When the time comes to sell your house, you always want to bet the best possible price so you can recoup the financial (and emotional) investment. Thus, it’s only natural to feel cheated and irritated when a potential buyer sends in a lowball offer, particularly after setting a price that you feel is reasonable. What is considered a lowball offer in real estate? This really depends on the sellers. Some might not mind getting an offer that is 30% below their asking price. Others, however, will feel insulted if a buyer offers a penny under. Typically, real estate experts consider an offer that is anywhere from 20% – 50% lower than the asking price a lowball. Should sellers accept these offers?
Most real estate agents recommend home sellers to steer clear of lowball offers – or, at least, to counteroffer at a higher price. However, sometimes it might be in your best interest to accept the lowball offer and move on. And while getting a lowball offer on your home can be upsetting, it doesn’t have to be. The fact that someone wants to buy your home is a good thing and low offers are better than no offers. Read on to know the 5 situations when sellers should accept lower offers from potential buyers and how to respond to a lowball offer on a house.
5 Times to Accept a Lowball Offer
1) Your Days on Market (DOM) Has Become Too High
The first situation in which accepting a lowball offer is a good idea is if your Days on Market (DOM) has become way too high. This simply means that your home has been for sale on the market for far too long. There are a number of reasons why a house might have longer days on market. It could be because there are issues with the home itself so there are no offers on the table. Sometimes, it’s because a sale didn’t go through. For example, say you’ve accepted an offer and went into contract, but then the transaction fell apart. In this case, you’re going to put your house back onto the real estate market. Whichever the case may be, if your property has been on the market for 3 months or more and isn’t drawing in a lot of potential buyers, you may have to consider accepting a lowball offer.
Related: Why Is My House Not Selling? 7 Reasons & Solutions
2) Your Asking Price Is Way Too High
When selling a house in the US housing market, determining the right asking price plays an important part in how successful your sale is. This is one of the best tips to sell your house fast as well as a great tip if you’re looking to get multiple offers. Meaning, if you’re not getting the offers you hoped for, it might be because you’ve listed your home for a lot more than it’s worth. So when a buyer sends in a lowball offer, consider taking a step back and revise the asking price with your real estate agent.
To set the right price for your home, you need to run a comparative market analysis. This involves checking how much similar properties in the neighborhood (real estate comps) have been sold for in the last few weeks or months. After checking the asking price and selling price, home sellers can then set a price accordingly. A good real estate agent will conduct the analysis and property valuation for you, helping you establish the right asking price that attracts buyers.
An important thing to keep in mind, though, is that a CMA is only valid for a few months. This is because the housing market is constantly changing. Meaning, if you’ve been trying to sell your home on the market for some time now and you got a lowball offer, it may be time to reduce your price and accept the low offer because there’s a high chance that your original asking price is no longer appropriate. It may no longer drive interest in the current real estate market as your CMA could be outdated.
3) Your House Needs Repairs
As the homeowner, you may have learned to live with some of the small issues in your house such as that stain on the ceiling or that creaky bedroom door. However, potential buyers might see these minor issues as major problems and use them to justify their lowball offer. Therefore, if you’re property needs repairs but you can’t afford to make the required improvements, expect to get an offer that is low – even lowers than the cost of repairs. And if you can, making necessary repairs to your home is a great way to avoid lowball offers in real estate.
When selling your home, it doesn’t have to be perfect to sell. Nevertheless, it does need to be in good condition in order to attract buyers and, potentially, multiple offers. A tip for home sellers in this regard is to have a home inspection before setting up your real estate listing. An inspector will tell you what needs to be repaired or renovated in the home. This could be faulty wiring, a hole in the fence, a leaking toilet, or stains on the ceilings and walls. If you can’t pay upfront for minor repairs, expect to pay later on in the form of a lower sales price.
Related: 20 Tips for Selling Your Home in 2020
4) The Buyer Offers Other Incentives
For many sellers (and potential buyers), the price is not all that matters. Ideally, you want an offer to match your asking price. However, some sellers are willing to move on from the price if the buyer makes the deal more enticing. This includes if the buyer offers other incentives like a higher down payment, shorter inspection periods, reducing or waiving some contingencies, submitting a lender pre-approval letter, or if the buyer is a cash buyer. If you got a lowball offer with enticements like these, this tells you that the buyer is serious, qualified, and ready to close the deal quickly. Thus, this might be a good reason to accept the lower offer.
5) You Are in a Buyer’s Market
As mentioned, the housing market is always changing according to the economics of supply and demand. As a result, the local market can be used to determine the best time to sell a house. Typically, this is during a seller’s market – when the supply of homes is limited and there’s a surplus of willing, ready buyers. When selling a house during this time, home sellers have higher chances of attracting multiple offers that meet their asking price. Alternatively, a buyer’s market is when the supply of homes for sale is greater than the number of buyers in the market.
As you can expect, it’s not always easy to sell a house in a buyer’s market. This is because buyers will have their pick of a surplus of properties during this time. In addition, when the supply is up, home prices and values go stagnant or decrease. The time of year also plays a role when it comes to when to sell. In general, spring and summer months are the best times to sell. If you wait until winter or holiday seasons, however, it’s likely that you won’t have as many offers coming in and, hence, the negotiating power will favor buyers. This means that a lowball offer could be the best you’ll be able to get in a buyer’s market.
Related: Summer 2020: Is It a Good Time to Sell a House?
How to Respond to a Lowball Offer on a House
Almost all real estate agents agree that a home seller should not reject a lowball offer right away. Instead, look at all of the disadvantages and advantages before rejecting or accepting the offer. In other words, determine which comes with a higher risk: accepting a lower price or losing a qualified buyer? Ultimately, you need to remember that you are in control and don’t have to accept any offer you don’t want to.
You should also keep in mind that potential buyers usually make lowball offers as a way to start negotiations and with a goal of arriving at a mutually acceptable – and fair – price. So don’t feel too offended if you got an offer lower than your asking price. Therefore, the best way to respond is with a counteroffer. Here, home sellers can do one of the following:
- Counter with an offer over asking price
- Counter with something reasonable
In most cases, choice #2 is the best course of action to respond to a lowball offer on a house. The first can make you feel better in the short term, but it doesn’t work towards accomplishing the desired goal of selling your home. If after you have countered with something reasonable and the buyer doesn’t come up substantially, then he/she probably wasn’t serious anyway.
One final tip for responding to a lowball offer in real estate is to stay calm. When selling a house, you should leave your emotional attachments at the door because you are engaging in a business of negotiation. This is one of the benefits of hiring a real estate agent. When you have an agent, you’ll have a team member who is willing to negotiate for you and get you what you want. Also, Agents do this for a living, making them better suited to get you a good price on your home.
