Thinking of Making a Low-Ball Offer on a Home? Think Again!

The market is definitely picking up and with inventory at an all time low and the increasing amount of buyers, competition is stiff. Good News: The Market is improving and prices are rising but be careful making a low offer on a home you really want. If you chance that, you may lose the house all together.

WASHINGTON — It’s not something that economists routinely track, but it provides a rough sense of what’s happening in local real estate markets. Call it the low-ball index.

A year ago, according to researchers at the National Assn. of Realtors, 1 out of 10 members surveyed in a monthly poll complained about low-ball offers on houses listed for sale. In the latest survey — conducted during March among a sample of 4,500 agents and brokers across the country and not yet released — there were hardly any. Instead, the focus of volunteered comments has shifted to declining inventory levels — fewer houses available to sell — and multiple offers on well-priced listings.

A low-ball offer typically involves a contract submitted to a seller where the price proposed by the purchaser is 25% or more below list. Low-ball offers increase sharply when there’s a glut of properties available, asking prices are out of sync with local economic realities and values are depressed or uncertain. Buyers figure: Hey, why not? Maybe I’ll get lucky.

Based on the latest survey results, that sort of strategy is not a winning move in many communities this spring. In fact, in local markets where inventories are tight and competition for homes rising, realty agents say that buyers looking to steal houses by low-balling their offers are ending up at the back of the line — their contracts either rejected out of hand or countered close to the original asking price.

In high-demand, high-cost markets that have rebounded from recession slumps, sellers are now firmly in control; they pay scant attention to low-ball offers. Jayne Esposito, an agent with Coldwell Banker Residential Brokerage in Los Gatos, Calif., said multiple offers are “the rule, not the exception,” in her area, and many transactions end up with final contract prices higher than the listing.

“Sure, I’ve had a few buyers try to low-ball and they wouldn’t listen,” she said, “but that didn’t work out well for them.”

Similar trends are underway in more moderately priced markets. Wes Neal, an agent at Prudential Olympia in Olympia, Wash., said, “Low-ball offers are down a lot because we’re seeing more homes come on the market that are more realistically priced” — sellers have absorbed the hard lessons of the recession years about what the market can bear.

Even when buyers submit shockingly low bids, sellers no longer are so insulted that they send the contract back without a counteroffer. Now they negotiate aggressively and the final number ends up close to the original asking price. For example, Neal said, a buyer recently came in with a bottom-fishing offer of $150,000 on a house listed for $250,000. Although the seller was irritated, after a series of negotiations the low-ball buyer settled for a final price of $230,000.

Outside Washington, D.C., in the Northern Virginia suburbs, well-priced houses in good locations move fast, sometimes pulling in multiple offers within 48 hours of listing, said Chris Ann Cleland, an agent with Long & Foster Realtors. Sellers who encounter the occasional outrageous low-ball offer reminiscent of the recession years tell listing agents “don’t even bother” with them. After all, there’s an excellent chance there will be a realistic offer shortly — maybe more than one.

In the suburbs south of Chicago, Judy Orr, an agent with Classic Realty Group in Orland Park, Ill., said low-ball frequency and efficacy depend on the specific neighborhood or town. “We still see them, and we try to work with them” in communities where prices are soft and the effects of tough economic times persist, she said.



Article Courtesy of the LA Times 4/22/12