Making a lowball bid

I wouldn't discount the "percentage off of asking" benchmark because the market has a stratified price structure of asking prices. It is as simple as looking at the properties $5-20k cheaper and more expensive. If a property's asking price is out of line in this market price structure it is a moot point, but on average there is usually a percentage off of asking based on the current price structure that pushes sellers agents and buyers agents to really get things moving and start to put pressure on the non professionals. For instance, if a person got an offer within 5% of asking today, the selling agent would most likely put the full court press on the seller to take the offer. Smart sellers keep their prices below their value on the asking price structure because the buyers out there select a few open houses each weekend, and if you're a "deal" those buyers will show up at your house...

The reason why this accepted % off of asking is so important is because without a consistent basis, people get stubborn to wait for their price or with their lowball figure and people get nervous making deals without contingencies because they don't know what type of deal they can get on the other end.

The first wave of sales in this Spring Season will set the tone because it will create the "Comps" that the nervous nellies are waiting to base their decisions on.

I wouldn't call it low-balling. It is what the home is worth. I bought a home a few years ago and it was priced way too high and the seller got it b/c of the way the market was. Did they "high-ball" me? No, so it is not low-balling. If the seller thinks that they can get more, then just deny the offer.

Take a deep breath and consider your goal. Do you want to buy the house? If the answer is "yes", make a fair offer and be able to back it up with examples of SALES of similar homes in the area. In a sense you must "sell" your offer. (I'd suggest using an agent for this calculus but I dare not upset the broker bashers). Comp sales trump every other measure including: going a fixed percentage below asking, using what the current owner paid, how much you'd like to spend, and what you read in the Globe this morning.

I do not like making "low ball" offers in general. However, if you base your offer on comp sales and ignore asking price, you will never "insult" anyone. This advice cuts both ways. It is very possible that a home is offered at the correct price and you must make an ASKING PRICE OFFER. Oh my God..no..not in this market!? Yes.

I have made the mistake of overpricing my property with the expectation that potential buyers would hit me with a slew of low ball offers. My plan would then be to simply choose the highest low and I would have lost little. This experiment failed. I received no offers. Perhaps potential buyers wanted to avoid "insulting" me. So to that point, if the property is overpriced (based on comps) make a low-ball offer. It might work.

If your agenda is to try to proactively accelerate market trends downward, which I might suggest is the goal of the more strident cassandras who haunt this post, please resist the urge to waste everyone's time with genuinely insulting offers. Sellers are unlikely to "see the light" or get worn down by this tactic. True low ballers, those who hope to "get lucky" and exploit a distressed buyer, are doomed to overpay for a house that nobody wants.

I advise my selling clients all the time to keep in mind that buyers are the ones that establish the value of a property, not agents and not sellers.

As self-serving as this may sound, this is where the value of a highly experienced agent comes in. Not only one with negotiating skills but rather a market perspective honed over many years and in up and down markets. It's essential to do your due diligence and discover if the price you're offering falls within very recent asking price to selling price ratios. Numbers from 6 months ago make no difference nor do your crystal ball predictions of what the ratios will be in 6 months. With all due respect to my fellow professionals, nothing is more challenging than trying to get an offer accepted that is an excellent one only to be met with stiff resistance from a seller's agent who is invested in the very wrong number he gave the seller.

Thank you Avi. Having been both a buyer and a seller in the past 3 years, I know first hand that it is the buyers who determine the price every time. Having said that, now that I am a buyer again, I'm amazed that sellers are still "insulted" by offers that they consider to be too low. This is not personal; buyers are anticipating future depreciation and trying to minimize their exposure.

My husband and I recently made an offer on a home that was clearly overpriced by about $30,000. We offered a price that was very close to what an identical unit in the same complex sold for last year. Last year---before the market really started to decline. The seller rejected our offer, and their realtor was downright rude to our realtor about it. Very unprofessional behavior. A few weeks later, the seller's broker came back and asked us if we would pay $20,000 more than our best offer. We reiterated what we were willing to pay and have not even received a courtesy thanks for replying to their ridiculous "counter".

I feel like I'm in the real estate twilight zone. Only this time, I'm not in a hurry, I do my homework, and I'm not going to pay more than I think a home is worth. Period.

Call it what you will... but today's 'lowball offer', will be tomorrow's market adjustment. Swallow your pride, accept the fact that your home was never worth the 300% hike in value it saw over the past 10+ years. Or watch it fall further, then one of us side-liners will scoop it up at auction. Oh and leave your chandelier, NO EXCLUSIONS!

