Puzzle Finance Blog
The art of the low offer
Would you be able to walk into an open home inspection, fall in love with the property and then offer them 85% of the asking price without flinching?
I was able to and I did. I can happily say that through utilising the tactics below, I was able to purchase my home at a 15% discount.
The house was scheduled to go to auction (the preferred sale method these days), but by making an offer, I was able to not only have the seller accept my low offer, I bypassed the stressful auction process entirely (an even bigger win).
So how do you make a low ball offer and get away with it? Here are the tricks of the trade. Understand the mind of the seller
Buying a house is one big game, a game that requires you to bluff, hold your nerves and do just about everything that doesn’t come naturally.
You firstly need to understand the mind of the seller; this will show you that they too are nervous about the process.
People trying to sell their house are thinking things like:
- Will my house sell?
- Is my asking price too high?
- What if the house passes in at auction?
- Every week I don’t sell, I am paying interest on my mortgage
- I want to buy another place and need the equity from my existing house
This means the seller isn’t standing there completely confident in the sale of their house. They too are human and have their own concerns, doubts and insecurities. Knowing this will give you an advantage
Understanding what the seller may be thinking is critical. It helps you realise that no offer will be simply put in the bin, the seller will have to go through the questions above based on your offer and seriously consider it. If anything, see this as a confidence booster that you are two steps ahead of the next person who doesn’t dare to make an off market offer. Make your offer as tidy as possible
This means putting forward a solid offer, slightly lower than the asking price and limiting the ‘ifs’ and ‘buts’ in your offer. Don’t put conditions in place, just simply make an offer and follow the rest of the below tactics. I would suggest not going below 85% of the asking price as this will likely just result in failure. Explain why you are offering a lower figure
Don’t just make a low offer and not explain your methodology. Look for anything on the property that would potentially be a worry point for the seller.
Tell the real estate agent your concerns, such as; Unrepaired damage you noticed Findings in the pest and building report A comparative sale that recently happened for a lower price
Use this as leverage for why you believe the property should be sold at your asking price.
Tell the real estate agents/owners you will not be attending the auction
This is the golden goose in the game.
Make a tidy offer, explain potential worry points and follow up with a note that you will not be attending the auction. The idea of an interested party, willing to make an offer, though unwilling to attend the auction is a big concern for both real estate agents and sellers alike.
It shows that you are serious and willing to acquire this house, albeit not at auction. The seller will likely have to second guess whether or not the house will reach the reserve price they have set, let alone potentially be passed in at auction without an engaged and willing buyer such as yourself. Assume they will counter offer
In most instances, the real estate agent or owner will come back with a counter offer. This means they are willing to engage you and your first few steps have worked.
They are either happy with your offer but attempting to squeeze more money from you, or simply not happy and continuing to engage you just in case you come to their asking price. You will never know which way this sits, so I suggest you don’t walk away from a counter offer and make one last offer that is slightly higher but still lower than their asking price.
Explain to them that this is your final offer and you would like confirmation as soon as possible as you are particularly interested in another property. Remember that real estate agents are not working for you
Throughout the process you will likely be working closely with the seller’s real estate agent. They will be working you from moment go and you must remember that they are working on behalf of the seller, not you. Do not give them any insights into your strategy or true situation – assume that everything you tell them is relayed to the owner.
In fact, a real estate agent can become a reverse weapon for you in your bargaining. Explaining to them in detail all of the above means they might feed advice to the seller that will help you in getting your offer accepted.
“They are very interested in the house and have made a final offer. They won’t be attending the actual auction so I think it might be wise to consider”.
It is also worth noting that real estate agents are well rehearsed in these kinds of games. Be genuine with them and always play it cool. Real estate agents work on commission, so they too have an interest in getting the property sold as soon as possible without risk of the house passing in at auction. Have your home loan approved and ready to go
Don’t go shooting offers to people if you don’t have the funding to back it up. Be sure to have your home loan approved and ready to go. This will greatly reduce administration time and can be used as an incentive for further counter offers.
Posted by Alex Wilson - Savings Guide on 23rd August, 2012 | Comments | Trackbacks
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