Dear Monty: Six steps to take with a low-ball offer on your home
By Richard Montgomery
Reader Question: Our home is for sale for $284,900. It has been for sale for two months. We just received a low-ball offer for $245,000. We are very disappointed and stunned with the offer. We feel like telling them to get lost. How should we deal with this situation?
Monty’s Answer: The offer is about sixteen percent below asking price. Consider looking at the offer like this; hey – we have an offer on the house! If you paid ten real estate appraisers for their opinion of your home’s value, the difference between the most conservative and the most optimistic could be sixteen percent.
Consider taking the following steps
- Check your emotions at the door. The proposal is strictly business. Yes, it is your home, and it is full of memories, but those feeling have little to do with the current situation. The key to success here is knowledge, patience, and effort on your part. Are you confident that your asking price is correct? Do you know how the market in your neighborhood is behaving, for certain? This buyer could just be testing you. It could also be this customer is closer to the market range than you are.
- Look to your agent. Do you have a written document that contains the best comparable homes? Have you driven by them? Does the report include adjustments between your home and each comparable for the differences between each comparable and your home? If you do not have such a document, ask your agent to prepare one. Also ask for the following statistics from two months ago to the same measurements today:
) Number of similar homes on the market.
b.) Number of similar homes sold and closed since the listing’s inception.
c.) Number of listings that expired unsold.
d.) Number of pending transactions.
e.) Number of new similar listings (your competition) with the data sheets and pricing
Your goal here is to understand the lowest price you should expect and the highest price you can expect based on up-to-date information.
- Determine the sales rate of homes in the area similar to your home. The sales rate will tell you if it is a buyer’s market, a balanced market, or a seller’s market. If your agent verbalizes about the state of the market, ask them to prove it to you with the facts. Many agents will be surprised to learn their opinion, and the facts do not line up.
- What do you know about this potential buyer? Have you seen a pre-approval letter? Do you know why they offered the price they did? Do they have comparables they used in setting their price? If your agent does not have the answers to these questions, ask your agent to gather this information. If the buyer is serious about your home, they should be willing to offer up information to defend their offer.
- Learn the basis for their offer. A knowledgeable real estate agent can make any home look more or less valuable with their selection of comparables and the comparable adjustments. Remember, picking comparables and making adjustments are subjective. This is why Dear Monty recommends unfiltered MLS data queries so that you and your agent together choose the best comparables from the entire field. Assuming your agent can get the buyer’s comparables (there is a chance the buyer does not have any comparables, or even deny it, as they may feel they are somehow giving you an edge in the negotiation) you may gain an understanding of the offer. Hopefully, your agent can convince the buyer’s agent to share how they determined their price – if they want the house. Armed with this data, you are in a better position to evaluate how to respond.
If the buyer truly had no comparables on which to base their offer, presenting them with useful data can have a powerful influence on them.
- Make them a new counter offer. A counter offer is a rejection of the original offer. You are reversing roles with the buyer. You and your agent can now take their comparables and either demonstrate better comparables or why the differences between their comparables and your home need to be adjusted. You are using logic and data to educate the prospective buyer in a reasoned and calm fashion.
Another potential outcome using this data is that you may come to realize the buyer has a point, and soften your stance. There is no single price for any home.
“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”