Why be concerned about angering the seller? With the huge collapse in sales from last year, sellers should be concerned about their asking prices offending buyers. Clearly, buyers aren't interesting in giving their down payment away.

Agents who refuse to present lowball offers aren't helping anybody. In a market where the house you buy today will be worth less a year from now, such arrogance merely interferes with price discovery, and delays the recovery of the market.

"Lowball offer"? OK, let's take a look at the asking price history of this house.

Listing Price History
Date Price
Nov 23, 2007 $849,900
Jan 03, 2008 $750,000
Mar 12, 2008 $699,000
Mar 14, 2008 $699,900
Mar 27, 2008 $649,900

So is the seller insulting himself now with his own latest "lowball" asking price??

I think that generally speaking, realtors are the biggest problem in the whole equation. I find it amusing that someone can scoff at 15% below asking while managing to take 6% for themselves, for what usually amounts to a few hours of work.

I had 2 offers rejected on properties. The first was purchased at 100% financing for 30k more than I offered, and is currently being foreclosed on. The second was rejected and sold 8 months later for 20k less than I offered. In both instances it seemed to be the realtor causing the hang-ups.

I finally placed a detailed ad on Craigslist stating I was interested in buying property in Jamaica Plain in the 6-700k range & within 24 hours I had several responses. After a couple not so good places, I found a nice single family and negotiated a fair price one on one with the former owner. I enjoyed the experience, and no middle man got in the way..Our lawyers took care of the P&S and the deal was closed in 3 weeks. I think that the lack of the realtors comission was essential in finding our middle ground. I reccommend this process to others.

CB Brown, you're welcome. Sounds like you did your due diligence on pricing or you had a very good agent who did and a) barring any major differences in improvements in the unit or b) any proven appreciation in the specific complex or town or c) very high demand for that type of unit or price range with low inventory, you were right on target and could move on with no regrets.

It bears repeating that the "Boston Market" consists of various micro markets. In my own (the Back Bay and South End), high demand both in the "low end" (i.e. under 450Kish) and "high end" (i.e. over $1M) with relatively tight inventory is a critical determining factor in making an offer substantially below the asking price. There are so...so...many factors to an offer that influence the advice a professional is going to give his clients about accepting an offer. For example, just this past week I had multiple offers on an expensive well-located duplex in the South End, the demand being very high for large apartments in that particular neighborhood. 3 of the 4 offers had no financing contingencies....guess which offers got the most immediate attention. Alternately, I had offers on a much lower priced unit and the offer that was accepted was $2,000 less than another offer...but...it was a buyer putting down 25% versus 10%. Knowing the current lending environment, the higher deposit offer was the one accepted, not the higher price offer.

I do understand Binyamin's blog is one I tread carefully in because it's one where it's easy to simply cast blame on an agent for all the troubles of the real estate market. Often that's the case...but I'd happily provide years of testimonials from clients who would tell you that on the buying end they got sound advice often encouraging them not to buy something overpriced and on the selling end got the sellers a better price than they expected. I find it fascinating that the average buyer/seller would likely do extensive research before entrusting their finances to a specific investment advisor or firm, yet do very little research about the person they're entrusting with the purchase or sale of their biggest investment. Like the stock markets, some people with all the talent, wisdom and competency will pick the ETrades, etc. of this world and the discounts and minimal advice that goes with it and others even with that expertise realize that the fees at Goldman Sachs are worth it because the professionals there know even more than they do. Having survived 17-18% mortgage rates in the early 1980s and 20-25% price declines in the early 1990s, all I can say is do your research or have someone who is doing it for you, make an offer based on all the variables including how much you love the home and how long you intend to be there...try to stay unemotional about it...and then move on. But simply making low offers in a local market that has no support for your price, expecting that the seller should accept your conviction his particular market is "definitely going to drop" is a conviction that I hope people are humble enough to accept may not be someone else's. Winchester is not Back Bay...Back Bay is not Boxford...Boxford is not Dorchester....ad nauseum :-)

We recently received a 'low-ball' offer from a prospective purchaser, which we rejected out of hand. They came back the very next day 20K higher - but still way too low - and our broker convinced us to 'talk.' The negotiations were not fruitful and broke off, but the home-seekers continued to drive by the house and instruct their realtor to ask our realtor 'if we've changed our minds." His sense and ours is that they really want our house but, because they started SO low, they feel like they're having to give up too much in the negotiation. Since our move is completely discretionary and we're relatively new to the market, we feel no need to make additional concessions, so they will have to settle for a different house. But it probably didn't (doesn't?) have to work out that way. My sense: a more reasonable starting point would have made ALL the difference.

