Poll: How to Handle a Low Ball Offer

[mystang52]

Keep emotions out of the deal. Counter with a few % off to send the signal that they're way off base. I had this happen when I was selling my late father's house earlier this year. The agent was going on about the offer being "insulting," etc. What insult? They figure if you sell it at that price they've got a good deal. If not, then they either move on or counter with a higher price.

My career was mainly involved with serious injury claims, and most ultimately settled. I always instructed my staff to never view an offer, or counter-offer, as insulting. To me, any offer showed an interest in settlement, so at that point it was "simply" a matter of arriving at a figure both parties could live with.
One example: 30+ years ago, I got a demand, involving a truly catastrophic injury, for $7 million. Our counter: $1 million. Never mind the details, but there was a rationale for both of our figures. The plaintiff attorney went nuts, and he was the one that was insulted. We ultimately settled, much closer to my counter than his original demand.
I suggest making a counter.....even if the counter is your original asking price, or a nominal reduction to your original offer. You should be able to gauge the seriousness of the original offer.

 

[bclover]

Decline the offer.

Period.

Bingo.

Been there, done that. when I was selling my house I got this guy who kept putting in these ridiculous bids. I think it was a flipper who wanted a house that was in good shape. It actually ticked my agent off more than me. Finally my agent informed him that this was not a clearance sale and we were not giving the house away and to please come back when he would stop wasting her time.
I'm sure she said it a lot more professional but there wasn't any emotion involved. I would have kept the house before accepting a 30% cut so "no thank you" worked for me.

You guys are better than me, as I get older I find my patience is getting worse.

 

[eytonxav]

In my opinion, anyone making ludicrous offers is not worthy of a counter. If they are serious they will be back. While that is unlikely, they also may not be someone you would want to deal with (if a price was eventually agreed to) after an inspection as they would likely attempt to nickel and dime you to death.

 

[donheff]

Helped put together 450+ deals as a Realtor. So, if we are talking houses...

My take:
If you are motivated to sell (some aren't-just want to test the water), always counter. I advise a very high counter offer just to see if the buyers are serious. You could drop your price $1,000 to make your point-but at least it keeps the negotiation going.

We (sellers) rarely know where the buyers are coming from. Many times, a trusted family member (Dads are famous for this) is giving advice on coming in low-"you can always come up!". By countering, even a little, you show "Dad" that you aren't desperate and you aren't going to give the house away. This also allows the "kid" buyer to say "tried it Dad-did not work". ("Dad" could be a spouse, attorney or just advice found on line).

If, however, the counter offer from the buyers matches your hard counter, you are dealing with people who aren't serious. Counter and tell them it is your final offer. Or write rejected on it and send it back. If you reject it, they then know you received it (Some suspect that the Realtor may not have presented it). Better than just letting it expire.

When my sellers would get upset about a low-ball offer I would suggest that those people at least took the time to seriously consider the home, and write an offer. Save the anger for the "lookers" who just waste sellers time and never offer anything.

This is how we dealt with a lowball offer on our weekend house. Turned out the potential buyer loved our location and how the house looked, felt, etc but was going to need to add a big addition for his growing family. He could only make things work if he paid a lot less for a house that didn't really meet his needs. His needs didn't match ours so we never got any closer.

The most difficult thing to me is setting the offer price. In my Capitol Hill DC area at many times the practice is to set the price at a level that seems a little low and then watch the bidding wars take it way over list in a few weeks. When I sold my weekend home we basically had to offer at a wild ass guess about what a luxury home price would be in a slow market with no good comparables. The approach in that market involved dealing with a few interested buyers who were all interested in knocking the price way back. Waterfront houses there were taking ~18 months to sell vs days to weeks on Capitol Hill.

 

[Midpack]

Some interesting thoughts thanks. I was leaning toward option 1 or 2.

 

[MooreBonds]

What are you basing your source of "market price"? And what kind of "high priced" good is this? real estate?

