I blame the media for most of this kind of activity. It is not the buyer's fault that they constantly hear this is a buyer's market, home prices are falling, seller's are desperate...

I also have to put some blame on the buyer's agent. Yes, we have to write what the buyer wants, but it is our obligation to the buyer and seller to provide the best information regarding CURRENT comps to the buyers and help them arrive at a fair offer.

I tell my buyer's that the home is listed at $xxx. This is what the comps are for the area. If you offer less than this, you can almost assuredly expect a counter offer. If you write too low of an offer, you run the risk of alienating the seller to the point that they will not negotiate.

To really answer your question, yes, I have experienced it here, and yes, I get frustrated having to approach my sellers with some of the offers that I have received. All we can do is educate our buyers about what the market is really like and do our best to help our seller's understand what their home is really worth in the current market.

It's all over the place here.  I'm getting sick of it too.

I have a listing that is at $274K, which is WAY below comps.  I'm the 3rd listing agent for this home.  Nothing the matter with it... just freaking slow out here.  Buyers paid $267K two years ago and are bringing money to the table as it is. A lady called me and asked me if they'd "consider" $179K.  HA!  Are you kidding me??

I have told another buyer who wanted to play the "low ball" game that if this is how they were going to approach buying a home (low balling sellers), then find another agent as I don't have time for their games.  

When other agents present me an low ball offer ( I mean a ridiclous low ball offer)  I ask them WHY the offer is so low.  Justify your offer.  I also ask them do they know how much the seller paid for the property?  (it's in the tax records).

I would LOVE to take a one page ad out in our paper with a headline that read something like, "ATTENTION SELLER'S - STOP LOWERING YOUR PRICES.  TAKE A STAND NOW BEFORE IT TOO LATE!"  <grin>

Steven said:

"I have told another buyer who wanted to play the "low ball" game that if this is how they were going to approach buying a home (low balling sellers), then find another agent as I don't have time for their games."

Good job, Steven!  I love it when a professional takes control of his profession!  

We need to ask very poignant questions when working with this type of buyer to find out what his true values, motives and goals are in the transaction.  Then, I think we need to make our roll in the process very clear to him and explain just how it is that we get paid.  We also need to demonstrate that HE NEEDS us and our knowledge/abilities.

If he is serious about making a purchase and just doesn't really know how to negotiate then we have an opportunity to teach him.  (I am working on the presumption that each of us is skilled in the art of negotiations already... if not, then the first step is to get the skill or GET OUT of the business!)

If, on the other hand, he is simply playing a game hoping to find some poor desperate seller, then it is up to us to decide if that is a game we are willing to engage in ourselves.  Me?  I don't have the time or inclination to play that game - there are a sufficient number of serious buyers that need and value my time and abilities.

One and a half years ago, we offered $250,000 for a home that was listed at $279,900. We were not low-balling--we were actually high-balling, (I know it isn't a word!) in my opinion! My husband loved the home, but I wasn't as in love as he--and I thought it was overpriced. The seller countered with $275,000. He thought we were low-balling the price.

Long story short--it is on the market for $214,000.  

Sharron,

Excellent point:  A 'lowball offer' today may look real SWEET in 6 months.

That is why we caution our sellers to NOT allow themselves to view an offer 'emotionally'.  We tell them that the offer is nothing more or less than 'a number'.  In today's market, don't worry nearly as much about THAT number but rather, allow us to negotiate to A NUMBER that WORKS for both the buyer and the seller.

We, too, have seen sellers dig in their heals on 'a number' only to turn around a few weeks later and lower their asking price to the very NUMBER they turned down before.

Remember that EVERYTHING is negotiable.

Micheala, that would be so much more useful than this old foggy crystal ball i have.  Share the power!!!

Shelly

Michaela,

I'm with you!  The problem, as I see it, regarding the buyer agents is that they simply are not professionals... plain and simple.  When going in with what appears by any practical standard to be a lowball offer, the offer should be accompanied by comps and reasons for the offer designed to 'move' the seller in the direction of the buyer's offer.

The 'problem' is not with the buyer or the seller in many instances but, rather, it is with the untrained and unskilled agent(s).  We MUST demand a higher level of professionalism and skill within our industry.  As in nature itself, the strong (mentally) will survive and excel!  Humans have excelled over the animal kingdom, not because of physical strength but because of mental superiority.

I agree with Gary.  The media folks are NOT our friends.  Yes this is a buyer's market.  Yes sellers are willing to negotiate.  But buyers have got to be realistic! I received a $280,000 offer for a home listed at $429,000 (appraised at $438,500).  