I tell me buyers all the time that the list price is meaningless until we do the research and determine what the property is worth.

There is a lot of data available to real estate professionals to use on behalf of their clients. You just need an advocate who is willing and able to use it creatively and effectively.

We're not talking "Zesitimates" here folks.

Some listing agents greatly overprice, others price just right, and sometimes properties are priced to sell quick (and they usually do), so saying a certain percentage is considered low really doesn't make sense.

The most effective way to negotiate is too have a strategy right from the beginning, so you take the emotion out. Throwing out numbers to see if they stick is usually a recipe for failure. Just like a buyer isn't going to pay list price in this market, a seller isn't likely to accept your first offer. If you actually want to buy the home, then the point should be to keep the process moving, without paying more than the home is worth and you can afford.

One more point: I never refuse, and no agent should ever, refuse to make any offer a buyer wants to make.

I've noticed in most situations one buys a house, but sells a home.

As all of the posts recognize, it is fraught with human (owners, buyers, realtors, inspectors...) emotion -- both positive and less so. Lowball offers have an important place in the real estate world; but respect and sensitivity are key as these can ultimately lead to the mutual goal of selling and buying the property. I find that insulting people (in this market sellers, but not too long ago it was buyers) rarely results in the outcome they both desire, i.e. an accepted offer; thus wasting each clients' time. You can't control how people will receive your information and bid, but it doesn't hurt to try and optimize its delivery.

We basically did what Binyamin suggested when we bought our house last summer - we found a place we liked, knew how much money we had to spend (and what we thought the house was worth to us), and we made an offer $5k lower than that ($10k below asking price) , assuming that the seller would come back to us with a counter offer somewhere in the middle. It worked - we paid exactly what we wanted to pay for the property, and presumably the seller wasn't too insulted that we'd "low-balled" them.

Marcus

"Agents who refuse to present lowball offers aren't helping anybody."

According to law of agency, agents must present *all* offers and counter-offers to their seller.

Michael May: "I think that generally speaking, realtors are the biggest problem in the whole equation. I find it amusing that someone can scoff at 15% below asking while managing to take 6% for themselves, for what usually amounts to a few hours of work."

Based on my experiences buying & selling property I have to agree 100%. Dirt Merchants are interested in one thing and one thing only, maximizing their commission. It's all about getting the biggest score while doing the least amount of work possible. These guys are worse then used car salesmen.

I am looking for an opinion on my "low ball" offer. Specifically, I submitted an offer that was ~93% of the FSBO price. I based this price on comparable sales in the building. In fact, I began by looking at the neighborhood, but the sales in the building I am looking at were significantly higher than the neighborhood.

Details:
The current owner purchased from the developer in June '06 and since made significant impovements.

I looked at sales in the building, adjusted the price down if it came with parking and also lopped off 5% to represent brokerage fees.

I divided the adjusted prices paid by the square footage of the units. This gives me price per sq ft with no parking.

I then took the value of the impovements and divided by the square footage of the unit I want to buy to approximate what it would cost to "renovate" a comparable unit up the standards of the unit I want to buy. (I discounted the sellers renovation costs by 70% because that is what is widely cited as the ROI for high end remodels.)

I added the two prices per square foot multiplied by the sellers total square footage and added back the value of the parking space (as a lump sum).

The seller and I are far apart and I have great confidence in my price. As it uses actual transaction data in the actual building and adjusts the price upwards for the fantastic remodel and parking space. However, I am having problems communicating that to the seller. I think his cost basis or attachment to the property are dictating his price. Any thoughts on how to proceed?

OK, what are these sellers thinking? A defense for lowball or anticipation of HOT sales in Spring? Don't they have the common sense to think that "if I don't have an offer at my lowest asking price, I'm must still be asking too much?". WOW! instead, I'll increase it and I will get some offers! Sellers have to realize that any offer presenting without stating "final" means buyers are willing to pay more and let's start negotiating and find the middle ground. Instead they get offended! LOL.

Property#1: 84 days on market.
Price Increased: 04/23/08 -- $429,888 to $449,888

Property#2: 192 days on market.
Price Reduced: 12/03/07 -- $369,900 to $339,900
Price Reduced: 01/07/08 -- $339,900 to $319,900
Price Increased: 04/28/08 -- $319,900 to $375,000

I don't get why sellers are so offended by "lowball" offers.

As far as feed back goes, it is the best kind. Some one liked your house so much they offered to buy it.

I have noticed that "lowball" is relative to the seller and agent. A buyer could be submitting a realistic offer, but the agent/ seller is looking at the listed price to make a judgement on weather it is a "lowball" instead of comps and the market in general it skews the whole term.

