Let's say you are a buyer and you have found a house that meets your needs and its listing price is in your financial comfort zone. You have reviewed recent comparable sales for like properties. You have established what you think the value of the home is. You are armed with a pre-approval if you are going to seek financing or have copies of statements verifying liquid funds if you are paying cash. You are ready to make an offer and open good-faith negotiations for the house.
Okay, so stop for a moment and think of yourself as a pitcher...a baseball pitcher. Think of the seller as the batter at the plate. The catcher's mitt is like the comps - the target you are aiming for. Are you with me?
Pitchers have more than one pitch. Each pitch is used for a different strategy. Offers are the same. You can make a full-price offer with super strong terms - a fast ball pitch down the middle of the plate. If a house is priced at market value and there is strong competition from other buyers, your fast ball is the best option. And you may have to go over the ask...that is put a little extra on that pitch!
You can make an offer somewhere at the bottom of the zone of established value. That is like throwing a slider or a breaking ball low and inside...if it is interesting enough (strong terms like a high percentage down, no mortgage contingency, waiving of inspections), the seller will take a look at that pitch and may swing (a decent counter offer comes back to you) or a check swing (no or low counter offer).
Or, you can combo up some strong terms with a sensible value price...that's like throwing a knuckleball in the strike zone and let the seller make contact. Get the ball in play and see if you can reach agreeable terms and price for both sides.
Lately, I am seeing too much of the dangerous pitch choice...the wild pitch. Lowball offers are like wild pitches. Wild pitches are so far out of the zone, the catcher doesn't see it coming, can't catch it and the batter is puzzled and trying not to get injured. Same thing with lowball offers. They insult the seller, confuse the agents about your motivation and there is no basis in anything concrete to support the offer. Pitchers who pitch wild pitches get pulled. The seller reacts the same way by making no counter offer and saying "NEXT!" and some other choice words I cannot type here. Your wild pitch of an offer has set a tone for the negotiation and vicariously painted a picture of yourself as being opportunistic, or unrealistic or not serious. If the seller is able to remain calm and let you make an improvement, you are lucky. But the damage has been done. You have left the door wide open for another buyer to come in and give the seller incentive to listen more closely to them as direct response to your lowball offer.
So, when you are ready to make an offer think of yourself as a pitcher with a choice of pitches. AVOID WILD PITCHES. Study your target. Get that offer over the plate and give the batter something to look at and consider swinging at! If you can put the ball in play, you are on your way to buying a house.
I just love the comparison to baseball!
Wishing you great success
your friend in Charlottesville
True for owner-occupants. Not quite so true for investors buying ugly houses, especially if they have been on the market for a while. But I get your point, if the Buyers Agent has developed a good CMA. The trouble with our market right now is the trend line is mimicking the stock market.
Maybe this is like pitching a real wobbler? What a great analogy!
Annie....very creative! your approach is terrific. all makes sense. My clients are investors...wow!
theyre extremely "wild"///// everyone has to "duck" to avoid getting hit on the head......
thanks for sharing...
Mike
Great post and a great analogy. Annie. I try to discourage my Buyers from making lowball offers.
Investors are different than Owner-Occupant Buyers. To an investor, his profit or upside potential is tied to how well he can do on the purchase.
An Owner-Occupant Buyer wants to buy the RIGHT house. If he "trhrows a wild pitch" he may lose the home he really wants. Therefore the risk of making a wild pitch is MUCH GREATER for this type of Buyer.
Great analogy. I recently sold a house and received numerous "wild pitches". Despite the complete and total ridiculousness and the desire to tell them to go jump, we still countered very close to asking. From an investment perspective you hear about people making purchases with the wild pitches so I guess they just decide to give it a shot and maybe the seller will be desperate.
This is fantastic, I love your analogy! I just received an offer today that was 75k less than asking on a well priced house...couldn't have read this at a better time. Thanks for the post!
Great analogy. In todays market people think that wild pitches are a great option...wrong!
Thank you all for reading and taking the time to drop a comment. As you guessed, 99% of my business is primary residences. I am hoping the baseball anaology works to discourage some of your buyers from making a misstep. I was a pitcher in an all-boys league as a kid...i know how important it is to get the pitch over the plate!
Happy Selling.
If for one moment the buyers can really look at an offer realistically it would be best for their interest. I had a guy last week low ball a very under market listing that had multiple offers on it, it was a waste of my time, but the things we do. When a property is hot, come in strong and win a great home at a great price... good post.
You do not have to be an investor to make an offer on a house that is ugly and has been on the market for a long time. Just because the buyer is an investor does not entitle the buyer to expect that the seller is going to accept a low ball offer. Value is value! Sure, an ugly house that is on the market for a long time may very well be overpriced, but that is not the same as those mislead buyers who think that it makes sense to pitch a low ball offer at a listing the is correctly priced.
Sometimes the wild pitch goes way outside... and is harmless, while other times it is high & tight and the batter needs to bail out of the box to avoid getting beaned! The problem is, a buyer making a lowball/wild pitch offer doesn't know what will offend the seller, so better to avoid it all together unless there other terms of the offer that could possibly make up for the low price.
Realistically, those offers are very rarely received well by the sellers, so if you are purchasing a primary residence, decide how important that home is before you let loose with your heater!
great blog...really enjoyed it....as a buyers rep I can tell you that buyers have lots of options today, especaily above the $500K price point. I have no problem with lowball offers....they are better than no offers and you never know how "motivated" a seller is....I have closed deals at 50% below ask...it's just the nature of today's market...
