A tip for Negotiating - Practice making Low Ball Offers

Many years ago we were looking for a new PPOR ( Upper North Shore , Sydney )

Market was quiet so we weren't under any time pressure .

We went around making offers we could afford on properties we couldn't afford .

We were polite about it . We didn't denigrate the properties . We were apologetic about our offers

Our standard line was " we really like the property , we realize they expect more , but this is all we can afford " .

It was a great learning experience .

We saw how agents reacted to low ball offers , some were offended , some were quite practical . If they said they wouldn't pass it on ( A couple did ) I reminded them ( unless they has specific instructions not to ) they had a legal obligation to do so ( at least in NSW ).

We saw how we reacted to making a low offer to the point where we no longer worry about making one .

What was interesting was seeing how vendors reacted . Some were offended, some politely rejected it ( well at least that's what the agents said ) , some came back with counter offers that were SIGNIFICANTLY LOWER THAN THE ASKING PRICE . The reality is you ( and often the agent ) have no idea on the vendors real situation .

Because we had no real expectations on getting any of them we had no emotion attached and no problems with walking away without making another offer.

I have no idea if this happened , but I also wonder whether in a way whether it conditioned the agents that we didn't come back with further offers .

When we did buy our PPOR it was to an agent we had made one of these offers and our first offer was accepted ...

Cliff

 

Hi See Change, if you don't mind me asking how much was the listed price and how much did you get the property for?

 

Did you ever give more explanations for the low offers? Or just the one mentioned above?

With the intent of buying under value (as very often you hear this is where tge most is made) I have made numerous low ball offers in the past, but have never had any success and often a negative response from the agent. I often wonder if they even pass it on to the vendor.

Do you think this ever eroded relationships with agents?

 

That is the crux of the matter indeed. Been there twice with my first and second purchases.
The first in 2011, was an auction with a reserve of 720K (vendor bid). I didn't bid even though there was around 12 people in the room with plenty of interest. Was the last one standing after the auction finished and negotiated down to 650K. Pure luck to be honest and obviously a lot of patience... Vendor had to sell on the day as she was moving interstate.

Same story in 2014, didn't bid on my current PPOR and when everyone left, i made a low ball offer (an easy 30k under market ) and got the property as the vendor had to sell as she was moving.
Obviously , i could have lost both properties that way but, there are always plenty of opportunities out there. Always.

Great savings on buying price can be made with a bit of hard work, patience and with some luck

 

Most likely it would have to some agents. The other thing to remember is even if your offer is lower than they'd like,. If there is not much interest, most agents will (behind closed doors) try their best to sell your offer to their client, making it almost sound better than winning the lottery. At the end of the day the vast majority of agents just want the sale to close.

 

Agent's motives vary, sellers motives vary. If you don't make an offer in the first place, you don't get the deal. Over time you'll understand what works for you and how to best articulate your offers to reduce risk of offense. If you make a lot of low-ball offers it can be quite disheartening when you miss out on so many opportunities. So you need to be confident that you can overcome those mental challenges, be patient and play the long game.

 

We've played the waiting game and lowball offer. Watching the price drop until it reaches a palatable range, then drop in a lowball which would make you cry,

Conversely, not being under to pressure to have to sell to stem your losses means you can hang out and reject the lowballers to get the desired outcome.

It's all about willing buyer/willing seller.

 

What is classed as a low ball offer?
I've always read that offering 8% -10% lower than asking was not offensive.. But then is it 10% lower than the low/mid/high range of asking price?

 

Depends on the market too. Low balling in Sydney right now Vs low balling in Darwin would be 2 different animals....

 

What about Adelaide?

 

I think it depends on the property and how many others are interested. We offered on a potential Reno / flip prop last weekend and they didn’t bother countering as had 5 better offers.

On another you might be the the only offer so you have better odds there.

 

Very true

 

Close to 20 years ago , Sorry can't remember .

Cliff

 

Explanations ? Just the one above .

Response to low balls with come down to the market sector and what's the state of the market . Also personal confidence / presentation .

Relationship with agent ? Don't think so . If it did , it's their problem .

Cliff

 

As hammer says , it depends on the market .

One month Post GFC in Mosman we made an offer on two units . Asking price 1.275 ( for the two ) , contemplating low ball offer , no other buyers , we had cash . Wife thought no way they'd go below 1 mill .

I suggested 800 ... which after debate was the offer we made which is 37 % below asking price ..

They came back and said they wouldn't accept anything under 900 which we happily agreed to .

In any normal market in Mosman , making that sort of offer probably would be laughed at , but the agent knew the reality of the market at that time so didn't make any negative comments.

That is an extreme example for a prime residential area. It also does come down to knowing what is a realistic valuation.

Cliff

 

The vendor was probably under pressure of a market call and $900k today was better than nothing in three weeks time.

 

One thing I have noticed in Adelaide is how many properties are advertised best offer by......!

Went to an open for an upcoming auction, needs significant reno. Would guess around 40 people through while we were there ~15 mins

 

The market itself plays a huge role.

Sydney in 2016, 2018 and 2020 are very different beasts.

Everyone knows its easier to get low offers accepted in a bad market. But a bad market always looks like it will get worse. The hard part is buying while accepting that it might fall as soon as you buy it. The smart people would wait until it stops falling, but.......

 

Great idea which I have practiced on many occasions.

Got me a five bagger on one property in Mt Druitt.

Although, with some agents out there I found it necessary to wear a cup protector before making any low ball offer.

 

Here's another tip:

Offer even less when the agent is not from the area.