How and When to Bid Low on a Property

With prices stagnant or falling and inventory up in many markets, home sellers are no longer automatically turning up their noses at offers that come in far below their asking price.

Buyers who make offers asking for deep discounts still risk offending sellers to the point where they quash any deal.  Some real estate professionals suggest that before making an aggressive offer, some homework is in order.  Buyers might want to effectively explain why the price of a home should be lower.

Here are some guidelines on how — and when — to make an aggressive bid:

1. Learn how motivated the seller is to make a deal.

• Certain sellers are going to be more willing than others to negotiate a low offer — and there are several reasons which might indicate more leeway on price.
   
• If the sellers have already purchased another home and that sale has closed, they're usually more likely to be willing to make a deal.
   
• If the property has been on the market for a long time, sellers will be interested in entertaining any offers.
   
• Overall local market conditions also play a role.  Is the market sluggish, or is it still a hot or competitive market?

2. Make your case with hard facts.

According to Jon Boyd, an Ann Arbor, Michigan broker and president of the National Association of Exclusive Buyer Agents, "When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or [the buyer] not as serious."  When putting together an aggressive offer for a client, Mr. Boyd doesn't just hand the seller a purchase agreement with the price the buyer is willing to pay — he creates a cover letter explaining exactly where that number came from. 

In addition to citing comparable sales in making the offer, it also could be important to include details regarding the amount of inventory in the immediate surrounding area, he says.

3. Prepare for the possibility of rejection or negotiation.

Dick Gaylord, president elect of the National Association of Realtors and a broker in Long Beach, California says he warns buyers making very low offers that the seller might refuse to negotiate.

Danielle Kennedy, a real-estate sales coach and author based in Pacific Palisades, Calif., advises sellers not to think of a low offer as an insult but as "a sign of interest."  It "begins the dialogue regarding the purchase of your house," she says.

Have you made an offer on a property that you (as the buyer) thought may have insulted the seller due to the low offer?  Have you (as a seller) received a "low-ball offer" from a potential buyer?  We'd love to hear your comments either way.

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