As the market remains slow in most areas of Greater Vancouver, some buyers and sellers are unsure of how to properly navigate the changing value of homes. Many homeowners are emotionally attached to their property and may struggle to accept offers that are below their list price. Buyers are seeking deals and may send offers that are far below what has been listed.
Denny and Monica share behind-the-scenes conversations they have with buyers and sellers when it comes to sending and receiving “lowball” offers during a slow real estate market.
This episode will cover the difference between fair market value versus a home’s list price, the importance of educating both sellers and buyers on comparable properties, the benefit of replying to every offer, how the seller’s timeline affects their desire to sell now or wait until the market picks up, and the power of a counter offer.
Read the Transcript Here
Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.
Denny: Slower markets Monica, they come and go and we’ve seen them before. We’re going to see them again. But we’re currently in one and something that happens pretty often when you are sitting on market for a little while. Listing is sitting on market and maybe it’s slightly overpriced. Maybe it is just in a slower neighborhood. Maybe it’s on a busy street, for whatever reason. You’re sitting on market a little while. Eventually you get thrown this lowball offer and in a lot of cases, sellers are almost… well, they take it personally. They get emotional. It’s fair enough. It’s their long term home. They’ve been there for 20 years. They obviously have a ton of memories and emotional attachment to the home and the lowball offer really ticks them off.
And instead of thinking rationally, often their response is emotional and the deal is dead immediately. Think it’s important to understand that in a slower market like we’re in today, getting an offer is a good thing. And you don’t need to take that number. You can negotiate with it, you can work with it. But an offer sometimes takes a few months to receive and if you just completely ignore the one that you get on the table and don’t explore how much higher that buyer is willing to go. Potentially you don’t sell that year, potentially you’re waiting another three, four or five months to find another interested buyer. So today we’re just gonna kind of share our thoughts of what we, what goes on behind the scenes in the conversations with the seller when we receive a lowball offer. And then on the other side, when a buyer sees something that has been on market for a few months, and they want to send an offer that is well below list price, what the conversations look like and what kind of goes into our decision making of are we going to send that offer or not.
Monica: Right. So from the sell side, it’s really important to educate our sellers every step of the way, not just when we receive an offer. But if we have a listing that’s been sitting on market for two, three, even four months, there’s a lot of conversations that need to happen every few weeks updating the seller on current market value. Current market value isn’t going to stay the same from the day that you listed to four months from now. It’s just isn’t. It’s gonna either go up or go down. That’s the only it doesn’t stay the same. So educating our sellers throughout the listing timeline is really important so that if they receive an offer that’s below asking, then a realistic well rounded perspective of what that offer really means.
So, yes, it’s underasking, is it actually a lowball offer or is it close to market value? That’s the first question you have to answer. Half the time the sellers know that it’s probably close to market value and the other half the time they’re offended. Again, there’s like no in between. I think that educating sellers throughout the listing timeline is probably the best way to stay on top of these types of things and then make offers come together.
With that said our team has not so many times where we’ve received hilariously actual lowball offers and then ended up with an offer that our clients were thrilled with. And the only way we were able to do that is through working with that crap offer and countering and conversations with the buyer’s agent and take it from there.
Denny: I think that you made a really, really good point is: the communication throughout the life of the listing is probably the most important thing as a listing agent. Educating even just like bi-weekly or every two weeks or every three weeks, sending the seller an email with what’s currently available in your, in your neighborhood. What is sold in your neighborhood have anything in those last couple of weeks, just so they and then you’re backing up your original valuation or your updated valuation. Often in markets like this, where we’re suggesting the list price and where the list price actually comes out, are different numbers. And we’re obviously we’re very willing to work in a reasonable range. And often,a seller is just trying to squeeze a little bit more out of the list price, which is totally fine and we’re testing it out on market.
After a couple of weeks, with no offer with few showings. We’re just kind of sending a new market update and backing up our original valuation right. And as the life of the listing goes on, I think Monica made a really good point of that valuation may change. And there’s one situation right now that we’re dealing with that is an older home. And we’ve been on market three months I believe, the original valuation was one thing and that’s probably coming down 50 to $100,000. in the life of the listing, just with interest rates going up for the summer being quite slow. Nothing in the neighborhood has sold in the last couple of months.
So it does change and often that is very challenging for a seller to kind of wrap their head around that value changing especially when it’s going south. But the lowball offer I think it is important to respond to all of them, regardless of what they are. There’s no harm in sending a counteroffer coming off your list price, whatever 10, 20, $30,000 depending how high and how far apart those, that offer is. But that’s usually the conversation with the seller is: “Okay. Yes, this is not what we want, we’re not accepting it” but keep the conversation going. What is the harm in sending a counteroffer back to these people with everything that we want? They may react to it, they may ignore it. They may significantly improve their offer and they were just trying to see how desperate we are.
