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March 9, 2009
Making an Offer?
We've seen something we like very much but cannot afford the asking price. How much lower than asking can one offer? Specifically, could someone offer $1 -1.1 million on something that is asking $1.295 million or will the owners just get upset and offended?
Comments
Why worry about offending the seller?
When I bought my current house, the realtor we worked with was really into invoking the "don't offend the seller" thing, and I hate to admit that it worked on me, even though it makes no sense, and we probably paid about $30K more than we could have.
Either the seller wants to negotiate or they don't. If they don't want to negotiate, they can say no and you can either offer more or walk away.
Posted by: vanburenproud at March 8, 2009 5:44 PM
Leela, worrying about such niceties is the stuff of a different era in the real estate market. Maybe in 2006 one worried about such things. Offer what you feel you can afford and nothing more. They can turn you down if they don't like the price but I doubt any seller will reject any buyer out of hand in this climate.
Posted by: wasder at March 8, 2009 5:52 PM
youre buying a house for a million dollars. I dont think you can worry about hurt feelings....
Posted by: slick at March 8, 2009 5:59 PM
If you really wanna have some fun, post a link to the property and watch people tell you it's not even worth 1.1
Posted by: denton at March 8, 2009 6:26 PM
Where have you been the last few months? Do you read the newspapers? People are lowballing and offering up to 40% less than asking price, insulting many sellers in the process. It's a buyers' market, in case you hadn't noticed.
Posted by: BKLYN_73 at March 8, 2009 7:18 PM
Offending the homeowner? Are you kidding me? Isn't the homeowner offending your intelligence by over asking you 50 percent more than what he should be? You are buying a house not sleeping with the guys sister you know?
Posted by: hannible at March 8, 2009 8:10 PM
Impossible to guess the outcome without seeing the property, but I agree with others who say you should not worry at all about offending the seller. Are you worried you are going to see him on the street or something? It's a market. He put the place on the market. You are giving him valuable information by saying that you are ready, willing and able to buy at a particular price. If he doesn't like it, he can say no. The very worst thing that can happen to you is that you don't get the place.
Posted by: lechacal at March 8, 2009 8:51 PM
Figure out what you can afford and then offer 2/3rds of that amount.
That way you have some wiggle room to come up in price.
The biggest problem is that nobody really knows what anything is "worth" right now because so little is selling.
Posted by: IronBalls at March 8, 2009 9:25 PM
One: going from 1.3 to 1.1 isn't exactly a lowball.
Two: Decide what you think the house is worth and what you can afford, and offer less than that.
If you're playing games -- trying to figure out how low you can go without just insulting them -- I have no special advice to offer you.
Otherwise, you should offer a little less than you want to pay and see what happens. And, don't let the realtor manipulate you. They'll say "that is insulting"; or "they'll never consider that, make a more reasonable offer." Whatever. If the broker doesn't want to take your offer to the seller, say explicitly that that is the written offer you'd like to make and make them give you an offer form.
Posted by: serpentor at March 8, 2009 11:41 PM
The seller has probably already worked the lowball offer into the price by asking more than they actually want. They'd probably be ecstatic with a 1.2 offer so how could they be offended by 1.1? Make your offer and then walk away. They'll pretend to be offended and then call you back in 2 weeks...
Posted by: annieny at March 9, 2009 1:13 AM
Low ball by about 30% or so and make sure the broker takes the written offer to the seller. Don't take any crap from the broker.
Posted by: daveinbedstuy at March 9, 2009 7:17 AM
Offend the seller! Their job is to get as much as possible, not be fair. Go ahead and offer, but leave some room for negotiation. Start at a million or a little less if the property is truly worth it.
Posted by: Iknow at March 9, 2009 9:08 AM
Thank you everyone for your comments, they're extremely helpful. I have yet to buy anything in this market so negotiating is pretty new to me. Last time I purchased was in 2003 when you had to offer at least the asking price at the first showing, then brace for a bidding war.
Posted by: Leela at March 9, 2009 9:43 AM
Beyond offending the seller... how much below an asking price could you conceivably be successful in a bid? For instance, is 25% below a total long shot, but 15% below very possible?
Posted by: alsawo at March 9, 2009 11:14 AM
If they are asking $1.295 I frankly wouldn't consider anything over $1 million to be a lowball. Offering less than asking is not lowballing. Offering a substantially reduced price that most buyers would reject, in the hope that they are desperate and have no alternative and will be forced into your icy cold arms, is a real lowball.
If you are lowballing properly, you are doing a lot of legwork and making offers on many properties, the great majority of which are being rejected.
