Lowballing Offers

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fk123_IHB

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From personal or hearsay experience, what are typical lowball offers? Is -100k below asking price the norm? Lower/higher?
 
Geez, I've known people to low ball more than 300K on 1.4 mil new houses recently. LOL. (And the final prices were pretty close to what they were asking for)
 
<p>So say you are aiming for -25% of retail price.</p>

<p>Now that is the final selling price, or a combination of price reduction, credit, and "upgrades?"</p>

<p>Also, typically what percentage of the reduction would each take? I assume the builder would rather offer credit and upgrades rather than an overt reduction.</p>
 
sweet. while i dream of the day i can offer 50% less without being laughed at, 15-25% is quite a big chunk already.





so that's like offering 800000 on a one million home


or 400000 on a 500000 home





not great, but it's alot easier on peace of mind!
 
<p>Re: IIIrvine's comment -</p>

<p>How do you get burned? The worst they can say is 'no,' then you know they are not willing to go that low and you restart at a different price.</p>

<p>Of course if you lowball too low then they are just going to turn off and discount you, but I have a feeling what fk is asking is what is a reasonable % off to lowball without pissing off the salespeople.</p>
 
Fraychielle: I was not referring to the process of making an offer. If, however, you had actually made a "low ball" offer, say...25% off the asking price of a $1MM home, thinking that it is a good deal but in reality, the house was worth even less than that, and you go through with the sale because you thought you were getting a good deal. Whereelse on this board someone made a comment that some of the resales were overpriced by about $300,000-$400,000. Additionally, I have seen new homes have been dropping price by $100,000+ at a time over a short span of a few months. Is your "low ball" offer enough to give the extra cushion you need to weather the downturn? Some housing bears are predicting a price correction of 25%, may be even 50%, off the current market.





My take is ... when you start seeing a 1,600 sq. ft. POS (townhouse) built circa 1980 where I am renting selling for $650-$700,000, you know it's a bubble. I wouldn't even pay more than half that. Yet, brand new THs in VOC (arguably better) for the same square footage, for example, Savannah, are selling for $600,000 (assuming no financial incentives, free upgrades, free HOA for a year, or price concession). So, unless you know your market, you can get burned.
 
thanks to both IIIIIIIrvine and Fray for the responses. I was more looking for a more market-independent response. However, IIIIIIIrvine's warning to all of us should ring true, I think we all freak out after we make an offer and keep secondguessing whether it was too much or whether the house is worth it.





But.....when making (as a buyer) and reviewing (as a seller) offers, we do need to be mindful of the human nature. I mean, yes, in today's market, all properties are 30%+ overpriced. And while I would LOVE to offer that or even lower, you should be mindful of 1) the seller's sentimental attachment and value of their home and 2) the agent's reputation (they'll be known as the one that offers "silly" numbers). (NOTE: we could get into a whole debate that sellers and agents are scum and we don't give a crap about their feelings, but lets just assume for the moment that they're just regular humans).





As I told IRVINEEEEEEEEEEE (are you guys related? j/k) before, I'm renting because this market is just too wild.
 
fk123 - No Irvineeeee and I are not related, although I must admit I was inspired by his pen name





I am renting too, but if I see something I like and at my "price", I am ready to buy, despite what hbunny may think.
 
<p>If I was looking at a new home (single family detached) in the mid-900 range, let's say 950K what would be a reasonable offer in your opinion (everyone participating in this blog - true housing bears and shills alike)?</p>

<p> </p>

<p>I was thinking I'd be happy offering 900K (as an 20% down buyer with an 800+ credit score) and asking for 25K in upgrades... although I realize this is still overpriced... I am slowly getting to the point where I will need to buy...</p>

<p>thoughts?</p>
 
GrewUpInIrvine - you are a dream customer. There aren't too many 800 FICO buyers willing to pay so close to the sticker price. To me, a lowball offer would mean $750, a reasonable offer $800. I think I've seen a pattern of dropping prices by $100,000 by many of these tracts so that $50 off $950 will not give you the cushion you need to weather a downturn.
 
We looked at a Lennar home at VOC that was finished, but unpurchased from older phase. They were asking $850K, and we were thinking it over. They called us a few days later and I told the sales gal that as much as we liked the home, it was more than we were comfortable paying, especially given Mello-Roos, etc.. She asked what our range was, and I said $725K to $750K, and she didn't like that answer <em>at all.</em> She was nice about it, but asked what features we needed in a home and offered to call us should anything similar come up that was in our price range. She didn't offer to negotiate or even get into what our down payment (at least $250K) or credit score (among the highest) was. Had they been a little more flexible, I'd probably be landscaping the backyard right now. I've heard a number of commenters mention that HBs were negotiating, but that hasn't been my experience.
 
