lowballing if you’re okay with the possibility of losing the property in the case the seller doesn’t accept.

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