All Topics / General Property / opinions on low balling bids

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  • Profile photo of abugslifeabugslife
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    @abugslife
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    I have one philosophical question and one practical question.

    1) What are people’s opinions on lowball bids. I have been considering putting in a number of bids at the asking price less 7%. It seems that is where most house sales end up anyhow.

    2) Is there somewhere online I can order those forms you use to submit an offer on a house?

    Okay I lied I have 3 questions.
    3) What clever things do people put in bids? eg Sign it “by appointee” or caveats to get out less bond…

    Thanks once again for helping a newbie. [|)]

    Profile photo of FWFW
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    toystory
    I wouldn’t define 7% as lowballing. It’s generally accepted that between 5-10% of a listing price is regarded as “cream”, because most agents/vendors expect that the first offer is always going to take a bit off the asking price. Reality doesn’t always work that way (I’ve offered full price twice on houses that were already bargains – so it’s relative).
    Lowballing as a practice is generally asking for a seriously big discount, like 20%. I’m using figures as a guide, there aren’t any “rules” about what % consitutes lowballing, but just to try and illustrate what I mean. Suffice it to say that it means offering a price well and truly below market value in the hope that the vendor is desperate enough to take it. You can tell if you’re lowballing because an extremely high percentage of your offers will get knocked back, quite often with negative comments from the agent…. [}:)]

    Keep smiling
    Felicity 8-)

    Profile photo of shaunwalkershaunwalker
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    i agree, though i have put in low ball offers, most of the RE agents havent been impressed. but in saying that, one or two of the agents have been good enough to put me onto deals where my offering amount has been the asking price. what i did do however, was put in my offer a paragraph saying that i have pre approved finance which is attached to show them that i am genuine in my offer and not wasting their time. on doing that i would recommend you delete how much money the bank will give you…. trust me when they know they will try and sell you a more expensive house.
    hope this is of some help
    cheers
    shaun

    Profile photo of kay henrykay henry
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    toystory,

    Offering a reasonable price- perhaps 7% lower than the asking price, is very fair. Think of buying a place as similar to selling. When you sell, you want the buyer to give you a fair price. Well, we are the same person whether we buy or sell, so we can use the same principles. Noone wants to be ripped off.

    Buying houses is a business practice, and one would do it with the normal standards we apply to our lives, and treat people how we want to be treated. Being fair can never be underestimated, and you’ll be able to respect yourself in the morning.

    As with all these things, if it makes sense to you to offer fair price- as in fair after you’ve done all your checking on what you think the place is truly worth- then it will make sense. If it makes sense to you to ground the seller into the ground and take his/her property for almost nothing, then you’ll make that your choice.

    With my last negotiation, I made an offer of about 3% less than the asking price, because I thought that was fair. When the RE came back and said the seller wanted more, I told him that my offer was firm, that I thought it was a fair offer, and that I felt that the sellers might see it as such, and accept it as fair people. That worked for me, and it worked for the sellers. It also made me feel good about the negotiation practice. For me, I wanna feel good about myself and don’t want the sellers sitting at home crying because they are in a deperate situation and I have tapped into their misery.

    kay henry

    Profile photo of Still in SchoolStill in School
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    low bids….

    im a really low ball player, and a hard negotiator, but thats me, but if you buying for market value and want to make some profit, your gonna have to wait till the market shifts and moves and property prices go up.

    But lets say if you can purchase the property under market value and then sell it at market value, at least you can cover your closing and opening costs.

    There was an early thread about this on the forum not long ago. i think the thread was called “Buying at a fair market value” or sumthing like that.

    Though if you can buy a property under market value and sell above market value, thats a good done deal.

    But in my ideas and words “Buy at a profit, sell at a profit and leave some profit”

    cheers guys
    s.i.s

    “People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”
    http://www.theenlightenedway.com/tools/mil_calc.shtml

    Profile photo of AdministratorAdministrator
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    toystory,

    I think that you will never know if you don’t try. What is the worst thing that could happen if you put in a low offer? The RE will knock you back and if you really want it, you just put in a higher offer. If you don’t put in an offer at all cause you are afraid that it is too low, then maybe the seller might miss out on your bid when in fact they might be willing to sell it at that price rather than not sell it at all.

