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November 21, 2005
The Hot New Game of Lowballing
Lowballing is the profitable game of submitting a ludicrously low bid on a house just to see if the seller goes for it. The game didn't get played much over the past few years, when houses were sold within hours for above the asking price. But for obvious reasons it seems to be enjoying a resurgence of popularity.
I just found this new blog about the northern New Jersey housing market. The blogger, named James Bednar, aka "Grim," posted an item Saturday about houses that sold recently for way below their asking price, including one in Madison, N.J., that was listed for $2.89 million and sold for $2.3 million.
Not everyone has the stomach for lowballing, particularly if the seller is in genuine distress. But like it or not, this is how markets work in a slowdown.
Please let me know of any extreme lowballs where you live.
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What a difference a couple months makes!! I heard from associates that bidding on houses less than 5-10% above the asking price was asking to be rejected.
This game is just getting started. The smarter of the investor flippers are trying to get out now before the getting is worse.
Posted by: Wes at November 21, 2005 01:59 PM
Remeber, the real value of a house it what someone is willing to pay for it. "lowballs" are nothing more than reality being injected back into the market and another indication that it is becoming a buyers market. What will happen this spring when the flood of homes for sale hits with the current back up in inventory still in place? How much over supply does it take for sellers to adjust prices.
Posted by: Doesitmatter at November 22, 2005 10:39 PM
with an explosion in listings, there's got to be panic and desperation out there
but how low is fair? I'd say 50% of asking price. Seriously.
Posted by: keith at November 27, 2005 03:15 PM
I'd say 50% is a little drastic, even if the underlying fundamentals justify such a price-cut, which incidentally in most markets is not the case. Also, prices are relatively sticky for single-family homes, most people will not really accept much less than what they paid for it. Over the longer term this means that prices will flatten for several years as the underlying fundamentals that drive demand come back to equilibrium compared to price.
Posted by: Nathan at December 5, 2005 12:09 AM
I say if house prices appreciate in the 20-30% range then "fair" is somewhere around annual depreciation of 20-30%. But seriously, a fair offer is whatever you are willing to pay for a house (not what you can afford). A sellers market forces prices based on what you can afford. A buyers market forces prices to what you are willing to pay. Supply and demand eventually settles on the median price where buyers and sellers can agree. An overage of supply (which we have) means sellers need to adjust their prices down in order to reach a level where buyers raise demand sufficiently to match supply. The extremely sharp drop off in sales (wait for the Katrina 400,000+ person displacement effect to work its way out of the lagging numbers NAR reports) indicates that prices are to high for buyers and that market forces will push prices down.
Posted by: Doesitmatter at December 6, 2005 09:21 PM
It is fair to low ball your offer as much as you think is the real value in YOUR view. Ignore any realtor's view since they are primarily driven what is good to THEM. Always, remember it is YOUR money and only YOU and YOU have the right to make a decision about how much a house is worth in terms of your hard earned money. In any way, houses are artificially inflated, making an offer about 50% will be just fine.
Posted by: James at December 14, 2005 04:26 AM