Springtime is here (!) in Tulsa and I have seen a dramatic upswing in activity in the Real Estate market here. But I have one client who has been shopping with me since last November and when he started he was determined he was going to find a screaming Real Estate deal that he could talk about over beers at the local pub. The problem with that is, there aren’t any of those deals left in this market. Today in Tulsa available inventory is down 20% over last year at this time. That means where there were five houses to look at in a price range, now there are four. And those four aren’t lasting very long. The deal is still there. It just doesn’t look the same. But before I get to what it does look like, here are some things to consider if you’re thinking about making a lowball offer on a house in today’s market.
1. The Market matters.
As a Real Estate agent I know that in good markets and bad, the market sets the price, not the seller. It’s the seller’s responsibility to realize that early on. And if he retains a good Real Estate agent that agent will help him understand that. In a slow market that may mean a lower price. But in a hot market that means there may be more than one buyer for the same property. When that is the case, the “lowball” offer is dead on arrival. Once the buyer has lost one or two good properties to higher bids it usually begins to dawn on them that the lowball approach isn’t going to work.
2. Apples are apples.
It’s also important to look at similar houses that have sold in the area. If you’re looking at a four bedroom house with two car garage that is around 2500 square feet built in 1995 it’s a good idea to look at all of the properties within a one mile radius that are similar. Properties that are much larger smaller, newer, or older will skew your results. Normally you could look at sales going back over the last year. But with the market as active as it is you should probably go back no more than six months right now. And realize also that those six months are winter months. Prices are already beginning to heat up for summer.
3. Time is money.
The NRA says the typical home search lasts 12 weeks. If you spend your time lowballing the sellers you could find yourself taking much longer than that to find a house. It’s mainly because good houses are getting multiple offers. The seller doesn’t even have to consider an offer way off the mark.
4. Sellers are people too.
If the sellers purchased their house between 2005 and 2009, chances are, that property has lost value. They are not happy about it and, whatever their reasons for selling, they are already very frustrated at having to sell at a loss. The sellers are already losing money and will push very hard not to lose any more. In many cases the seller may not even be able to respond to a low offer. Financially he can’t make the numbers work to get out of the house with only his dignity intact. So while submitting a low-ball price sounds like a great way to get a cheap deal, it can start the negotiation process on the wrong foot. A seller and a good seller’s agent will not take that offer seriously. In fact, even if they do respond, that seller now does not want to sell the home to you and will do almost anything to encourage another buyer to step up.
5. The wrong offer can cause buyers to miss out.
Here is the story of a buyer in California:
My real estate agent called me about a cute little 1920s Craftsman house in Hollywood that was about to go on the market at $303,000. It was a fixer-upper and, at that price, it was a very good deal. Although I would have been willing to pay the asking price or close to it, I wanted to see if I could lowball and get it for less. Against my agent’s recommendation, I offered $270,000. I thought they would come back with a counter and that we would ultimately close the deal at $290,000. Well, they did counter, but with another potential buyer whose initial offer was $290,000. They were so offended by my low offer that they refused to sell it to me at any price.
Because the market is fluid, housing prices are as well. My client has discovered this not once, but twice, now in the last two weeks on two very nice properties.
So where are the deals now? The deals are in the way you finance the house you want to buy. Consider the fact that right now if you have good credit you can get an interest rate in the mid-four percent range. Analysts predict the rate will be in the mid-fives by this time next year. On a $200,000 loan that’s a difference of roughly $120 every month on your mortgage. That’s $1440.00 every year. If you live in your house only five years that’s over $7,000.00 in savings on interest. And if interest rates go even higher that number will, too.
Even though the cash price of the house may not be a screaming deal by lowball standards, the real savings over time will be just as big.
In Tulsa, if I can help you buy or sell your next home please call me at 918-809-5199.