And, the last one...

~ Should you attempt to dissuade your buyer client from making a low-ball offer?

Thanks in advance for your help with my writer's block!

I think you could get a lot of responses to this in the foreclosure section! A very underpriced home in my area just came available the other day. I work with several investors and the one always wonders why the other one always gets the deal. Simple. He dont necessarily look much at the list price but rather what he would spend for it and still make a nice profit. He often bids a decent amount over list price, and has his act together with his bank. Also this guy makes time to look at the property quickly instead of waiting several days until the great deals are gone. As for lowball offers. I inform the potential buyer that while its the law that we must submit all offers, they should consider how bad they want the property. If there are multiple offers I inform them that they may only get one shot at it.

I think it depends on the market. In a seller's market, I think you should educate your buyer on the unlikelihood of success with a lowball offer. If they really want the property then they should structure their offer to be attractive.

In a buyer's market, of course you should support a lowball offer.

It is all about educating your client and letting them decide. It is not up to the agent to decide what to offer . . . if after hearing your recommedations they want to do something you think is crazy, then either refuse to represent them or make the offer on their behalf. I think that's our job.

I don't think you should try to talk them out of making a lowball offer, but you should educate them about what the comps show the property is worth and let them know not to be surprised if their offer isn't accepted. If this becomes a habit with a certain buyer, I might decide not to work with them, but I never tell someone what to do with their money.

Jennifer: What is your idea of a lowball offer? What percentage of FMV? And is it someone you have a buyer broker agreement with?

Just an offer that you feel is unreasonably low in your market. And Yes, you are a buyer broker...

"How do you expect the other side to react to your offer?"

If this is a one-shot, maybe I'll get lucky offer, then go for the lowball. You are not trying to establish a relationship with the seller. Be aware, however, that the seller does not even have to respond to your offer.*

"If, however, you really want this property, you should pause to consider the entire process." Whether or not I have a signed buyer's agency agreemet with them, I urge buyers to view their first offer as the start of negotiation. Making the seller mad or making the seller write you off as a nut cannot be a good way to start. If you start the negotiations on a sour note, that's where every step of the process may end up.

*A misconception that many buyers (and agents) have is that sellers are legally bound to accept, reject or negotiate offers. In fact, a seller does not have to do any of those things (in Missouri, at least). A seller can legally ignore even a full-price offer. That seller could, of course, be forced to pay commissions in that case but not to actually sell to that buyer.

What I've found out in the past is sometimes the "low ball offer" is all the buyer can qualify for. If you're not doing the loan, you may not be aware of what the buyer can afford. Their loan agent may have told them "you can buy up to 650k" and they tell you to make a 650k offer on a 750k property.

I always want them to explain to me why they want to make the low offer, and then I make the offer in person to the listing agent with an explanation of my client's rational for the offer. It's been my experience that sellers will be more likely to accept a low offer if they fully understand the logic of the buyer. If they just get a figure sent to them, they often times get upset and reject it out of hand.

If my buyer can help me "build a case" for the offer, than I feel the listing agent is going to be more cooperative in presenting it to his seller.

Of course, if the buyer insists on low-balling it, write the offer.

But you need to educate the buyer about current market conditions, list-to-sale ratios, and possibility of alienating the seller so they simply refuse to deal at all. Also advise them that if a better offer comes in at the same time, they could lose out altogether.

An informed buyer can then make his decision based on knowledge, and not just the desire to get a bargain.

There are "low" offers and there are "unreasonably low" offers. Since we are talking about an "unreasonably low" offer, I lean towards educating the client not to make that type of offer. Unless there was a compelling rationale, I don't want to waste my time, the buyer's time, the seller's time and the listing agent's time. I also would be reluctant to start developing a reputation as "that agent who submits unreasonably low ball offers" as it could compromise offers I later make for other buyers.

I discuss the subject of offers in relation to FMV before entering into a BBA with a buyer and it is unlikely I would enter into a BBA if the buyer was going to make unreasonably low and unrealistic offers.

In CA you have a duty to make whatever offer your client instructs you to make.

The listing agent does have a duty to present all offers. The selling agent, however, does not have that responsibility when dealing with a CUSTOMER--only when dealing with a CLIENT with whom the agent has a contractual relationship.

If you look at the sales price history of sold homes,a huge percentage sell at plus or minus 5 percent of list price,so at most a 10 percent swing.

Just based on the averages if you come with an offer 20 percent lower than the asking the chances are slim they will except.Unless there are extenuating circumstances like foreclosure,death,job loss etc.

I think you should counsel the buyer and tell them what is considered a really good deal in the market,like 10 percent off of list.

What if they hadn't bought a home in years and start shooting out offers 30 percent off list and then after 5 rejections turned to you and said I didn't know that 30 percent was considered ridiculous.

I don't wait for buyers to make decisions.I explain this is how the process usually goes,you have to guide them and not the other way around.

I stopped shotgunning offers for investors long ago.You put in alot of time for little return.I like CONTROLLING the listing,you will get paid your commission.If 20 agents submit an offer on behalf of owner occupants or investors,19 will LOSE and one will get paid.The rest will repeat the process all over again.

If you have the deals,you are GOD.

In CA, the selling agent is a sub-agent of the listing agent.

I hope California agents know better.
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