Making Low Ball Offers – Risk Versus Benefit

When you’re seriously looking for a new home to purchase, the first step is to take a good, realistic look at what kind of dollar figure you can afford. Once you are clear about your budget, you should go on to educate yourself about the current market. Check out Madison Wisconsin home sales for the past six months and see how much various sizes of houses sold for, especially in the neighborhoods that most interest you. (Your realtor can provide you with this information.) These two pieces of homework will put you in a great position to make an offer on a home you like.

Making a Low Ball Offer

After viewing a home for sale, you may decide to put in an offer – but for an amount substantially less than the price requested by the owner, often termed a “low ball offer.” General real estate wisdom says that a buyer considers a low ball offer to be lower than 80 percent of the asking price, while the seller thinks it is anything less than 90 percent. You may have a good reason – for example, the house is overpriced compared to recent similar Madison home sales or it needs a good deal of repair work. If this is the first home purchase offer you have made, maybe you’d like to test the waters to see how flexible the seller will be.

Risks

There are two major risks to making a low ball offer on a home for sale. The first is that home owners tend to be quite attached to their property and may have an immediate emotional response to an offer that is far below what they hope for. They might get angry and insulted, or quite simply feel that you are not serious about buying. Either way, they could decide not to waste their time. The second risk lies in the fact that, even if you are prepared to negotiate upward on the price of this particular home, the sellers don’t know that. If someone comes along in the meantime and makes a more attractive bid, they are very likely to accept – and you’ll lose out.

Benefits

On the other hand, making a low ball offer can sometimes work out and save you big money. Besides the cases of homes that are priced well above the market or “fixer uppers,” you may come across a situation where the owners are highly motivated to sell. They may have already bought another house, meaning they need fast cash. Or they may be struggling to pay their mortgage; before their home becomes another one of the Madison foreclosures, they are willing to take a low offer for the sake of a quick deal. If you are lucky enough to find yourself in this situation – fantastic! Just make sure you have done the footwork such as prequalifying for a mortgage so that you are ready to act.