How to lowball a home seller

By MarketWatch

Home sellers are not automatically turning up their noses at offers that come in far below their asking prices these days as prices stagnate and the inventory of homes for sale remains elevated in many markets.

But buyers who ask for deep discounts still risk offending sellers to the point where they quash any deal. So before making an aggressive offer, some homework is in order, real-estate professionals say. Further, buyers need to effectively explain why the price of a home should be lower.

That's what Pat O'Heron did recently when buying a home in Ann Arbor, Mich. He was able to negotiate a steep discount with a seller who relocated for a job, in a neighborhood that had two years' worth of inventory on the market.

Before he even made an offer, the asking price had dropped by about $80,000, he said. After O'Heron made his case for an even lower price, he bought the home for $270,400, with about $11,000 in other credits. The net price ended up being $115,000 below the initial asking price.

O'Heron was able to take advantage of a market in which buyers decidedly hold the upper hand, with its excessive for-sale inventory due in large part to job losses in the area. Even though housing is in a slump in many parts of the U.S., those tactics won't work in markets that remain healthy.

And in any location in which an aggressive offer is attempted, there is always an inherent danger in going too low. There's a real risk the offer will insult the sellers to the point that they'll refuse to even counter, real-estate agents say, and the sellers could easily make the assumption that the buyer isn't committed to making a deal.

"There's a danger of them taking it too personally," said Jon Boyd, O'Heron's agent and the president of the National Association of Exclusive Buyer Agents. "When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or (the buyer) not as serious."

Heed these three guidelines on how -- and when -- to make an aggressive bid for a home:

Find out how motivated the sellers are

Certain sellers are going to be more willing than others to negotiate a low offer, and there are several giveaways that might indicate more leeway on price.

For instance, if the sellers have already purchased another home and that sale has closed, they're likely to be more willing to make a deal, said Dick Gaylord, the president-elect of the National Association of Realtors and a broker with Re/Max Real Estate Specialists in Long Beach, Calif.

And certainly if the property has been on the market for a long time, sellers will be interested in entertaining any offers, he added.

To get at as many seller details as possible, Gaylord gets in the ear of his or her listing agent. The nuggets of information he gets can be clues as to what kind of offers they'll consider.

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Overall local market conditions also play a role. The housing market in which O'Heron bought, for example, was sluggish, and the home he bought had been on the market for about a year. Because of the job relocation, the seller needed to move and wasn't in the position to take the home off the market until conditions were more favorable, O'Heron said.

Continued: Make your case

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