We have received more low ball offers on our listings in the past two months, than we have in the two years prior to that. The market is changing; at this point there is little doubt about that. It's one of life's greatest ironies; everything is always changing, and yet people dislike change. In real estate, those who see change for what it is, and embrace it, are way ahead of the curve.

Writing a Low Ball Real Estate Offer

For those of you who want to be ahead of the curve, I'm going to teach you how to successfully write a low ball offer. It's a skill that will no doubt come in handy for buyers over the next few years.  My insights into this topic are borne from both my experience as a real estate investor, and my experience as a real estate agent. I have successfully negotiated 1,000+ real estate contracts in my career. As a Listing Agent on Vancouver Island, I consistently help my clients sell their homes closer to the asking price, than is typical in my markets. In short, I live and breathe real estate negotiation.

These days HGTV teaches people that they should write low ball offers. Real estate seminars are popping up everywhere teaching people how to invest in real estate. There is one thing that I find missing and it's the secret ingredient in a successful negotiation - perspective! That's right perspective. 

You see, perspective is why this is such an interesting topic for me, because I'm a Listing Agent. I haven't represented a buyer in a real estate negotiation in years, and here I am writing am article on how to successfully low ball a negotiation as a buyer. It's my perspective, from the sellers’ side of the negotiation table, which allows me to best help you as a buyer.  And if you want to be successful, you'd be well advised to change your perspective and start looking at it from the Sellers point of view.

Before we go any further, I think it’s important that I define what a smart low ball offer is. A smart low ball offer opportunity presents itself when the Seller thinks the real estate is worth more than you believe the market will bear for it. Meaning as a buyer, if you like a property, but you feel the Seller is asking too much money for it, it might be time to throw in a low ball offer. Randomly writing ridiculously low offers on house after house, is not a smart strategy, nor one I could ever get behind.  

Without further ado, here are my tips on successfully writing a low ball offer:

  1. Know what type of market you are in. Are you in a Buyer's Market or a Seller's Market? If you're in a Seller's Market there is little point in writing a low ball offer. If you're in a Buyer's Market, proceed.
  2. Know the stats for your market. Specifically, ask your real estate agent to tell you what the average house is selling for, as a percentage of the listing price, in the area. This will give you a mathematical understanding of what is reasonable, because successfully writing a low ball offer is all about avoiding insulting the Seller.
  3. Armed with this info, it's time for you to think like a seller. How long has the house you're preparing to lowball been on the market? If it's in the first few weeks, the Seller is likely going to have a high degree of confidence in the process, and will logically not be very receptive to a low ball offer.
  4. The Seller is likely going to be happier with an offer that has a large deposit - so go big! The money is held safely in trust, and there is very little reason not to go big.
  5. The Seller is going to favour offers with fewer Subject Conditions, so discuss with your real estate agents, safe ways to reduce the number and duration of any Subject Conditions.
  6. Ask your real estate agent to find out ahead of time what type of time frame the Seller has in mind for closing/moving. If possible, go with that time frame in your offer, after all your goal here is to get a favourable price, not favourable dates.
  7. Don't ever tell the Seller that you’ve offered a low price because it's all you can get financing approval for. That's the wrong perspective! The Seller doesn't care what you can afford, they are focused on getting the most money they can for their real estate. It also inadvertently sends the message that you are a poor financing risk!
  8. Use logic to explain the reason for your low offer price. Have your agent find 4-5 good, recent, comparable sales.  Then, make notes by each one about the differences between the comparable and the subject property, to explain how you came to your valuation. Just remember when writing the note to think from the Seller's perspective! Be very careful not to insult their home in any way.
  9. Remember that with a low ball offer negotiation, there will likely be 3-5 total counter offers. So build that into your strategy.
  10. Use time! Negotiations are a stressful process for everyone, even for professional negotiators - sometimes, making the other party wait (impatiently) overnight before your return a counter offer, can erode their resolve.

The intelligent negotiator will always get what they want by understanding the party across the table. Before negotiating on a client’s behalf, I always close my eyes and try to imagine what it's feels like to be the other party (or in my case the other agent). This allows you to get what you want, by ensuring that everyone gets what they want. At the end of the day the Seller wants to get the most money possible for their real estate, and even more importantly they want to feel that they got the most money for their real estate. A successful negotiation is one in which all parties feel like they won! Too often Buyer's treat the process like only one side can win - it's simply a false perception.

A couple final notes. If you get an accepted offer in place on a low ball offer, it's likely that both parties will feel a little worn down. Do not make the mistake of thinking you can get a better deal by further renegotiating based on your building inspection. In my experience, if a Seller accepts well below the market average, they are not open to further negotiations. By asking for a reduction in the sale price in writing, you are opening up the contract, and the Seller will very likely choose to walk away.

If you do not successfully get an accepted offer in place on a low ball, then be patient. Walk away and resubmit your offer a few weeks, or months later, once the seller has had ample opportunity to unsuccessfully try to get their price in the open market. I witnessed that exact scenario play out countless times in my career.

If you approach a low ball offer in good faith, act reasonably, know your market, and most importantly always approach the negotiation with the other party’s perspective clearly in your mind, you will find success as a real estate investor and negation.  

~Chris Fenton
CEO The Fenton Team