How To Make A Lowball Offer On A Home

How To Make A Lowball Offer On A Home

Imagine yourself as a seller. You may love your house; it may have been your dream come true when you purchased it and your dreams have changed. You may dislike your home; it’s too big, too small, the neighbourhood is too crowded and too remote. You may simply view your house as an investment, and you’re ready to cash in on it. Regardless, if you’re like most sellers, you want to realise a healthy profit. Understandable!

Now imagine yourself as a buyer. Equally understandable, you want to get the best deal possible. You may view a beloved home and see the shifting foundation or feel (and smell) the damp. You may view a home that’s “too remote” and feel as if it wouldn’t be optimal for a rental opportunity for income. You may see a “great investment” that wouldn’t yield quite the returns the seller thinks. For these reasons – and many others besides – you may put in a lowball offer.

What is “lowballing” – and how do you do it?

In this guide, we will discuss:

  • Low Ball Meaning
  • Should You Make a Lowball Offer
  • How Much Under Asking Price Should You Offer
  • Successful Low Balling
  • (For Sellers) What To Do If Buyer Wants to Reduce Offer

Lowball Meaning

What is a reasonable offer on a house? The answer, of course, depends on whether you are the buyer or the seller! “Reasonable” to one may not necessarily be sensible to the other. We discussed scenarios where this might be true (e.g. the owner loves the house and cannot see its faults through their memories!). However, with help from an estate agent, the seller typically arrives at what is closer to a reasonable listing price.

Depending on the market, as well as other factors, such as the condition and age of the house, buyers may feel that this listing price is simply too high. In this case, they may “lowball.”

When it comes to a standard lowballing meaning… well, there really isn’t one. Some sellers consider anything below their asking price to be a lowball offer. Generally, however, this term refers to offers that are “well below” asking. Many set the figure at 10% to 15% below the listing price or lower. So, for example, if a house is listed at £350,000, offers between £315,000 and £297,500 (or lower, of course) may be considered to fall into this definition.

Of course, this depends a great deal on the state of the market. For example, in a hot market such as we have seen in the past few years, an offer that is even three to five per cent below the listing can be considered lowball. That is because there is far more demand than supply. Conversely, in a cold market, an offer that’s 10% – 15% below the listing may just indicate that the seller is asking too much given that there are more houses sitting for sale than buyers who want them.

As you can see the lowballing meaning can be different, based on factors like these. Regardless, though, we can agree that it is an offer well below asking and at least somewhat below market.

Should You Offer Below Listing Price?

Let’s look at the reasoning behind the practice of offering below asking. Often, potential buyers will do this as a way to jumpstart negotiations. They don’t really expect the seller to agree to their offer (more the better if they do end up accepting!); instead, it just signals to the seller that the buyer is ready and willing to start talking price and working towards a final agreement.

This allows the buyer to gauge how flexible the seller is. If, for example, they come back with a firm “No,” they know they don’t have any wiggle room. They can agree to ask or keep looking for a property. If it is a seller’s market, you can expect less flexibility – and more firm “No”s! On the other hand, if the seller counters with a price that is a bit below their asking, then the buyer has little room to keep negotiating.

Now in some cases, buyers may offer a lower price because they see significant issues with the property. This could be anything from physical defects (e.g. roofing problems, subsidence) or issues with the location (e.g. near or in a flood zone).

Should you make an offer below the listing? That is up to you; it is certainly within your rights. It is also within the seller’s rights to refuse to entertain such offers. Lowball techniques can help you save some money (or a lot of money!) while finding the home you want, but it can backfire.

Again, you need to read the market. If houses are in high demand with low stock, you may find yourself out of luck with this strategy as properties don’t stay on the market that long. In the frenzy during and immediately following the pandemic, for example, it wasn’t unusual for houses to have offers within hours of being listed. Offers… plural. In this case, a seller will not even look at much less consider a low ball.

This technique works better in buyer’s markets where there are more homes than buyers. Look at how long a home has been on the market; the longer, the better for you. This means that the seller may be frustrated and willing to consider offers that may have appeared “too low” a few months ago.

How much should you offer on a house?

To determine this, look at several key factors:

  • The length of time that the home has been on the market. Again, the longer, the better for buyers. It certainly signals that there must be a reason (or perhaps several) that no one wants it. Lowballing a seller in this position may be very effective.
  • The quality of the home. This is another key factor in whether this tactic will work effectively for buyers. Obviously, a newer, beautifully maintained and advantageously located home will be more appealing for buyers and more likely to get t asking price or above. An older home with outdated features, a poor location or general fair to the poor condition will not be as compelling to buyers. A “lowball” offer may indeed just be a more accurate number given the state of the property.
  • The motivation of the seller. Some sellers have the luxury of waiting (and waiting, and waiting) for the right buyer to come along. Others need to sell up so they can move on for a variety of reasons, from work to family to finances. The more motivated they are to move, the better the odds of success for you.
  • Benefits you can offer. Can you offer cash instead of going with financing to “sweeten the deal”? Can you agree to a completion date that coincides with the close of term so children don’t have to move schools before the end of the year? Little things like this may make a big difference.
  • Unnecessary contingencies. Are there any contingencies you can skip? For example, are there certain searches you can forgo, with the knowledge that you are assuming that risk? This too can make your offer more attractive.

What Is a Cheeky Offer on a House 2021?

In 2021, it was a firm and hot seller’s market. A cheeky offer on a house listed for £400,000 may have been £400,000! In that climate, houses were routinely going for 10% – 15% above the listing price. Lowballing was not an option for most houses. There are always properties, and always sellers, who will accept a lower-than-list offer because of the condition of their house, their motivation to move, the length of time it has sat without an offer and various other factors.

If you plan to use this technique, you have to do your homework.

What If It Happens to You?

Now you know the lowballed meaning, what if it happens to you? How should you respond? Well, you could always reject it out of hand. If it’s just too low, it’s just too low. You may also feel that the buyer was not serious about following through; in this case, a low ball is just a waste of your time. They are akin to “tyre kickers” who waste car dealers’ time with their tiresome “offers.”

But if you think the buyer is serious, ask yourself if their offer is really outrageous or unreasonable. Were you, perhaps, too optimistic when setting your price? This happens frequently, especially when people have an attachment to their house or have paid more for it than they can get in the current market.

Some people just accept. They want the process over and done with. They may recognise that there are some issues with the house that would cost too much to resolve and are willing to part ways with a little profit in order to get the deal completed. This is up to you. It may be the best option for your situation.

If you are willing to entertain a lower offer but not accept it straight out, start to negotiate. How far are you comfortable coming down? Consider offering a price that is just below your listing rate. This shows you are willing to talk. The buyer will likely come back with another offer that’s slightly higher than their original one. Progress! Keep negotiating until you hit a point where you feel satisfied in accepting the offer.

There is a difference between a lowball offer and a fair and reasonable one. With the latter, you will feel far more comfortable in completing the deal.

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