Congrats on the feature! What a great analogy; I enjoyed your creativity. Although, in today's economy, sometimes even the wild pitches aka low ball offers are considered and acted on. Thanks for sharing.
Annie,
The baseball analogy is a very good one, and I like the comparison to the wild pitch.
Brian
I loved this blog! I appreciate the comparrisons ... we all have had a wild pitch here and there!
Annie,
This is a great blog post and I couldn't agree with you more! The problem exists because the Buyers assume Sellers and Agents are desperate. Most of them learn, usually at the price of losing out on a home they really love, that their assumptions are incorrect.
Hi Annie--I love the analogy to baseball. But let me write this as a buyer and an investor. I bought a house 6 months ago on Maui. The first offer I made was apparently so low the sellers were insulted, even though our agent agreed with the number. First time in years of buying and selling that had ever happened. The sellers pouted. We moved on. Two months later their agent sent out feelers to our agent--were we ready to talk some more. Sure. We made another offer (countering our own offer, how weird is that?). They still were not happy. Even their own agent knew they were trailing the market. Comps weren't supporting higher numbers. Bottom line, after 4 months of the most insane on and off negotiations we finally bought the house. More than I thought we should pay for it. Much, much, much less than they wanted. In this case I think it took some wild pitching to get those sellers to see reality. I see so many listings come on the market here and even other agents laugh at the listing price. Where does that leave the sellers, other than to toss a few wild pitches and find out what is true in a market that no one has a good handle on?
Annie, Not sure if I understood the entire analogy but it sure was fun to read, thanks!
Annie, that is the first time I ever hear of making offer that way. Great comparison.
In reading some of the comments, I'd like to mention that a low ball offer for me is not based on the asking price but on the true market value. Buying something at 50% of list price really doesn't make it a good deal if it was 200% overpriced.
I'm beginning to think that the "education" of the average home buyer has been overly hyped by the media. If making low-ball offers (way below market, not asking) is the way that people feel they should go just because this is a "buyer's market" just shows how little they understand what that phrase really means.
Just because an agent "goes with it" does not mean that they endorse that course of action. Conversations need to take place before and after those offers have been submitted.
Great wild pitch parallel to real estate offers! Sometimes breaking principles down with a unique analogy strikes a chord with someone about to throw that wild pitch. I'll keep this one in my back pocket for the next time a client is considering a low-ball offer.
Annie...we really enjoyed your analogy.
The one exception to your rules is that it makes the asumption that the property is priced correctly. If it is grossly overpriced, and the buyer can justify their offer via comps, then it isn't really that "wild pitch" lowball.
Lowball offers seem a bit more rare these days, at least around here. Maybe it is because the prices have become so low the strike zone has expanded!
Great analogy. I like it.
My kids play baseball and softball so I've seen a lot of pitches and swings. If the batter is a professional or a kid with a lot of experience, they can learn to layoff those wild pitches. But many times the batter is inexperienced and if this is the first time at the plate, they might swing at a crazy pitch even though the coach is telling them to be careful. If the batter keeps getting thrown bad pitches, sometimes they become impatient and swing at pitches far outside the strike zone. A good pitcher might test the batter out to see if they might chase a bad one. Then when he throws one low in the zone, the batter might swing even though it's a bit outside of the strike zone.
Annie, very good analogy! I always advise my sellers to counter those low ball offers and let the buyer know if they want to hit one out of the park they have to be more realistic.
Hi Annie,
I saw this on Gary's reblog but had to stop by and tell you that I think the analogy is great. Well done!
Lisa
I enjoyed your analogy of baseball pitching to buyers making low ball offers. How creative! I can use that in my negotiations.
Good post Annie! In this market it's good to prepare sellers about the wild pitchers and stay calm enough to counter back.
Then advise my own buyers to think long and hard before making a wayward pitch if they actually "want" the house.
I also agree with Howard and Susan in #25...this assumes the property is priced correctly.
Some seller's are just happy to be in the line-up and off the bench. You don't know if they will swing at that wild pitch until you throw the ball.
Annie, I loved this post, especially during the World Series (Go Cardinals!). I'm a huge baseball fan, and your analogies are spot-on!
Wow! Thanks so much for featuring my post...speaking of baseball...did you see that exciting game 6 last night??? Holy cow what a comeback for the Cards.
I agree wholeheartedly with all of you who have commented on the offer in relation to the listing price...if the list price is inflated, I tell sellers to expect low ball offers. There is something magnetic about a high list price driving low offers...if the list is so out of range then buyers don't know where to start so they go to the polar opposite of the inflated list price...to the lowball offer. My experience shows that homes priced close to market sell close to market.
My concern lately is this new breed of buyer...who trolls for a house. They are not looking at features or location they are simply looking to steal. In my market, nobody steals houses! The data proves it over and over. But they dont listen and ignore the data and place lowball after lowball, house after house. If you hold a few listings, you end up seeing them over and over.
I also believe that real estate is as local as the weather...I respect so many of you and know your market may be different than what I am experiencing in mine...and GAry comment #26...I love how you took the analogy and adapted to your market!
Thank you so much for all the nice words of support...and if this analogy helps you in your practice...hooray! If not, there are plenty of pithy and smart people on here to read! Love the Rain!
annie
It can be easy to not take a lwo ball serious, but it doesnt hurt to respond. I usually get to them when I get to them..
I like that analogy - low ball offers are like wild pitches. Good post!
I guess your post....HIT HOME....with everyone!! heehee.