It shouldn't be called a lowball offer just becasue it is 20% off the listed price when listed price is 30% over market value.

When determining value I have to go with the buyers on this one because sellers use the amount they want or desperately need as a reference for property value and buyers usually use comps of sold properties to make an offer.

Yes there are insane buyers who are asking too much but there aren't that many of them in comparison to the number of sellers who have an extremely high asking price.

I agree that with 'just me' and others that there's little value in sellers taking offense at low offers. However, I'm guessing those who bottom feed in a bear market are the same ones who whine about the unwillingness of sellers to budge in a bull market. If you low ball in comparison to all realistic comps on a property and manage to secure the home of your dreams, good for you. If you do so and lose out on that house, well, that's just the market behaving the way markets are supposed to behave. As long as everyone's OK with that, what's left to debate?

According to law of agency, agents must present *all* offers and counter-offers to their seller.

Realtors refuse to present offers all the time.

It bears repeating that the "Boston Market" consists of various micro markets

Which are popping like punctured balloons. See today's article by Kimberly Blanton about the collapse of the much-vaunted downtown condo market. It takes longer for the top of a shipwrecked boat to get wet, but it all sinks eventually. So one can't set much store by past comps, much less by sellers' fantasies.

I am looking for an opinion on my "low ball" offer.

Walk away. It costs nothing to make a lowball offer, but a great deal to overpay for a house. If you are confident in your price, then that is the price you should pay. The seller sounds like someone who bought near the peak of the market and over-improved the property, and now expects to be made whole for their mistakes. Just because a drowning man throws you an anchor doesn't mean you have to catch it.

"Agents who refuse to present lowball offers aren't helping anybody." What? Agents who I have hired are bound by law and license to present every offer. However, agents may insist on a pre-approval letter to ensure that it is a genuine offer. The seller is the only one who can say, "No". (Besides, I thought it was our consensus that brokers are greedy and want to take all deals at the peril of their seller.)

"In a market where the house you buy today will be worth less a year from now, such arrogance merely interferes with price discovery, and delays the recovery of the market." Huh? Discovery price is, by definition, the price for which the home sells. The best predictor of that price is comp sales. It is not based on what it sold for last year.

Folks, you are not competing with the seller or the broker or the bank for your house. You are competing with other buyers. These posts suggest that low ballers are losing that competition.

Perhaps the market will lose more value and perhaps not. My brother-in-law has been predicting a crash for the last 10 years. He is confidence is not dimmed even when asked whether he could have thrown a dart at a map 10 years ago, paid asking price for that home, and still have been up %250 right now.

The real threat out there is inflation. Recently minted MBA' do not have the experience to know that if and when it comes it will erode your paycheck, your savings account, and my fixed rate mortgage payments. Double digit inflation will mean your savings will not buy a ham sandwich let alone my house. Right now rates are low, prices are lower, and optimism is at a nadir. Waiting now or expecting low ball offers to generate low ball sales will not get you much at this point....but don't tell my brother-in-law.

"Home of your dreams" - classic real estate agent speak. Trying to make a financial decision into an emotional one.

The truth is, most houses that are not at the extreme upper end are commodity products - they aren't that different, and that difference can usually be smoothed out through price adjustments and renovations. Neighborhoods and towns actually are different.

I make "lowball" offers regularly. If people take them, great, I'm in a place at a good price. If they don't, who cares? Time to figure out the next place.

It's a market place. Amazing how many people don't see that. Getting emotional about finances has always seemed crazy to me - it results in poor financial decisions.

Home is people, not a house.

"Making financial decisions emotional" - It's funny because I'm not a realtor, just another owner/prospective buyer, and I am always the first to say "don't make this emotional." You're right, that there is always another house. But precise locations and certain unique characteristics aren't always easily replicated. Sometimes, whey you find the exact right mix for your family, you have to consider those things. But if you are - like most home buyers - looking for the place where you will spend a significant portion of your life and perhaps raise a family, it's not quite so easy to regard a home purchase the way you might regard a stock or bond purchase. It is, primarily, a monetary investment. But it's also more than that. Spending 10 or 20 precious years of life in a place that's almost as good as the place you really wanted to be, for the sake of saving 10 or 20K, is not a good life investment.

Chuck and Charles are demonstrating one of the cardinal rules of negotiations: know your walk away point. I am a professional Realtor (and there is no such thing as those "few hours of work") who is also a trained, professional negotiator.

