Wednesday, July 16, 2008

How much to Lowball in Virginia?

Somebody recently asked what % below list to offer if you wanted to lowball a place?

My answer:
Lowballs don't really work.

They sound all sexy and everyone around the water cooler might say "low ball the heck out of that house, this is a buyer's market!" Yeah sounds all great, but look at the stats. Have your agent pull some real MLS data for you.

Look at the last 100 homes in that area that have sold. I bet you only 1 or 2 have dropped 15% from the current asking price.

So mathematically you would have to offer on 50 properties before you landed a "lowball." They just don't work. So Redfin is smart to say "No Thanks" to those types of buyers that just don't "get it" yet. Perhaps with the notion that "once they 'get it'... they will be back."

And don't get fooled by the agents that WILL let you put in low balls. They are full of it. They know you won't win the contract. They are just hoping that you will get worn down and still use them (or get you locked into an exclusive contract).

I even know one agent that blogs about lowballing... but in reality he tells me it doesn't work, but it gets people to his site and he gets deals from it. (I hate that kinda stuff)

Now there is some debate as to what a lowball is. I actually don't consider offering 15% less on a property that is overpriced by 20% a lowball. In the building where I live there was a unit that was 20% overpriced. A FSBO. $100,000 overpriced. So would your offer that comes in 15% lower be a "low ball?"

I say no. I say you are overpaying by 5%. Highballing it! (that sounds like a drug reference)

It is rare (way overpricing), but it happens. Some agents, or sellers just completely miss the mark. There is a place like that right now in Alexandria. It is about $100,000 overpriced.

Guess what, I did a Frankly CRA, Comparative Realtor Analysis and saw the last 2 listings the agent closed $100k and $140k below list price. Coincidence? I think not.

So back to the example above, the 2 people that bought for 15% less. I bet you one of those was actually 15% overpriced, so they just got current market rates.

Bottom line is don't focus on % below list or you will miss the best values out there. Know your area's value and focus on VALUE!

Sometimes offering ABOVE list can get you a better "deal." Especially bank owned properties. I had to bid on 6 recently to get one. Ask me to offer 15% below on properties that sell for above list... yeah right.

Best of luck! ;-)

Frank Borges LL0SA

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