It is important for agents to understand one thing: a lowball offer doesn’t eliminate a respective buyer. At the very least, real estate agents should view lowball offers as viable leads, given the degree of interest, it takes to submit an offer in the first place.
The agents who can turn a lowball offer into one that benefits both parties will certainly become a hot commodity. Perhaps even more importantly, there is no reason every agent shouldn’t be able to turn their worst offers into lucrative sales.
Let’s examine just how to turn those offers that are less than encouraging into deals everyone can get excited about.
Remain calm and collectedIt is important to note that a lowball offer is not necessarily a pre-emptive attempt to take advantage of a seller. Although there are certainly buyers who will purposefully undervalue a property for obvious reasons, it isn’t fair to automatically assume everyone is doing so out of their own greed.
Instead, many lowball offers might be more indicative of first-time homebuyers than anything else. They might not even know the degree in which they are lowballing your initial asking price.
Either way, agents are advised to give prospective buyers the benefit of the doubt, as there is no way of knowing their immediate intentions.
Defaulting to a defensive position will make negotiations much more difficult, given the likely direction any impending talks will head.
The best agents will remain calm and collected in the face of even the most insulting offers; they are more than aware that any offer represents an inherent degree of interest.
As a result, they will increase their chances of building a working rapport with interested buyers. No other way has more potential to build a relationship out of essentially nothing. What’s more, it is that relationship will give you the best odds of negotiating a better offer.
The importance of maintaining a level head in the face of a lowball offer is only magnified when you consider the alternative. If for nothing else, the more people who want to work with you, the more likely you are to close on a deal.
Any attempt to call out a potential buyer’s offer will only lead to resentment and can very easily cost you an interested client.
Respond in a calculated mannerAt the risk of sounding cliche, real estate is a people business; every transaction requires the cooperation of at least two independent parties.
Not surprisingly, each party must learn to work together if they ever hope to complete a transaction. However, it is important to note that, as an agent, you can’t expect people to work together inherently.
Both sides of a transaction are typically working to make it come out in their favor. More often than not, buyers will want to drive down the price, and for good reason, but how you respond to their initial offer can be very telling in the right circumstances.
You must be proactive in your attempt to establish a working rapport with buyers, even if they did just insult you with their first offer.
Instead of responding brashly, I encourage you to take a more calculated approach. Although a lowball offer can hurt, and it is more often insulting than not, there is no reason for you to express your sentiment.
A little gratitude — even if you are less than excited about the last offer — can go a long way in any transaction.
“It doesn’t do you any good to let the buyer know that you think their offer is rubbish,” said Kimberly Sands, a broker at Coldwell Banker Advantage in Apex, North Carolina.
Indeed, responding in a negative tone can potentially kill the deal for good. “It sounds like common sense — don’t piss off the buyer — but many sellers get caught up in their emotions,” said Sands.
The manner in which you respond to a lowball offer will set the table for the rest of the negotiations.
The last thing you want to do is start off on the wrong foot, so be sure to express your gratitude that someone has shown interest in the property you are trying to sell; only then will you be able to move the needle on their next offer.
Provided you have done your homework and are confident that the home is priced well, there is no reason you shouldn’t counteroffer at a price you are comfortable with.
In other words, now is not the time to pressure yourself into drastically slashing your asking price. Remember, you already priced the home at a point you previously deemed a fair market value; now is not the time to question your diligence.
I am convinced that the most common mistake people make when countering is settling on too low of an asking price.
“Some people feel so eager to sell their home that their counteroffer is actually too low,” said Sands. Although you will be expected to give up some ground, do not immediately assume your next offer should split the difference.
You are only hurting yourself if you don’t initiate your negotiations with a slight reduction. Somewhere in the neighborhood of $5,000 to $10,000 should suffice for a $300,000 home.
It is important to note, however, that you should be prepared to defend your claim. Run through the data you collected to come up with your initial asking price, and use comparables to defend its current price point.
It’s also a good idea to highlight some of the home’s sizzle features at this point. Convince them that they are getting the home at a great price.
Don’t be surprised if they counterNot surprisingly, negotiations typically involve a little back-and-forth haggling. It shouldn’t surprise any agent to have their counteroffers, well, countered.
However, those expecting a counteroffer to their initial reduction will have a slight advantage over the other party. If for nothing else, understanding that negotiations will go back and forth — at least a couple of times — will play a role in the very first counter.
Agents armed with this knowledge will temper their first reduction, knowing full-well that a subsequent price drop is on the horizon. In predicting a counteroffer to your first reduction, you can essentially limit your losses.
“When a buyer comes in with a lowball offer, the buyer and seller might go back and forth for a while before both parties agree on a sale price,” said Sands.
Instead of countering with a significant drop, reduce your price and know that it is likely to go down again. Reducing your initial drop will save money, yet still allow for some wiggle room.
Although price has become synonymous with the most important aspect of selling a home, it is by no means the end-all-be-all. There are other incentives to simultaneously maintain the attention of buyers without actually dropping the price.
Selling a property is a complicated process, and the best agents are well aware of subsequent measures to contribute to their cause. Outside of the price, real estate agents are entitled to negotiate attractive terms, which can be more valuable than capital to many buyers depending on their circumstances.
It is not out of the realm of possibility to expect a buyer to accept a higher asking price if the agent negotiates terms that, more or less, appeal to their specific needs.
For instance, if a buyer needs to close on a home fast, they might be willing to pay more if the seller agrees to have the home sold by a specific date.
It’s important to understand that the cost of the property is not the only thing that can be negotiated. Savvy agents will uncover the needs of interested buyers and find out what is really important to them.
You can’t truly turn a lowball offer into a great sale unless you know the needs of the buyer. Nothing else has the power to sell a home for more than negotiating terms; they can simultaneously make a property more attractive to a buyer while maintaining the price point sellers covet.
Although even the best agents will be confronted with lowball offers, those that are prepared to handle them are more than capable of negotiating a deal that every party is comfortable with.
Than Merrill is the founder and CEO of FortuneBuilders and CT Homes. Connect with Than on LinkedIn or follow him on Twitter @ThanMerrill.