Very good analogy and so true!! In some of our areas, the tide is turning and it's a sellers market.
Wild pitches never add up to anything!!
Jeannette Kohlhaas
Keller Williams Realty Jax
"A Straight Shot to a Successful Closing!"
904-735-8666
Great analogy and article! It is frustrating to listing agents who do not take over priced listings and get their seller's to price their homes at market value. Sadly this practice happens because a third of the market is over priced and will never sell.
The one thing about offers that I think brokers/agents and buyers need to know - do not present it with negative comments about the HOUSE. The house is where someone has lived and for the most part, has taken care of it the best that they can.
So many times I hear brokers/agents presenting offers with comments like "this house needs alot of work" (this only tells me that even if we do get an accepted offer the buyers are likely to rip apart the house during the inspection process thus creating another painful negotiation for the seller). In other words, lots of negative comments about the property - I blogged about this on Facebook a few days ago - it's like saying "You look fat in those jeans, but I'll still go out with you if you agree to my terms"
I think the best way to present an offer that may look painful is with sincere apprecation for the home, the buyers' interest in purchasing the home, but to say that your buyer would just like to see if that's what the seller would like to see on paper, or is it at least a starting point?
I don't think a sellers' broker needs more education in the comparables; we have all had sellers that are not listening to our best advice but are just waiting for 'an offer' - let the sellers' broker start the re-education process once they get something on the table. Only if the sellers' broker starts the conversation with me will I start the fact finding presentation of how the buyers' and/or I am looking at the value.
Keep the mutual respect going and it will continue throughout the negotiation process.
I love this post - one of the best I have ever read. Your comparison to baseball is wonderful.
This is such an insightful way to explain the offer process! Now that the market seems to have stopped its slide in most areas, maybe the wild pitches will become more rare.
Annie ~ You hit a home run with this blog. Very well written in my opinion. Too many times you see buyers hitting the batter with the ball and that is a automatic walk. Very hard market these days and you better be in the game or you will be sitting on the bench.
Annie -- I absolutely love your analogy. You sure know your pitching! You also know the value of NOT making a wild pitch. Very well said.
Great analogy! I love it because it works perfectly.
Wow I love Baseball analogies but I never thought of this one. Great post. Thanks.
Way to nail it! You know, sometimes it is the best to give a client an example they can relate to...I will definitely be quoting you on this. Buyers need to get their heads around the consequences of their offers!!
Annie, I love your analysis.
I tell my sellers not to be offended by a low-ball offer. I tell them to think of it as an expression of interest from a potential buyer and that it is a signal to me to attempt serious negotiations with that potential buyer.
Love the baseball analogy with this you hit it over the home plate; but same goes true for the seller have a strong pitch to support your price or the property will just sit and the pitches will come in low ball
Ann-How timely coming just at the end of baseball season. Just as in baseball, sometimes offers are out of the strike zone, but a deal is done. You never know what will happen until you throw the ball.
This is awesome. The comparison to baseball (especially at World Series time) is great. Can I share it with my agents?
Good morning Annie. I generally agree with you except for certain second home markets where there is no relationship between asking and market prices. Western MA is like that. Typical homes on the market for 5+ years.
Yes, I see this all the time. I usually see at LEAST a 10% off the asking price if not lower. I deal with a good portion of New Construction Homes and it is amazing just how low they will go, even before the home is built. My builders can't negotiate much off the asking price. They may add a few small options to make a deal, but not much. To stay in competition they market the home very close to what it needs to sell for. When the agents show the home, I make sure that they realize the value in these new construction. In my area, resales can be the same as a new home. So the value here is enormous. Sometimes the buyers are shocked when we tell them the builder is not going to play ball with them. Usually when they see the value they come up in price. I only see them walk, when they were shopping in a store that they couldn't afford to be in to begin with.
Love your baseball analogy. Excellent points and agree with all. I do work with investors who often need to buy at a discount to "market", make repairs/improvements, and resell the home with profit margin - this usually results in a wild pitch offer. It usually results in a "walk" to use your baseball analogy but certainly not always.
I have made hundreds (maybe a thousand) low ball offers in a past part of my career. Most of my clients were realistic and knew than 99.9% of these would go no where. I found that this was not a good business model for me, so I stopped doing this. I feel sorry for agents who are working with these clients, especially if they are looking at this many homes....
I always thank agents for their offers, no matter how low!
I would have to say that buying a home in this market is like buying a car. People who buy cars normally make low ball offers the first time just to see what the dealer will come back at. Unfortunately for the listing agent, they have to calm down the seller and make them realize that this is a buyers market, and not to get emotional about the offer and just counter the offer. YOU HAVE AN INTETRESTED BUYER! I spent 15 years in the retail automobile industry and faced this type of buyer all the time. What I would do as the manager is counter at slightly below the list price and see what type of reaction I got back. This my friends is called negotiiations. Everybody is looking for a great deal and will not leave money on the table. So as listing agents, I would suggest that you present the offer as it is and keep you sellers calm and make a counter offer. If your home is priced correctly, the buyer knows this and is just on a fishing expedition to see if they can steal a home. The key to this is not to be emotional in the process. what your seller thinks it's worth is not the same as the buyer's view.
Great post- your title caught my eye and I live in St. Louis. Let's go Cards!!!!
Great job. I love the anology.
Great analogy, especially as the 7th game in the World Series goes off tonight! Being a baseball fan I really got it. Just sent this link off to an agent who brought me a low-ball offer and ended up nowhere. A lot of time and angst wasted. Thanks for the great Blog!
