Lowball Offers on Retail Homes
I wrote a post almost 2 years ago about making lowball offers on bank owned properties. I use an offer that is more than 20% below list price as a lowball offer. Both then and now, most banks will not even consider an offer that is too low. Sometimes they won’t even respond, let alone accept a low ball offer.
As I have mentioned before, this market has also been very difficult in the last 6 months as the inventory of properties is much lower than 12 months ago and competition is much higher for both retail and investor properties. In this foreclosure market, many of my customers have been purchasing foreclosed properties to rehab and flip them. Their margins are much smaller than the huge numbers you see on those type flipping homes shows. Most my customers are simply trying to make a modest profit and considering the risk they are taking, it is not that much.
I have been very surprised lately to see my investor customers receiving offers on their completely rehabbed properties at prices that I would consider lowball. My customers price these homes competitively in their neighborhood and so I am disappointed to see offers that are 10-20% below list price. When you are making only 10% on a flip, maybe $15,000 after all expense, you can’t discount the price by 10%!
While I don’t think we will change our model, it is interesting how aggressive the retail buyers are becoming out there right now. Come to think of it…..I have been just as aggressive when making offers on retail properties. Wait, maybe I should delete this post!
Scott,
This is an interesting take on making lowball offers. My guess is that some of these potential buyers are new the the real estate “game” and don’t understand that some houses may actually be listed for their real market value. After a couple tries of lowballing sellers, they may see that they need to make a more reasonable bid if they really want to purchase the home.
Many parts of Texas are growing and there’s an increased need for housing. This attracts investors, who may throw offers at the wall just to see if they stick.A good strategy for making their home offer is to make a lowball offer thinking and assuming that they make get lucky and get their offer accepted. They figure the worst case is that the seller will counter their lowball offer, maybe half way, and they will still save a ton of money.