Blog: R.E. Tales
Hey, not every place is pretty.
I have no problem with folks who lowball; I often do it myself. It’s just business: the seller wants the most he can get and the buyer wants it as low as he can get it. If neither party is satisfied, then there is no sale. Simple. Or at least it should be. But emotions get in the way.
If folks would lowball more often, there’d be more sales. You would be surprised at what sellers will accept sometimes. The examples I could give: a $32500 home in need of tremendous work that sold for $22000, a woodlot the owner asked $45000 for but accepted $16000, the farm sold at 20% below the price the owner said he would never deviate from, a 10 acre lot we asked a reasonable $19500 for but sold at $10000… Even my home: it was once advertised (very unfinished) for over $100000 and the price dropped over time as more and more buyers could not get the financing. I offered what I had at the time, $25000 cash, and they jumped on it. When I go to buy a place, I figure my costs of renovation, add a percentage for profit and cost over-runs, then calculate what I expect to sell it for and make my offer accordingly. If the buyer does not accept, I am good with it and move on and look for another opportunity. But I am not buying as a residence for myself and am not so emotionally involved as if I were. Using it for myself would change the way I look at things – and it should change your viewpoint as well.
When an owner has invested a good part of his life and his financial resources into a property, they can be offended, deeply, by a lowball offer. They shouldn’t be; it’s just business. But they are sometimes. Part of my job is to present these offers in a way that they are not offended. If they are upset, they will be less inclined to agree to a higher and more suitable future offer the buyer may make. I have seen sellers refuse a perfectly good offer from a former lowballer, knowing they’d accept the same amount from someone else.
Lowballing can come at a cost to the buyer. Let me give an example. Anita took pride in being a sharp bargainer. Great gal, but too shrewd. She found a place she loved and made an offer no owner would accept. I presented it in such a way that the owner was not angry; they just refused it with no counter. A higher offer was made and a small counter offer was the response. This went on and on until finally both parties reached a point with which they could live. It took a month or more of back and forth bargaining to reach this point. Part of the final agreement was that the owner could accept cash offers from someone else up until the point the buyer had a mortgage commitment.
Wouldn’t you know, it happened. David surfaced. He was a cash buyer who had seen it a full year ago and had made a lowball offer that was refused. Now, all of a sudden, he was willing to pay an acceptable amount. I’ll make this part of the story short – all Hell then erupted, both attorneys ended up fired, and the Anita ended up paying additional to stay in the deal. If Anita has just offered the contracted price in the beginning instead of wasting a month or more in bargaining, she would have had her mortgage commitment and David would have just been too late. Anita would have saved thousands in addition to the time.
But wait, it gets worse. The bargaining Anita did with us was also done with mortgage companies and it took her far longer to decide on a company than it should have. That delayed us another 2 weeks. She ended up with a firm that was, to put it nicely, “very slow”. That is somewhat understandable – if they are going to offer an exceptionally low rate to her, they want to cover their bases very well. And they did, it took forever. There was always just another form to fill out, another something else to do. One speed bump after another with no end of them in sight. Eventually, the owner got pissed at all the delays. It was now months past the original expected closing date.
They issued a “time is of the essence” letter, stating if they could not close by a certain date the deal was off. A “time is of the essence” clause is a very serious thing and I never use one lightly. Some buyer’s lawyers do, however, and kind of ignore it, figuring the seller won’t risk losing their sale over a further delay of few days (read: “weeks”). But this time, the seller’s lawyer meant just what she said, as the other lawyer learned. The upshot was a large non-refundable deposit given in exchange for a later closing date.
Normally, the buyer’s deposit is returned if they cannot get a mortgage within a certain time frame and that safeguard is routinely written into the Purchase Contract. But now Anita is on the hook for a far greater sum which she will never see again, regardless of whether she gets the property or not.
By now, Anita switched mortgage companies and went with one which had been recommended to her at the start. They, understanding what was at risk, have moved with lightning speed. And though its not over, it appears that Anita will get her new home and David will continue to look.
If she has not been such a lowballer, a process stared in early April would have finished in in June instead of November, and she’d be several thousand richer. And both buyer and seller would have what they wanted sooner and at far less emotional stress. There would have been no tears.
Here’s another one that just happened. Jana wanted to buy a woodlot and made a lowball offer that was countered with what the seller said was the lowest they’d go. She made another offer after a few days, two thousand higher. Not accepted, they meant what they said. So, some time passes and then Jana calls up to say she’ll take their counter offer after all. We meet to write it up and she adds a surprise clause asking the seller to pay her closing costs. I never like such clauses, because I want the buyers properly represented, but I did what I was asked. The seller did their due diligence on what extra this would cost them and then decided not to go along. So I wrote Jana to say that she would have to pay her own normal share of the costs if she wanted it.
Here’s where the story gets good. Only 15 minutes after I wrote Jana to tell her the news, there came a knock on the door. It’s another agent, bringing me a written full price cash offer. Totally out of the blue. I sent the papers to the seller, but asked them to hold off signing until I can give Jana a chance to make an offer above the published price. I called her and she rather impolitely told us where we could stick it. Using nicer language, I told the owner that she was not going to compete and 15 minutes later, we had a fully executed contract with the new buyer. And now there is nothing Jana can do about it. She’s out.
Some blogs are designed to amuse; others can be an immense help. All are interesting.
After 40 years, I've learned a lot, & acquired unforgettable experiences. Follow these long enough and you'll eventually get the whole book. (Names probably changed, for obvious reasons.)