    However, what is the best thing that could happen? You can save thousands$$$! It takes years for normal people to save up thousands of dollars, well I know that it takes me that long.[:D]. The seller might be happy to make a quick sale!

    Buying investment properties is business. Only the figures need to make sense. [8D]

    Well that is my 2 cents.[;)]

    #####################
    Tomorrow, you might wish you started today.
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    Profile photo of Matt PMatt P
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    Well said SIS, but i don’t think i would low ball as much as you do,[:I] its not in me.

    Matt

    “If you do what you have always done, you will get what you have always had.”

    “Isn’t it time for a change?”

    Profile photo of AdministratorAdministrator
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    >>With my last negotiation, I made an offer of about 3% less than the asking price, because I thought that was fair. When the RE came back and said the seller wanted more, I told him that my offer was firm, that I thought it was a fair offer, and that I felt that the sellers might see it as such, and accept it as fair people. That worked for me, and it worked for the sellers.<<

    Next time you want to sell a property I suggest you use that same estate agent Kay. He is pretty smart as he ‘hooked’ you like a fish.

    Anyway guys, it is clear from different posts that there is normally a margin in the asking price which represents ‘cream’ (well put Felicity).

    We all know what a ‘Low ball’ offer is the moment we ‘crinch’ when we make it.

    I had a partner once who was in the habit of making such ludicrous offers that it made me feel embarassed standing next to him when he made the offer.

    The remarkeable thing is that many of his offers were accepted.

    Another friend of mine who was in the market for a house and he looked at some thrity or so houses, made rediculously low offers AND had several offers accepted.

    I would think that anybody who offers a paltry
    4-6% off the asking price isn’t doing the right thing by him/herself.

    Pisces133

    Profile photo of kay henrykay henry
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    Peter,

    I understand where you’re coming from in your perspectives regarding the way I do things. But I am aware of what IU’m doing and I make my choices- just like all of you make yours. I don;t feel I was “hooked like a fish”. In fact, I had done an incredible amount of research for months on properties in the exact location and I am completely happy with what I’ve done. Happy buyer and happy seller. That makes me quite satisfied- win/win, remember?

    kay henry

    Profile photo of aussierogueaussierogue
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    hi toystory

    first property i bought i offered 25 pct lower than what they wanted. sold….

    i think the practice only works in the right market ie conditions are right for the strategy..interest rate rises, lots of property on the market, property been on the market for more than 2 months etc etc

    by the way i dont think low balling has anything to do with ethics. if the price is too low the vendor should say no….

    good luck

    Profile photo of AdministratorAdministrator
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    Kay, if you are satisfied you paid the right price then that is fine.

    I wasn’t trying to be a smartarse. Well, perhaps it looked that way, so I want to assure you that there was no malice behind my post.

    Here is another interesting story.
    The same ex-partner who by the way is quite wealthy told me some 25 years ago that he wanted to buy a waterfront house forhimself.

    I got busy lining up suitable properties and we spent several months inspecting and making offers.

    There were several properties which he was interested in but he applied the same techniques as he did in business i.e. making low ball offers.

    The end result is that he never did buy a waterfront property.

    The moral is that if one wants to buy a property for one’s own use perhaps one should consider paying that little bit more than one otherwise would.

    Pisces133

    Profile photo of jancrowsjancrows
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    i think the practice only works in the right market ie conditions are right for the strategy..interest rate rises, lots of property on the market, property been on the market for more than 2 months etc etc

    by the way i dont think low balling has anything to do with ethics. if the price is too low the vendor should say no….