Great baseball analogy, especially during World Series week. You definitelt put a lot of thought into your post. It was a great read. Thanks.
I loved all the thought you put in the article & comparing it to baseball. But now I'm going to carry this a step further.
The seller is in the box and crowding the plate: Has a home in need of a ton & I mean a ton of repairs. And has it priced with other homes that were not only prepared for market but also staged and MOVE IN READY! So as a coach I call time out walk out and instruct my picture to throw a wild pitch, right at the head works best and back that batter off the box. PRICE THE HOME AT MARKET VALUE FOR THE CONDITION.
Now if the seller stands in the box normally and has all the old wallpaper removed, every little thing repaired and ready for market, we can play ball!!! Buyers want every pitch right over the plate and easy to hit it out of the park like teeball or coach pitching.
This is called a BUYERS MARKET and if the sellers want to sell they must set it on the tee or at least let the coach pitch if they are unable to get it over the plate! :)
LOVED THIS BUT I HAVE TO GET BACK TO WORK!! CONGRATS
Sometimes a wild pitch is necessary to back the over-agressive batter away from the plate. It can also be a good tactic to use on a desperate batter who is ready to swing at just about anything. I throw these pitches when necessary and it has worked to my advantage. I am tired of hearing agents bitching about bad offers. Pretend the offer was $0 and make a counter. Stop taking this so personally, it's just a negociation. I literally had an agent call me crying the other day saying "this can't be your offer, my client is going to kill me". Are you kidding? I am seeing multi-family properties close for 50-60% of listing price fairly often. What kind of a disservice would you be doing to your clients if you found out that the seller was in a comprimising position and would have taken $100K less?
How about some actual discussion on these boards?
Great Post....I plan to use this with my off the wall buyers
Great analogy. What do you do when the pitcher wants to throw a slow pitch softball at the batter, or use a tee?
Great Post, I loved it and it's all sooo true!!!! Have a Wonderful Weekend!!!
great analogy after watching the world series last night! The only time a lowball offer is reasonable is when the asking price is way out of whack. There are so many similar models in my area of Parkland FL that it is easy to see what the right price should be. Lowball offers really don't come in that much with so many comps to back up the market value.
Great fun. But, don't forget the Umpire!
The appraiser just may have the final say.
Annie,
While I appreciate your analogy to baseball and think it is very clever, and I agree with the opinion that "Lowball Offers" are a total waste of everybody's time (in Owner-Occupied situations), I highly disagree with your strategy of offers for your clients. No inspection? Offering over asking price? Based on what? If the comps justify it, OK. But unless your market is completely different than mine, we are still in a Buyer's market. It seems if we negotiated (or lack thereof) in this manner, we would be doing our clients a huge disservice.
One of the easiest ways to stand out in this market is with stellar negotiating skills. I believe we are throwing in the towel and putting the Seller in the driver's seat if we take this approach.
Just sayin'
Gregg
What a creative analogy. I'm not into baseball but it all make perfect sense and easily understandable. Thanks for the post.
I love the baseball analogy with my Texas Rangers headed to win the World Series tonight! I see this buyer occasionally who looks at the comps and still wants to steal the house. It rarely works in my market. It hurts to present those kind of offers because I know what the outcome will be. Sometimes they come to a middle of the road compromise, but most times not and the buyer does not get the house. Great post!
Annie, I too believe that wild pitches can be a listing agents best friend. If the seller is overpriced, despite their denials to the contrary, it will be a wake-up call. It make take more than one call.
In theory I agree with you. However, once during my 19 years in real estate I took a low offer on one of my listings and had it accepted immediately.
It was an inherited property, and the sellers (2 sisters) had known the buyer all of his life.
The offer was so low I thought they'd scream. Instead they said "OK, we like him. We'll do that."
Looks like you hit a home run Annie. Great job I loved it.
Luke...love the idea of backing the batter out of the box on an overpriced listing! Please see my earlier comments...post #34...I think everyone here agrees that overpriced listings attract lowball offers.
Negotiations are about compromise and good faith...my market is not distressed and our inventory is low...i wouldnt call it a buyer's market. Homes priced at market have bidding wars. I have had those listings this year, and still with full price and better offers coming in, someone will come in with a lowball...hello?
I dont find insulting people negotiating...i find it a waste of time and arrogant. I know a seller who did something equally insulting when he received a lowball offer. He instructed his agent to counter with a number higher than his list price...hey, why not? Maybe it was the seller's lucky day!
Thanks for heating it up!!
Hi Annie - I think we have seen all the types of pitches you mentioned, and I think in all cases, education and analysis are key. Each offer made must be made uniquely to the situation, much like pitches. Each situation is handled differently and will determine what type of pitch is thrown. It was a fun read.
If the Buyer's the pitcher and the Seller is the batter, then getting them to swing is the goal.
If they've not gotten a pitch in months and they are desperate just to get in the game, then throwing a pitch, any pitch including a low ball may be more than enough to get them to swing.
Unlike baseball, a Buyer really doesn't have to care whether they throw 3 strikes or 30 junk balls - they just need to serve one up to that Seller who is willing to take a solid swing - especially when the Seller's motivation is to stop their losses and get out.
Your job as an agent is to work all offers, wild or not. Just because a pitch is out of the "zone" doesn't mean you can't put some wood on it... Work to find an agreeable number for both parties. I am ALWAYS happy to get something on paper for a listing. Someone has taken the time to commit to your property and has physically (written on paper) and emotionally committed to buying. I am grateful for that, now all I have to do is get them to a number that works.
