Low-ball house / property offers

I have spent the last year making a hobby of looking at properties and houses. Most of them I have made offers on have been pretty extreme lowballs for the current market. I believe with continued fed interest rate increases, the housing market will see price decreases. So I believe my offers are fair valuations.

I have learned a lot so far from this. Negotiating over something that is usually someone’s largest investment means you learn a ton about negotiating. In general, I have seen sellers bring their prices down 8-15% fairly consistently. These are generally properties that have been on the market for awhile, and are already generally pretty good values.

On one property, the seller came down 14%, but had a loan based backup offer to my cash offer and when I pushed for further concessions, opted for the other offer.

On another, the sellers came down only 9% despite having no other offers. I believe the real estate agents were a strong influence on the sellers in that case.

I am currently on one that is pretty legitimately overpriced for what it is, but that has a fairly unique location that is attractive. If the sellers can get close to my offer, I will come up probably.

The wonderful thing about being a buyer is that there are thousands of options and more coming on the market every day. And lots of sellers not seeing action drop their prices each day. I think when the Feds raise interest rates again, we will see further price drops in real estate prices.

Making low-ball offers teaches patience. Sellers take awhile to respond, and when they do respond, it is usually not quite where you were hoping. So then you have to think some more and maybe make a counter-counter offer. Lots of times you have to walk away from properties you were quite interested in. There will always be more though. I know my wife got sick of the drama though and now has put her foot down against getting worked up on new offers.

Low-ball offers teach a lot about seller psychology as well. It’s interesting to me that there is not more variation in counteroffers. I have seen emotional appeal buyer’s letters help sellers drop their prices though. That worked well for a friend of mine, as well as for me when I purchased my Long Beach house. It did not work for my Washington state house though.

The problem with making lowball offers is it’s hard to scale. Maybe it would work better if you made a company and had a low wage employee go out and view these and take videos, then you sit back and make a few offers a week without having to go out and see them until it’s under contract.

Interesting discussion sparked by this post:

Update: a low-ball offer I had on a vacation property was rejected without a counteroffer recently. I feel the offer was fair though and so will not be amending this upwards. I have had one other low-ball offer rejected without a counteroffer, in that case I came up significantly and now live in that house.

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Joel Gross

Joel Gross is the CEO of Coalition Technologies.