Lowball offer on a home

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welldone
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Re: Lowball offer on a home

Post by welldone » Mon Jan 08, 2018 11:40 pm

I think lowballing your offer will not get you the result you are hoping for. When we last sold a house (and we were not in any way sentimental about the house being sold) we received an offer that was substantially below our asking price ($100K) and the reason given was that the potential buyers wanted to finish the basement and redo the kitchen which they wanted to deduct from the cost of the house purchase. A house down the the street from us had sold for $10k above our asking price (ours was larger, but the other one had a finished basement - their kitchen wasn't renovated).

Needless to say, we did not accept the offer and refused to counter. They came back with a slightly better offer which we again didn't accept in large part due to the fact that it was clear to us that these buyers would be a pain in the neck and we didn't want to deal with a 'nickel and dime' situation through the selling process. We also thought that anyone trying to take almost 25% off the cost of a house really couldn't afford the house they wanted. Again, not something we wanted to deal with. It seemed like the buyers had champagne taste with a beer budget.

We took the house off the market (it was late fall/early winter when we put it on the market), spent less than $5k repainting some rooms and replacing the kitchen counters and put it back on 3 months at a $10K higher list price than our first attempt. It was on the market for literally less than a day and we received an all cash offer at full list price. Even factoring in having to cover the mortgage for the additional time - we obviously did a lot better than the first offer. And it was an easy, pain free process with our buyer - closed in less than 30 days.

It is not just the money that will be an issue, it is what your offer says about you as someone with whom to enter into a large financial transaction. I wouldn't want to deal with someone who wanted me to bear the cost of their remodeling choices. And I would think a person who had that thought at the beginning of the process would be an absolute disaster to negotiate with when it came to inspection and such.

itstoomuch
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Re: Lowball offer on a home

Post by itstoomuch » Mon Jan 08, 2018 11:45 pm

^ that is close experience on last week's closing. But ours was bare land.
One bidder was more interested and kept at it. And we came into an agreement
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Erwin007
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Re: Lowball offer on a home

Post by Erwin007 » Tue Jan 09, 2018 1:03 am

I think if you want to make a lowball offer then you should do it. As long as you aren’t really attached to the house (which sounds like you might be), then who cares if they reject it? There will be more houses to offer on. What you can’t do is then come back with an increased offer after they’ve rejected your first and not countered because then they know you really want the house and you are no longer in a good bargaining position.

I also agree with an earlier poster who said some of the things you think “need” to be changed or renovated are actually things you just don’t like (shingle siding instead of vinyl, for example). No reason a seller should have to discount their price for your preferences.

Keep us posted on how it goes.

2comma
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Re: Lowball offer on a home

Post by 2comma » Tue Jan 09, 2018 2:16 am

Sounds like you have a good idea of what the house is worth and you are not emotional about it. If they aren't interested in a fair price so be it. There really will be other fish in the sea, they have the product but you have the money. I think I am rational about home buying and was helping my girlfriend, now wife buy and I told her the house is overpriced, as much as we liked it. We gave the exuberant seller a little more than we wanted to give (because we'll be here a long time and I don't want to loose the house over a few thousand) but said that was final. The agent said they had passed. Fine. A few days later agent called back and said they had accepted. Never pays to fall in love with the perfect house. We've been here a long time and the little extra just doesn't matter in the scheme of things but if they want a primo price for something that is obviously sub-par just walk away.
If I am stupid I will pay.

carolinaman
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Re: Lowball offer on a home

Post by carolinaman » Tue Jan 09, 2018 7:36 am

adamthesmythe wrote:
Mon Jan 08, 2018 6:25 pm
> I figure it would take $100k to bring this up to the equivalent house 2 doors down

Then you should buy the house 2 doors down, right?

My guess is...you make the lowball offer...they reject it angrily...and you get to move on to find something closer to your desires.
Agreed. Usually outlandish offers are rejected rather than countered.

