What Is Considered a Lowball Offer on a House?

When navigating the real estate market, both buyers and sellers often encounter offers that deviate significantly from the listed price. A “lowball offer” refers to a bid on a property notably below the seller’s asking price. Understanding the nuances of such offers is important for all parties involved, as they can represent either a strategic negotiation tactic or an unrealistic expectation.

Understanding What Constitutes a Lowball Offer

While the exact percentage can vary based on market dynamics and local customs, a lowball offer often falls in the range of 10% to 20% or even 20% to 25% below the initial list price. For instance, an offer of $425,000 on a $500,000 home represents a 15% reduction. However, it is not solely the price that determines if an offer is considered lowball.

Unfavorable terms can also contribute to an offer’s lowball perception, even if the price is not drastically reduced. These terms might include excessive contingencies, such as a lengthy inspection period or a requirement for significant seller concessions towards closing costs. A request for a very long closing period, exceeding the standard 30 to 60 days for financed purchases, can also make an offer less attractive.

Key Factors Influencing a Lowball Offer

Several factors determine whether an offer is a true lowball or a reasonable proposal. Market type plays a substantial role. In a buyer’s market, with more homes available than buyers, lower offers are commonplace and can be a strategic opening. Conversely, in a seller’s market, where demand outstrips supply, low offers are less frequent and almost always perceived as lowball.

The property’s condition is another significant factor. Homes requiring substantial repairs, major updates, or those with known structural issues often warrant a lower offer to offset buyer expenses. A property lingering on the market for an extended period can also signal seller receptiveness to a lower bid. Furthermore, a seller’s motivation, such as a need for a quick sale due to job relocation or financial distress, can make them more open to considering lower offers.

Comparable sales data, often referred to as “comps,” provides a factual basis for an offer. If recent sales of similar properties support a value below the asking price, a lower offer might be perceived as market-driven rather than arbitrary. This data helps establish a property’s true market value, which can differ from the listed price.

Strategies for Sellers When Receiving a Lowball Offer

Receiving a lowball offer can be frustrating for sellers, but several strategic responses exist. One option is to outright reject the offer, particularly if it is insultingly low, the market heavily favors sellers, or the terms are entirely unacceptable. However, engaging in negotiation is often more productive.

A common strategy is to issue a counter-offer. This involves proposing a revised price, adjusting contingencies, or altering other terms like the closing date or earnest money deposit. For instance, a seller might counter at a price closer to their asking price, request a higher earnest money deposit (typically 1% to 3% of the purchase price), or seek a quicker closing. This approach keeps communication open and allows for continued negotiation towards a mutually agreeable outcome.

In some situations, a seller might choose to ignore a truly egregious lowball offer. However, many real estate professionals advise against this, suggesting that every offer should be addressed as a potential starting point for negotiation. Consulting a real estate agent is advisable to determine the most appropriate strategy based on market conditions and seller objectives.

Strategic Approaches for Buyers When Making a Lowball Offer

Buyers considering a lowball offer should approach the situation strategically to increase their chances of success. This tactic is often more viable in a buyer’s market, where there is an abundance of inventory and less competition among buyers. It can also be a fitting strategy for distressed properties or homes that visibly require significant repairs or updates. Properties that have been listed for an extended period, indicating a potentially motivated seller, also present an opportune moment for a lower bid.

To enhance the credibility of a lowball offer, buyers should be prepared to justify their proposed price with concrete data. This justification can include recent comparable sales that support a lower valuation, or detailed estimates for necessary repairs. Presenting such information helps the seller understand the rationale behind the offer, making it less likely to be dismissed as arbitrary.

Buyers must also be aware of the potential consequences of making a lowball offer. There is a risk of alienating the seller, which could lead to a refusal to negotiate or a missed opportunity if other offers emerge. To mitigate this, buyers can present a strong overall offer by having pre-approved financing, offering a higher earnest money deposit, or minimizing contingencies where feasible. Presenting the offer professionally through a real estate agent can also help ensure it is taken seriously.