That’s Your Offer? Really!?!
“Pornography is hard to define . . . but I know it when I see it.”
–Supreme Court Justice Potter Stewart
No, there’s no scientific definition of a lowball offer, but like Potter Stewart, “I know one when I see one.”
In fact, unbeknownst to laymen, there are actually three types of lowball offers, not just one.
For the benefit of non-Realtors, here’s a lexicon of lowball offers, followed by how an experienced listing agent (OK, me) advises their client to field them.
Type #1: The “garden variety” lowball offer, for more than 25% (ballpark) below a well-priced home’s list price.
Usually made by a first-time Buyer who’s under the (mistaken) impression that homes are (still) being given away by desperate Sellers (Psst! That was never the case, even at the housing market low). See also, “The Mulligan Market.”
Seller Response: a polite-but-firm (and umbrage-free), “Thanks, but no thanks — try again.”
That keeps the door open with such a Buyer, who invariably comes back with a second, much stronger offer, and not infrequently commences a negotiation that leads to a consummated deal.
Type #2: “The insultingly low, lowball offer” — for between 50% and 75% of the property’s list price.
Seller Response: Two choices: a) none; b) counter at $50 million — or some similarly ridiculous number.
Why dignify a non-serious offer with a serious response — or a response of any kind?
Type #3: The “You’ve Got to Be Kidding” lowball offer.
This one is for less than 50% of the property’s list price, and often isn’t even on a formal Purchase Agreement (I’ve seen one page “Letters of Intent,” personal stationery — you name it).
Seller Response: Similar to the “You’ve Got to Be Kidding” lowball offer, Sellers’ knee jerk response is also . . . not to respond.
But, I actually think that that encourages such a Buyer to persist, at least until they get an answer.
So, I recommend that my clients rebuff such an “overture” quickly and conclusively.
Like you’d get rid of dandruff (vs. ignoring it).
P.S.: In contrast to Types #1 and #2, which can weaken a Seller’s resolve, the third type of lowball offer is so ridiculous that it has no effect.