You seem to be looking at this home like HGTV remodels. If home is that far off from what you want, perhaps best option is finding something closer to what you want rather than doing a major remodel.

pennywise
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Re: Lowball offer on a home

Post by pennywise » Tue Jan 09, 2018 7:55 am

Jags4186 wrote:
Mon Jan 08, 2018 7:29 pm

Correct that is true. However, regardless of what we need vs. what we want I am comparing it to what other houses in the neighborhood have and the prices they’ve sold for. They have renovated kitchens. They have their back “sun room” winterized into a real 4 season den. They have central air. They have vinyl siding. They have good finishings. This house doesn’t have that so I need to discount it to make it truly comparable.
I think what you are disregarding is that real estate prices do not track on exactly what another house sold for with X, Y or Z done or not done. There are a lot of factors involved; if the area is 'hot' ie has strong value due to good schools, good location, good stable prices etc. the cost of the house won't necessarily be discounted by the amount it takes to fix old or outdated features. That may not be what you want to hear but it's nevertheless true.

So offering some price with a discount that factors in everything YOU want to spend on the house may or may not get you the place. You can try but if the reality is that houses usually sell for X it's highly unlikely that someone is going to sell it to you for X minus your hope of a discount. That's simply realty 101.

We experienced this last year searching for a vacation/retirement home in an area with high real estate values. We looked at 14 houses and I kept track of the asking v. the sale price of each. In every case the final sales price of the house was within a similar range and that held true for homes that had been meticulously updated as well as ones that were shown in all their cluttered original-condition glory. The value is the value so to speak and the market doesn't really care what you think should be knocked off the price. If you don't make an offer at market value someone else will.

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Smorgasbord
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Re: Lowball offer on a home

Post by Smorgasbord » Tue Jan 09, 2018 10:33 am

Jags4186 wrote:
Mon Jan 08, 2018 5:21 pm
My wife and I saw a 3br/1.5ba house in a spectacular neighborhood the other day that we liked and are interested in making an offer. It is currently listed for $529,000 and all of the comps in the area have sold between $480k and $530k in the last year. A house two doors down sold for $525,000. The catch is this house needs a ton of work...How much would you discount your offer? The full $100k of the two door house next door? Offer $425k? Would you offer even less to compensate for actually having to do the work? Or would you simply pass on this home? It is a hot hot market but we’re not pressured to buy at the moment other than the fact that we want to buy a home.
From your description, it sounds like you are arriving at an offer price by using a $525k house as a base and then deducting $100k based on mostly cosmetic issues (except the furnace) that you don't like. My suggestion would be to compare your target house, in its current condition, to houses that are listed in the $450k range. If you can truthfully say that the $450k houses are more desirable than your target house, then go forward with the low ball offer.

p0nyboy
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Re: Lowball offer on a home

Post by p0nyboy » Tue Jan 09, 2018 10:38 am

If it really does need $100k in renovations I would pass. Do you really want to be in a home that is under severe construction? Also...unless you actually know what you're talking about you really have no idea how much its going to cost to update everything you want. If you think its $100k then add another $30k on top of that.

Most people have no idea the amount of work it takes to do what seems like a simple task. Take those doors you want for example. Its not just a door...what kind of wood was used to frame the door? Most people rip out the old dated crap and put new in. Gotta get it framed properly/painted. Molding around doors...need painted...then nailed in, then puttied/sanded and painted again. Good idea to hang the door now.
You want a door knob on it...ever see someone drill out where the door knob goes...then drill where the striker plate goes and use a chisel. Of course not...no one has cause they hire someone to do it. Theres a LOT of work to hang a single new door from star to finish. People watch those home improvement shows where 30 people are on site and they can knock out a house in 3 weeks. Thats not the real world. And lets not forget...finding a good reliable contractor is a crap shoot.

Im lucky...my father is a master craftsman...been doing it for 30+ years. He can do anything that involves wood but he wont touch plumbing or electrical unless its ultra basic...like hanging a light. Too much liability. Ill say it again...most people cant even fathom what it takes to renovate something...ive helped him throughout the years and we're currently renovating an entire upstairs at my house.

Also for your hvac...I too had duct work in place. Unit was too small for entire house so we left the downstairs as is and installed a 2nd handler in the attic...nice to regulate temps on each floor. Anyway...my fathers friend installed it...his labor was around $500 which was dirt cheap...and everything still cost $5500. Figure on $10k-$12k for your hvac. My guess is the duct they use is garbage with a low rating...so its not efficient. It'll need replaced unless you're willing to cut corners.