    I agree with the above. In an escalating market which I fully experienced as an estate agent in Qld late 80’s the asking price to settle ratio was extremely minimal. The market was such a whirlwind – houses were on contract before the agency got to put the for sale sign up.
    I personally bought a property at $91,500 asking price $93,000 at the time.

    I think it goes back to what determines the selling price when listed. Agents go around also at times advising the owner a high figure beleiving theyll get the listing v’s other more realistic agents appraisal $.
    Owners get a certain expectation then……..like if you make and offer that is 20% less…Owners see this as “lost $” which was not there in the first place.
    If you really do your homework then as an investor you know your $ and you by pass that deal till the next one comes along (and they always do). If its for personal use then the $ v’s personal requirements becomes less stringent.
    Eg. I am haapy to make an offer at XXX$$$ because this locality is closer to work or where I intend to holiday on vacations.The $ are combined into a lifestyle equation.
    You really have to be ruthless if its a business deal. All the vendor can say is No. I dont have a problem with that.

    Profile photo of Agent007Agent007
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    Don’t warry too much about the “ethics” of low-balling. Because in reality ethics doesn’t come into it. All you are doing is putting in an offer in a free democratic market.

    If they accept your low offer fine. In not, they counter-offer or refuse to deal with you outright (that’s their ego getting in the way).

    You are not ripping anyone off if you low-ball. As the purchase of real estate in Australia involves a legally binding contractual arragement, you are not dealing with minors or people of unsound mind (in most cases :) ). Nor you are not applying coercion or duress. If any of the preceeding conditions apply the contract would most likely be null & void anyway.

    ALSO, in reality, most vendors in this crazy market could be seen as ripping off purchasers anyway. I see this happening often now in land sales when I try to do House & Land packages for my clients. In fact, several vendors have purchased a traditional size block in an estate from the developer for only $80-90,000 in earlier this year. Then in October/November have been reselling it for $160,000!!!!

    Where are the ethics in that?!!!

    So don’t feel bad about lowballing. As a property investor (just like a share trader), in order to make any profit, you must keep your emotions (& ego) out of the deal. Plus you should ALWAYS buy at wholesale & sell at retail!

    Treat this like a profession, as a proper business. And only let the emotions come out when you “come home (to your family) with the bacon”.

    Good luck & Merry Christmas,

    David

    P.S. BTW the extra profit you make not only adds to your coffers, but also could go to those more needy!!!

    Why not start a charity foundation for homeless or abused kids with those great wholesale prices & profits you make from low-balling???

    David Paxton
    “You Only Live Twice”

    Profile photo of Still in SchoolStill in School
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    Hi Team,

    I just want to share a property that im currently looking at investing into.

    Market Price $135,000

    Consists of 2 brand new units that are both 2 bedrooms(not really but only 5 years old)

    Plus

    3 bedroom fibro cement home, with brand new kitchen and all services as number 1, only a few hundred metres from the town centre.

    Plus 3 lock up garages as well.

    Asking Price is $135,000

    So far negotiated too $100,000.

    2 Units – Weekly Rental – $180 pw
    House – Weekly Rental – $100 pw

    Gross Rental – $280 pw

    If this deal goes through, instant saving of $35,000

    Might be very low ball, but this is an example of how i play the game.

    cheers
    s.i.s

    “People 4 get that by saving just $3 aday & investing it sensibly over a working life, you’ll end up wit around $1 million.”
    How?

    Profile photo of BasslaBassla
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    Hey Guys,
    If you give a low ball offer (but are willing to pay more) and the offer is refused – or worse still the vendor is offended – can you and what are the ways you can come back with another offer?

    Profile photo of melbearmelbear
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    Bassla, you could alwasy ask them for a counter offer.

    Cheers
    Mel

    Profile photo of manofactionmanofaction
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    toystory;

    Some good tips in there and here’s something more to think on.

    Asking price and market price are two completely different things. Add to this, vendor’s lowest sell price and you have quite a mixuture in there.

    The trick is not to boast about how much you negotiated the vendor down (almost anybody can get a few % off!), but how much below reasonable market value you acquired the property for.