<p>EvaL-</p>

<p>Two things: You have to submit a full credit app so they can see your financial strength, and don't conduct those types of negotiations over the phone: do it in person.</p>

<p>Now, doing those doesn't assure that you'll get the property, but the HBs need to see that those with the means to pay still have price demands.</p>

<p>SCHB</p>
 
EvaL - So-called economists have been calling the capitulation of the real estate market and HBs responded by firming up their prices. I am not an economist, but I do believe that the market has quite a ways to go. I am betting that this spring through summer is the last ditch effort by HBs to work their contraction, and they are hoping that by putting the "predictions" out there, it may become a self-selfulfilling prophecy (pretty much the same way the bears have called for the real estate bubble burst). It by spring, the HBs are not able to sell through their spec homes (finished but unsold), they will have to reassess their marketing plan. I don't know what your time line is for buying a home, but I feel better bargains are just ahead if you wait.
 
Eval - I second socalhousingbubble's comments. Do your negotiating in person. Lennar straight up lied to my friend (who just bought a house in Westbourne (1+ mill) back in October about the prices of houses that closed then. People were getting steals back then. He asked in person, but they felt that he was just browsing and not a serious buyer. When he came back a few months later showing his intention to buy (submitting an offer on a house), Lennar leveled with him and told him those good October prices he inquired about were true - BUT they weren't giving those deals anymore because they were "wrapping up their financial quarter at the time."





Of course, these are > 1mil houses in Westbourne so they have a lot more margin to play around with.
 
The good news is that I'm not particularly heartbroken about it. And because we fully believe that prices will fall, we're improving the place we're in and making it more to our liking. I checked out of the rat race last year, and took a job within the same profession that is far more pleasant and requires fewer hours. Not being tied to an ungodly mortgage was key to making that change, as it involved about a 25% pay cut. Whenever I get tempted by a pretty new home, all I have to do is ask myself, "Would you go back to X, if it meant you could buy this house?" Every time, the answer is "No."





I appreciate the advice, though. When we do get to the point of feeling the need to move, your tips will come in handy, no doubt.





Now if things would just return to even 2003 prices, I'd be quite happy indeed.
 
<p><em>"I checked out of the rat race last year, and took a job within the same profession that is far more pleasant and requires fewer hours. Not being tied to an ungodly mortgage was key to making that change, as it involved about a 25% pay cut. Whenever I get tempted by a pretty new home, all I have to do is ask myself, "Would you go back to X, if it meant you could buy this house?" Every time, the answer is "No.""


</em><em></em></p>

<p>So true. My wife is planning on going part time to be at home more with the kids - especially as they get 'older' and the older one is about to go off to school ...</p>

<p>As it is we could easily afford 850k on a 30 year conventional jumbo ... if she went full time we'd be looking at Turtle Ridge ... BUT the kicker is</p>

<p>Why own a million+ home if you are busting your ass and not seeing your kids in order to own that home?!</p>

<p>Priorities ... and ours lies foremost with family and children. A mcmansion isn't worth missing your children grow up.</p>
 
<p>My thoughts on lowballing offers on NEW HOMES: Do Your Home Work by Checking out ALL the available COMPS in that track and similar track. This is the only way to do it. A deduction of a certain % from the asking price will not protect you fully. </p>

<p>Here are my suggested steps: </p>

<p>a. Go to the county recording office and find out how much all your neighbours paid for their house. This is public information. What you will be get is the Transfer Tax they paid on the purchase price. From Transfer Tax, you can calculate how much they paid for the house. Don't worry about how much of that is upgrades, etc. It is irrelevent. When it is time to sell, only the absolutely price will matter to any seller. Also, Comps are blind to what kind of upgrades you have put it. The only thing probably matters is VIEW. </p>

<p>b. Do a spreadsheet to list of your future neighbour's house with price. Then go to the track, drive around, figure out each houses's floor plan. </p>

<p>c. Sort your spreadsheet by floor plan. Then sort by closing date. You can probably see a trend. </p>

<p>d. By sorting, you probably will notice the lowest priced ones are the ones they sold last Dec just before year end closing if the builder is a publically traded company. I will low ball 10% to 15% from their lowest price, and go from there. Reason being: </p>

<p>i) there might be some interest buy down, or closing cost paid by the builder which won't reflect in the final purchase price. But that is not going to be more than 5% in total. There is a limit to how much one person can buy down the interest. </p>

<p>ii) I also believe the amount the discount the builders are willing to discount also depend on type and $ value of upgrades are included in the home. Certain upgrades are very very high margin, while other upgrades might not be too high a magin. For example, granite upgrades, flooring upgrades are marked up really really high, while, a jetted tub or wine celler upgrade might not be marked up too high ( too obvious). </p>

<p>iii) so a 10 to 15% lowball on the lowest comp in your neighbourhood should bring you to a price that is close to they might accept. If the market continue to slide, then I will lowball more. However, if you try to low ball 30% from the lowest, they just won't take you serious, which I believe will affect your ability to secure the best price. Remember, whatever you tell the sales person there, I believe they will tell everything to their regional sales manager when submitting your offer.</p>

<p>iiii) lastly, if you can get the house you want ( assuming you want a house to live, not use as an investment), and pay about 5% to 15% lower than anyone else in your neighbourhood, you shouldn't worry too much. At least you have a cusion. </p>

<p>iv) one warning on this practice: don't buy a house in a non desireable area regardless. Personally, I don't think it is a good idea to buy a home at VOC, especially at the Tustin side. </p>
 
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