Are you handy and do you plan on doing a lot of the work yourself? If you answer no then absolutely skip it. Wait until a much more up to date home goes on sale in a neighborhood you like. Homes are constantly being listed...just be patient.
Last edited by p0nyboy on Tue Jan 09, 2018 10:55 am, edited 2 times in total.

barnaclebob
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Re: Lowball offer on a home

Post by barnaclebob » Tue Jan 09, 2018 10:52 am

Smorgasbord wrote:
Tue Jan 09, 2018 10:33 am
From your description, it sounds like you are arriving at an offer price by using a $525k house as a base and then deducting $100k based on mostly cosmetic issues (except the furnace) that you don't like. My suggestion would be to compare your target house, in its current condition, to houses that are listed in the $450k range. If you can truthfully say that the $450k houses are more desirable than your target house, then go forward with the low ball offer.
I think this is the best advice. On the other hand there is really no harm in lowballing if losing the house is no big deal.

Carefreeap
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Re: Lowball offer on a home

Post by Carefreeap » Tue Jan 09, 2018 10:58 am

Jags4186 wrote:
Mon Jan 08, 2018 8:27 pm
Perhaps I shouldn’t use the term “lowball”. I should retitle the article “making realistic offer on overpriced home”.

Just some information:

House sold for $335,000 in 2001. Sold for $460,000 in 2004. Was listed for sale on 11/17 for $569,000. It was then dropped to $519,000. Taken off MLS then relisted a few days ago at $529,000.

Hope this gives a little clarity.
Lol, "realistic" to you "lowball" to the seller.

If you like the house then make your offer. If they reject or counter with an unrealistic price wait 30 days and try again.

Back when I was putting myself through college by selling real estate in the early 1980s, I sold a lot of houses that way. :wink:

Jags4186
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Re: Lowball offer on a home

Post by Jags4186 » Tue Jan 09, 2018 11:01 am

barnaclebob wrote:
Tue Jan 09, 2018 10:52 am
Smorgasbord wrote:
Tue Jan 09, 2018 10:33 am
From your description, it sounds like you are arriving at an offer price by using a $525k house as a base and then deducting $100k based on mostly cosmetic issues (except the furnace) that you don't like. My suggestion would be to compare your target house, in its current condition, to houses that are listed in the $450k range. If you can truthfully say that the $450k houses are more desirable than your target house, then go forward with the low ball offer.
I think this is the best advice. On the other hand there is really no harm in lowballing if losing the house is no big deal.
This is the type of information I was looking for. Thank you. The house is only the right house if the price is right. It is not worth $529k + the cost of improvements I want to make...to me personally. Perhaps to someone else though!

Helo80
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Re: Lowball offer on a home

Post by Helo80 » Tue Jan 09, 2018 8:13 pm

Jags4186 wrote:
Mon Jan 08, 2018 5:21 pm
My wife and I saw a 3br/1.5ba house in a spectacular neighborhood the other day that we liked and are interested in making an offer. It is currently listed for $529,000 and all of the comps in the area have sold between $480k and $530k in the last year. A house two doors down sold for $525,000.


Honestly, your best bet is to sit and wait for a comp that requires significantly less work to come online that will meet your needs. I can say this as I have been in your shoes for the last 4 months or so. I had the benefit that I was under zero time frame and that helped a lot.

Helo80
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Re: Lowball offer on a home

Post by Helo80 » Tue Jan 09, 2018 8:19 pm

Jags4186 wrote:
Tue Jan 09, 2018 11:01 am
This is the type of information I was looking for. Thank you. The house is only the right house if the price is right. It is not worth $529k + the cost of improvements I want to make...to me personally. Perhaps to someone else though!

This. x100

Sounds like you have the right attitude --- just sit it out and wait for something better to come online that requires less work. Like I said, I was in your shoes for the last quarter of 2017 and I saw several places that could have used 10-40% of the asking price in TLC and updates to make it okay.

quantAndHold
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Re: Lowball offer on a home

Post by quantAndHold » Tue Jan 09, 2018 9:04 pm

The house down the street... was it all fixed up when it sold, or did the fixing up come later?

It’s a hot market? Is it possible that the market has moved up since the house down the street sold?

