How to Make a Low-ball Offer When Buying a New Home

Hey everyone! Today I’ve got a guest post from Anna, owner of Bargainmoose, a site for Canadian coupon codes, discounts and shopping deals.

She has recently purchased her first home and wants to share her research and insights into how to make low-ball offers, to bag yourself a super bargain on what is likely to be one of the biggest purchases of your life. Take it away Anna!

Tip 1: Do your homework

When you’ve decided on the area in which you want to buy a house, do your homework. If you can, try to find out local property values. Google is your friend! Find out as much as you can about the local area and the state of the market.

When you view the house, bring a notebook with you and take notes on absolutely everything you see – use this information in the negotiation stage.

Things to ask the estate agent – when was the property built, are there any other interested parties on the property, how long has it been on the market, how many viewers it has had, why the vendors are selling… get as much information as you can.

Tip 2: Hire your own real estate agent

Did you know that as a buyer, you can also hire a real estate agent to work on your behalf? They don’t just have to work for the vendors. Having your own real estate agent can mean that you have access to expert advice, local property knowledge, pricing and values, and they’d be able to give your information you might not otherwise have known about. Also, they may even negotiate on your behalf, if you’re not comfortable with the process. Spending a few hundred dollars on this can potentially save you thousands.

Tip 3: Find out who you are buying from

Ask the real estate agent who the vendors are – if it is a private sale or a commercial one. The latter means that the house could have been repossessed and the sale is being carried out by a bank or other management firm. Knowing who the vendors are can help you make decisions as to the value of your initial offer.

Your initial offer

The results of the above research will have given you knowledge and information, putting you in a stronger buying position and becoming ready to negotiate.

If there are no other offers on the property and you’re the only interested party, I’d recommend that you start at about 85% of asking price. This is not a hard and fast rule though, and might vary depending on the property itself, the condition of the property, the area and local amenities.

Additionally, if it is a private sale, you run the risk that the vendors might be offended with such a low-ball offer and could make further negotiations tricky. But with commercial sales, you’re dealing with a bank or a company, so there’s less chance they will take offence and there might be more room for movement on the price.

Counter offers

If the vendor refuses your first offer, don’t worry! This is pretty normal. If they make a counter-offer, then you can clearly see they’re willing to negotiate. After this, don’t rush in with counter-offers – this is never going to be a speedy process.

When buying my house and the vendors made a counter-offer, I instantly wanted to make another offer that day, as I am very impulsive. But I controlled myself – I told their agent that I had more properties on my list to view, so I might be in touch next week. The agent phoned me back that afternoon to inform me that the vendor would accept my offer! I had been willing to spend $10k more, but my patience saved me some cash!

My experience

When I bought my house, I was lucky enough to have a friend of the family who owned a real estate company nearby, and he was able to give some advice for free (well, the cost of a bottle of wine). I used that knowledge and advice when negotiating for my house.

In the end, I managed to purchase the house for 89% of asking. I was so excited when I got the final phone call confirming the vendor’s acceptance of my offer, I nearly dropped the phone!

Do you have any more tips on making low-ball offers when buying a house?

2 thoughts on “How to Make a Low-ball Offer When Buying a New Home

  1. Here in the US in the market where I live, it is absolutely hard to get anything with a lowball offer. We have investors that we compete with that snatch up properties within a mere 2-4 days, and sellers no longer accept ANY offers after they have cash offers way above list price from investors. Compare that with the conventional loan we want and our lowball offer (which isn’t really lowball since we always offer more than list price and 100% of closing costs) and we are always beaten out. No response, no counter offer, nothing. The one time we decided to lowball it, we really regretted it. We’re always out of the first running once that happens. Maybe when more traditional sales pop up we can try lowballing, but for now – with REOs and short sales and crazy investors, I don’t think we can do any lowballing. We’ve tried offering on over 10 properties – it’s horrible here.

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