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When is an offer too low?

by sfishome on November 20, 2008

In today’s real estate market Buyers are submitting absurdly low offers. Some so low that Sellers are being insulted and not bothering to Counter offer. So how low can you go?

The answer is entirely dependent on YOUR goals. If your goal has more to do with getting a low price than finding the home of your dreams, go as low as you want. If the Seller doesn’t counter you, you move on. Of course you may end up submitting 100 offers before one is accepted. Personally I see no “art”, no strategy, and no sense to this method. There are better ways.

If your goal is to buy a property that you really do want, and have studied the market and feel you KNOW it’s “real” worth, my suggestion is to write up the offer at that price, AND submit your offer with your research or at least an explanation of HOW you came up with your offer price.

The wrong way, and the way I so often see unsophisticated Buyers and their agents do it, is to submit an offer below even what they think the property is worth. Then provide no reasoning or logic for how they came up with their absurdly low number. Of course they have no reasoning or logic, so how can they provide any? And how does the Seller react? They are confused, confounded, and often insulted. However, with reasoning and logic to support the offer, they’ll at least give the offer some thought and consideration.

So how low can you go? If you believe the market is in a downward spiral, so much so that while your research shows that the fair market value is $xxx,xxx, but in 6 months it will be 10% lower, you can and should submit an offer 10% lower than your research. But again, you must provide your reasoning to the Seller. Of course the Seller may think the market will be up 10% in 6 months, but at least they understand why you submitted the offer you submitted.

Should you go that low? Frankly, if you think the market will be 10% lower in 6 months, and you are sure of it, then you should wait 6 months. This is a San Francisco blog, and I discuss only the San Francisco market, and I know many Buyers who think the City will be down 10% in 6 months. But I have yet to meet a Seller who believes that. So Sellers are not accepting offers that are 10% below what they believe the current bottom is right now. So you are wasting their time and your own.

For that reason, the last time I checked, sales were at a run rate of about 1/3 of what they were last year because there is a stand off between Buyers and Sellers. Buyers only seem to be offering absurdly low amounts, many with no rhyme or reason, and so the Buyers are not even getting responses. Isn’t that a waste of time? In my book it is

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