3 types of Low Ball Offers (and how to respond to them)

So you got a “Low Ball” Offer on your house for sale…Unfortunately, “low ball offers” on homes are more common than you may think, particularly among investors. A “lowball offer” is an offer that is far below a home’s asking price (sometimes ridiculously low—but the value of “low” is in the eyes of the recipient). There is not really a benchmark for how low an offer is to be considered a “low ball,” but believe me, if you receive one when selling your home, you’ll know!

So…how should you respond? Should you tell them where they can stick it?

(It is soooo tempting!!) I say, usually, no! WHY?? You know, a bird in the hand and all that…

More than likely, you are angry. You are probably also insulted. It is difficult to do, but try to place your emotions aside—this is a business transaction (albeit a VERY personal one when selling your home!) The good news is…any offer is better than none because at least you have a negotiation dialogue started.

Definition of Low Ball Offer - What is a "low ball offer"? What is the definition of the term "low ball offer"? A low ball offer occurs when somebody is offered an amount for an asset that is far less than what the asset is actually worth.Let's take an example. You own a home that has been appraised at $350,000. You decide that you are going to put your home on the market and try to sell it yourself, without the aid of a real estate broker. A gentleman knocks on your door with an offer - $185,000. This would be the very definition of a "low ball offer". A "low ball offer" can be a shrewd way of beginning a negotiation process, but it can also be offensive to the seller if the offer is too low.

There are, for 99% of these types of offers, 3 core low-ball real estate buyer groups:

Case 1 - Home buyer low ball – This is a buyer who is shopping for his/her personal residence. They might possibly have seen too many episodes of “Flip This House,” Typically, the rationale for their low offer is not that they can’t afford it—but they think they can “get a deal” because they know about the real estate secrets and somehow sneak into the deal of a lifetime. (It can happen, but believe me, it is rare!)   Basically, the potential buyer is testing your response and they do want the house, even at a higher price.

How to respond to the offer? In this instance, I would advise my seller to counter back to the offer with a reasonable offer. Let’s try to get a REAL and REASONABLE negotiation dialogue going and get out of the dreamland pricing. If the potential home buyer is of this variety, this should give them a nice nudge back into reality on this purchase. If not, nothing lost—they weren’t serious anyway. There is no harm in countering back a realistic price, you literally have nothing to lose—but if you get mad and tell them to eat rocks and get lost, then you have nothing to gain!

 Case 2 - Investors low ball – Many investors write low ball offers on homes and properties all the time—it is a numbers game. The thought is, if you throw it (offers) at the wall (home sellers) often enough, eventually something will stick. They have no emotional ties to the property, its just an investment to them. They are hoping that you’re desperate enough to take the (typically cash with quick closing) offer and run.

How to respond? If you are the desperate seller who wants to take the money and run, take the offer (you can run after closing). If you want to get them up a little (or a lot), counter back. Always use a counter if you do not accept the offer straight away. This is my biggest point to this whole blog post—YOU HAVE NOTHING TO LOSE BY COUNTERING, IF THE INITIAL OFFER IS NOT ACCEPTABLE!  I would advise, when dealing with investors, to add a clause in the contract that the counter offer is good until 5pm the next day. It gives them a sense of urgency that is sometimes needed…remember, they don’t need it to close before their lease/rental is up because they aren’t buying personal real estate!

 Case 3 - Hopeful low ball – This could be either an individual buyer or an investor—this real estate buyer only writes extremely low ball offers, usually on distressed homes or properties that have been listed for sale for long periods. Distressed vacant properties are like homing beacons to certain real estate buyers, they can smell the scent of desperation (or so they hope). This buyer has no intention of negotiating—the lowball offer is a “take it or leave it.” This buyer will typically not ever respond to your counter offers and move on right away.

Luckily, this is the rarest of the 3 groups. You may not realize this is the type of buyer until later, as any response other than a signature to the initial offer is likely ignored. However, sometimes you get lucky and the buyer’s agent lets it slip that they made several other offers—that should put you on notice quickly that this probably isn’t going anywhere. However, my professional advice remains the same….if the offer is not acceptable, always counter back! I have not been seeing many of these buyers lately, probably because prices are going up and entering a seller’s market, so they don’t have as many possible sellers as they have in the past.