Regardless, I think you’re sunk simply because you’re trying to buy the house for less than the seller needs to get to get out of his own bad deal. Make your offer if you want, but don’t expect it to go anywhere.

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Lancelot
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Re: Lowball offer on a home

Post by Lancelot » Tue Jan 09, 2018 9:43 pm

I've made some very low ball offers; some times the seller doesn't respond and some times they do. If they respond, then you know they are at least open to negotiation (depending on the counter offer.) Of course low ball offers are not very successful during sellers markets or in a particularly hot market area. My advice is to do your home work -which it seems the OP has- and objectively explain your justification for your offer in the offer.

Good luck!
No Where for Very Long...

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Watty
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Re: Lowball offer on a home

Post by Watty » Tue Jan 09, 2018 10:02 pm

One risk is that a lowball offer often comes with no contingencies to make it look a bit tempting.

If the seller knows of some major problem they may be more tempted to accept it and you could be stuck with a big problem.

Another is that if you are working with a real estate agent then they may decide that you are wasting their time and drop you.

Please give an update on what happens.

Jags4186
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Re: Lowball offer on a home

Post by Jags4186 » Wed Jan 10, 2018 9:28 am

Watty wrote:
Tue Jan 09, 2018 10:02 pm
One risk is that a lowball offer often comes with no contingencies to make it look a bit tempting.

If the seller knows of some major problem they may be more tempted to accept it and you could be stuck with a big problem.

Another is that if you are working with a real estate agent then they may decide that you are wasting their time and drop you.

Please give an update on what happens.
We decided to pass and not offer. I think the reality of doing that much work hit us last night—regardless of the price.

Liberty1100
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Re: Lowball offer on a home

Post by Liberty1100 » Wed Jan 10, 2018 9:38 am

I would give that "low ball" offer that would cover 90% of the work that is to be done. If they ignore the offer (they get offended), then move on or offer a little bit more. If they realize that the house is way overpriced, they might counter and start splitting the difference.

In most places, agents must present every offer to their seller no matter how low is may be, so if the agents don't, threaten their license.

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Re: Lowball offer on a home

Post by LarryAllen » Wed Jan 10, 2018 9:55 am

I'd wait a month or two and offer $400k cash 10 day close.

pshonore
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Re: Lowball offer on a home

Post by pshonore » Wed Jan 10, 2018 9:58 am

Liberty1100 wrote:
Wed Jan 10, 2018 9:38 am
I would give that "low ball" offer that would cover 90% of the work that is to be done. If they ignore the offer (they get offended), then move on or offer a little bit more. If they realize that the house is way overpriced, they might counter and start splitting the difference.

In most places, agents must present every offer to their seller no matter how low is may be, so if the agents don't, threaten their license.
I guess my question is why would a seller lower his price drastically to accept a price reflecting the buyers personal tastes. As an example, tearing off the shingle siding and applying vinyl. That is an expensive proposition and in my opinion, gains nothing, and doesn't effect the value of the house one bit. But you're right the offer should be presented. When I was an agent I would not hesitate to present a low ball offer. (unless it was new construction where that was just not done).
Last edited by pshonore on Wed Jan 10, 2018 10:10 am, edited 1 time in total.

RudyS
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Re: Lowball offer on a home

Post by RudyS » Wed Jan 10, 2018 10:02 am

LarryAllen wrote:
Wed Jan 10, 2018 9:55 am
I'd wait a month or two and offer $400k cash 10 day close.
with an inspection contingency?

fastrock
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Re: Lowball offer on a home

Post by fastrock » Wed Jan 10, 2018 10:47 am

adamthesmythe wrote:
Mon Jan 08, 2018 6:25 pm
> I figure it would take $100k to bring this up to the equivalent house 2 doors down

Then you should buy the house 2 doors down, right?

My guess is...you make the lowball offer...they reject it angrily...and you get to move on to find something closer to your desires.
Anytime I lowball an offer, I always include that "this is nothing personal, that this is just business", list all the work you will be doing to move in. Also don't count on your agent to do this properly. I'd write it up as an addendum and attach to top of offer.

