Low-ball offers are made on houses all the time. Sometimes they're so low, they're insulting. Other times, they're accepted by the seller. You might be wondering why a seller would accept one. I often wondered the same thing so I did some digging to learn more about these offers and what makes them appealing.
When a low-ball offer is made, you can probably imagine what's going through the seller's mind ("Are you kidding me?"). On the other hand, the seller might be willing to accept the low offer if the other conditions of the contract are met. For example, the buyer doesn't request additional inspections outside of what's quoted in the contract and/or the following:
- Buyer accepts closing date
- Quick closing
- Provides seller the option to rent the house back to the sellers after closing (until they find another home)
- House has been on the market for an extensive amount of time
- Executor selling the house on behalf of an ill or deceased parent
- Close to the holidays
- End of prime selling season
If the seller's real estate agent is inexperienced, it may be more likely that a low-ball offer will be accepted. An experienced agent, who is an expert in the neighborhood, knows how to counter low-ball offers and will work to satisfy the needs of the seller and his/her agent. A "green" agent may not have well-honed negotiating skills and experience handling low offers. When you interview buyer's agents, ask them about their experience in dealing with low offers.
If a house is on the market for a long time and has experienced several price drops, the seller may be more likely to accept a low-ball offer. Time might be of the essence for the seller due to relocating for a job, a sick parent in another city/state, or perhaps a divorce situation. Justify your low offer with comps from the neighborhood, which your agent can provide.
When making a low offer, buyers need to make sure their finances/funding are in order. Sellers want to know that you've been qualified by your lender to be able to afford the purchase of their home. If you're qualified for a $300,000 home but are making low ball offers on $400,000 homes, you are setting yourself up for disappointment as sellers reject your offers. When a seller knows the buyer is qualified to purchase their home, their more likely to accept a low-ball offer.
If housing inventory is high (aka: competition), the seller may be willing to accept a low offer. A well-educated seller, whose agent has shared the reality of selling in a loaded market, may be willing to accept low offers because they understand that their home may be sitting on the market for a long time.
There are many reasons why low-ball offers might be accepted by home sellers. The buyer's timing might be perfect, the seller may be eager to sell due to a divorce, the home may have been on the market for a lengthy period of time, or the buyer may be willing to accommodate all conditions of the contract (except the price), are just a few reason why a low-ball offer could get you into the home of your choosing. Realize that low-ball offers are often rejected --- always be willing to walk away. An experienced agent knows the market better than anyone. Make sure you've got a good one, if you intend to submit low offers, so you can increase the likelihood of the offer being accepted.