A low-ball offer on your home means that the buyer has offered significantly less than our list price for various reasons. Often the seller feels insulted, but, before you say ‘no,’ ask yourself the questions below.
Home owners usually have a deep attachment to their condos or houses… it’s where they’ve made memories or perhaps it’s the first place where they owned the bricks and mortar or, in the case of a condo, the concrete. And that’s normal!
After being in Toronto’s real estate market since 1980 I’ve sometimes seen owners react badly when a low-ball offer comes in and occasionally they’re justified in getting angry. However, it’s not a good negotiating tactic to just reject that first ‘testing us’ low-ball offer.
Because that’s what it generally is… a TEST.
So, let’s put emotion aside (sometimes not easy) and do a bit of analysis.
Is It Really Low-Ball, Or Just Lower Than You’d Hoped?
First, before listing your home, we will have looked at all the comparable sales of homes just like yours to determine what is fair market value. You will have chosen a listing price based on those comparable sales.
Because of this prior price analysis, we’ll know right away if the buyer agent and the buyer are being unreasonable.
Next, we should consider what the buyer’s strategy really is.
If I was representing you as the buyer for a home AND there were no competing offers, I’d also counsel you to price your first offer lower than the list price to see what flexibility the seller had.
Quite often buyers feel better doing this (and sometimes demand this) so they don’t feel they’ve overpaid for the property.
Of course, on occasion the buyer is just throwing out a ridiculously low offer in the hopes that it might stick.
If we’ve listed your home at say $500,000 with a real market value range of $475,000 to $490,000 and the buyer came in at $400,000 that would be a true low-ball.
What Should Our Strategy Be… Reject It Or Work With It?
Ideally, although it can be difficult, try not to get emotional about that low offer. Try to put yourself into the position of the buyer and strategize from that point.
The fact that someone did appreciate the features of your home and want to put in an offer is a good thing so let’s work from there.
I always counsel the seller to counter that offer rather than just throwing it in the garbage (although you might like to) and then see how they respond. As the saying goes, “It’s not about where the buyers start… its where they end up”.
My suggestion in this situation is to sign it back with just a slight price drop from our list price. That could be as little as $1,000 or even a few thousand below our list price.
Our goal here is to show that we’re willing to negotiate but only with a committed purchaser.
We in turn are then testing the buyers… are they really serious and just trying to test us OR are they being frivolous and playing around?
I always talk to the buyer agent (I can’t talk to the buyer directly of course) and tell them they’re way lower than where they should be and, if the buyer is serious, bring us a serious offer.
I’ll ask the buyer’s agent where that low-ball price came from. What listing comparables are they looking at?
The agent might not have the negotiating skills necessary to talk to their buyer about the true market value and I’ll offer to help out if I can.
In some situations, I might even share the comparables I used with the buyer’s agent to justify the listing price so he or she can show them to their purchaser.
Think About What You REALLY Need
From time to time, sellers have other specific requirements other than just the price. Perhaps getting a specific closing date is more important or having a firm, unconditional offer in place so they can move forward on purchasing or closing on a new property.
As you can see, there are many factors that could influence your decision on how to react to a low-ball offer but the bottom line is, you want to sell your home.
It’s always better to negotiate than to reject outright.
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