So, throw all the junk you want, if it is around the zone I am going to make contact and chances are hit one out, again...
Go Rangers!
Great analogy! You obviously know more about baseball than I do. When selling the home where my children were raised, we received the ridiculous low-ball offer. We were unwilling to counter primarily due to the memories and emotions connected to our home.
If a buyer views a house as only a commodity, perhaps the low-ball offer makes sense. If you are buying a home, and have found the one that is ideal for you and your family, you are foolish to try low-ball your offer.
Awesome, especially reading it after staying up for Game 6 last night! Reposting if I can, thanks! Oh, and GO RANGERS!!
I LOVE THIS POST. Kudos to you for finding an analogy that will "hit home" with so many buyers and sellers. I bet you are an excellent agent!
Great analogy...I think you hit it out of the park. I know as a catcher I'm getting worn out by too many wild pitches lately.
This week I received a Low Ball offer and this completely insulted my Sellers. My clients countered, and again, we were insulted with another low offer. I think much of it is education... REALTORS need to do their homework, and be sure that they are really helping their Buyers get a home if that's the one they really want. In this case, the opposing REALTOR is doing his Buyers a disservice. Thank you for Sharing the persepctive.
Good morning Annie,
Great analogy, and great timing with the World Series! Have a wonderful weekend!
Great post, and well-thought-out analogy! Gonna repost - great timing during the series!
Annie,
Great analogy. There is a reason to think through the low ball offer. The challenge is when the home is priced incredibly higher and the low ball is truly a fast pitch over the center of the plate, but the sellers are calling it a low ball;-)
All the best, Michelle
Great post and well said!
I heard a story, not sure if it is true, but it's an interseting option on how to handle a lowball offer.
House is listed for $400,000. Buyer makes an offer at $250,000. Instead of getting mad, etc, seller counters with $14,000,000.
Buyer's agent, upon rececipt of $14 million counter says, "are you kidding? that's ridiculous."
Seller's agent says, "yes, ridiculous, just like your offer."
The trick after the wild pitch is to not get pulled and, if your buyers are still interested, throw one across the plate. Better to throw a good one from the start.
Low ball offers! Oh brother. Believe it or not, they've never been a problem for me as a listing agent, but have they ever been a problem for me as a buyer's agent, even with short sales and REOs! Talk till you're blue in the face about the need to offer current market value, but it does no good. That buyer is sharp--he knows that every real estate agent can work an offer that's 30% off listing price and get it accepted by the seller despite all that you've said to him. Then when you get no response from the short seller and the contract fails, he just can't believe it.
I am a huge baseball fan, totally get it and thank you for the metaphor and it is perfect comparison. now it stuck in my mind and will use this for future education to my clients.
Nice atricle, thanks!
GReat post, Annie! I have a buyer who recently submitted a " wild pitch" of an offer, $100,000 under list price, Bank owned waterfront property. He could care less about the bank. After 2 counters, we are under contract. The appraisal came in very close to my buyers offer. We just never know in this market.
Great post and analogy. I too am going to repost.
Annie,
A great analogy! Another danger with the "high and inside" wild pitch is the batter may think you were purposely trying to hit him in the head! Then the fight breaks out!
Just a note on your comment about "negotiations are about compromise and good faith" - I teach negotiation to real estate agents across the country and have also taught around the world. In many cultures around the world "compromise" is viewed as a sign of weakness. Compromise means giving up something. However, in the U.S. we view "fairness" as a value. I always ask my students "How many of you want to be perceived as unfair in a negotiation?" and no one has ever raised his/her hand in the U.S.! Most people define splitting something fairly as splitting it 50/50. So many negotiations in the U.S. do end up in the middle of the first reasonable positions from each party on the justification of "let's split the difference 50/50 - that's fair!" The fairness logic can be effective with many U.S. people.
In negotiation jargon, the offers and counter offers are "anchors" thrown out by each party. A good anchor has to be defensible, credible, and justifiable (using market data and/or other logic). If the anchor is justifiable, it has "staying power" and the negotiation will occur around that anchor. Bad anchors have no staying power and are not defensible. Low ball offers and over-listed prices are bad anchors. And if the seller is over-listed, it's not really a low ball offer!
Thanks for bringing up this great topic. What's really interesting is how the buyer's agent presents the low ball offer to the seller face-to-face! I always have the buyer's agent do this - I'd rather have the seller upset with the buyer's agent than with me!
All the best,
Tom Hayman
www.thereni.com
GOOD ANALOGY
GREAT POST
THANKS FOR SHARING
you are right on with your analogy. Good post!
In our market place, we are seeing one price range actually appreciate / recieved higher than list price in negotiations and that is $120k - $160K. It is than important to know market statistics when making offers these days because there are times when low ball offers get the buyer know where fast. Low balls are on their way out in our market place - though others may disagree - it is becoming less common to offer 20% less than list. I'll still write it up yet tell the buyer it is highly unlikely they'll even get a response. Also, pays to know stats.
