Negotiating for the best price for real estate can be a delicate process. By offering too much, it's easy for a buyer to overpay. Sometimes, a so-called "lowball" offer can offend the seller and jeopardize the whole deal. Experts say that communication is the key to success.
Even in today's lopsided buyer's market, it's possible to make an unreasonably low offer and offend a seller. When that happens, sellers typically react by getting upset and not responding with a counteroffer. By offering too little-in other words, by playing hardball-it's easy to lose the entire transaction and walk away empty-handed.
How low can you go?
Some realtors say that any dollar amount more than 15 percent below the original asking price is a lowball offer. Others say it's 25 percent. But many agree that there's no magic number, because every seller is unique, and the reaction to an offer is based on individual emotions. A smarter and more practical approach, they advise, is to present informal verbal offers in an ongoing effort to keep communication and negotiations alive.
That approach requires a good understanding of the strengths and weaknesses of the deal. If a seller has listed a property higher in hopes of fishing for bigger profits, there's more room for lowballing. If the price was determined based on the minimum amount the seller needs in order to pay off the mortgage, there will likely be much less wiggle room to accommodate the buyer.
Knowledge is power
It becomes easier to effectively negotiate when realtors are involved. The agents don't get emotionally involved the way that their clients do, so they can hammer out a deal much more easily by discussing the specific needs and goals of their customers. Often, they can figure out how to satisfy both buyer and seller by negotiating not just on price, but on other important terms like repairs, closing costs, or move-in date.
Working with institutional sellers, like mortgage lenders with repossessed homes, can also be simpler, because they're not sentimentally attached to the home. They'll generally entertain any offer that helps save money-or lose less than they might risk by holding out for a better price.
While there's no fixed formula regarding lowball offers, almost every expert agrees that the most volatile situation exists when inexperienced nonprofessional buyers and sellers come face to face. Buyers may be better off hiring an "exclusive buyer agent." These brokers owe their fiduciary responsibility to the buyer. Such reps, who are skillful negotiators, can often work deals at prices that offset their commissions. Working through a buyer's agent can be a less stressful and more productive process than going it alone.