Regardless of what it is, the 'market price' is composed of ready buyers and sellers - but also is dependent on the region. Prices in New York City or San Francisco will be higher than prices in Topeka, Kansas (for pretty much any good). Also, every offer has qualifiers that have value - if real estate, is this a cash buyer ready to close in 30 days, buying "as-is" regardless of inspection? Is it contingent on them selling their house first? The former has much more "value" than the latter. If the OP is willing to wait 30, 60, 120 more days to get a higher price, then so be it - but a market is composed of ready buyers and sellers. Sometimes a market price will vary - there is no "set" market price on anything. Prices will fluctuate, so I'm curious what their source is for determine what the "market price" is.

Also, as another poster pointed out, the OP says that their "rock bottom" price is fair market value, and their asking price is 10% above that.

If this is real estate, I would probably offer less than asking price on a house, unless it is a fair value and just came on market - or perhaps they just lowered the price to a fair value and I expect it to get snapped up quickly. IN those instances, I would offer what they are asking - but in other cases, if the house has been sitting for several months, it's obvious that the market has not submitted an offer for a variety of reasons, so the market value was likely lower than what the seller thought, especially since many homes have offers taken very quickly (so if a house is sitting for 2-3 months or more, it means that it was overpriced given a variety of factors, and not what the seller thought.) But if I were buying a house, I'd offer more favorable financial terms than other buyers (it's not contingent on financing, it's only contingent on an inspection, I could close in 45 days), so that does have value.

Also, if this "big ticket" item is a collectible or some other luxury good (like a boat, a car, etc.), the pool of buyers may be fairly small. Sure, there may be an "average" market price - but how many transactions are occurring in a given 3 month period? Just 2? If 3 or 4 already sold, then the supply is higher than the market average, so you should expect less. But if there are typically 100 sales in a given quarter, and only a few dozen have sold in the quarter so far, then there are likely other buyers out there. Or perhaps there are seasonal demand factors - if you are selling a boat, expect to get a higher price in the spring vs at the end of Fall, when not many people are buying boats. Also, if not a house, look at what hte "new" prices are you are competing with with your "used" product - if (for example) it's a boat, maybe many manufacturers put on sales this time of year, so your used product might be not that much cheaper than buying new right now...but if you timed it at times of high demand, more people might pay more for a pre-owned product.

 

[CaliKid]

It depends. If I just put the item on the market very recently I am likely to ignore or counter with a small reduction. On the other hand, if I have been trying to sell with little activity I would strongly consider a serious counter (meet in middle perhaps but willing to go lower to dump the item and move on).

People take "low ball" offers way to personal also. Like it's a personal attack when someone makes a "low ball" offer on your item. It's a thing and that thing has a monetary value. Too many people way overvalue their things by considering what they paid for it or what they see similar things asking prices.

 

[Midpack]

What are you basing your source of "market price"? And what kind of "high priced" good is this? real estate?

Regardless of what it is, the 'market price' is composed of ready buyers and sellers - but also is dependent on the region. Prices in New York City or San Francisco will be higher than prices in Topeka, Kansas (for pretty much any good). Also, every offer has qualifiers that have value - if real estate, is this a cash buyer ready to close in 30 days, buying "as-is" regardless of inspection? Is it contingent on them selling their house first? The former has much more "value" than the latter. If the OP is willing to wait 30, 60, 120 more days to get a higher price, then so be it - but a market is composed of ready buyers and sellers. Sometimes a market price will vary - there is no "set" market price on anything. Prices will fluctuate, so I'm curious what their source is for determine what the "market price" is.

Also, as another poster pointed out, the OP says that their "rock bottom" price is fair market value, and their asking price is 10% above that.

If this is real estate, I would probably offer less than asking price on a house, unless it is a fair value and just came on market - or perhaps they just lowered the price to a fair value and I expect it to get snapped up quickly. IN those instances, I would offer what they are asking - but in other cases, if the house has been sitting for several months, it's obvious that the market has not submitted an offer for a variety of reasons, so the market value was likely lower than what the seller thought, especially since many homes have offers taken very quickly (so if a house is sitting for 2-3 months or more, it means that it was overpriced given a variety of factors, and not what the seller thought.) But if I were buying a house, I'd offer more favorable financial terms than other buyers (it's not contingent on financing, it's only contingent on an inspection, I could close in 45 days), so that does have value.