Nowizard
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Re: Lowball offer on a home

Post by Nowizard » Wed Jan 10, 2018 11:17 am

There may be differences among people, but the only thing that ultimately matters is how much you want the house, can you afford it and are you being overly emotional in your attraction to it. A home is a centerpiece in one's life and its importance is not limited to pragmatic aspects when considering a purchase, though they are significant. Simply put, what is it worth to you? Figure that out and make an offer, then move in or move on to another possibility.

Tim

michaeljc70
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Re: Lowball offer on a home

Post by michaeljc70 » Wed Jan 10, 2018 11:54 am

I don't see an issue with low balling an offer. However, if you have no estimates and haven't done this kind of thing (major remodel) before, it seems pretty risky. What if it really is going to be $150k to do the things you want to? How are you going to live through the remodel or is the house going to sit empty (which is an additional cost)?

As someone else pointed out, everything costs more to redo than you think.

goodlifer
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Re: Lowball offer on a home

Post by goodlifer » Wed Jan 10, 2018 12:54 pm

I think it is best that you decided to pass on the home, but in case you come across this problem again...

If you are not using your own realtor, point it out to the seller. Not having to pay a commission goes a long way. Include a large chunk of earnest money to show that you are serious and not just bottom feeding. Get pre-approval for a mortgage and not just pre-qualified. If you are willing, state that you are willing to consider seller financing (even if you are pre-approved). If the sellers are downsizing and have the money they need, this might be interesting to them. Write a contract contingent on major problems only, perhaps costing $10,000 and above. That way, they can be confident that you will not nickel and dime them at the last minute. Really consider what actually needs to be remodeled and what just isn't to your tastes. Chipped formica counter tops need to be replaced. Quartz in good condition when you really expect granite is not a necessity. We received an offer that fell apart because the "inspector" noted that the 5 year old roof needed to be replaced, when the buyers really just wanted a different color. We didn't want to deal with jerks that would undoubtedly cause trouble during and probably after the sale. And when you point out what needs to be replaced, be tactful about it. Don't say that their house is woefully out of date and unlivable. Say something like, "Recent comps in the same price range have updated appliances and new flooring".

Good luck next time.

randomguy
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Re: Lowball offer on a home

Post by randomguy » Wed Jan 10, 2018 1:35 pm

michaeljc70 wrote:
Wed Jan 10, 2018 11:54 am
I don't see an issue with low balling an offer.
There is a difference between a low ball offer and one that has almost zero chance of being accepted. Getting something like 10% (50k) is in the realm of possiblity. Getting 20%(100k) isn't in most normal cases. Even if that is actually the right price and the seller is delusional, pretty much every seller is going to want to reduce the price to 499, 475, 450 and go through prime selling season before accepting that 425 is the real value You can make the offer but it is pretty much a waste of time.

If you go down the list of things, a lot of them are nonissues. A 12 year old roof has 18+ years of life in it. Turning a sun room into a fully weatherized space is an improvement not a repair. Same with siding. Same thing with replacing interior doors (i bet they all work), sanding floors, and knocking down walls. As other people have said expecting the sellers to pay for your personal tastes isn't a very realistic expectation.

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Re: Lowball offer on a home

Post by michaeljc70 » Wed Jan 10, 2018 2:04 pm

randomguy wrote:
Wed Jan 10, 2018 1:35 pm
michaeljc70 wrote:
Wed Jan 10, 2018 11:54 am
I don't see an issue with low balling an offer.
There is a difference between a low ball offer and one that has almost zero chance of being accepted. Getting something like 10% (50k) is in the realm of possiblity. Getting 20%(100k) isn't in most normal cases. Even if that is actually the right price and the seller is delusional, pretty much every seller is going to want to reduce the price to 499, 475, 450 and go through prime selling season before accepting that 425 is the real value You can make the offer but it is pretty much a waste of time.

If you go down the list of things, a lot of them are nonissues. A 12 year old roof has 18+ years of life in it. Turning a sun room into a fully weatherized space is an improvement not a repair. Same with siding. Same thing with replacing interior doors (i bet they all work), sanding floors, and knocking down walls. As other people have said expecting the sellers to pay for your personal tastes isn't a very realistic expectation.
I got 16% off my current place and it was on the market less than 2 weeks. I showed them the comps, they accepted it. I refused to counter any of their counter offers. It just depends. If the seller is going to be offended and refuse to deal with you due to a lowball, then they are probably being silly.