I just think people hear all the media hype about what a terrible housing market this is without getting the facts.  I think we should follow Steven's lead (although he said he was just tempted to take out a newspaper ad) and not only tell seller's to stand firm on their prices but also tell buyers that prices may not go lower and interest rates may rise NOW IS THE TIME TO BUY!

Sorry, but if they were at market value they'd be SOLD.

The market maybe be lower than you/we think. Have them do an appraisal 2055 drive by with interior inspection $250 + - from a third party and see what they're really worth in an appraisers eye.

And your right its the media fault, too. The media doesn't know any better maybe we should be talking to them more on a Local level.

[Dan sez: Sorry, but if they were at market value they'd be SOLD.]

Yep.

I'm going to run after I say this :)

As someone who loves to invest, I've written some hairy lowball offers too. SOME have flown.

The market is ONE buyer at ONE moment in time for ONE property, ONE unique situation.

The media's gonna bleed it so they can lead it. SOP.

I tell my agents:  

Let's not get attached to how we think things 'should' go. Or how they 'have' gone in the PAST. Adapt to change.

No, a weird offer may not fly, but we don't know till we send it up the flagpole.

If it's a buyer's market, be ready for the buyers to capitalize on it, and prepare your seller for it.

DON'T SPEAK FOR YOUR CLIENT. Ask them their desire, advise of your opinion, then do what they want.

And by all means, don't worry or internalize. Respond, don't react. It's not a reflection on you. The most counterproductive thing you can do is get offended at lowballers.

Sometimes being one can be fun, though! :)

Running like hell . . . LOL

Okay, my sweet Candice, I'm gonna be running right behind you after this comment.

Dan is absolutely correct.  Some folks in our industry need an education regarding the free market system (period).

LOL Tim . . . we are shameful and shameless!

LOL, I'm easy to track down, I know!

[Michaela sez: I know very few people who'd be willing to bring even $5K unless they really needed to get rid of the property]

Real estate's big time local!

I've seen sellers come in with more than that lately, because they DO!

When the market is really down and appreciation is stalling or even reversing, sometimes it IS in their best interest to pay someone to take it . . . taxes, insurance and other costs add up and it may be more economical to pay once now than to keep paying and paying . . .

This is a great discussion and I hope newer agents are monitoring it.

If everyone acts in the best interest of their own client and no one has a problem with each other doing just that, we're all functioning properly.

I don't blame the media. The guy sitting in one of the most powerful seats in the free world said there was "irrational exuberance" in the housing market. What year was that?

Today's buyers have a right to demand the clock be turned back. And don't forget to set your clock back the first Sunday in November.

Micaela, I know what you are saying but I agree about the frustration. But I still think that even a lowball offer is something to work with. The frustration is, as sellers agent, we have to present these terrible offers to our clients. We have to deal with the frustration from them as well.

But, as Candice said, we are all functioning properly if we are doing our job for our client. When I work with buyers I try to get them to be realistic with their offer but know that they also want to try to get a "deal". But our market here is holding well, the only homes that are not getting good offers are the repos.

I tell my sellers upfront that I have to and will present every offer, so when these lowball offers come in they already know what is going on and are not in shock. I hate it when I have to take my paramedic kit, just something else to drag along. lol

["irrtional exuberance" in the housing market. What year was that?]Gregory I think it was like 2002.

I participate on another real estate blog that is open to both buyers and sellers.  I noticed some comments yesterday from Sellers who've decided to hold their ground and wait it out.  They're not taking it off the market, just sitting tight.

Still, there is room for those low-ball offers.  "Any offer in writing, is a good offer" is what my Broker always says.  And she's right.  They either work or they don't.  I think fewer sellers are being offended by these offers because they listen to the media, too.  But real estate is definitely local and we, as professionals, need to know our local market as compared to the national averages and be able to explain the differences to both buyers and sellers.  

In our area we have noticed that some areas are falling faster than others.  It makes our job so much harder.  Appraiser's can't help.  CMA's can't help.  Only the offers will give you an idea if you are truly at market value or following it down!  If the offer is totally off the wall, it isn't an offer.  But if all the offers are coming in around the same price, that is the value.  Buyer's set the value.  

On one of our properties we have had several offers in the last month.  $1.1 with 3% back, $1.150, $1.150, $1.20, $1.210 and $1.250 - (these all came in at the beginning of Sept.)  All turned down by the lender.  By looking at these offers what do you think the property is worth?

This particular property was appraised in June for $1.439.  

The sellers are going to get to the point where they say enough is enough and pull their properties.  And around we will go again!

