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There is much disagreement about the term ‘lowball offer’. Some people use it to describe an offer that is significantly below the asking price, while others use it to describe an offer that is significantly below market value. For the purposes of this blog, I’m using the term ‘lowball offer’ to reflect offers that are significantly below the asking price OR below market value.

Lowball offers can be disappointing and frustrating- but they can be managed. Here’s our best advice:

Understanding the Buyer’s Motivations

Before responding to a lowball offer, it’s important to understand the buyer’s motivations. Usually, lowball offers come from buyers in one of the following situations:

1 – They are looking for a bargain. Opportunistic buyers or investors are looking for a deal and want to buy a home below market value. They use lowball offers as a way to sniff out desperate sellers.

2- They have budget constraints that limit how much they can pay. Sometimes, buyers fall in love with a home that’s outside of their price range – so while they might see how your home could be worth $1,000,000, they only have an $800,000 budget, so they submit an $800,000 offer, just in case they get lucky.

3 – They want to renovate, so they subtract their renovation budget from the asking price. This happens more often than you’d expect. A buyer falls in love with a $1,200,000 house and plans to replace the (totally-acceptable-for-the-average-buyer) kitchen and bathrooms, so they offer $1,000,000. Some buyers don’t realize that their personal plans for a home don’t impact its market value.

4 – They think it’s a good negotiating tactic. Some buyers (and their agents) love to negotiate and use lowball offers as a way to shift the power dynamics during a negotiation. They might have every intention of paying market value – but they want to play out a long negotiation first.

5 – They don’t know any better. Most buyers depend on their real estate agent to help them understand the value of a property, and unfortunately, not all agents are experienced in valuing properties. I’ll never forget a buyer I met 5 years ago, back when bidding wars were hosted in person. I was the listing agent on a gorgeous west-end home that had attracted 15 offers and sold $300K above the asking price. She had offered $200K below the asking price. When she found out we had sold the home to someone else, she was in tears. She shared with me that this was her fifteenth lost bidding war and that she had a huge budget – but that her REALTOR had told her to offer that amount. He hadn’t done a comparative market analysis for her – he just picked that number of the blue. I still wonder if she ever found a home.

6 – They have legitimate concerns about the value of your property. While you may or may not agree with them, they may truly believe that your home is worth substantially less than your asking price.

Understanding the buyer’s motivations can help you better negotiate and potentially increase the likelihood of a successful sale.

Are You Priced Right?

Are there strong comparables sales (in other words, nearby, similar homes that have recently sold) that justify your asking price? Have you factored in the current market conditions?

Toronto home buyers are SMART – they can spot an overpriced home just as fast as they can spot an underpriced one. If you’re selling your home and have received multiple lowball offers, you may be overpriced.

Don’t Take it Personally

It’s easy to take a lowball offer personally, but it’s important to remember that the buyer is simply trying to negotiate the best deal for themselves. I’ve seen sellers respond emotionally to lowball offers and refuse to negotiate – heck, I’ve been that seller myself! But if you can avoid getting defensive, you’ll increase your chances of success.

Counteroffer with a Realistic Price

If you receive a lowball offer, it’s important to counteroffer with a realistic price. Consider the current market conditions, comparable sales in the area, and any upgrades or renovations you’ve made to the property. A counteroffer should be based on objective factors and not on emotions or a desire to get back at the buyer. Just because the buyer is playing games, it doesn’t mean you have to join them.

Be Willing to Walk Away

If the buyer is not willing to negotiate and is not offering a fair price, you may have to walk away. Some lowballers are just looking for a bargain and have no intention of ever paying market value.

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