Seattle Sweet Digs

April 3, 2008

Is a Low Ball Better than a No Ball?

 Recent posts on Sweet Digs Seattle:

low ball offers Is a Low Ball Better than a No Ball?Congratulations! You’ve been trying to sell your home for three, six or even nine months. Walk through traffic has been low and potential buyers are scarce. Then, when you least expect it, you get word that there is a non-contingent offer ready for your review.  Excitement builds and builds until the moment you see the number, and then, you take it in the gut! Hope turns to panic, then panic turns to anger– how can anybody reasonably expect you to seriously consider an offer at that price?!

But wait, before you decide to give these “buyers” a response (possibly using “sign” language), take a deep breath and give that offer a good long look. It’s been a buyer’s market for quite some time now and there is no end in sight. No reasonable buyer is going to approach any MLS listed home and offer the full list price, and you’ll need to consider all the other monetary  ( not to mention stress ) expenses associated with keeping that home on the market.

For example, if your circumstances compel you to purchase another home before selling the one you have on hand, you may be facing the daunting task of maintaining an empty home for an extended period of time. Let’s do the math on a hypothetical low ball bid….

House List Price:  $ 499,000
Low Offer Price:  $ 440,000

Monthly cost to maintain house:

1/12 cost of homeowners insurance       $   175.00
Monthly utility bills                              $     50.00
Yard Maintenance Service                     $   200.00
1/12 cost of property tax                      $   500.00
Mortgage (estimate )                           $ 2,000.00
——————————————————————-
Total MONTHLY cost                            $ 2,925.00

Now let’s review that offer again.  If you assume that any closed offer in today’s market is going to come in at least 5% under asking price, then on the $499,000 home you can expect a “reasonable” offer to land someplace around $ 475,000.  The difference between $475K and the $440K is $35,000.  Leaving mental stress and anxiety out of it, you could legitimately carry the home for about one year, close the house at $475,000 and be in the same spot you would be if you accepted the offer for $440,000 today.

Now, you may think to yourself, “Wow! A year! I’ll pass–my house will definitely sell in a year!”  Unfortunately, there are a lot of sellers who are approaching seven, eight, nine months on the market right now—sellers who may have thought that very same thing last April…

Posted by Katrina Munsell on April 3, 2008 8:52 PM | del.icio.us | Digg

  • tezza
    twigamwezi you are an idiot!!!!!! take any offer while you can and run for the hills!!!!!!!


    LOWBAL..LOWBALL...LOWBALL...LOWBALL..
    ITS BETTER THAN NOTHING!!!!!! TAKE IT AND LEAVE!!!!!!!
  • skip
    You're kidding me right? In my area the overvaluation of homes has been out of control for the past 5 years. There are homes here that were purchased 3 years ago for 230,000 and three years later that owner is trying to sell his property for 380,000. I think this goes both directions, during a sellers market sellers didn't have a problem selling their homes for way more than they were worth to someone that just HAD to have that home, yet now that the market has reversed those same sellers are crying about "low balling" buyers. I would low ball any day of the week if it would mean a better deal for me.
  • I offer MLS#: 27165989 (Zillow Home ID: 48925892) as a great object lesson here in how far an unwillingness to settle can go wrong, and how the lack of a sale can itself build up a kind of momentum. On the market for 958 days under various MLS's, unoccupied, new construction (though that is a debatable point at this juncture), and hasn't come down in actual price in many months, though I'd say its market price is coming down all the time.
  • Konrad
    If your house has been on the market for 9 months without an offer it is probably time to accept the reality that you aren't asking a fair market price for your house. The low-ball offer is probably closer to the market price then your asking price. Just because the offer is $50k under the asking price doesn't mean it that far from the market price...
  • Karen Jones
    Sometimes sellers loose site of the fact that they have the option of going back to the buyer with an alternate proposal, in the form of a counter offer. Both buyer and seller are looking for maximum gain and often times meeting in the middle makes everyone feel satisfied. Buyers are not usually trying to offend when they make a low offer, and sellers are not usually trying to be unreasonable when they want or need more than the initial offer.

    I agree with Katrina that in this buyer driven market sometimes the financial, or even emotional, costs of keeping a home on the market don't make the wait worthwhile. There is also the risk that the longer you stay on the market, the lower a price you may have to agree to. That is to say, that your fifth month on the market will not bring in the same kinds of buyers and level of interest that your fifth day on the market will.
  • It's a scary time for sellers indeed, but there are many out there who can't afford to wait it out. There are some who are currently holding two homes, or there are some who just need to move on, and whatever these other circumstances are, sometimes you just have to put a dollar value on the stress and uncertainty and factor it into the valution of an offer.

    I'm not saying jump at a low offer--I'm saying consider the costs of holding out for the next offer, and consider the possibility that the next offer might be just as low...after all, isn't that what market price is?

    Also, while the idea is noble, I could no longer hold out for the sake of my neighbors, as I would not expect them to put themselves at risk for me...business is business...
  • Realistic
    twigamwezi, good luck having your house value keep up with inflation LOL...
  • abuyer
    There is no such thing as HIGH BALL so why is there a low ball?
    Prices are driven by market hence when its good prices go up - when its bad prices go down the sooner seller realizes that better. Also it is all dependent on what the need is. If you have to sell the house and cant hold on to it - any price is a good price. If you can afford to keep the house - take it off market and wait
  • twigamwezi
    Oh, and also think about the damage you do to the whole neighborhood when you lowball. It's a very direct way to "give back to society" by keeping your price challenging, as a lowball offer is not that far removed psychologically than a foreclosure, and cumulatively the effect is that your nice neighborhood turns into a crappy neighborhood because of lowballs. Don't fall for it.
  • twigamwezi
    Wrong. This is just the latest drip from the faucet on trying to make sellers feel just a bit more guilty and tempted to give up. We are being assaulted every day by media and even our own selling agents with their gloom gimmicks, trying to get us to cave in. The fact remains that every day you spend in your house while it's for sale, you are paying down your debt. Your listing price remains the same, the value increases for inflaction, and your mortgage goes down. You win by staying patient. Don't lowball.
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