The Dangers of Low Offers in Real Estate

Many home buyers (especially in today's market) will find a home they want to purchase and make a lowball offer in an attempt to draw out the seller's bottom line price. While this may seem like a great tactic in finding out how low the seller is willing to go, it can be detrimental to the buyer doing more harm than good. It's always best for the seller to make their highest and best offer first if they find the house they really want. Let's explore the reasons why.

As a former real estate agent, I have seen many people lose the house they really want by putting in a lowball offer. It's true that real estate agents are among the list of least trusted professions. It's also true that their client may believe a Realtor will suggest offering a higher price in an attempt to get the contract accepted quicker and turning a higher commission. In most cases, this is not true. Only when the offer is rejected and the buyer client loses the house they want do they trust their agent.

Too many times a client has gone against their agent's advice and wrote an offer for a low price. The offer is then submitted and rejected or ignored. In the meantime, a serious buyer comes along and writes an offer that is accepted. It's then too late to purchase the property and owning the home you chose is no longer an option.

Another danger in writing a low offer is having to come back higher. You may end up paying more for the home than you would have if you had just submitted your highest and best first. The scenario goes something like this: The buyer submits a very low offer. It doesn't even come close to the seller's bottom price. So, the seller decides to counter at full price or reject all together. The buyer then submits a slightly higher offer. The seller again decides to counter at full price. At this point, the seller knows the buyer really wants the house and now wants to see how high they will go. It's no longer a game of seeing how low the seller will go, but how high the buyer will go. This can lead to the buyer submitting multiple offers and slowly climbing up to the buyer's asking price.

Trying to wiggle out the seller's bottom line can actually be detrimental to your negotiating power. The best way to make an offer on a home is to come in with your highest and best price taking into consideration several factors such as similar homes that have recently sold or are for sale, length of time on the market, how much work the home needs, how fast the seller needs to sell and several other situations that could fluctuate the offer. It's always best to hire a licensed Realtor to determine these factors for you.