    Being able to consistently acquire property at below market price is what seperates the pro’s from the amatuers.

    So what’s market price? I tend to think it’s what Joe Average would probably buy the house for.

    Here’s an exercise you can do to see if you are truely a pro or an amatuer.

    Invest $1-50 in a simple kids school book with blank, ruled pages. Then go out and look at a few houses like the sort you want to buy. rule 4 columns in the book.

    In column a) Write the date and details of the house
    In column b)The advertised/asking price
    Column c)Your guess as to what it will sell for.
    Column d)Leave this blank for the time being.

    Over the next few weeks, track the houses and find out what they actually sold for, recording this in column d)

    Now have a look back and see just how close you were with your inital estimates.

    If you do even 10 -20, you WILL get some spikes in there where the buyer has paid well over market price or a bargain might have been picked up. Don’t worry about these too much.

    Anyway, in no time you will become really good at knowing what “market prices” for properties are.

    Do this exercise 10-30 times or until you are consistently very close in your estimates and you WILL be able to consistently pickup properties BELOW reasonable market price.

    The other great thing about this is when an Agent rings you says “Maaaaayt, have I got a hot one for you today!” you’ll simply ask for some basic details and immediately know if it’s worth getting out of bed to see it. This saves you heaps of time.

    As Han Jakobi said, “I’m an investor, not a tourist” meaning he doesn’t waste time driving around to see every “bargain” offered, rather he knows what’s worth the trip and what isn’t.

    My “rule of thumb” is that I want to buy at a price whereby once I settle on the property, i could (theoretically) put it straight back on the market and recover ALL my costs – stampduty legals, loan app fee etc etc.

    That means I MUST buy below the market price -allowing for future capital growth/loss while waiting for settlement.

    You might say in a rising market, that isn’t too hard. But in a flat market, it’s no harder because there’s usually less demand, so you have more leverage to negotiate with.

    Hope it helps.

    Profile photo of mopsyblossommopsyblossom
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    If you are aware that the ip you are looking at is a bargain and would possibly be snapped up, I tend to pay asking price, also area has a lot to do with it as well… if it is a sellers market you will find that most agents will tell you that the vendor won’t negotiate.
    the last property I purchased, the b/insp came back with a few tiny things amiss (the majority that the vendor fixed at their cost)I mentioned I was not happy with the building report to the agent, and within 1/2 hr the vendor dropped the price by a further $15,000.00, also mentioning that “finance” has been approved (but not to what amount) helps. Another house was being auctioned and I offered a price and was rejected, I let the house go to auction, I did not attend, it was passed in, and I purchased it for $5,000.00 less than I had offered prior to auction.
    If you keep offering low-low and keep getting rejected than you may have to adjust your strategy.
    Mopsy

    Profile photo of MiniMogulMiniMogul
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    Hi there,

    we’ve had this discussion before, but I don’t get how it’s possible to buy ‘under market value’ because as the accepted buyer you *are* the market, and you are paying as low as you can get, while the vendor is holding out for as much as they can get (both parties being realistic to the point in time and knowing a sale in the hand is worth two in the bush.)

    cheers-
    mini

    PS

    7 percent discount is fine, but how do you know it’s a good deal at that price, or still overpriced? IMO ‘asking prices’ compared to what the house is worth fluctuate wildly depending on a number of things, and if you get one that is already reasonable for a further discount, then wahey. if you paid 7 percent less for something that was overpriced, you still might have paid too much. it all depends on whether someone wants it really badly more than you. if they do, let them have it. They’re emotional, and you’re an investor.

    Profile photo of Matt PMatt P
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    @matt-p
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    A lot of ideas mentioned here about low balling bids, this has been mentioned 2 or 3 times in this thread. Make an offer below what it is advertised. If the vendor thinks its to low he/she will knock it back. As simple as that.

    Matt

    “If you do what you have always done, you will get what you have always had.”

    “Isn’t it time for a change?”

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