A Strategy For Success
If you are seriously interested in a particular home, making a low bid is a calculated risk.
If your bid is too low, the homeowner may be insulted and choose not to negotiate with you, (even if you come back later with an improved offer). Often homeowners consider buyers who make insultingly low offers to be either trouble-makers or unqualified smart alecs.
Submitting a low offer, without a strategy, could cause you to lose credibility with the homeowner permanently.
So is it worth it?
If you really want the house, should you run the risk of making a low offer?
In a strong market (a seller’s market)… probably not.
In a soft market (a buyer’s market), however, many homeowners are willing to consider "any and all offers". And low offers, if presented correctly, just might have a good chance of being successful.
IMPORTANT: In order for a low offer to have any chance of success, you must provide the homeowner with a way to move off his list price with dignity. Your goal is to challenge the list price without damaging the homeowner’s pride. The proper use of diplomacy, courtesy and respect will enable the homeowner to save face while simultaneously conceding on his list price. (Remember: A true diplomat is someone who can tell people to go to hell in a way that makes them look forward to the trip.) Include diplomacy, courtesy and respect in your plan and you will be rewarded.
How to make a challenging, but diplomatic, offer that a homeowner might consider:
- Make sure you want the house. Does the house suit your needs? Is it in a location that you want? Your decision to bid on a house should not be based solely upon the idea that you might “get a good deal”. (i.e. “Never buy anything on sale that you wouldn’t consider buying at full price.”)
- Do your homework. Remember - Your goal is to submit a justifiable, educated offer that just happens to be significantly lower than the home seller’s list price. You don’t want your offer to be perceived as an arbitrary low-ball number that is unable to be supported with facts.
Research recent home sale prices in the neighborhood. Know the status of the current real estate market. In addition, know the answers to the following basic questions. How long has the home been on the market? Have there been any price adjustments? When was the last price change? Have there been any offers? Why is the owner moving? Is the house occupied or vacant? If the home is vacant, how long ago did the owner move? If it is not vacant, when would the owner like to move?
- Evaluate your true intentions. After doing your homework, do you really believe that your offer is fair or are you just trying to “get a good deal”? Are you attempting to bargain in good faith or do you feel you have the home seller at a disadvantage? If you sincerely believe the offer you are about to make is a honest effort toward the beginning of a good faith negotiation, then by all means make the offer.
- Present your offer in writing and include information that supports and justifies your offer. (i.e. a list of recent sales of comparable homes or references to articles about the current market conditions) A professional-looking, typewritten offer on your Realtor’s company letterhead commands respect and your offer will automatically be perceived as credible and sincere. Click here to read How To Write A Successful Offer To Purchase .
- Include a mortgage pre-approval with your offer.(Promises of pre-approvals to be provided later are always viewed with skepticism by homeowners.) Including the pre-approval with your written offer indicates that you are a serious buyer who is qualified to follow through should the owner choose to consider the offer.
- Personalize your offer. Include a brief profile of you and your family. (i.e. “We are first time home buyers looking to find a nice home to raise our two young children.”) It is very easy for the homeowner to reject a number. It is much more difficult, however, to reject a person.
NOTE: Many homeowners have raised their families in the house. They have many fond memories associated with the home and would love to turn it over to a nice young family who might enjoy the home as much as they did. Most homeowners would prefer to sell their homes to someone they like. Do your best to be likeable.
- Include a “love letter” to the house. The "letter" should be addressed to the homeowners (i.e. Dear Mr & Mrs Jones) and it should include all of the things that you love about their home. Compliment the home wherever appropriate. This is “the spoonful of sugar” that will hopefully make “the medicine go down”. And then conclude the note with a phrase like “we hope you will give our offer every consideration.”
- DO NOT criticize the house. The magnitude of your offer is painful enough for the homeowner. Don’t add insult to injury by telling them their home is in need of extensive repair. If you feel you must itemize repairs or upgrades that the home needs, frame your comments in the context that these are things that you and your family need and you have to leave a little money in your budget to accomplish them.
- Be prepared to add some pot sweeteners(non-money concessions). Try to determine what the owner wants (besides his price) and then offer to give those items to him. Would the owner prefer a quick closing or a delayed closing? A larger down payment? Make your offer independent of the sale of your current residence. If you are selling another home, investigate bridge financing so the owner does not feel your purchase of his home is dependent upon the successful sale of your current residence.
- Be willing to negotiate. It is not a good idea to make low-ball offers, on a take-it-or-leave-it basis. If the homeowner makes a counteroffer to your low offer that’s a good sign. Your low offer was not rejected and the homeowner is willing to talk.
- Never burn your bridges. If the discussion eventually reaches an impasse, always part on good terms. As long as both parties are cordial to one another, it leaves the door open to resume the discussion at a later date.
- Be diplomatic. Be polite. And be respectful. You just might be surprised and rewarded by having the owners agree to sell you their home at a price significantly below the list price.
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© Copyright 2007 Bill Boeckelman Publications