Also, if this "big ticket" item is a collectible or some other luxury good (like a boat, a car, etc.), the pool of buyers may be fairly small. Sure, there may be an "average" market price - but how many transactions are occurring in a given 3 month period? Just 2? If 3 or 4 already sold, then the supply is higher than the market average, so you should expect less. But if there are typically 100 sales in a given quarter, and only a few dozen have sold in the quarter so far, then there are likely other buyers out there. Or perhaps there are seasonal demand factors - if you are selling a boat, expect to get a higher price in the spring vs at the end of Fall, when not many people are buying boats. Also, if not a house, look at what hte "new" prices are you are competing with with your "used" product - if (for example) it's a boat, maybe many manufacturers put on sales this time of year, so your used product might be not that much cheaper than buying new right now...but if you timed it at times of high demand, more people might pay more for a pre-owned product.

I fully understand all this. As I noted several ways in the OP, the question was based on an assumed reasonable FMV for a given time/market/item...to focus solely on how best to handle a true low ball offer.

 

[CardsFan]

I fully understand all this. As I noted several ways in the OP, the question was based on an assumed reasonable FMV for a given time/market/item...to focus solely on how best to handle a true low ball offer.

Again, if the listing price is 10% above FMV, then an offer at 10% below FMV is not "lowball", IMHO. Unless, of course you call the offer price a "high ball" offer. One must assume the buyer has investigated the market as much as the seller, so he also knows what the FMV is.

The seller really wants more than FMV, and of course the buyer wants to pay less. So we are back to the motivations and needs of the buyer and seller. But I would always counter an offer within 10% of my bottom line price. If this is real estate, depending on the market, offers can be few and far between.

In 1988, when buying a home, we really liked a place priced at $160k, it had the charm factor, but was considerably smaller than most others in that price range. I proposed to DW we offer $130k, with the idea of settling higher. DW did not want to "insult" the seller with that offer. We ultimately bought a much larger house just up the street for the same $160k. Later, we received a follow-up call from the seller, offering the home at $130k. This was a hot market, but late in the season (after school had started). Timing is everything.

 

[Midpack]

Again, if the listing price is 10% above FMV, then an offer at 10% below FMV is not "lowball", IMHO. Unless, of course you call the offer price a "high ball" offer. One must assume the buyer has investigated the market as much as the seller, so he also knows what the FMV is.

The seller really wants more than FMV, and of course the buyer wants to pay less. So we are back to the motivations and needs of the buyer and seller. But I would always counter an offer within 10% of my bottom line price. If this is real estate, depending on the market, offers can be few and far between. This was a hot market, but late in the season (after school had started). Timing is everything.

In 1988, when buying a home, we really liked a place priced at $160k, it had the charm factor, but was considerably smaller than most others in that price range. I proposed to DW we offer $130k, with the idea of settling higher. DW did not want to "insult" the seller with that offer. We ultimately bought a much larger house just up the street for the same $160k. Later, we received a follow-up call from the seller, offering the home at $130k.

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.

 

[RunningBum]

Some interesting thoughts thanks. I was leaning toward option 1 or 2.

I think either is fine.

In my younger days, trying to sell a house after a divorce, we got a lowball offer. I told my realtor I was insulted, and she said I shouldn't get emotional about it. True enough. I forget what else she said, but the result of it all is that we did option 3, countered with our lowest acceptable offer. They rejected it and that negotiation was over.

The next offer from another prospective buyer, came in right around that amount, and we pretty quickly negotiated to that lowest amount. Our realtor told us she knew the buyers, and in fact was upset because she thought she was going to get both ends but another realtor in her office somehow wedged in and got the seller commission. In any case, I feel like we showed our hand to the realtor community on what we would accept and lost our chance to get a better price.

