Lowball offers, questions.

Discussion in 'The Buying/Selling Process' started by Schnookle, 17th Jun, 2015.

  1. Schnookle

    Schnookle Member

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    I am days away from submitting a lowball offer for a house in Caboolture.

    $45k under current asking.

    I have *reasons* for my lowball, such as recent comparable property sales, among others.

    I have written a letter outlining my *reasons* and was thinking of submitting the letter to the seller with the offer, a cheque for 10% and a special condition that the REA makes sure they get that letter.

    I also want to include other special conditions such as

    Subject to approval from business partner (unnamed)
    ST minor repairs being made - (guttering)
    Plus a 48 hour window to accept, reject or counter

    I am interested in your opinions, plus can anyone answer the following questions? -

    1. How common is it for an investor to submit a letter with their offer ?

    2. How often do investors include special conditions?

    3. What are the most common special conditions aside from building/pest/ finance?
     
  2. The Y-man

    The Y-man Member

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    In Victoria, we usually just sit down with the agent, and write the offer and conditions on the contract and that's it.

    Repairs conditions like yours are common, or you can make an even lower offer citing repairs you will need to make.

    Expiry is also quite common (and is 3 days on the standard Victorian contract template, but can be changed)

    The Y-man
     
  3. BayView

    BayView Member

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    As a seller, (and I currently am one), I want to sell my house for the best price for me.

    Standard human behavior - we all want to buy houses for nothing, but sell them for a zillion dollars...and then brag about both scenarios to our mates.

    As a seller, most folks are emotionally attached to the house for various reasons, so that adds to their desire to sell at a higher price.

    If you lowball a seller (me), the deal needs to be attractive to me.

    Such things as very short settlement (30 days) and no "subject to" conditions - other than finance - would work.

    It has to be a win for you, and win for the seller, otherwise you are wasting everyone's time.
     
  4. Perp

    Perp Member

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    I think this is a bad idea, as you just start a ******* competition about whether your reasons are valid or not, and it's really irrelevant. You want to pay $X, and the only decision they have to make is whether they accept that offer or not. Getting into why you're making that offer is just a distraction.
    Why such a large deposit? I think that's a bad idea.
    The real estate agent isn't a party to the contract between you and the vendor, so this is a bit of a nonsense.
    This is an open-ended "get out of jail free" clause. I guess you can include it if you want, but usually your best chance of having a lowball offer accepted is to show that you're committed to the purchase. This is the opposite of that.
     
  5. Schnookle

    Schnookle Member

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    Most books on property investment advise to either give a hefty deposit, or even better, the FULL amount in cash. It gives the buyer a psychological advantage.

    I do not trust anyone, I have heard stories of REA's throwing anything accompanying the offers in the trash, I want some insurance that this will not happen to me.

    This is an interesting observation, one I will consider.

    I guess, at the end of the day I am really going to stand out as 'different' as far as property investors go.

    I'll be the weird low baller who writes love notes. lol.
     
  6. Truly Exotic

    Truly Exotic Property Deal Finder

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    I love lowball offers ;)

    I dont do as nearly as many as I used to as its a hot market in many areas around the country.

    if your reasons are valid then I think its a good idea. When you mean letter I assume you mean quick email and not a 15 page essay. If your reasons are silly, then it makes you look stupid

    Big Deposit: TICK
    Short Settlement: TICK
    Unconditional: TICK
    Thrusting a cheque in the agents: TICK

    all positiives, if you try all of them and it doesnt work, then it wasnt meant to be
     
  7. D.T.

    D.T. Property Lookerafterer

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    Love lowball offers too. My favorite was getting a $185K 4bed house for $147K

    It's about recognising value in your chosen area, being patient with letting vendors get desperate and sticking to your guns on what your chosen amount is.
     
  8. Schnookle

    Schnookle Member

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    Thanks mate.

    The letter outlines 2 comparable properties that have sold this month in the street behind.
    Those were 3 bed houses and the one I want to buy is only 2 bed.

    With the letter I aim in just pointing out the current market as much as possible.

    In addition, I have also made mention of the fact that the area may struggle in terms of capital growth and could possibly suffer capital loss due to it being flood prone.
     
  9. S.T

    S.T Member

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    Lose the conditions, you need to be serious on this offer - not stupid repair conditions. Just factor in the cost and remove that cost from your price instead.

    Keep it simple so the seller cannot say no.

    Short settlement, big deposit, no BS conditions.

    I wouldn't bother with all the reasons why you're offering that price.
     
  10. Perp

    Perp Member

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    Sounds like a good idea in theory, but the deposit is forfeited if you breach the contract by not settling. So if, for example, your bank isn't ready to settle on settlement day, you lose your deposit. Better to lose $1,000 or $5,000 than (say) $30,000.
    I understand about not trusting anybody, but this is no insurance at all, other than as symbolism.
    They know those things; those aren't new discoveries that you've made. They priced it with the market, and it being flood-prone, in mind.