Writing offer's is like a science project, you do the research and comps, and have passed on this information to your client/customer. And they in turn review this be for you write their offfer now, they have the evidence to support the opinion of the offering price of what they wish to pay. The problems begin when you have everyone else telling them that the housing market as changed and the property sellers are disperate and will accept anything so they look at your info which is fairly accurate for what the area is going to support and decide to go with the therory of the Kmart blue special therory because they think the guy will take it and be happy. For these clients that I've given them solid material supporting a far market value offer, I usually tell them that you submit that offer I' m going to be your representive because my name and reputation is involved and I like to be making fair offers and everyone plays nice and escrow will be quick and friendly. But all the so called experts are saying homes aren't selling the stay long periods on the market price changes all mean there is a problem, so you have to get you group to stop listeming to the tv and radio long enough to view the house and see the data of what houses in this area are selling for and stop trying to be the frankenstein monster that the experts have created.
I had one of my sellers get hit upside the head last week with an offer so wild it should never have let the mitt. Not only did it come in substantially under market but they asked for seller concessions, extended inspection period, home warranty...
Tom #96...thank you for your comment based on your experience. I really appreciate your thoughts.
My market is seeing alot of overseas buyers...and in other cultures buyers negotiate everything! As I watch, Americans are not comfortable haggling. They have maybe 2 counters in them. The overseas buyers also bring cash...and want a BIG discount because in their culture cash is king. They will walk into a home and begin to insult it! I have learned that means they are interested. They will try renegotiate the price even at the closing table!
American buyers here are well-qualified and secure mortgages easily. Sellers are just not willing to listen to 50cents on the dollar for the security of cash...they will take their chances with a buyer putting 50% down and receive 95 cents on the dollar for the risk of waiting out 2 weeks post contract for a commitment.
Love the anchor terminology..and again agree with your thinking!
It is an interesting time to be an agent!
I throw "wild pitches" for my buyers all the time, sometimes they are excepted and sometimes we are completely ignored. I make it clear to my buyer that it may not be the best approach and they may get theirs feelings hurt, but if they want to try a low-ball offer, I'm in the game! When we hit a home run, it feels good for all involved. Don't discount the little guy.
Beign a real estate agent and a baseball fan - I love your analogy!!!
What a great post...and I love the analogy!
Taking it to it's logical conclusion, is the most egregious "wild pitch"....hitting the batter, which almost always results in the seller getting so pissed off that he refuses to deal with the buyer (or his agent)!
I'm going to re-post!
Annie, you really know your baseball and real estate. I'm not a fan of the low-ball offer. I understand the reason why buyers and the agents who write them up offer them, but sellers don't have to respond. It always comes back around to needs. Does the buyer need to buy this home? Does the seller need to sell their home?
The baseball game is an interesting analogy.
However since our office represents buyers I wonder about all the homes that are listed at a "screwball over-market price". Is that like a batter thinking if he just holds the bat out that the pitched ball will bounce off and he'll get a base hit out of it?
We probably see as many of those as we see of the "lowball" offers.
Thanks for the post!
I love this post. I often feel like the catcher - caught off guard when I know my home is priced properly. It is a great analogy and a great way to bring the situation to life in terms that both buyers and seller will understand what is going on. Great post.
Annie, thank you for the great creative post! And I appreciate the education from Tom #96, and your follow-up comments on overseas cash buyers. They don't understand why a homeowner doesn't jump at their offer that may be $100K or more below asking, but accepts a (higher) financed offer instead, because of that belief that cash is king. Cash may be king, but it doesn't mean the seller is desparate.
Interesting analogy. Sometimes it takes simplicity to get a buyer to understand the up and downs of this market. I had one buyer who got so mad with me when the listing agent wouldn't present his low ball offer on instructions from the bank who owned the property without proof of funds, he never talked to me again.
In the City of Napa, CA, at out office meeting last Tuesday with about 120 agents attending, there were approx. 30 accepted offers and of these 15 were multiple offers situations.
In my view it all depends on the buyer's motivation. If the buyer is in love with the house and has to have that particular house, then the fast ball analogy works. For some people, though, it is all about the numbers even on an owner occupied property. For example, I personally expect property values to fall a lot more than they have already. So why would I want to base an offer on current comparables? And the fact is, you absolutely never know what is in a seller's mind or what their situation might be without making the offer. It is incumbent upon listing agents to know how to keep the seller from being insulted by low offers.
(@Curtis in#110: In Georgia, if you have a written offer the law requires that it must be presented to the seller regardless of any requirements the seller may have about how they want it presented.)
Interesting way to look at the situation, I am finding that low ball offers are generally ignored just like a batter taking a pitch for a "ball" and forcing the pitcher to throw more accurately the next time.
Great analogy!
You are correct... however, I have had some success with lowball offers in specific geographic areas where many homes have been overpriced and the competition has been sitting on the market as well. When this happens, an investor or savvy buyer can pounce on one after the other if he/she has a patient agent and sometimes an unbelievable deal can happen for a buyer. It has happened with me on many occasions.
Sellers who don't get rattled by a lowball (and who have been coached ahead of time not to tell any buyer to "go *%$^$" but rather to counter the offer), can find that the fishing expedition on the part of the potential buyer was only a test and that if the seller counters back instead of being offended, an agreement can be reached. Buyers sometimes are nervous now and the investors are very patient in my neck of the woods.
Annie: A great post, but I disagree with you on a few points. You mentioned that a low ball offer insults the seller and confuses the agents. Yikes... sounds like this seller needs a different agent... one who knows what to do with one of those "nasty" low-ball offers.
A good agent will not let the low-ball offer insult the seller. There are good ways to present it, and sloppy ways... which WILL insult the seller. An agent like this needs some really intensive training on what to do with, and how to present a low-ball offer.
And... if this agent is also "confused" by a low-ball offer... perhaps more training, or perhaps even a different profession might be in order.