I know there are some reputable realtors out there, but there are some that aren't any better than typical used car salesmen. Now I will never show all my cards to any realtor. I may take their advice, and I will let them know if I want a house priced aggressively to move fast or if I want to try to hold out for the best price, but I'm not getting specific.

 

[Midpack]

I think either is fine.

In my younger days, trying to sell a house after a divorce, we got a lowball offer. I told my realtor I was insulted, and she said I shouldn't get emotional about it. True enough. I forget what else she said, but the result of it all is that we did option 3, countered with our lowest acceptable offer. They rejected it and that negotiation was over.

The next offer from another prospective buyer, came in right around that amount, and we pretty quickly negotiated to that lowest amount. Our realtor told us she knew the buyers, and in fact was upset because she thought she was going to get both ends but another realtor in her office somehow wedged in and got the seller commission. In any case, I feel like we showed our hand to the realtor community on what we would accept and lost our chance to get a better price.

I know there are some reputable realtors out there, but there are some that aren't any better than typical used car salesmen. Now I will never show all my cards to any realtor. I may take their advice, and I will let them know if I want a house priced aggressively to move fast or if I want to try to hold out for the best price, but I'm not getting specific.

Good insight thanks.

 

[OldShooter]

... In any case, I feel like we showed our hand to the realtor community on what we would accept and lost our chance to get a better price.

... Now I will never show all my cards to any realtor. I may take their advice, and I will let them know if I want a house priced aggressively to move fast or if I want to try to hold out for the best price, but I'm not getting specific.

Whenever I am dealing through an intermediary, I am play-acting --- specifically exhibiting the behaviors that I want the intermediary to transmit to the other party.

For example, for a lowball offer on a house I would start stomping around and feign anger. Then I would tell the intermediary to tell the other party to go away and stop wasting my time. The intermediary, seeing his/her commission slipping away, will then talk me out of this "rash behavior" and we will compromise on some kind of counter offer. But at that point the intermediary believes, and will tell the other party, that I am a bit of a lunatic and should not be trifled with. In a negotiation, one of the best things is to be underestimated and thought to be a little crazy.

I am also big on absent authority negotiating but that is another thread someday.

 

[Music Lover]

Again, if the listing price is 10% above FMV, then an offer at 10% below FMV is not "lowball", IMHO. Unless, of course you call the offer price a "high ball" offer. One must assume the buyer has investigated the market as much as the seller, so he also knows what the FMV is.

Even 20% under asking (if the asking price is 10% over FMV) is not necessarily too much of a lowball.

If a house is worth $200k and is listed for $220k, then a counter of $180k is not unrealistic...it's only 10% under FMV. The seller can come back with $205 or $210, and the buyer can counter with $190 or $195, and they may eventually settle around the FMV of $200. I would probably counter 15% under at $190 and hope to settle a little under $200.

 

[MooreBonds]

I fully understand all this. As I noted several ways in the OP, the question was based on an assumed reasonable FMV for a given time/market/item...to focus solely on how best to handle a true low ball offer.

If you think the person may seriously, ultimately pay your "bottom price", then I would reduce the asking price by 5%-7%. They will likely come up about 5% or so, probably matching your drop. If htey dont' budge or only rise up 1% or 2%, then they likely won't raise up too much ultimately. Or they might give their 'best and final' offer.

At any rate, I'd never drop down to my rock bottom price as a counter, unless I felt they wouldn't be paying any more than that, and I would simply say "the absolute lowest I would go is $X. Take it or leave it.". It depends on how anxious you are to sell it, and how likely there is to be another buyer appearing. Again, if there are just a few sales per year for an odd collectible, I'd drop down to your final offer now and tell them it's the final. If it's something that would likely have 5 more offers in the next 2-3 weeks, I'd wait.

But, as dealing with Craigslist has taught me.....a buyer with cash on the barrelhead is worth dropping to my lowest price to get a sale, because 10 offers on Craigslist is like 2 "genuine offers" and 8 flakes. Errr.....make that 1 "genuine offer" and 9 flakes.


So, if on Craigslist, I'd drop to your best and final, and tell them that's it.