I know how to help buyer-clients formulate their starting bid by knowing what the ultimate goal is. In my recent blog I wrote about properties again going for greater than asking price on the Cape (while many, many go below).

Having a pro with all of the data in hand is the way to be sure you win that "home you will spend those precious year of your life in." There are creative solutions as well, with Seller concessions that create value but don't take away from the net sale. And know when you go in at what point you will walk walk away.

I was going to put an offer in on this house in Westford in october 07. The list price started at 399,173 (august 2007) The price was 379,00 when i told my broker i'd like to offer 350k for the house. Apparantly the sellers agant told mine that they already had offers in "close to asking" and that if i really wanted it I should up my offer. I said absolutly not and we never made a official offer. Now this broker probably never told the homeowner about this offer and this house sat on the market and sold in March of 08 for 337,500, So five months later and they end up selling it for less than what the could have got... i really wanted to let the homeowners know that their broker passed on a higher offer five months prior but i'm not to upset now because i think she did me a favor and screwd the homeowners.... these brokers today think that they can still pull the tactics from 03-05 trying to get offers raised and a bigger commisions... i've held off on buying and will probably have 35-40% now

When I bought my house, I made a very low offer, 28% below asking price. It was based less on the value of the house, and more on how comfortable i would be with the monthly payments, and the original price range in which I was looking.

The broker said that the buyer would be insulted, but I said "will you offer it anyway?" She did, to my surprise they countered, we went back and forth a bunch of times and ended up agreeing on a price, which was 12% below the asking price and included many useful items. Somehow, with each round, I reevaluated how much I wanted the house.

Why not try a low offer? Why not give back a modified counter, if you're willing to play?

To chuck - once again, I've found neighborhoods to be unique, locations within them less so. And house features are wasy to duplicate.

Granted most don't think so, which is good - easy money for me

Istill maintain, a house is a place to live, a home is people. not a thing

Hi WS,

I think the issue is you are using a cost plus approach where real estate is market driven. Base your offer on what you think other buyers would pay, you can do this by pulling comps, either by yourself with the Registry of Deeds or Zillow, or have a RE agent help you. If possible and current, use the comps from the very smae building as they are the best indicator of value. You could also pay an appraiser to give you a price, usually they charge $300-$500 and will need access to the property.

It is similar to shares of stock, the share is valued at what the market feels is fair for that particular day, not the sum of the parts.

And to all the lowballers. There is a good way and a bad way to present a lowball offer. If you go in saying "hey take it or leave it" most sellers will leave it as it is generally an indication of how the whole transaction is going to proceed. But if you present as "here is my opening price based on this, this and this, let's start a dialog and negotiation." you will be far more successful.

And as a real estate agent I can tell you that I never spend just a few hours on each of my clients. If you break down the time I spend on each client I am making less than most of you make per hour, but at least I enjoy my job enough to be actually working during the day instead of posting online about subjects not job related.

Dina,
Thanks for taking the time to comment. If you re-read my post, you will see that I exclusively used sales comps from the same building. However, I made an attempt to compensate for the unit location in the building, unique amenities, parking vs. no parking, and quality of the finishes.

A little more specific, my methodology was to take the median price paid for a condo in the same building over the trailing 12 months, reduce the per sq ft price by 2.5% to reflect splitting the realtor fee, add back the cost of renovations per square foot to reflect the improvements that other units in the building may not have undergone, and added in parking as well.

However, the value of a house is NOT like the value of shares. The real estate market is much less transparent and much less liquid. Unlike real estate, any divergence in equity share price and value is quickly eliminated by the market e.g. capital structure arbitrage, M&A arb, risk or statistical arb, (arguably) pairs arb, etc.

Further, a widely accepted measure of the value of a firm is the sum of its parts. Divergence in the sum of the parts and the share price is called Liquidation Arbitrage or its more speculative cousin Mergers and Takeover arbitrage . Divergence of sum of the parts from share price is why private equity funds (and hedge funds masquerading as PE funds) and other corporate 'activists' are able to apply disproportionate pressure on the target companies management.

What we are seeing more and more here in the Metrowest surrounding areas is that houses at the $550K range and below are selling now, not anywhere new the good days but selling and pretty close to the asking price. The slowness seems to be festering more at the $600K and above level. Most likely the lack of people qualifying at the Jumbo rates. And this lack of high end realty sales is bringing down the median home prices. Until that sector starts selling also, we will not know how much the median home prices have changed. However, I can say that looking at the Grafton area, homes that were selling for $850K in 2006, are now selling for $700K and below. So prices have adjusted quite abit. but may have some more to come down, but how far?