If you have fallen in love with a property and just want to get it at a price you can afford, then for heaven's sake don't lowball. Figure out how much you can afford, and offer that.
A proper lowball probably will offend the seller, but if you are a lowballer you don't care. I remember getting pissed at a couple lowballers when I was selling my place, but I got over it very quickly. I also remember lowballing the sellers when I bought the place. They got pretty pissed, but they sold to me. The wife wouldn't even come into the closing room she was so pissed.
An example of a lowball would be offering $900k for this place. Send them a contract with a really big down payment check and a pre-approval letter for the exact amount of your offer (if you need to finance) showing that you can get the deal done. Tell them to sign or you are gone. Tell them there are plenty of opportunities for you to pursue elsewhere if they don't want your money. Chances are you will not succeed with any particular property, but eventually you will.
This strategy is plausible in NYC for the first time in almost 20 years. A few years ago you would have been wasting your time. Not any more.
Posted by: lechacal at March 9, 2009 11:46 AM
I'm a current seller and I know I wouldn't be "offended" if someone offered me 200K less than what I was asking - I just would tell them to resubmit a higher offer and I would consider it. I think actual sale prices haven't come down to 20% yet especially in prime areas for prime properties.
Don't be a lowballer because you might miss out on the property you really do love because someone else valued the house closer to the asking price.
Posted by: gemini10 at March 9, 2009 11:56 AM
Gemini - The point of lowballing is to find the buyer that has to accept the offer. If a buyer says no, you just move on to another property. As you correctly point out it is a bad strategy if you want a high likelihood of getting a particular property. But if you want to limit the risk of buying into a falling market and are willing to spend time doing the legwork, it is a good strategy.
I think history has shown that, in hindsight, some sellers would have been well advised to take an offer they considered to be a lowball. Consider how you would proceed if comps for your apartment do in fact drop 20% in the next year and are continuing to fall.
Out of curiosity, what is the general description of what you are selling? Of course no need to post a link to the listing or give identifying information, which often just invites nasty comments.
Posted by: lechacal at March 9, 2009 12:10 PM
Write the seller and point out you were offended by him pricing it so obviously high.
Posted by: dittoburg at March 9, 2009 12:11 PM
Bid what you think the property is worth (assuming you can afford it) based on comp sales. So, for example, if a comparable property sold for x two months ago and you see actual sales prices are coming down by about y per quarter, then offer x - y.
The asking price is irrelevant. Irrelevant. Irrelevant.
An owner can ask $10 billion for a shack in the piney woods. Doesn't mean you have to offer $10 billion to avoid offense.
Posted by: mopar at March 9, 2009 12:13 PM
gemini - I saw details in an old post. No need to re-post. Good luck with your sale by the way. I don't mean to suggest that you should accept a lowball offer - I'm just describing the strategy, which for obvious reasons sellers find distasteful.
Posted by: lechacal at March 9, 2009 12:16 PM
Lechal - it's actually a house, and you are right - I'll wait on posting a link for fear someone will comment on why I chose to paint my walls "victorian linen" vs. "vintage linen" - hahahaha
Also you are right on strategy with regards to lowballing on a property you like - Don't do it! I think throwing out 900K on a place asking 1.295K isn't smart - especially if you reallly want it, you won't win. I would hope the seller isn't desperate enough in that case to accept 900K on a place asking 1.3mil
Posted by: gemini10 at March 9, 2009 12:22 PM
Offer $999,999 so you can avoid the mansion tax.
Posted by: Bklnite at March 9, 2009 12:25 PM
Oh Lechacal - no worries at all
here's hoping - I feel pretty confident I priced it correctly and will be flexible of course,. My lawyer told me the first few offers are usually the best you are going to get so consider them all carefully.
However (and this is just my tenaciousness talking) i'll be dammed accepting a lowball offer! - hahahaha
Posted by: gemini10 at March 9, 2009 12:26 PM
$500,000 offer on a $1.29 million property is an offensive low ball offer.
$1 million isn't.
I'd offer $999,999 (like someone else mentioned) but I'd also offer $50k cash under the table, if you can swing it.
You save on mansion tax, you get the building for $1.050. For tax/capital gains purposes the owners sell for "less" plus they get $50k off the books.
In Brooklyn under the table cash was how a lot of buildings changed hands for a long time.
Posted by: christopher at March 9, 2009 12:56 PM
Two years ago the asking price on our house was 1.275. We offered 1.150 and got it. If I did it all over again I would definitely ask the seller to pay the mansion tax. Go for it!
Posted by: Turtlejam19 at March 9, 2009 12:57 PM
Bklnite - you took the words right from my fingers.
