Why do Buyers Make Lowball Offers?

J Philip Faranda February 15, 2010

I am often asked by seller clients “what are these people thinking?” when a low offer comes in. I can only speak of what I see in my marketplace (Westchester and other suburban New York counties), and it is easy to answer “they AREN’T thinking,” but the real truth is far more complex. At the heart of it all is always self interest, which is the very same reason why sellers want the most they can get themselves. 

First, a few obvious motivations:

  • Speculation– Hey, you never know, the seller might just go for it. Sadly, there are some mud throwers in this group who will make 20 low offers hoping one sticks. Some are wanna-be investors, others just want to live cheaply (do you blame them?).   
  • Bad advice- The buyer’s agent made too lofty a promise about what they could do for them, or their Uncle Cornelius thinks he’s a wheeler dealer at Sunday dinner.
  • Media Hysteria-The TV or newspaper reports that property values are down 50% in Kerflinkle County, two time zones away. The trouble with this one is that all real estate is local, and what is happening in Las Vegas or Gary, Indiana is not happening in Yonkers or Mount Kisco. 
There are other reasons which actually do contain a great deal of thought.
  • Fear. Some buyers know too many people who have been hurt due to a job loss, declining values, or both. They are therefore far more cautious than they were 5 years ago. These people want to make a deal but do not want to be pushed. 
  • Culture.Westchester County is very diverse, and the bidder on your property may not be from Brooklyn, if you know what I mean. They could be from Sri Lanka, Taiwan, or Albania. Some people make low offers because that is just how they do business where they come from, and they may have no idea that a low number would be insulting. When my brother was in the Peace Corps in Guatemala he told me they haggled over prices with shopkeepers. Can you imagine negotiating at the mall? 
  • Mixed signals. The buyer or their agent might feel that a vacant home might have more desperate owners, or that a house with no signs of a male is a divorce. If a buyer “smells blood” they will understandably press their perceived advantage, accurate or not. 
  • Research. GIGO (garbage in, garbage out) comes to mind, and no matter the source, be it Zillow, the local paper or their broker’s market analysis, some buyers get very hung up on a sale down the street or price per square foot. These people will respond to honest data. 
This is by no means comprehensive, but in all cases the response should be calm, calculated and unemotional. Offers are just a starting point. The real goal is a good ending point (an accepted offer and contracts), and those start with an offer, no matter how high or low. It might be tempting to send a low offer packing, but the best thing to do is counter offer and negotiate
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