Micheala sez:

A lot comes down to the buyers' agents ... they should do their homework and educate their buyers about the reality ... there are properties where low-ball offers can fly ... but there are those where it's simply not realistic. They should know how to check the tax records and see what the mortgage amount on the property are

__________________________________________________________

Micheala I represent buyers and sellers.  I hate when I get a low ball, but I deal with it.  As a buyers agent I have always told my buyer, it doesn't matter what the seller paid for a house.  It could have been 20 years ago for 20k or 20 minutes for 200k... point being you offer what the market says to offer and what you feel the house is worth.  

And as for sellers not bringing money to the table, guess what some of them are open to bringing money.  Buyer just doesn't know which ones until they place offer.  I had a seller bring 30k to the table.  But he wanted gone and that was the only offer in over a year!!!  Even though he had a recent appraiser telling him it was worth much, much more!!!  

so, we grin, we bear it, and we do our best for our sellers and are buyers.  thats our job.

Shelly

Education is the key.  It's what we are supposed to do for our clients.  The low ball offers you get today could be the great offers of tomorrow.  

I look at any offer as a chance to negotiate.  Our job is to get the buyers and the sellers to come to a meeting of the minds.

Micheala, I can only tell a buyer what is on the tax records, and they don't show any equity loans, etc.  So I really do discount (as a buyers agent) what the seller paid for a home and possibly home much they have into it.  I do pull it, and we do look at it, but it is only for secondary information to see if they really want to go down that path.... I'm glad my sellers second didn't show up, as he got the offer based on the tax records just showing the first... and he took it even though he brought 30k to the table (had taken a equity line and had the money in his bank).  Point being, only so much credence should be given to that number.  JMHO of course... and I still love your shield!!!  

shelly

Hmm,

Media, reports, etc..

"The value of a property (or your coffemaker for that matter) is the price that a buyer is willing to give and a seller is willing to take at that moment in time."

I just had an appraisal done on Oct 5. It appraised at $396,000. It is on the market at $359,900. We can't seem to get a showing.

So there goes the appraisal approach ey?

If I might play devil's advocate here...

I have had buyers that are afraid to buy and voice that to me. The media and others (especially here in Florida with the whole insurance and taxes up in the are about what/when something will be done) preaching that the market is still in a decline and may be for quite some time to come is making these buyers afraid to purchase a home today and have it drop in value tomorrow and be upside down a week after purchasing the home.

So until the market statistics starts to show some kind of improvement (and it hasn't for us - Pinellas county had a total of 422 single family homes sold last month which is about 100 less SFR's than sold last month).

I can't say I blame a buyer for lowballing. I would too if I were buying. If for no other reason to ensure that I am not going to be upside down a week or six months later in a market that is continuing to decline.

Funny how there are different angles and points of view on this topic.

But how many of us are buying a home for ourselves and not lowballing in today's market?

I'm dyslexic, that's my story and I'm sticking with it, LOL!!!  thanks for letting me know, i think my fingers type faster than my brain : )

Shylle

Here’s my 2 cents worth.

How many of you live or work in areas that doubled or tripled in price from 2000-2005? Do you suppose that the  incomes of the people from those areas doubled or tripled during that same time frame? Or let me put it to you in this way, could you afford to buy the house that you live in right now at the price that the house is considered to be worth (assuming that you own the home you live in)

Does anyone remember the .com frenzy?  Did the fact that many of the dot coms that were not making any profit worth speaking off justify the ridicules prices that their stocks were trading for escape the investors?  No, there weren’t many investors, but there were a lot of speculators.

Doesn’t anyone think that there was an awful lot of speculation  in the real estate market during 2003-2005? Homes being purchased  one day , and being put back on the market within months for a 100K more. Sometimes nearly 50% more than what they were bought for just a short time earlier. Those weren’t  families looking for housing, those were speculators looking to make a killing. Families create the need for housing (housing has to be affordable though), speculators create a frenzy for the profit. The market was superficially inflated by those speculators, and now the incomes have to catch up to the prices of the homes, or the homes have to lower to accommodate the incomes.

It is said that for every 5K that a house goes up in price , a percentage of the eligible buyers is cut out.  Following that logic, what happens when the same house goes up by 50K in three months? Would cut out a lot of potential buyers, don’t you think.?

During 2004 & 2005, the mortgage rates literally hit below 5%, yet there were buyers that were getting interest only mortgages. Did they think that the interest rates were going to get lower?

Guys, this is what I think. Yes there are some low balers out there, but there are still a lot of homes that are superficially high because of the frenzied market of the recent past. This might take a bit of time before it completely resolves it self, and before the prices of homes reflect what the people in the neighborhoods are earning.

