Poll: How to Handle a Low Ball Offer

[LOL!]

The poll didn't include some other choices:

1. Counter with the original asking price.

2. Counter with a higher asking price.

3. what else?

We had a seller counter with the original asking price on a home. The reason became apparent: That was their buyout number from their employer in a corporate transfer. They really had no intention of selling because the buyout was going to be the highest price for them. Later after the corporate re-lo service bought the house, the re-lo service ended up selling to us for about $100 over our original offer. Of course, the re-lo service tried for a higher price with "This is our final offer, take it or leave it" to which we laughed.

 

[CardsFan]

I wonder why people keep trying to change the question being asked... that FMV is not FMV.....

The OP asked what would you do IF blah blah blah and said if it were FMV... but so many posts keep trying to say it is not FMV because of whatever... but I think the OP is not asking if he is off FMV, but what would you do if you knew you had it at FMV and got a low ball offer... so the given is FMV...

I think what CRLLS is pointing out is, in the case of real estate at least, FMV is really an unknown, until someone pays a price. By definition, that IS the FMV. There are never enough, if any, Identical comps to establish one before the sale. So, to say your price is 1.xx times FMV is only a guess on your part.

Now, if you are selling a widget on Craigslist, and you can find dozens of identical widgets that have sold in your area, then something close to a FMV can be approximated. But even then, how do you differentiate between "like new", "mint condition", "hardly used", etc.

In the end, the amount of interest and the number of offers you get will tell you if you were close in your assessment.

 

[CRLLS]

I wonder why people keep trying to change the question being asked... that FMV is not FMV.....

The OP asked what would you do IF blah blah blah and said if it were FMV... but so many posts keep trying to say it is not FMV because of whatever... but I think the OP is not asking if he is off FMV, but what would you do if you knew you had it at FMV and got a low ball offer... so the given is FMV...

I responded with reference to real estate because 29 of the 47 posts previous to mine had been about real estate. And I predicated my response with "If we are talking strictly real estate, then..." I used my personal experiences with real estate to make a point about FMV, whether related to real estate, or any other big ticket item (per Midpack's original question) There is no one FMV. IMO, FMV is a range not a particular number. So who is to say 5% or 10% low is actually "low"?.

As I watch Misfit Garage or Gas Monkey Garage and American Pickers on TV, I often see them counter offering ~50% of asking price for a car or other item. IMO, that takes cohones. But sometimes the finalize on a purchase price close to that.

To eliminate all this FMV and real estate references, the question might have been "How do you handle a counter offer significantly less than your asking price?" Few of us foresee the way a thread twists and turns beforehand. That doesn't make the responses any less valid.

 

[Midpack]

It’s not real estate, but that’s beside the point. Determining asking price, FMV and what’s low ball were not the point.

It’s a big ticket item, not something I’d expect to find on craigslist.

Many thanks to those who’ve just answered the question asked and given pertinent insights. As far as I’m concerned I got my answer.

As I reiterated earlier, “Please use whatever %'s you consider legitimate for asking price, FMV and a truly low ball offer. The question is simply about how best to handle a true low ball offer, clearly well under any reasonable FMV.”

 

[DrRoy]

I would do the 1-2% counter. Test the waters to see if they will get serious.

 

[MooreBonds]

Many thanks to those who’ve just answered the question asked and given pertinent insights. As far as I’m concerned I got my answer.

As I reiterated earlier, “Please use whatever %'s you consider legitimate for asking price, FMV and a truly low ball offer. The question is simply about how best to handle a true low ball offer, clearly well under any reasonable FMV.”

I did ultimately offer my $.02 to specifically answer your very vague set of initial conditions. The reason why I also commented about "FMV price" is that some people may assume they have a "FMV" for an item - when in fact, what you think is a FMV price may just be part of a continuum of a price scale, and that "low ball offer" you initially think is a low-ball may actually be somewhat close to a FMV price, and as such is worthy of a negotiated response.

Now, if you were talking about someone offering 50% of what you are asking (and your asking price is in the range of FMV prices) - THAT is a true "low-ball" offer in my eyes, to which I wouldn't even bother replying to.

However, if someone offers 80% of your asking price, it could very well be a fair and acceptable starting price and not too far off of a fair final equilibrium price, pending several details and clarifications....to which I would merely engage in usual negotiation counter responses, depending on the terms of their initial offer.

 

[Texas Proud]

It’s not real estate, but that’s beside the point. Determining asking price, FMV and what’s low ball were not the point.

It’s a big ticket item, not something I’d expect to find on craigslist.

Many thanks to those who’ve just answered the question asked and given pertinent insights. As far as I’m concerned I got my answer.

As I reiterated earlier, “Please use whatever %'s you consider legitimate for asking price, FMV and a truly low ball offer. The question is simply about how best to handle a true low ball offer, clearly well under any reasonable FMV.”