Well WS, I guess you and the seller are at an impasse. I am reading from your response a tone of aggresiveness that may not be helping you.

If you haven't damaged your report with the seller, try to adjust your tone and take the approach of a negotiator, which is mostly salesmanship. After all, sellers are people with emotions and feelings, and numbers don't always work for everyone, no matter how accurate you think they are.

My best advice is to sell them on why you are the best buyer and forget about the details on how you got to the price. Let them know that if they choose you, the transaction will be timely and smooth, with little chance of litigation. That alone can be worth thousands off of a price.

I have seen offers fall through because the buyer or seller was a blow-hard and knew-it-all and the issue was never price. You may want to consider that price is not your only obstacle. And that is where real estate agents can really help.

Dina,
I think you have given the most salient reason for using a broker that anyone has given in quite some time.

In my case, I did a lot of work to come up with a fair offer. (I estimate about 16-20 hours learning various databases, combing through them, and then constructing an offer.) I had a pretty good idea that I was going to come in too low and I did try to explain the comparables and how I actually inflated the medians to represent the quality of renovations they did.

If I had been 'situationally aware', I would have recognized that the sellers dropped several hints that they were 'emotional' about the property. What I was aware of, is that I spent a lot of time and care to present a fair offer and they weren't listening! People are not wired to react rationally (See the book "Predictably Irrational"): they did not take a 'rational' look at the offer and I did not rationally respond to their position.

Recently, I gave them a call to let them know that financing was in place; a quick look at the condo docs and the condition of the 2 year old home suggest no impediments to closing; we are on a monthly lease; and we appreciate the uniqueness of their property. I am afraid that now it is only about price and the shock of my first 'lowball' offer.

This is where a good broker would have noticed the lay of the land. Unfortunately, it is FSBO.

Dina, I am not certain what was aggressive about my post. I did correct your mis-statement about stock and house pricing because it is a very important distinction to make. The NAR and 'not good' brokers sell the emotion of buying a house. However, buying a house is a financial decision and needs to be weighted much more heavily in the buyers decision process.

To put it into context, a conventional mortgage has more leverage than the median equity hedge fund at 5:1 and 1.5:1 respectively. Luckily the housing market is usually stable. Alternately put, home prices are less volatile than other assets such as equities. Lower volatility mitigates the risks of buying a highly leveraged asset. This market, since 2003, has has been very volatile.

Unfortuately, unexpected volatility is what causes great losses. People experience volatility in their personal lives when they get divorced, lose a job, medical emergencies, or, perhaps, their ARM resets higher than their ability to pay. People should have enough savings to help them through this volatility until they can get back to normal.

Let's take one more example: the collapse of Bear Stearns. Exactly like your corner bank, Bear used clients money to fund their businesses. Bear was unable to sell their investment portfolio fast enough or at good enough price to continue operations. One exacerbating problem was that Bear overextended themselves by being levered at ~30:1. So when things went bad, they essentially did not have enough savings to pay the bills. 30:1 leverage is about the same as a 3% FHA mortgage.

Keynes said it best: "The market can remain irrational longer than you can remain solvent."

Lastly, I you said ". . . I enjoy my job enough to be actually working during the day instead of posting online about subjects not job related."

In this case, cervantes said it best: "said the frying-pan to the kettle, get away, blackbreech"

I sold my house in another state a couple months ago and have been actively looking for a house in the Boston area as I watch prices continue to go down and inventory go up.
I think there still is considerable softness in the market and would expect to see another 10% reduction in prices throughout the year.

I made an offer on a house earlier this year and spent a large amount of time getting comps and also figuring in the continued decrease in home prices. We negotiated a bit but clearly we were never going to close on the price I was looking for so I pulled out. Of course the house still sits and has twice lowered it price. The sellers just would not look at the landscape of a down market and the fact that prices are still going down. I’m sure mainly from bad advice of a realtor was part of the problem.

As far as low balling someone on an offer get used to it and take emotion out of selling a property. Its business and you are no longer going to own the house so if you have any emotional attachment get over it prior to putting the house on the market.

When I sold my house the first offer from the eventual buyer was 10% low. This didn’t upset me in the least as like I say its business and you should expect it in today’s negative housing climate.

Last what amazes me about the market here is how poorly the initial price is set. I’ve watched one house that went on the market for $879k. Two weeks later they reduced the price to $859. A week later $850 and now the house sits for $809 after being on the market for only 2 months. Coming from another state this is just crazy and makes no sense to me.