Sorry to be so critical, but a good, experienced agent should NOT have a problem with a low-ball offer.
As my Grandfather taught me, "Something is only worth what someone is willing to give for it." If you ask $100K for your home but the most someone is willing to give you for it is $50K then your home is worth $50K. Now you may or may not sell your home for $50K because it may be worth more than that amount to you but that aside, if it were to go to auction, that's about what it would bring.
I am of the belief that an offer is better than no offer.
Someone may have their home priced at $100K but if I can only rent it for $500/month then it is only worth $25K to me as an investment because I can usually get 2%+ of the purchase price per month in rent. Most agents laugh when I make offers like these, I don't use those agents anymore.
What about intentionally walking the batter (seller)...where you make your offer so compelling to the seller that they don't even have to swing! They walk right into the deal
Love your analogies!
Hi Annie, a really well thought out post, congratulations, it all makes sense. Thanks Geoff
Some of these wild pitches are so hard they are like a hit to the groin! It sure will be good when the market becomes more balanced! God Speed to that!
Wonderful post. Would you mind me reprinting this for my buyer information packet?
Great analogy however, once the pitch is thrown, it's up to the batter or umpire to determine the results. I like football, so when i have a moment, I'll think about how that would play out. Good stuff regardless.
Great Analogy. Great example for buyers who think that reality TV is what is going on in their markets!!!
Annie - I like your analogy, and I agree that lowball offers tend to antagonize sellers.
You hit a home run with this post. Agents should have a three-strikes rule on low-ball offers. Write three of them, and YOU'REOUT!
Annie,
Very great analogy. However, in this crazy pure buyer's market, I tend to disagree. You never can tell how far a Seller is willing to go unless you try...so, I feel it is prudent to test the waters with almost every deal, and recommend starting with low ball offers. Sellers in this market should not feel insulted with a low ball offer, but instead should feel conplimented that someone is even interested in their property.
We've had so many deals here sell for 25% or more from asking price. And if that is your target, you've got to start twice as far from the center of the strike zone, to meet that target through negotiations.
Anyway, thanks for the advice, it will nonetheless come in handy during some deals!
Makes sense to me.
good analogy
Excellent post Annie! I love the comparison to pitching a baseball- makes SO much sense! Thanks for sharing :o)
Nothing left to say-
Wow...lots of good discussion here! Can't repeat it enough, real estate is as local as the weather...so if this analogy doesn't fly in your market...no harm no foul!
Karen #115 - When an agent prepares comps and shows a range of value, and a buyer dismisses the data and comes in with a number based on nothing, i find that confusing. Why ask for help and expertise and then dismiss it? I find it confusing when a listing agent has shared that their are multiple offers on the property and a lowball comes in because despite the stated urgency for the property, the buyer's uncle has told the buyer that he just read an article in XYZ national journal that prices are down and the sky is falling.
I agree that sellers must be prepared and expectation management is paramount as listing agents. And that expectation setting comes in quite handy when presenting a lowball offer. If you have some words and technique you can share about presenting an offer that is 50 cents on the listing dollar while other opening offers are coming in above 90 cents on the listing dollar, I am all ears! In fact you should write a blog post about it as I would nominate that as a feature!
This was written specifically for my marketplace (where less than 1% of transactions involve a buyer agent - it hasnt caught on here) and the group of buyers and sellers who read my blog. My market is not like the one portrayed in the media. My market is strong and values are high. This year on average, i held my listings less than 60 days. Not a single house sold to a lowball offer and most had multiple offers. My market is small, inventory is tight and there are still multiple buyers for most homes. Lowball offers are not the way to start here if you want to buy a house.
Thanks for weighing in..dialogue makes the world go round. I hope you are enjoying a good year of production!
Unless it is a solid buyer's market, making lowball offers on properties in MLS is a total waste of time. However if it is a buyer's market, then lowball away. I've seen sellers accept 60 cents on the dollar just to get out from under a deal.
A "Grand Slam" Post.....
Buyer's need to be ready, willing, able and Realistic to play ball or they need to be in the bleechers!
I have to disagree, sorry. Nobody knows what a seller may take and we must present all offers no matter how low they are. I have been surprised more than once with low offers.
Annie,
I enjoyed your baseball analogy. Unfortunately, it is sometimes difficult to determine if the low ball offer is from a buyer who loves the house, the neighborrhood, and community, and will be a long time happy owner. Perhaps they have been watching too much late night television! I say, let the investors scoop up the foreclosures and short sales. This will go along way to solving that pesky problem of too much low priced inventory. Either way, it is the buyer who puts the ball in motion, sometimes at mid-court and sometimes directly under the goal. Sellers anxiety wil be greatly releaved when they understand who that buyer really is.
Annie,
Just a follow up. The U.S. is the most efficient economy in the world. We have many different choices on shopping. If we don't like WalMart, we can go to Target or K-Mart or Costco or Sears other stores - or even online at Amazon (and many others). Net, we don't have to negotiate very often. In the U.S. we are taught to negotiate on housing, cars, and maybe other large purchases like boats.
In other countries, they don't have the choices we have so if they want a better outcome, they have to negotiate (or bargain or haggle). And most other economies around the world teach that you are expected to negotiate. If you don't, it's an insult to the other party. So many people grow up haggling and using hard bargaining tactics for everyday living. Then when they come here they use the negotiation approach from their culture and the U.S. negotiators are uncomfortable. On a global scale, Americans are not viewed as very tough negotiators!
Go Cardinals!
Tom
Love it! SO worthy of a re-blog... or 50!
