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Low Balling Offers- Why Do Buyers Do it?

I'm re-blogging an excellent article that every buyer should read.  Very appropriate for me anyway right now, because I myself am puzzled by what I'm seeing in the market.  Enjoy!

Low Balling Offers-Why Do Buyers Do it?- It's really important for Buyers to understand how and why they make their offers. Often I find buyers make offers based upon what they've always been told buy their parents or others. For example: "Always go in with your offer at least 10%(or what ever formula they were given) under what the seller is asking".

The problem with this is that there is no real basis for this "formula" other than "low balling for the sake of Low Balling Offers". I can see if the property is overpriced to begin with, but that's just bringing the seller down to earth on their overpriced home.

I completely understand everybody wants the best deal they can get. Of course, who wants to over pay for a home?So really, the questions buyers need to ask themselves is why am I buying a home?

Ask yourself this:

Am I buying because I intend to live in my home for 5 or more years, interest rates are great and I can afford the payments?


                     or...


Am I an "investor" or "trader" who intends to "flip" the property for a quick profit?

Both of these Buyers make their offers differently because they have different motivations and are looking for different types of homes.

An Investor is typically looking for "distressed" sellers and homes that need a great deal of improvement. Investors often are contractors or can do the work themselves and save a lot of money doing the improvements the home needs with the intention of putting the home back on the market for a quick profit. These are the investors are in a position to make "low ball offers". They don't care if they get the house or not, it's all about the numbers.

on the other hand...

If you are the buyer looking to purchase because you want to live in the home for 5 or more years, your motivation is completely different. Believe it or not, although price is important, terms may be MORE important.

For example:

  • Are the payments acceptable to you?
  • Will the seller take your FHA offer?
  • Do I want the seller to pay my closing cost?
  • Is it better to buy something that is "turn key" or close to "turn key"rather than find a great deal and pull $30K out of the 401K and have no money left for an emergency?

Your Stratagy Should Be Different

  • Write Offers Based on Market Value: If there are NO offers, there may be some "wiggle"room in the price. If there are multiple offers, be prepared to go "at or above" asking price.
  • The more concessions you want (closing cost, repairs etc..) be prepared to write a stronger offer.
  • If you are going with FHA, be prepared to write stronger offers.

The bottom line here is if you are a buyer who intends on living in your home, make fair and reasonable offers that are a "win-win" for you and the seller. I've seen many people "low-ball" themselves out of homes that would have otherwise been PERFECT for them.

And remember this: If you are in fear of overpaying, then Fear Not because you are protected by the appraisal. If the appraisal comes in “under value” renegotiate or move on!

Copyright © 2010 By Stephen Munson,Munson Realty,homes for sale pasadena ca*Low Balling Offers- Why Do Buyers Do it?*



Thanks for stopping by my blog!

Comment balloon 2 commentsLisa Bosques • September 13 2010 11:22PM

Comments

Some buyers low ball out of fear.

In a downward market, they low ball to see if they can get an accepted price that will give them a buffer against and continued downward trends.

Posted by Ralph Gorgoglione, Hawaii and California Real Estate (800) 591-6121 (Maui Life Homes / Metro Life Homes) almost 7 years ago

many do it because they heard at a cocktail party, or read on the internet, that this is the thing to do now regardless of whether or not it makes sense. I tend to believe those are buyers who are a bit naive. There can be a right place for something like this situation such as one where there is a lot of risk involved in taking on the purchase, but I still believe those to be rare.

Many people thought for a time that this was the right way to approach short sales, and before the banks got their collective acts together, I would have agreed.  I helped some buyers get some great deals 2 years ago on short sales. But the market has continued to change and mature in this arena so it's not the right thing unless it's the right situation.

Posted by Reba Haas, Team Reba, CDPE (Team Reba of RE/MAX Metro Eastside www.TeamReba.com) over 6 years ago

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