Maybe it's the same guys that were trying to cash in on the way up, that are trying to cash in in the opposite direction:-)

I'm with Michaela on this one.  Our market did appreciate very well in the last 4-5 years, but I wouldn't consider it over-heated compared to other areas of the country like California, Florida, Las Vegas, etc.  Have the prices come down in our market? Absolutely, there's no denying that.  Have they deflated as much as some of the other over-heated areas? Absolutely NOT!  Historically, the Chicagoland market has been one of the more stable markets in the U.S. with not as many wild price swings as other areas.  It seems that all the buyers are hearing is the hype and gloom and doom from the media and buying into that.  Then expect sellers to drop their prices 20/30/40/50% additionally when the sellers are already at the new lower adjusted market value or way under value.

Some sellers seem to be digging in their heels more lately in our area.  I'm actually advising my clients to price it right and then STAND PAT because we're probably going to get a lowball offer anyway so why lower the price even more and "lose your shorts"?  If I've got comps that justify the list price then the buyer's agent better have comps to justify their clients offer.  I believe that will have the effect of helping prices hold up instead of continuing to free-fall.  Obviously, every market is diffent and there are times when you need to drop the price.  However, I've noticed in our market that lowering the price doesn't really seem to do anything - even when the price is ridiculously under-market...IMHO :)

Sarah, I agree with you but let me pose a question, what do you do when you are the buyer's agent and they are hearing all the media stuff and insist on you presenting a low offer. I have advised that if they really want the house, they stand a good chance of offending the seller and never getting it and that a reasonable below list offer would be in their best interests but they want to go low.

Michaela, I love negotiating as well but I like to feel like I have a chance to win, I hate starting from behind if my buyers insist on starting low.  

What do you do, fire them or work on their behalf to get it negotiated to where the price should be?

Hi Howard, haven't talked with you in awhile! :)  To answer your question, I run a market analysis for them to see if their proposed offer is on target or not.  If it is, then we proceed.  If it isn't, then I give them basically the same advice you do.  "If you really want the house and can see from the analysis that it is reasonably priced or maybe even under-priced, then why run the risk of alienating the seller by a low-ball offer?"  I do also advise them that every local market is different and while prices have deflated and come down, not every area has seen HUGE deflation.  Some of our suburbs have seen more deflation than others that are holding up fairly well.   If the house is already priced right my advice to them is usually to offer anywhere around 5-10-12% off of list typically and in my experience most sellers have not been offended by that and we've pulled the deal together.  

If they still insist on a low-ball offer then I try to get them to agree that we'll write the offer with "their" price and see what happens, if it doesn't go well then they need to accept my advice and do it MY way (since they did hire me to be their Buyer's Agent) and come back with a better offer so they can get into the house.  If they don't agree then I would consider dropping them as a client if they are just going to be "tire-kickers" and not make realistic offers.

Sarah, you are wonderful, that is exactly it. I even asked them if they were in love with the home because I know they are and are running the risk of alienating the seller with their offer.

They don't care, they say their are other houses out there but I know they aren't looking for cookie cutter, this house is right for them. I'll do my best but they have to come up and while they say they will, the question is whether the seller will even counter or dismiss them as a lowballer.

For some perspective, the house is listed for $399k.

If they would have offered about 20k more, I'm sure I could have gotten the house for them at a  bargain price, with their starting point, I'm not sure they'll get any consideration. I'll keep you posted and it was nice to chat with you again.

What is frustrating is listing a home below market value based on a current market analysis, and getting NO offers or even showings. I have one and would welcome ANY offer at this point. The home is listed for $225K, comps sold for $275K to $325K and shows reasonably well (if anybody would even take a look).

Buyers set the fair market value, so are we overpirced?

Gary,

We share your pain, my friend!  With the large number of listings available and a limited number of buyers it is not unusual for a well-priced property to get completely over-looked... especially in a large market.  

This is something that is a real concern for us with each new listing we take.  We go to great lengths to fully explain the current market to the sellers at the time we take the listing and assure them that we will do everything possible to market their home.  HOWEVER, because of the unbalanced market (seller to buyers) even the best priced, most charming home may sit for a long time today.

The 'stats' we are able to show them from our P2 site and Realtor.com definitely help to prove that buyers KNOW about their listing but just like the proverbial horse, we can lead them to the water but we cannot make them drink.

But the most effective stats are in showing them the actual sales in their neighborhood.  If they are indeed priced right and the home is in good condition, then there should not be other homes in the area that are being sold while theirs sits 'unshown'... if listings are selling around them then it is time to examine the ENTIRE situation and figure out WHY that is happening.  Is it the price?  Is it the location (street it is on, waterfront or not, geographic direction it faces, etc)?  Is it the condition and/or appearance? Or, is it the marketing?

By the way, Gary, I think the world of YOU but I hope my Jags demolish your Colts in Monday Night's game!  LOL

Tim

Tim, GO COLTS! ! The test will be the Pats next Monday.