    A vendor's "bottom line" usually ultimately comes down to what the vendor needs to clear to buy their next place, or what they need to settle the divorce, or their own entirely personal psychological reasons for having to get a certain figure. The point is that a seller's bottom line is rarely based solely on objective, rational analysis of the market, so there's no point trying to persuade them on that basis. It's just a distraction, and can also serve to **** them off. e.g. "How dare they compare our lovely place to that crap house in the next street!"

    Just make your offer.
     
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  11. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    Others may disagree, but I wouldn't put that in. The recent sales are relevant information that shows the seller he may be priced wrong, the above is priced in to the recent sales.

    If I got a letter with those points in it, I'd be annoyed and when you're low-balling an annoyed vendor will lose you the sale.
     
    Perp likes this.
  12. TMNT

    TMNT Member

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    Maybe an agent or former agent could clarify

    Comments like its in a flooded area or its a bad street or its a cold market. They know it so theyll probably wont be fazed and might tell the vendor that every person is commenting about it so you better adjust the orice

    But comments like oh three doors down sold for this much or there is a easement etc. They would more likely say wow this guy knows his stuff and take you more seriously

    Or am i giving them too much credit
     
  13. TMNT

    TMNT Member

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    Brilliantly said!
     
  14. see_change

    see_change Apprentice Timing Lord

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    Is it a flood prone property or just a flood prone area .

    Either are irrelevant as the vendor should have priced those in .

    If it's 45 k above what you consider to be reasonable price , you probably have an unrealistic vendor , and they take time to move .

    I wouldn't worry about the conditions . You've been reading too many books .

    Make the offer with minimum of fuss and if they reject it , don't waste your time trying to convince them you're right ...

    You don't want to get the reputation as the weird buyer ...
    as if you don't buy this one , the agent won't go out of their way to help you the next time ( they're only human )


    Cliff
     
  15. Mitch1

    Mitch1 Member

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    This!

    I think you might need to give the agent/seller some credit. They will be keeping an eye on the market around them without you pointing it out, it is in their best interest to do this and most seem to.

    As far as I can see, here in Brissy anyway

    The agent gives the seller the best price possible to get the listing and ultimately hopes for an emotional buyer.
    They then use open homes and questions on the property to decide to change selling tactics -go to auction/adjust the price etc
    They use the feedback to adjust the mindset of the seller towards the end goal
    If they do not get the emotional buyer and have more investor savvy interest, they also use the feedback from there
    They also use the knowledge they have from the seller
    Are they testing the market and will only sell if they get x
    Are they in a hurry to sell/committed elsewhere
    Personal circumstances

    The buyer rarely gets access to the bare bones of those true reasons, so perhaps give your best offer, with as few subject to conditions and quick settlement (unless the buyer wants a longer settlement to sort out their own move, in which case give short settlement or longer if the buyer wants it)
    Would not ever put in subject to partner approval, as Perp said, this is a get of clause of the highest order and does not show a committed buyer.
     
  16. TMNT

    TMNT Member

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    as people say, the market price is what anyone is willing to pay for and sell at the same time.

    some owners think their house is worth more, some dont care, you cant force an owner to change their minds, unless other factors come in eg. they need the money, or they get sick of dealing with low balls

    thats where throwing in a few creative offers or reasons may help
     
  17. aussieB

    aussieB Member

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    I think REAs are required by law to report all offers - or at least thats what I was told by every single REA I have dealt with. Usually, when I am low balling, my offers come with a time window. "Blah is my offer for Blah reasons. And my offer is on the table for the next 48 hours" - It has worked every single time. But I have done this mainly when I am gauging an area and sales in there and not necessarily for 100% purchase.
     
  18. perthguy

    perthguy Member

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    It is not common but I have used a variation of this tatic to secure a property well under market value. This is how: I made the offer. The agent picked up the phone and yelled at me that the offer was too low :p After he calmed down, I explained why it was so low. I quickly put together a 2 page written justification for my low offer and email it to him. He emailed that to the seller and we negotiated a price from there. In my case the house was a dump and the yard was full of rubbish, at least 10 skips worth. I pointed out the cost of removing all of that, getting the place livable and also comparable properties selling around my offer price. The vendor needed someone beside the agent to demonstrate clearly the asking price was above the market at the time. Explaining it clearly and politely in writing helped. My email was factual and objective, not rude and judgmental.
     
  19. neK

    neK Member

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    In my opinion, telling an agent that this property sold for x and another sold for y does one thing - annoy them.

    I generally avoid saying such things unless asked by the agent in person. When i do reply, i respond with words to the effect of "as you are already aware, couple similar houses around here have sold for X in the last month"
     
  20. Azazel

    Azazel Member

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    Giving reasons for a lower offer is Ok, eg if there are repairs needed like a fence is obviously falling over or front stairs unsafe. Though they may have already factored it into the price.
    It depends what the market is doing. If there are plenty of other buyers you might be wasting your time and potentially miss out on a good buy because of ego or being perceived as trying to stuff them around. Make it as smooth a transaction as possible.
    Another tip: Experienced RE's aren't generally impressed by rookie investors trying to talk themselves up. But the more you talk to, the better you will get.