Monica: Right? There’s a lot of things that, that need to be talked about when you receive an offer. If the seller has plans to relocate, if they have plans to buy, what is that buy side look for that look, like for them right now in this market. What could it look like for them if it took another month to sell their place? Conversations like that.
It’s really important in stratas too, because you have to look at the broad scope of things from work coming up in the building to your strata fees that you’re paying every month. Like how like how much are those little dollars adding up? And, and yeah, does it really make sense and I don’t believe we’re gonna see a lot of really exciting record sales this fall. I’d be really surprised if we do. So if you’re holding out for a record sale, that probably means you’re looking to wait until spring and how many mortgage payments and how many strata payments are making between now and then and what kind of work is coming up? Like that’s a really important conversation to have.
Denny: When you do counter the lowball offer, and they come up and there is a gap between what the seller’s lowest number is and what the buyer is willing to put on paper. Then the conversation kind of switches to okay, what are we waiting for? We’re waiting for an extra $20,000? What if you don’t get that this year? Is that going to be frustrating to you? Are you willing to wait till next spring, next summer? Are you like, are you willing to wait another 12 months? And if the answer is no, I don’t want that to happen. Maybe that 10 or $20,000 gap is not worth saying no to and so that you can actually move on. If that answer is yes, it is a very, very important to me to get that extra 10 or $20,000. I’m downsizing. This is my retirement fund. Great. You just may have to wait till next year. And those are the conversations that are regularly happening, happening in markets like this that we’re not getting multiple offers there are not this anxious lineup of buyers at every single open house anymore. But let’s maybe chat about the buy side too.
Monica: The buy side is a pretty exciting market as well right now. There are some deals out there. I think that the best advice I can give to any buyer’s agent or buyer out there that thinks they found the right property but it’s not quite the price that they want.
I would highly recommend sending an offer but I’d highly recommend making it professional. Put it on paper. Have your Realtor send in comparables, why you’re offering that amount. Put the whole package together so when the listing agent takes it to their seller, it looks like you really care about the place, you really want it and you it supports your value that you’re giving. It doesn’t just say hey, I think your house was a piece of crap and probably worth 100k less than you’re asking. You know there’s, there is a right way to do it. And there’s a wrong way to do it.
The wrong way is to like throw a low number out there and like oh, I’m just feeling it out. I just want to find out like what’s the sellers expectations and that kind of thing. Some sellers might be open to that conversation verbally other sellers need to see it on paper for them to really consider it. Because if you’re just getting a phone call from your agent and you’re hearing a really low number, it’s easy to say no. But if you have a nice beautiful offer in front of you with signatures on it, and a lovely letter it might make it feel more real. So put the effort in if you’re going to put the low offer and put the effort in.
Denny: On the buy side there’s a big difference between a quote unquote “lowball offer” and a “market value” offer. Right, a lot of times in, in these markets where homes are sitting on, on market a few months, people are pricing them at yesterday’s prices and they’re listed 100, 200, $300,000 higher than what homes in that neighborhood have been selling for. So upon the buy side when we’re talking about value like we often just ignore list price. List price doesn’t mean anything in a busy market or a slow market. It doesn’t matter. But we’re educating buyers on: “This is what is sold in the neighborhood. This is probably what the home’s worth in this range. And if we’re willing to offer in that range, we’re absolutely sending that offer in.” If, if a buyer is wanting to take a $250,000 discount off of that, it’s completely different.Then, that’s the, that’s the term “lowball offer”. But just because it is off of list price does not necessarily mean it’s a “lowball offer”. And I think a lot of buyers get caught up in seeing a list price and they just ignore a home because it is 100,000, $200,000 higher than what they want to spend. But in a lot of cases in markets like this, that homes are sitting on market where those list prices are just too high and they’re not going to sell there anyway.
Monica: Yeah, that’s a great point Denny, like the term “lowball offer”, really what does it mean? Like a lowball offer typically means under market value like well under market value. Sometimes to sellers a “lowball offer” can just be under what they’re asking. So that’s where the education process comes in constantly and with buyers too. I have no, I’m not shy to let my buyers know that no, that is a “lowball offer” that’s well under “market value”. It’s, the seller is probably not going to respond to that because I have no way of supporting this value that we’re asking for. But this value, yeah, you know, kind of educating your buyer just like you’re educating your seller along the way. Like a deal should, in the end, whether everyone feels this way or not, a deal in the end should be a fair market value for the property. That’s what it should be.