There is another as someone else pointed out, but that is if you are face to face...

My BIL was selling something of value... he put a price on it that was low so it would sell... the guy offered an even lower price... BIL said to buyer something like... my starting price was 1.2X, I already lowered it for you... the guy paid what BIL asked...

 

[Koolau]

This is just my opinion, so don't shoot the messenger, please. "Low ball" offers on real estate won't be an issue if the house is move-in ready and priced properly. In some markets, it's prudent to ask 3% to 5% "too much" so the buyer can "make a deal" and feel good about it. Other markets, a "good price" will set off a bidding war (happening where I live now.)

In general, if the place is "priced right" it will get a good offer quickly enough that you won't even need to answer a low ball offer. We've sold 5 places and none was on the market more than two weeks (average 5 days). No "low ball" offers because there was no time for the vultures to gather. YMMV

 

[jfn111]

As an RE Agent I've put in "low ball" offers for clients on numerous occasions. The big reason is a house will have a different value for an investor or rehabber than an owner occupant. We are not trying to insult the seller but were offering what we think the properties worth to my client's intended use.
I just completed an auction purchase, for a client, where the bank turned down our first offer, put the house back on the auction, and we bought it the second round for $10,000 less than we offered the first time.

 

[Montecfo]

If you were selling a big ticket item, how would you deal with a low ball offer way below anything you’d accept (e.g. 20%+). For purposes of discussion (if you’re so inclined), assume you’ve asked 10% over your “bottom line” and that’s market reasonable.*** From what I’ve read there are three schools of thought.

1. No counter, no reply - sends the message the low ball is an insult, come back with a “serious” offer and we’ll talk...
2. Offer a counter 1-2% below asking - sends the message I’m willing to negotiate but I’m NOT meeting you half way...
3. Counter at 10% below asking and tell the potential buyer, that’s it, take it or leave it.

*** Of course if your asking price is unrealistic, that’ll become apparent in time.

In some cultures it is normal to lowball and some individuals want you to passionately plead for your price.

That just seems too boring to me. If someone wants to make a lower offer, let them explain their rationale for it. I will listen.

Another thing like that is you advertise an item for sale-say a car-and someone calls and wants to negotiate price on the phone.

I never do that.

 

[Shanky]

We have moved more than ten times during my career so we have been on both sides of this situation many times. One clear thing I have learned, the person who is the least rational on what is the Fair market price is the seller. This is manifested in pricing too high in down markets and too low in up markets.

When buying a home we were usually on a very tight schedule and had to find a house an make an offer to avoid a second flight out and extended house hunting. To facilitate this we would narrow our list down to a half dozen homes that would suit our needs. We would then make a take it or leave it offer on the first house, if declined, we would do the same on the second. We never had to make offers on more than 4 houses. Ironically, even though we told all involved with the offer that it was one time only, no negotiation, we would still get calls, often weeks later asking if we were still interested in there house. It was as if they did not believe us.

 

[Clone]

We sold DW's parents house through a realtor. After being listed for a couple days, the realtor told us we had an offer on the property. It was perhaps 60% of asking price. The realtor suggested that we counter, I said not worth the time. The realtor challenged me that maybe the price wasn't right. I challenged her that since she was the one that suggested the price, it would reflect poorly if she had priced the property at 160% of a reasonable selling price, and that we were in no rush to sell the house on the 2nd day at such a low price.

Several days later, on a Friday, she called and said that there was an offer coming in from another realtor. She asked us to hold on until Monday, because she also had a lead.

Monday morning she brought in a full price offer from the party that had made the low-ball bid. I believe that the first offer and the realtor were looking to buy it cheap.

 

[Rambler]

We had this experience with a real estate transaction.

We simply countered with a full price counter offer which deleted a number of their onerous conditions. We fully expected never to hear from these time wasters again. We did not.

In my working career as a GM a few of the very best deals I did were deals that I walked away from because of a combo of price and t's and c's. A competitor took the deal. They lost their shirt on the deal. The client never achieved the desired results. No one was happy.....except my boss when he realized how very bad the clients offer was.

I've done this as well. We used to have a client on a very low contract, and they tried to push it at the next negotiation to half the already money losing markup that had been in place for years before I took over. I told them no and walked away, and told them that post contract that any services would be at retail. My company was in staffing, and we had 400 staffers at this firm. A competitor took the bait. I was fine with that. Then the competitors' people on the ground refuse to provide service because they couldn't make their bonuses at the prices their CEO agree to. At the end of the day, I ended up providing 25-30% more volume, at twice the markup because the client's strategy failed. My staff smiled all the way to the bank. Sure, this will backfire sometimes, but there's no reason to sell your product or service at a loss on an ongoing basis. That only makes for unhappy staff, unhappy customers and unhappy corporate.