If you’re a real estate wholesaler, investor, or a flipper, it is more than likely you’ve gotten the response:
“This is a lowball offer!”
This is the most common objection and response from homeowners.
There are a few things you can do before and after to deal with this.
And in this article, we’ll dive into it…
What is a Low Ball Offer in Real Estate?
A lowball offer in real estate isn’t just a random low number; it’s a strategic bid significantly below a property’s market value and often well under the seller’s asking price. Think of it as a bold chess move in the game of real estate negotiations. Understanding this concept is crucial for wholesalers, investors, and agents, as it transforms you from a mere participant to a savvy strategist in the realm of property dealing. It’s a calculated approach, essential in your toolkit for navigating the complex landscape of real estate transactions.
Example of Low Balling in Real Estate
Picture this: You’ve found a charming, slightly run-down house in a decent neighborhood. The seller is asking for $300,000, but your market analysis, combined with the cost of needed renovations, tells you the house’s value is closer to $250,000. So, you make an offer – $200,000. That’s right, a whole $100,000 below the asking price.
Why such a dramatic dip? You’re accounting for the risks, the renovation costs, and ensuring you’ve got a safety net for unforeseen expenses. This isn’t just throwing a dart in the dark; it’s a strategic move, based on data and market savvy.
This, in the world of real estate, is a classic example of low balling. It’s bold, it’s strategic, and it sets the stage for negotiation. Remember, in real estate investing, the initial offer is just the opening act of a potentially lucrative play.
Is it Really Low Balling?
Let’s get real for a moment. You’re in the business of real estate wholesaling, and it’s time for a pep talk. When you hear “This is a lowball offer!” it can feel like a gut punch, right? But hold on, let’s put things into perspective.
First things first, let’s debunk a myth. Not every offer below asking price is low balling. It’s about context. You’re not just offering a price; you’re offering convenience, speed, and a solution. That’s your ace in the hole. Remember, you’re in the business of solving problems – fast sales, hassle-free transactions, and no red tape. And yes, that’s a valuable service.
So, when someone labels your offer as a low ball, take a step back. Are they looking for retail value? Are they in a position where they don’t need the unique advantages you bring to the table? If so, it’s not about you; it’s about their expectations.
But here’s the kicker – you’re offering something more than money. You’re offering peace of mind, a quick sale, and a way out of potentially lengthy and complicated processes. This is your value proposition. It’s not just about the price; it’s about the package.
As a wholesaler, doubting yourself is the last thing you need. You’re not just a buyer; you’re a problem solver, a facilitator, and a vital part of the community. Your service comes at a cost, and it’s a cost justified by the value you provide.
So, the next time you face the “low ball” objection, stand firm in your role. You’re not just making offers; you’re providing solutions. And that, my friend, is something to be proud of.
Is 20% Off a Lowball Offer?
Navigating the waters of real estate offers can often feel like a guessing game, especially when it comes to understanding what constitutes a lowball offer. Is offering 20% below the asking price too audacious? The answer, like many things in real estate, isn’t cut and dry.
The definition of a lowball offer can vary dramatically. Some agents might say it’s 25% or more below the list price. However, in areas with a shortage of available homes, this threshold could shrink to 20%. Steve McLinden of Bankrate.com points out, “What defines lowball varies from market to market and even submarket to submarket, but certainly from price range to price range.”
This variability means that what’s considered a lowball offer in one neighborhood might be the norm in another. It’s all about the context – the local market conditions, the price range of the property, and the current demand.
So, when considering whether a 20% reduction is a lowball offer, you need to assess the market you’re operating in. In a seller’s market, where demand outstrips supply, such an offer might be seen as too aggressive. Conversely, in a buyer’s market, where properties linger on the market, a 20% lower offer might be more palatable, even expected.
The key takeaway for wholesalers, investors, and agents is this: understand your market deeply. Knowing the nuances of your specific market, down to the neighborhood and price range, can help you gauge what kind of offer is likely to be successful or dismissed as a lowball. Remember, real estate is as much about psychology and negotiation as it is about property.
Reducing “Low Ball Offers” with Right Targeting
In real estate wholesaling, investing, and flipping, steering clear of frequent “low ball” objections is all about strategic targeting. Think of it like fishing – you need to know exactly where to cast your line.
Don’t Target:
1. New Builds: These properties are the shiny new toys of the real estate world. Sellers of new builds typically expect top dollar and are not in a rush to sell, making them less than ideal for your purposes.
2. Recent Purchases (within 2 years): Homeowners who have bought their property within the last two years are usually just settling in and not keen on selling, unless they’re facing unusual circumstances.
3. Blanket Marketing in Entire Neighborhoods: While it might seem efficient to target an entire neighborhood, this approach lacks the precision needed for effective wholesaling. It’s more about finding the right prospects than casting a wide net.