Too close to home recently.... And I read this blog as I had game 7 of the World Series on in my office!
Very well said.
I agree with you and what a great analogy! I'm finding buyers calling and only wanting to see short sales or foreclosures simply because they think they can give the wild pitch! My hope is these people wake up before rates start to creep up.
Annie...You hit it out of the park! Love your use of pitching as an analogy. Guess I need to subscribe.
Kate
Annie- This is so true. And your reply to Karen #115 was spot on! On more than one occasion, I have found myself apologizing and reminding the sellers that we are required to pass on all offers, no matter how insulting.
I had to put one of those wild pitch offers in last week. Let's just say it was not a "hit".
I love it when against all coaching a buyer makes a wild pitch. You've gone over all the sellers stats and still they throw a wild pitch. Of course he lost the game. When he called to blame me and said he was switching teams I just laughed, and sighed "Thank You"
With the world series just ending, this is a timely post and a good analogy. No strikes here.
I have thrown 3 of those wild pitch offers this year and had clients walk away with great deals. Yes, we went in well below comps, houses were priced fairly, but we got our deal due to high days on the market. Yes, it stinks to be a seller on that side of the offer, but really in this market, you can't blame a buyer for not wanting to over pay.
Loved the baseball analogy. It was fun and easy to read. Great comparisons.
Cute story, but may be setting up your clients for a long listing, lots of listings out there these days going over 500 days or just plain expiring. Many serious sellers should be prepared to welcome a lowball offer, its far better than no offer and a market that doent want to waste anymore time on a seller that doesnt see the reality of a market full of forclosures and buyers with no money.
Hi Annie, maybe we need "refs" to penalize buyers after they have thrown too many low ball offers!
If I were a batter I would take all the wild pitches I could get, espicially if I did not have to worry about striking out. Maybe I could connect with one and knock it out of the park. But the worst that could happen would be that I walked to first base.
Your market sounds like every Realtor's dream. Ours is not like that. We often have trouble even getting a wild pitch.
I require agents that bring low ball offers to submit their CMA with their offer. If they don't, I just counter it at full price with the terms we would accept. Trying to rationalize with irrational people (on low ball offers) just makes my head hurt so I don't waste much time on them regardless if I am the listing or selling agent here in the Boise area.
Annie,
I loved this scenario, especially with the World Series going on (or just finished I guess). You hit a home run with this post!
Love the analogy! Coming off the world series, it's perfect, but sometimes a wild pitch actually find the strike zone. That's what these folks are banking on!
Annie,
Great post; as inventories decline I believe we'll see the pitches come into line.
Best,
Steve
Love the tie-in to baseball that was on everyone's mind after the world series, especially game 6! Lowball offers take the fun out of selling real estate and just waste everyone's time. Buyers need to make a serious offer so the sellers will take them serious. Frivolous offers should be challenged.
I read a book that said when you get a frivolous offer, just put the pen down, look the buyer in the eye and say, why are you making such a low offer? Tell them that the sellers will want an explanation why you are not offering in good faith. Ask something like, are there some repair issues you want resolved? This might help them think about their offer and make one that might help get the negotiations going.
Buyers need to know that the sellers usually have a mortgage to pay off and they are not going to be anxious to sell for a loss.
Annie, your post is very descriptive of the current state of affairs. Because of the Short Sale and REO numbers, Buyers have become accustomed to thinking they are entitled to a 30% reduction of the current asking price, whatever it is! Sellers too often believe their home is worth more than it is because of their emotional connection. We should find some equalibrium when the market levels off.
Great example! I've had buyers wanting to make low ball offers before and I usually give them that "Seriously?" look, but it' not always effective in getting them to change their offer. Next time I'll use your analogy and see how it works. Thanks!
Yes, I have to agree. Several years ago, we took a Bank of America forclosure and priced it at $265,000. Needed lots of work and former owner had two mortgages of $400,000 plUs. Buyer Doctor attended open house and started negotiations at $160,000. Bank was not impressed till we put down a $30,000 Binder. Eventually worked at $240,000 and some seller concessions including half the cost of an old 500 galloon oil TANK UNDERGROUND REMOVAL( READ CONTAMINATION REMEDIATION.) So Get In The Game~!!
Cordially,
Phil Woolley CRS GRI CSP ABR SRES CDME
I love the baseball analogy. I also appreciate your comment in response about how this post was written specific to your market. My market is strange, where sometimes low ball offers get accepted and sometimes there are multiple offers on the same home. I've learned to give the buyer the information but to present any offer, as we have been shocked at what some sellers are willing to take, so you never know. -Kasey
I love the analogy, very well put! I'll have to print this for some of my buyers to read.
Beautiful work,
Nice to explain it that way to the Buyer Client as well. Maybe it would educate them a bit and perhaps save us a lot of wasted time with those lowball Offers. People needs to have some more respect for Realtors and the work they do. Thank you and great work.
regards
Chad Singh
Hi Annie,
Love this slider of an analogy. It sends a clear message on the topic.
Great piece.
Happy selling!
A great post.
I love the baseball analogy as well! We are seeing quite a few wild pitches, but those don't go through often, if ever. It is better to go for a great deal than a steal in this market so you don't miss out!
I fully understand that as a "Sotheby's" agent, you would like to avoid lowball offers and discourage them. However, I work with a lot of investors, and invest myself...and lowball offers are the norm AND are oftentimes accepted. If I tried to talk my clients up, I would both lose them as clients and cost them a lot of money.