“What!!! I just got my first offer, but it’s too low! Should I even consider it? What should I do?”
This is the exact question a seller from Los Angeles, or wherever you are, would have when receiving an offer below expectations. But here is the thing. The frustration and the anticipation of receiving offers over the asking price in Los Angeles will get to you quickly if you’re not prepared on how to deal with lowball offers in this market. Does that make sense? In other words, it’s your expectations and feels like a gamble at that point – hoping to get over asking offers.
Let me go into more on this topic. Once upon a time, not too terribly long ago, homebuyers wouldn’t even dream of submitting an offer less than what a home was listed. I think many of us could remember that one.
That, however, is so last year. We’re now in a time where it appears and feels like that buyers will have more homes from which to choose, more time to shop for homes, and more leeway in asking for those juicy concessions during the escrow period and I’m talking about those credits. They’ll also not hesitate to submit an offer lower than asking price.
You see, lowball offers, those that are 10% or more off the list price, aren’t common. Yet. That doesn’t mean, however, that you won’t receive one when your home is on the market. You know?
It’s insulting, right? It takes a lot of nerve, as some sellers claim and others feel a sense of panic as I experienced this with a couple clients here in Los Angeles. I’m sure some of you could also relate to this.
Now, when homes begin to sit on the market longer than they did in the previous hot sellers’ market, some homeowners may feel a sense of desperation when faced with a very low offer. They may suffer from that gnawing feeling that anything is better than nothing.
Let’s take a look at how you can deal with such an offer without being sucked into common knee-jerk emotional responses.
“First, We Can All Agree To Take A Deep Breath.”
As mentioned above, you may not get a lowball offer in Los Angeles or wherever you live. But being prepared for one, emotionally at least, will help you deal with it should it come to pass.
There are two primary reasons that some homebuyers may submit a low offer on your home.
First, there are all those “news” stories claiming that home prices are falling, rapidly and dramatically. While that may be true in some markets, it’s so untrue in most. So ignore it. Misinformation rules the day when it comes to the current housing market. But it’s simple economics and accounting. Low inventory and high demand equal higher prices. The opposite is also true where high inventory and low demand equal low price; however, we need to find an equilibrium to the agreed price. In accounting, the market sale price is when the buyer and seller agree on a price. That my friends, becomes the price both parties shake on.
“But the average person in the Los Angeles market to buy a home doesn’t know that“
The truth is my friends, “… home prices jumped 40% higher from previous pandemic levels” according to CNBC.com’s Diana Olick, citing a report from property data giant CoreLogic.
Then, understand that the buyer is most likely NOT intentionally insulting your home or you, as the seller. Many Los Angeles buyers… I know I keep mentioning here in Los Angeles but that’s because I’m out here but it’s very true if you’re in Texas, or New York or wherever. But going back, many Los Angeles buyers treat the homebuying process as a business transaction, which it is. Others are skilled at haggling over prices in other areas of their lives and aren’t about to stop when it comes to such a huge purchase. So don’t be offended by that.
In other words, put yourself in their shoes. Appreciate that they made an offer at all and the valiant effort put forth to get the home at a bargain price. Next…
“Remember, just cause you got the offer doesn’t mean you have to accept the offer“
How you respond to the offer depends a lot on the type of market we’re in. In a market such as the one we’ve seen in the past few years here in Los Angeles, with multiple offers on homes, often over asking price, and homes selling as soon as they hit the market, it makes no sense to waste time on a lowball offer.
In slower markets, however, you may want to entertain the offer by counteroffering at a price that’s more palatable to you. You might also consider countering any concessions the buyer has requested, such as paying for a percentage of the buyers closing costs.
Or, check this out, you may want to ignore the offer altogether and that’s okay as well. The buyer’s offer will simply expire on the date specified in the purchase agreement – if and only if they have put an expiration date.
If, on the other hand, the offer is acceptable to you, in both price and terms, you will simply sign it and we’ll send it back to the buyer’s agent. We now have an executed contract with clearly defined tasks and time limits. It’s time to take the next step towards closing.
And there you have my friends. These were the tips on how you can avoid the heart aches and frustrations on receiving those lowball offer in Los Angeles. Stay tuned for more tips about LA’s real estate market.