I think you have nothing to lose by trying a lowball offer. We put our house on the market last week for 765,000 even though our agent thought 785,000 but we are moving to a less expensive area and my husbands company is paying all our realty fees so I think I would accept 735,000 immediately and would consider anything over 7. Also we have sold 4 times in the past 8 years so we are used to the process and are not all emotional about our house. You never know what peoples circumstances are so if you think its what the house is worth to you, why not?

My fiancée and I could not have bought our home without doing our own market research, sticking to our budget, and using the hard working efforts of a good real estate agent. Like all stereotypes, the one that I hear that tars all real estate agents is pretty unfair. Our agent tirelessly presented our “low ball” offers to sellers who eventually went into foreclosure.

Our most disappointing experience was not with a low ball offer, but rather when we tried to by a house in a for-sale-by-owner arrangement. With our agent, we spent hours, and considerable money, on inspections and paperwork presenting our offer after the seller told us that it was agreeable to him. He then turned around, without even a courtesy call, and sold the house to his brother-in-law for considerably less money. Our agent dogged the fellow until he told her that he needed to use us to get his brother-in-law to move on buying the house, as he was dragging his feet over the price!

The deal for the house we finally did buy nearly fell through when inspections revealed that 20 thousand dollars in decking repairs were needed for the house to pass town inspection, and transfer title. We had pretty much maxed out our budget, but the two agents involved (ours and the seller’s) saved the day when they negotiated a deal in which we all divided the cost four ways. The agents paid their quarter shares out of their commission and the sale went through. I don’t know an attorney who would have done that in trying to help us buy our first house. My fiancée and I were then married on that decking at our lovely creek-side setting and the real estate agents were guests of honor at the ceremony. :>)

I'm selling my condo after buying a place with a successul low bid offer. I think people should do their research, and offer the price they want to pay (or at least are willing to work from). A seller will either accept a low ball offer, or they won't. I did a lot of research before setting the price on my condo, and have had 16 showings, plus a couple repeats, in 2.5 weeks. The photos and description are also very accurate. So, it seems there is interest in my place, which is good.

Would I accept a low ball offer? If they started 10% below offering, I wouldn't be shocked or offended. I would counter offer of course, but I consider \10% off asking a reasonable starting point for this market. I don't know that I would be inclined to work much with a buyer that came in significantly lower than 10% below asking, but, its possible. I'd probably counter and try to determine if they really wanted the lowball price, or were just trying to start off as tough negotiators.

I think most sellers will at least entertain any offer they receive, and submit a counter offer. So, I would recommend that buyers submit a reasonable lowball offer, and see what happens. It can't hurt.

The people that have the money to buy are sitting the sidelines waiting for the eventual drastic price drop. Thanks to the internet we can see what you all bought your houses for. People that bought houses in 2004 for $ 150 K and now have them on the market for $ 500k are a bit whacked in the head.

People such as myself are not going to bail you folks out for using your houses as piggy banks. Thats the attitude and reality of the new buyers out there.

As realtors sit and silently cry in the corner about the housing crisis they helped cause, we rejoice in the coming drastic reduction in housing prices.

Comments to "the newbuyer". I have news for you. Keep waiting because the real estate market is on its way up again and I hope all you vultures sitting on the fence miss the "boom" again. The interest rates are great and there are plenty of houses out there for a good DEAL, not a steal. The sellers out there are sitting on their equity, which will come again soon, and you have just spent years paying rent (1200-1500K per month) for what???

The buyers out there like you think your so smart but you really aren't! It is bottomed out and I can't wait for the tables to turn. I can already tell you in my own neighborhood that 3 houses have sold in the last 3 months and the last two went in less than 5 days.

Sellers have dropped their house as much as they are going to do so now. Nobody is sellling a steal unless they have to and usually those aren't the best houses. So I guess buyers, like you should stick to the foreclosures because so many of you think that you are getting an awesome deal until you start fixing them up and then they cost you more than YOU will be able to sell the house.

Shoshanna. This market is far from bottoming out. You sound like the typical panicky "home owner" ( you dont own it as most of you are finding out, the bank does) who is upside down in your mortgage.

As far as just sticking to buying foreclosures. Thats all there is going to be in this state as is evidenced every day. Greed never wins. As your all finding out. And people like me have no problem putting people like you out in the street.

Shoshanna, paying rent is not a waste of money as the NAR and the "not good" realty agents would have you believe.

- A $1500 rent payment is roughly the initial interest amount on financing $300,000 at 6.25% for 30 years. The total payment is about $1850. And you would have purchased a $375,000 home putting down $75,000.