It is true the seller doesn't care how much you are going to put into the house to make it the way you want. It isn't clear to me if the bathrooms are just ugly, not their taste, non-functional, etc. This sounds mostly like cosmetics and maybe the seller can find a buyer that likes the bathrooms and kitchen and therefore is not willing to budge much. Also, some people put properties on the market to just to test the waters and are not motivated at all. It is a guessing game so I don't think there is harm in a lowball.

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monkey_business
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Re: Lowball offer on a home

Post by monkey_business » Wed Jan 10, 2018 2:38 pm

I think it's also a matter of whether the upgrades are truly necessary, or more of a preference. For example, is the kitchen in awful shape and clearly needs to be remodeled? Or, is the kitchen fine but has an outdated look to it?

It's one thing if the house clearly *needs* work, and another if maybe it's not as up-to-date as it should be given the area, and is actually in decent shape.

michaeljc70
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Re: Lowball offer on a home

Post by michaeljc70 » Wed Jan 10, 2018 2:51 pm

monkey_business wrote:
Wed Jan 10, 2018 2:38 pm
I think it's also a matter of whether the upgrades are truly necessary, or more of a preference. For example, is the kitchen in awful shape and clearly needs to be remodeled? Or, is the kitchen fine but has an outdated look to it?

It's one thing if the house clearly *needs* work, and another if maybe it's not as up-to-date as it should be given the area, and is actually in decent shape.
Exactly. The OP said it looked like they hadn't done anything since 2004. I've seen houses that looked like they hadn't done anything since 1964.

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jfn111
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Re: Lowball offer on a home

Post by jfn111 » Wed Jan 10, 2018 3:01 pm

There is nothing wrong with "low ball offers" if there is validity to the offer. A seller can ask anything for a house but that doesn't mean they will get their price. I run comps for my clients and we come up with a reasonable offer and present it. If it happens to be 20% less than the asking price, so be it.
I have also dropped clients that were professional low ballers. The ones that dragged me around looking at houses and then wanting to make ridiculous offers on appropriately priced houses. (It's their right to make the offers but I don't have to continue wasting my time).

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Re: Lowball offer on a home

Post by LarryAllen » Wed Jan 10, 2018 5:58 pm

RudyS wrote:
Wed Jan 10, 2018 10:02 am
LarryAllen wrote:
Wed Jan 10, 2018 9:55 am
I'd wait a month or two and offer $400k cash 10 day close.
with an inspection contingency?
Of course. 72 hours or some short window.

randomguy
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Re: Lowball offer on a home

Post by randomguy » Wed Jan 10, 2018 7:00 pm

michaeljc70 wrote:
Wed Jan 10, 2018 2:04 pm

I got 16% off my current place and it was on the market less than 2 weeks. I showed them the comps, they accepted it. I refused to counter any of their counter offers. It just depends. If the seller is going to be offended and refuse to deal with you due to a lowball, then they are probably being silly.
It helps if the comps support your case. When the comps suggest the house is fairly priced, no so much😁 desperate sellers also helps,😁

The couple times I have sold a house, I always countered with MSRP with the couple of low ball offers I got. I figure there is no point neogiating against myself.

Lauren Vignec
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Re: Lowball offer on a home

Post by Lauren Vignec » Wed Jan 10, 2018 8:12 pm

Jags4186 wrote:
Wed Jan 10, 2018 9:28 am
Watty wrote:
Tue Jan 09, 2018 10:02 pm
One risk is that a lowball offer often comes with no contingencies to make it look a bit tempting.

If the seller knows of some major problem they may be more tempted to accept it and you could be stuck with a big problem.

Another is that if you are working with a real estate agent then they may decide that you are wasting their time and drop you.

Please give an update on what happens.
We decided to pass and not offer. I think the reality of doing that much work hit us last night—regardless of the price.
If you just don't want to do the work, then, yes, passing on the house is the right option.

I will say from personal experience, though, that if a house has been on the market, and its price has already been cut, it is a great idea to offer exactly what you think the house is worth. You might be surprised at the offer a seller will accept when they really want to move and they literally haven't had any offers at all (lowball or otherwise.)

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