Posted by: gkw at March 9, 2009 12:57 PM
Christopher, just remember that tax evasion can put you behind bars.
Posted by: lechacal at March 9, 2009 1:07 PM
Fair market value is determined by what a willing seller will accept from a willing buyer. That is how market prices are set for gods sake. Your offer is only a lowball if there are other buyers willing to pay more. Obviously you dont know what other buyers will pay, which is why you dont ordinarily lowball on a property you want. Sellers do get emotional when they see buyers valuing their property for less than they they do - but that is their issue. A smart seller should put feelings aside. If all offers are low, thats an indication that they overvalued their property.
If you really really want the property, I would offer no less than 1.1; if you are a bit less enthusiastic i would ask them to pay all associated closing costs. If you can go either way, I would go lower than 1.1 on the offer.
Posted by: saminthehood at March 9, 2009 1:29 PM
Woman up and bid half off peak comps. DO NOT LET THE MARKET FUCK WITH YOUR EMOTIONS. Find three comparables, take the average and chop it in half. Can you afford that? Go for it! (YOU CAN WALK if they reject you. You will always find something better. The longer it takes, the cheaper it will be. The market is in freefall.)
Market uncertainty (it was upwards before the peak - now it is downwards) must be priced in. You don't even have to speak to anyone. Just email or text-message the broker with you number. "Bid = X". That and your qualifications are the only things that matter in your communication to the seller. Short and sweet. Consise. Save the drawn out correspondance for the contract and close.
YOU CAN DOOOOOOOOO IT!!!
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 1:43 PM
...If you can't afford 1.295, then you probably can't afford 1.1. Don't do it to yourself. Rent in the mean time. Good things come to those who wait.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 1:46 PM
So, what would be an "offensive" bid on a high-maintenance apartment that's been cut from $550 to $520K -- would it be insane to bid what I can actually afford, which is about $380?
Posted by: zuleika at March 9, 2009 1:49 PM
So, what would be an "offensive" bid on a high-maintenance apartment that's been cut from $550 to $520K -- would it be insane to bid what I can actually afford, which is about $380?
Posted by: zuleika at March 9, 2009 1:51 PM
Brownstones Half Off,
You said "Find three comparables, take the average and chop it in half"
You are saying if the 3 comps average out to 1.2 you would offer around $750k?
where's the rolling eyes emoticon when you need it?
Posted by: christopher at March 9, 2009 2:21 PM
zulelka, if comperable apartments in the same building have recently sold for $550 or so, then $380 would be ridiculous, yes. But if they've recently sold for $200, you'd be overpaying. ASK HAS NOTHING TO DO WITH PRICE.
Posted by: mopar at March 9, 2009 2:54 PM
Thanks, Mopar. I think that comparables are selling for about $500 now. I thought maybe I should factor in an expected fall in price of 20% or so, too.
But probably I should just wait another few months and see if the apartment is still on the market.
Posted by: zuleika at March 9, 2009 3:06 PM
"You are saying if the 3 [highest] comps average out to 1.2 you would offer around $750k?"
Yes Sir. That's a little more than half but you get the picture. Pay any more than that and the market will be rolling its eyes at you when you try to resell to break even, let alone for a gain, within the next ten years.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 4:47 PM
zuleika, yes, you could wait. I don't know when prices were $500,000 or where the apt is located and how quickly prices are declining there, but a 20 percent decline does not sound unrealistic.
BHO, why would you try to resell within the next ten years?
Posted by: mopar at March 9, 2009 6:28 PM
jeez, at 1.1 you're already asking yourself "why pay the mansion tax?" and think 999.999. Also, rule #1 in this market is that if you don't offend the seller you didn't get a good deal. It is in fact a requirement to feel like you ripped off someone's face just to stay 6 months ahead of the (falling) comps.
Posted by: invisible at March 9, 2009 8:58 PM
"BHO, why would you try to resell within the next ten years?"
Average turn around. Owners rarely outlast their mortgages.
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 9, 2009 9:30 PM
Watching HGTV tonight a guy was looking at a house somewhere in NJ, on teh Hudson if I remember right. It was a carriage house that was asking about 1.2m, and he offered $600K. It was too funny. He walks in the place saying how it's unlivable, and that it would require a gut reno. House looked livable to me, so don't know what he was taking about, but maybe that was his plan to make the house seem trashy.
Fast forward to the end, the buyer's offer got declined and the seller was unwilling to even entertain a counter since buyer was far off. Buyer wanted seller to take a 600K hit.
Posted by: Attention2detail at March 10, 2009 6:48 AM
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