- The joint standard deduction for fed tax is $10,900. You would have paid interest of $18,000 per year. Of which, $7,100 is in excess of the standard deduction and will further reduce your tax's paid. The effective tax break for someone paying 25% fed marginal rate is about $1775 per year or ~$150 per month.

- Your effective monthly payment is in the neighborhood of $1700. If you apply the tax break to your mortgage you effectively reduce your interest payment by portion of the mortgage to $1350.

Not bad, but renters do not pay for maintenance or taxes and have an extra $75,000 in the bank.

Let's say maintenance and tax are $100 and $200 per month respectively. Now your effective cost of owning a home is >$2000. The renter paying $1500 a month is ahead by $500 per month.

How can homeownership possibly be a good deal then? Well, banks loan you a lot of money to buy a house.* In fact, conforming loans will give you 5-times what you contribute to the purchase. Now, say your house value increases 6.5% from $375,000 to $400,000. If you sell the house, you keep the entire $25,000 gain from the sale and, best of all, do not have to split it with the bank! So, you spent $75,000 to get $25,000 or an effective return of 33%. Conversely, If the value goes down 6.5% to $350,000, then your $75,000 investment is now worth $50,000. (All nitpickers: This is a simplified version yet somewhat realistic example for illustration.)

Meanwhile, the renters $75,000 can grow at a very conservative 4% and save the difference between homeownership costs and rent ~$9000 per year.

The question becomes: Will the value of a home increase faster than the growth in savings from from not owning a home? People who purchased in 2005 - 2006 have lost money because their homes declined in value and in opportunity costs from not investing the $75,000 and "homeownership minus rent' savings.

These are very advanced financial topics that are often counterintuitive and we, as a society, need to do a better job of explaining the concepts or, in 30 years, we will repeat the sub-prime mess.

Please consult the following NY Times calculator for a graphic interpretation: http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

(They loan you five times the amount you put in: for every dollar you contribute to buy the house, the bank gives you $5. This is called leverage. Leverage is one of the things that make hedge funds what they are. A typical hedge fund that invests solely in stocks only has leverage of 1.3 x the amount they contribute; the banks loan them $0.30 for every dollar they contribute.)

I'd love to see the loaded word "Lowball" banished from our vocabulary. There is no way to use that word in any positive fashion.

As a home seller, I read a sentence that really changed my perspective on pricing and offers. I cannot remember who to credit for this.. but it's something like "the minute you price your home, or begin negotiations, with a figure in your mind of what you have to get out of your house, you're sunk." I think the hardest thing for home sellers to understand in this historically depressed market is that your home is ONLY worth what someone will pay for it. The market sets the price.

We just sold our home with a full price offer. Now, we'd had 3 price reductions over 11 months to get to that price. We were priced fairly, we thought, according to the comps. Our price changes were in keeping with the falling home values around us. The curious thing about our final sales price. It was exactly where we'd had two contingent offers at various times (and prices) since the house had been on the market. Our house sold for what it was worth to buyers, apparently. As we'd gotten three offers at the same price. The buyers determined the worth of our home. Of the contingent buyers one "lowballed" it, as people would call it, the other contingent buyer sort of "lowballed" it, then the final and successful offer was at that same price, but because we'd lowered our price to the "lowball" price, it was a full price offer. Once I got my pride and expectations out of the way, I priced it where it should have been all along and it sold immediately.

I would not be afraid to make an offer of up to 15% off of a home if the comps made sense. You can sit there and be afraid of upsetting a seller, or you could make an offer and save them from foreclosure or a short sale. You don't know their story. The area I'm purchasing in has seen some activity this spring, but all from short sale and foreclosure homes, which have driven down the comps tremendously. They run foreclosure bus tours in the area I'll be purchasing in.

If I seller needs to sell their house in these troubled times, they need to get their ego out of the way, and look at all offers. Accepting a lower offer now is much cheaper than sitting on the market for months, taking more price reductions, and ending up with less than the person offered in the first place.

Oh, I forgot that we did have one total lowball, non-contingent, offer before we got this last one. They'd made an offer 45k less than our asking price, and we countered back taking off 20k in response. They decided it was too far apart and they bought something else -- which was fine with us, as it turned out they weren't approved to spend more than what they'd offered. It all ended well... we ended up with 17k more than their offer, and they got a house they loved and could afford up the street.

I had a clown offer me 20% below my asking. I countered with 10% above my offering. Take that a-hole. My agent was not happy with me but it was fun. Wish I saw the [deleted] face when he saw that.

My nice home is paid off so time is on my side. I kick low balling bottom feeders to the curb. So pay up buyer or move your [deleted] down the road and buy a pos. I am not running a yard sale folks.