 

[W2R]

I would *ALWAYS* negotiate at least a little bit, even with a low ball offer. I'd counter-offer a tiny bit less and go from there. Who knows what the outcome might be? Nobody says I have to accept any price that isn't satisfactory to me.

 

[Teacher Terry]

I have moved quite a bit so have sold many times. I always counter because then you are at least in the game. You never know which person is serious. However, once we made an offer on a house and the seller just rejected it without countering. I never made another offer because it was obvious he was not willing to negotiate. The realtor wanted us to make another offer and I said no way. Someone like that is too difficult to work with.

 

[Texas Proud]

I have moved quite a bit so have sold many times. I always counter because then you are at least in the game. You never know which person is serious. However, once we made an offer on a house and the seller just rejected it without countering. I never made another offer because it was obvious he was not willing to negotiate. The realtor wanted us to make another offer and I said no way. Someone like that is too difficult to work with.

And the seller can be thinking that the offer was so low that countering would be a waste of time as someone like that is too difficult to work with...

It can always be viewed similar from the opposite side... just a different prospective....

 

[Texas Proud]

Reading all the posts... I think I will change my mind...

I put down that I would not counter.... but I think that I would have my RE agent pass along to their RE agent that I am willing to negotiate when a valid offer is put on the table.... IOW, I would not lower the price but offer the house at the same price until I got an offer that was in the ballpark...

 

[Teacher Terry]

TP: you definitely have a valid point. Although, only once in all the offers that I have made did someone not counter so I think most people will.

 

[CaliKid]

And the seller can be thinking that the offer was so low that countering would be a waste of time as someone like that is too difficult to work with...

It can always be viewed similar from the opposite side... just a different prospective....

I would say you are both saying the same thing. It's always good to reply because you just never know what the other side is really thinking or how they may reply.

 

[Midpack]

The last time I was faced with a true low ball offer, I went with option 2. I think I'll do the same this time if I find myself faced with another true low ball offer. You want the prospect to know you're willing to negotiate which isn't clear with option 1, but there's no reason to drop all the way to your option 3 final bottom line at the outset. And I'd never reveal my bottom line number as a "bottom line" to a prospect or broker, I'd leave it just another number in their eyes.

 

[CRLLS]

Interesting responses. If we are talking strictly real estate, then who is to say what FMV really is? You can have 3 realtors go thru their comps and get different umbers. But until a hired appraiser goes thru the numbers, FMV is not discernable. Even when you are in a subdivision with many similar homes and recent sales. 11 yrs ago, I saw the mortgage appraiser play with numbers on our purchased home to justify the appraised value, even on a 50% LTV loan where the bank was not at significant risk!

In the 70's, we were selling our 1st home in a subdivision with many similar homes. FMV should be easily determined. Ours was, IMO, the best of the group. We listed for our realtor's comp price and had NO lookers. NONE! At the end of our 90 day listing contract, we RAISED the price and immediately had a buyer for full asking price.

We listed another house higher than any other comps in 2005 and again sold it within days for full asking price. Based on my limited experience in selling homes, FMV can be +/ 5%-10% from other comps depending on condition, which is not easily determined from a simple listing or sales documents.

What I am trying to show is that FMV is a fuzzy number to start with, let alone trying to figure if 10% of asking price is a lowball offer.

 

[Texas Proud]

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...

 

[Totoro]

Probably the negotiator read a 'price anchoring' book, and just shouted a ludicrous price to anchor you to that. In which case I go for option 1. Signal there is no negotiation started.

If it is within range or near, and I am rather high, option 2. Signal the game is on. Make a decent enough step.

For repeat sales I usually employ the tactic of not negotiating on price at all, and just quote the price. Will save a lot of time down the road. In the end most people want a fair deal and make sure they didn't leave money on the table by not negotiating while it was expected. I actually tell them that too: i.e. "I don't like playing tricks, so this is my price".

Most customers find that refreshing, and it takes a lot of stress out of the conversation. This does assume I know the market price obviously (which, for repeat sales, is usually the case).