Low-Ball Offer

Definition

A low-ball offer is an offer from a prospective property buyer that is much lower than the listing price. Such an offer may indicate the buyer’s belief that the property will not attract many good offers and that the asking price is unrealistic. It also suggests that the buyer is interested in the property only if it can be purchased at a bargain price.

Examples

Residential Example: A house listed at $500,000 receives a low-ball offer of $400,000. The buyer may perceive the home as overvalued, be aware of market conditions favoring buyers, or be testing the seller’s willingness to negotiate.
Commercial Example: A commercial building listed for $1,200,000 receives a low-ball offer of $850,000. The prospective buyer believes that there are few interested buyers and aims to negotiate a much lower purchase price.

Frequently Asked Questions

Q1: Is a low-ball offer considered disrespectful?

While a low-ball offer can be perceived as disrespectful by some sellers, it is also recognized as a strategic negotiation tactic in real estate.

Q2: How should sellers respond to a low-ball offer?

Sellers should stay calm, assess the offer seriously, and consider entering a counter-offer negotiation to bridge the gap between the listing price and the offer.

Q3: Can low-ball offers be counterproductive for buyers?

Yes, if the offer is too low, it could insult the seller and result in a flat rejection, thus closing off future negotiations.

Q4: Are low-ball offers common in certain markets?

Low-ball offers are more common in buyer’s markets where there is an excess of supply, giving buyers more leverage to negotiate lower prices.

Q5: What percentage lower than the asking price is considered a low-ball offer?

Typically, an offer 20% or more below the asking price is considered a low-ball offer.

Listing Price: The initial asking price set by the seller at which they intend to sell the property.
Buyer’s Market: A real estate market condition characterized by a surplus of properties and low buyer demand, resulting in lower property prices.
Negotiation: The process by which the buyer and seller discuss offers and counter-offers to reach a mutually acceptable agreement.
Counter-Offer: A response by the seller proposing a price that is different from the buyer’s offer, typically higher, aimed at reaching a compromise.
Market Value: The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller.

Online References

Suggested Books for Further Studies

“The Book on Negotiating Real Estate” by J Scott, Mark Ferguson, and Carol Scott: A comprehensive guide to mastering the art of negotiating real estate deals.
“Your First Home: The Proven Path to Home Ownership” by Gary Keller: Offers insights for those new to the process of buying a home.
“The Millionaire Real Estate Investor” by Gary Keller: Provides strategies and insights for real estate investing and navigating market offers.

Fundamentals of Low-Ball Offer: Real Estate Basics Quiz

### What is a low-ball offer? - [ ] An offer exactly matching the listing price. - [x] An offer significantly lower than the listing price. - [ ] An offer with attached conditions. - [ ] An offer based on a swift closing timeline. > **Explanation:** A low-ball offer is an offer that is significantly lower than the listing price. It often indicates that the buyer believes the property is overvalued or wants to purchase it at a bargain price. ### Why might a buyer submit a low-ball offer? - [x] They believe the property is overvalued. - [ ] They think the property market is highly competitive. - [ ] They want to meet the listing price. - [ ] They expect other high offers. > **Explanation:** Buyers typically submit low-ball offers when they believe the property is overvalued or they aim to secure a bargain deal. ### How might a seller respond to a low-ball offer? - [ ] Ignore the offer completely. - [ ] Instantly reject without consideration. - [x] Assess seriously and consider a counter-offer. - [ ] Accept outright. > **Explanation:** Sellers should assess the offer seriously and consider entering into a negotiation process with a counter-offer, rather than dismissing it outright. ### Low-ball offers are more common in which type of market? - [x] Buyer’s market - [ ] Seller’s market - [ ] Balanced market - [ ] Both balanced and seller's markets > **Explanation:** Low-ball offers are more common in a buyer’s market where an excess supply of properties gives buyers more negotiating leverage. ### What percentage below the asking price is usually considered a low-ball offer? - [ ] 5% - [ ] 10% - [x] 20% - [ ] 25% > **Explanation:** An offer that is 20% or more below the asking price is typically considered a low-ball offer. ### Which term refers to the seller's initial asking price? - [x] Listing Price - [ ] Market Value - [ ] Counter-Offer - [ ] Appraisal Value > **Explanation:** The listing price is the initial asking price set by the seller. ### What strategy can... - [x] Increase the likelihood of a seller accepting a low-ball offer? - [ ] Removal of contingencies - [ ] Offering a quick close - [x] Including an earnest money deposit - [ ] Making an as-is purchase - [ ] Offering seller motivations (relocations, economically burdensome) > **Explanation:** Strategies that can increase acceptance include: removal of contingencies, offering a quick close, including earnest money, making as-is purchases, or offering seller nostalgia-based upsides.

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