Homebuyers are always looking for a great deal, but making a lowball offer runs the risk of losing out on your dream home—even in a buyers’ market. How do you know how low to go when making an offer on a home you want to buy? Is there a formula for knowing how low is too low to go?
Most real estate experts agree that offering too little can be a risky proposition, because it could offend the seller and drive them toward accepting someone else’s offer. Yet, making a lower offer on a property that seems overpriced can also open the lines of communication and give you a chance to negotiate an acceptable price.
There isn’t a clear rule of thumb on what constitutes a lowball offer. Ultimately, an offer is only too low if it offends the seller enough to make them unwilling to negotiate a deal with you. Yet that point is different for every seller and every piece of real estate. One seller may be deeply offended by an offer that is just 10 percent below asking price, while another could see an offer at 25 percent below asking as a starting point to negotiations.
Unfortunately, you can’t simply ask a seller how low you’d have to go to offend them. Instead, each property has to be considered individually. Before making an offer, your real estate agent should do a comparative market analysis (CMA) to see how much they think the property is worth. If the asking price is much higher, there is a good chance that the seller will be prepared for a lower offer.
Use the CMA and the condition of the home to decide how much you are willing to pay. When making a low offer, your real estate agent should be prepared to cite reasons for the lower price. This might include points about the condition of the home (worn floors, damaged walls, etc.) or evidence that comparable homes in the area have recently sold for less.
If you do decide to come in low on the price, it helps to make your offer more attractive in other ways. Offering a quick or flexible closing date, a cash deal, or no contingency on the sale may take the sting out of a lower price.
Working with a trusted real estate agent will help you decide on the right offer for the home you want to buy. Though negotiations are an expected part of home sales, you should also consider how badly you want a home before making an offer. Don’t play tough with a lowball offer if you aren’t prepared to lose out on buying the home.
Regardless of the market, the seller has the option of accepting or rejecting your offer. You don’t want an offensively low offer to close the door on a chance to buy your dream home.