How to Bid Low without Causing Offense
As a buyer in today’s market of stagnant or dropping prices and high inventory, you might think you have free reign on what you offer a seller. Not so, according to a recent article from The Wall Street Journal Online. According to real estate professionals, buyers who bid low risk offending sellers to the point where they nix the deal. Or a seller could conclude that the buyer isn’t committed to the deal.
So, before making an offer, some homework is in order, and a buyer needs to be able to explain why the price of a home should be lower. When making an offer on a home, follow these three guidelines to determine when and how to make an aggressive bid:
- Determine the seller’s motivation to make a deal. Some sellers are going to be more motivated than others to make a deal and negotiate a low offer. There are a few telltale signs in relation to the seller’s circumstances that can give you the guidance you need. First, if a seller has already purchased another home and closed the sale, they are very likely to want to make a deal, explains Dick Gaylord, president elect of the National Association of Realtors and a broker with Re/Max Real Estate Specialists in Long Beach, California. He also adds that a seller with a property that has been on the market for a long time is more likely to negotiate a low price.
As a buyer’s representative, Gaylord says he talks to the seller’s agent to find out as many clues as possible to the seller’s motivation to sell. Ask your Realtor to do the same and you may be pleasantly surprised by what you find out. Another factor in a seller’s mindset is the local market condition. If the market is sluggish and inventory is high, sellers may be desperate to unload a property. The seller’s individual circumstances are also a strong motivator. If the seller has to relocate for work or is straddling two mortgages, a buyer may be able to get a great deal.
- Make your case, with evidence. Jon Boyd, president of the National Association of Exclusive Buyer Agents, says that when he makes an aggressive offer on behalf of a client, he doesn’t just hand over the offer; he also puts together a cover letter explaining why his client is offering that specific number. Citing comparable sales in the market and including details about the inventory in the area can both be reasonable explanations for a low offer, and buyers should do sellers the courtesy of explaining their position. They may even want to personally write a letter to the seller to make their point; this way, they can express what they like about the home while also expressing their concerns about dropping home values.
- Brace yourself for rejection. Or at least a negotiation. Your agent will honor and facilitate your wishes, even if the offer you are making is too low. Gaylord often warns buyers who are making very low offers that sellers might refuse to negotiate. On a “super aggressive offer,” Boyd says he might inform the buyer that “there’s a one in five chance there will be a positive response.”
Still, even if a seller refuses your first offer, however aggressive it may be, there may still be room for negotiation, especially if there haven’t been many other bids. Sometimes, Boyd says, a seller might even take some time to think about it and may come around to negotiating.
On the flip side, if you are selling your house and you receive an offer that is so low it’s ridiculous, don’t take offense. Danielle Kennedy, a real estate sales coach and author in Pacific Palisades, California, advises sellers to think of a low offer as a “sign of interest” rather than an insult. Be happy an offer was made and understand that it “begins the dialogue regarding the purchase of your house,” she says.
<<
Back to Home
|