Denny: On the buy side too. I think it’s important for buyers to understand that in some circumstances, sending an offer well below market value on a home that you really want to get and you’re gonna come up on your price regardless to around that market value number that we’re talking about. Sending the lowball offer can hurt you in a negotiation. It can make the seller defensive, it can make them not want to work with you at all. It can make them more stubborn on list price or on what number they’re looking for, because they get offended with this number that is, you know, $150,000 lower than what they’re expecting. So I always tell people to be cautious and like, talk out their their ideal outcome a little bit in more detail. If you’re willing to pay $1.4 Because that’s the market value for home and you’re starting at $1.25, you’re probably hurting yourself in that negotiation versus starting at $1.325, you know, a lot closer to that number that we’re trying to get to or trying to just be below. So I always say “Be cautious”. like especially on the buyer agent side.
I think it’s important to understand like, who is the seller? Is the seller, an older couple that’s been there for 25 years that raised their family there? Sending the lowball is probably going to piss them off and it’s going to be challenging to actually get the offer accepted because they’re going to be defensive. Is the, is the seller an investor that has had a renter in there for the last five years and is not emotional in any way? Then you know, you have a little bit more flexibility I think and stuff like that because they’re not going to take offense to, to another lowball offer because it’s not emotional for them.
But the idea of sending a package with sales to back up where you’re coming from, I think is a phenomenal idea. And I forgot to mention that on the listing side too, I think as a listing agent, if you’re countering a lowball offer saying, you know thanks for your offer $1.2 we believe it’s more like a $1.35 home, here’s why. Here’s our counter at $1.35. Here’s the last three sales that have sold in that range, then, at least, you know, if they’re not willing to go into that range, so be it but you’re really backing up that you know, we know what the value of the home is. And right now you’re getting a lot of phone calls from buyers agents who are just making stuff up. Like have no background information whatsoever other than they’re just saying: “The market is going down. Your seller better taken now or it’s going to be $950 tomorrow, you know?” And it’s just been like they have literally done no research other than read one news article that said interest rates are up, sky is falling.
Monica: I doubt they read the article, they just read the title.
Denny: They read the title, read the clickbait. So it’s important I mean, regardless of what side of the transaction you’re on the extra research and knowledge and showing that knowledge to another realtor goes a very long way.
Monica: Yeah, showing the knowledge is pretty priceless because you don’t actually know who you’re working with on the other side usually. So from the buy side you don’t know where that listing agent is from usually. You don’t know if they know the neighborhood really well. You really don’t know their relationship with the seller. So sending a really professional package even if you are actually doing a lowball offer because I’ve done this many times and I know Danny has too. I can just like pull whatever information I can to make my offer look like it’s legit. Put the work in, find those hilarious sales that make no sense. Find the outliers, put them all together in a list and make it look like it’s something and send that. You don’t know like that could make you win a lot for your client. But it’s certainly not going to happen if you send nothing.
Denny: As a realtor. Remember that the list price does not mean anything. The list price is a marketing number. So when you’re calling and negotiating off of list price based on work that the home has done, it almost makes you sound ignorant to what’s going on in the market. What like what is going on in that specific neighborhood. For example, I had a phone call yesterday that said well, we offered $200,000 under asking because the home needs $200,000 worth of work. I said exactly. That’s why we priced it $200,000 below where a renovated house would sell right? We’ve already taken that into consideration. It doesn’t really work like that. It would be nice if it did.
Monica: Nope, it does not work like that.
Denny: But it doesn’t really work like that. So I think ,making sure that you’re doing the extra work on the buy side too, to back up the offer. Makes you look more competent. It helps get deals together.
Monica: Yeah, it actually just makes it easier. It makes you, like from the realtor side, it helps you get your clients to transact quicker and what usually gets them into the best property that’s most suited for them before they get absolutely discombobulated by seeing 50 properties or more which I have some clients that are doing that right now. It’s just their personalities.
It really helps if you educate your clients, no matter if you’re on the buy side or the sales side. A little bit of effort throughout this whole process goes a really long way. And I think we talk about this in all different aspects. We talk a lot about a lot of different topics on this podcast and I think almost everything when it comes to buying and selling boils down to education. Making sure your buyers know what they’re doing, what they’re looking at, making sure your list, your sellers know the listings in their neighborhood and which ones are actually comparable to their property. It makes the whole process easier. And when it comes to lowball offers or below market value offers, I’m not saying it can’t happen. But the only way for it to happen is if you put the work in. Not just like, throwing some money at them like hoping it works. You got to put the work in.