In this strong Austin real estate market, we often hear about multiple offers, homes selling for more than asking price and cash buyers. What we don’t hear about too much, but happens more than you think, are “low ball” offers. Even in a booming Austin real estate market, you have buyers who are looking to test the market and gauge how desperate a seller is. The question many sellers ask is, should I respond to a low ball offer?
Understand Why a Buyer Writes a Low Ball Offer
The first step is to understand why a buyer writes a low ball offer. In my experience, it is for two reasons – either they are clueless about the state of the Austin housing market, or they are trying to test how desperate a seller is. A buyer wants to buy your house for the least amount of money possible, just as a seller wants to sell their house for the most money possible. If some buyers don’t feel the fear of loss (i.e. in a competitive multiple offer situation), they decide to make a low offer and test a seller’s response. After all, in their mind, they have nothing but time to get serious. No one must be interested in this house. It has been on the market for a whole 5 days, you know!
Advice for Sellers: Put Your Emotions Aside During Negotiations
I know when you get a low ball offer, it can be a pretty frustrating and deflating experience. Some sellers get furious and want to throw the buyer’s offer in the garbage. I’ve heard everything from “we’re too far away, there’s no point in wasting our time responding” to “this buyer is crazy – haven’t they seen the comps?” Though all of these feelings are completely understandable and sometimes (no, probably often) true, the most successful sellers know they need to put their emotions aside when selling their homes.
Why Should I Be the Bigger Person and Act Unemotional?
Another question we often get from a disgruntled seller who has just received a low ball offer is, “why should I put my emotions aside and be the bigger person? This buyer doesn’t deserve my house if they don’t think it is worth what I’m asking for it.” Again, I completely understand and agree with a seller’s frustration. If I hadn’t seen many low ball offers turn into viable offers, I’d probably agree there is no point wasting their time with a response. So, why should a seller be the bigger person and put together a serious response to a low ball offer? Because often times there is more money at the end of that negotiation process.
Often Low Ball Offers Aren’t Indicative of What that Buyer Will Actually Pay
A buyer likes your house enough to put pen to paper and send an offer. Sometimes a low ball offer is the most they are willing to pay. But, often that’s not the case. A lot of buyers want to see what the seller will come back with to determine whether or not they continue with the negotiation process. If a seller doesn’t respond to an offer, the buyer will likely launch into the same emotional fit the seller just experienced. Sometimes, buyers decide to put their big girl pants on and come back with a serious offer. However, often that doesn’t happen. They simply get a bad taste in their mouth and move on. If a seller would have led by example and taken emotions out of the negotiation, it’s highly likely they would be under contract at a number and terms acceptable to them.
Some Buyers Want to Prove to Themselves They Couldn’t Get it for Less
You have some personalities who simply have to start low to prove to themselves they really are getting the best price for the house. To these people, the worst thing that could happen was they make an offer and the seller accepts it right out of the gate. They would feel they grossly overpaid and could have gotten the house for less. The best strategy for this type of personality is to come back with a number you can live with and hold strong. The more you give in after you’ve said no, the more room they think they have to squeeze a little bit more out of you.
Not Every Negotiation Ends in a Contract
Could you go through several round of negotiations and not end up with a contract? Could all of this being the bigger person be a huge waste of time? Yes, absolutely. Not every buyer who makes an offer will turn into a contract, even in our inventory starved market. In some cases, buyers will only pay so much for a house. They put their number on the table and if a seller says no, they’ll keep looking. Same is true with sellers. Not every offer that comes in is acceptable to you. You propose acceptable terms and the buyer might not agree. Understand part of the process is seeing an offer negotiation through to it’s end to know if there is a deal there or not.
If You Don’t See an Offer Negotiation Through, You’ll Never Know if a Buyer has More Money to Give
Bottom line is if you don’t see a negotiation through to the end – unemotionally – you’ll never know if that buyer had more to give. If you shut down, the buyer will likely shut down and you might end up losing the best buyer you will have. Take a step back, analyze the situation unemotionally and respond with terms that will work for you. It might take a few counter offers, but if you are patient and professional, you’ll have a much better chance of success in selling your home.
Example After Example of Low Ball Offers
I could sit here and tell you story after story about how buyers and sellers reacted to low ball offers in my years in the real estate business. We have had sellers who have refused to respond to low ball offers and others who have taken our advice and responded unemotionally. 100% of the sellers who didn’t respond did not enter into a contract with a buyer who made a low ball offer. Not every seller who took the high road and acted unemotionally resulted in a contract, but the majority did. And the seller was, in the end, happy with what they got for their home.
On the buyer side, we’ve worked with many buyers who have made low ball offers. Many of the buyers who didn’t receive a counter offer decided not to proceed with a negotiation, even though they told to me in many conversations they would be willing to pay more. They said they wanted to start low to see what the seller would say, but when the seller was unresponsive they got insulted and gave up. Some of these sellers were lucky enough to get another buyer who was willing to pay more in the next few days and sometimes these properties saw several price reductions before they found a buyer.
Money is Often Left on the Table in Emotional Negotiations
Any way you slice it, money is often left on the table in emotional negotiations. Take emotion out of the equation and you’ll have a much better chance at arriving at a price and terms you’ll be happy with.
Always Respond to Every Offer – Even the Low Ball Offers!
It is our recommendation that you respond to every offer, even low ball offers, in a professional manner. You never know where a negotiation will end up once you get past the first stage of the negotiation process. The worst thing that could happen is you don’t come to an agreement and wait for another buyer. The best thing that could happen is you end up selling for top dollar.
Considering Selling a Home in Austin?
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How Much is a Low Ball Offer for My Home?
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