Do Target:
1. Absentee Owners: These can be your gold mines. Owners who don’t live in their properties might be more motivated to sell, especially if they find managing the property burdensome.
2. Niche Lists: Focus on specific groups like probates, divorcees, or properties with tax liens. Sellers in these categories often need to sell quickly and may be more open to lower offers.
3. Driving for Dollars Lists or Distressed Properties: Properties that show signs of neglect or distress can be key indicators of a potentially motivated seller. These owners might be more receptive to an offer, even if it’s below the market value.
Effective real estate investing relies as much on identifying the right sellers as it does on making smart offers. By targeting the right groups, you position yourself where a “low ball” objection is less of a hindrance and more an opening for negotiation. Refine your targeting strategy, and you’ll likely see a decrease in those challenging objections.
Here’s a video on niche lists:
Reducing “Low Ball Offers” with Better Offers
Now, let’s address a key point – are your offers genuinely too low to be accepted? It’s a question worth pondering. As a real estate wholesaler, investor, or flipper, making sure your offers are on point is crucial.
Start by analyzing your approach. Are you evaluating deals accurately? This isn’t just about gut feeling; it’s about hard data and market realities.
– Comps Analysis: Are you comparing apples to apples? Ensure you’re looking at comparable properties in similar areas. Missing the mark here can lead to offers that are way off base.
– Repair Estimates: This is a biggie. Underestimating or overestimating repair costs can skew your offer significantly. It’s a balancing act – getting this right is key to making an offer that’s attractive yet realistic.
But here’s a crucial tip – erring on the side of caution is better than overconfidence. Overestimating the value or underestimating the repair costs can lead you to tie up a deal that’s not feasible. That’s a scenario you want to avoid. It’s better to miss out on a deal than to be stuck with a miscalculated one that drains resources.
In essence, take a step back and review your offer strategy. Are your offers truly reflective of the market and the property conditions? Adjusting your approach here can significantly reduce those “low ball” objections and lead to more successful deal closures. Remember, it’s not just about making offers; it’s about making the right offers.
Here’s a video on estimating repairs:
Reverse wholesaling to avoid “low balling”
If you’re still worried or confused about getting the offer right there’s a great strategy called “Reverse Wholesaling” that takes away some of the risk.
Here’s a great video explaining:
Reducing “Low Ball Offers” with Better Presentations
Tackling the “low ball offer” objection isn’t just about the numbers; it’s equally about how you present your offer. The key here is to demonstrate value in a way that resonates with the seller. Let’s break down how you can enhance your presentation skills to make your offers more appealing.
Build Rapport
First impressions count. Start by building a genuine connection with the seller. This isn’t about small talk; it’s about showing empathy and understanding their situation. Ask open-ended questions about their reasons for selling and listen actively. This sets a foundation of trust.
Be Professional
Professionalism goes a long way. Dress smartly, be punctual, and ensure you have all the necessary information at your fingertips. This shows the seller that you’re serious and capable.
Provide a Detailed Checklist of Repairs
A tangible list of repairs can be a game-changer. It’s one thing to tell a seller their property needs work; it’s another to show them a detailed breakdown. Walk them through each item on the list. This helps in lowering their perceived value of the property, making your offer appear more reasonable.
Highlight Specific Conditions
Spend extra time discussing significant issues, like a major crack in the wall. Analyze it with them, discuss potential solutions, and the costs involved. This not only showcases your expertise but also subtly reinforces the extent of repairs needed.
Closing Scripts
Having a few scripts ready can help in steering the conversation towards closing the deal. Here’s one you could use:
– For a Direct Approach: “If I could get you $X in just 2 weeks, would that work for you? If so, we could go into escrow today. I understand it’s a big decision, but I’m here to make this process as smooth and beneficial for you as possible.”
– For Building Urgency: “I understand that selling a property is a big step. Considering the current market and the repairs needed, my offer of $X is designed to give you a quick, hassle-free sale. Let’s get this moving for you so you can focus on what’s next.”
Remember, reducing “low ball” objections is as much about the substance of your offer as the style of your presentation. Showcasing the value you bring, along with a professional and empathetic approach, can make all the difference in how your offer is received and can significantly increase the likelihood of a successful deal closure.
Conclusion
In the dynamic world of real estate, understanding the nuances of what constitutes a lowball offer is crucial. It varies by market conditions, property price ranges, and even specific neighborhoods. For wholesalers, investors, and agents, success lies in adapting to these variables and making informed offers. Remember, every market has its rhythm, and aligning your strategies accordingly can turn the often-misunderstood lowball offer into a powerful tool. Stay informed, stay flexible, and above all, stay attuned to the pulse of your market. This way, you navigate the real estate landscape not just with offers, but with insight and finesse.
