How low can you make a first offer without insulting the seller?

You can make an offer for anything you like. All the seller can do is say they're not interested.

That's true, but would the seller get insulted and then not be willing to negotiate?

Well, seller might say "we're so far apart that I'm not coming back to you with a counteroffer". At which point, you decide if you want to increase your offer.

In this market, hard to believe that a seller will not counter with SOME number.

Good advice. Much appreciated.

lobster, there are other threads about this if you do a quick search. My experience is it's impossible to predict a seller's emotional response - don't buy into the myth of "insulting" the seller; it's another silly broker tactic. That said, don't make a blatantly unfair offer that you know will get rejected either (ie: $500k in this case). I once had a broker tell me she didn't feel comfortable submitting my offer for this reason - I had to politely remind her of her legal obligation to do so.

lobster, do you think it is worth under $1M or are you just hoping to catch a lucky break? What are the comps in the building? $1.3M may be a great price that has already factored in the $75k for renovations. Need more information.

How strange that in residential real estate people take "bids" so personally! It seems strange but people do identify with their homes and they do often take things quite personally.

In an extreme case (needs lots of work) and market is very bad, I think you can consider 30% off the asking price.

For a "normal" property in "today's" market I think you can generally start at a 25% discount to the "offering" price. That is aggressive - but nothing wrong with low-balling. Most will say, "no..." or something worse. But what do you care? (Or are you just too sensitive?) It's just business. You're not trying to make a new friend.

All you need is one, "yes." You never really know all the reasons someone is selling and your low-ball bid may be a whole lot better than nothing - which is what they get from "polite" people who don't bid at all.

IMHO.

Look at the range of listing discounts (last asking - closed) for stuff that actually sells. A few at -20%-ish, a few above asking, and the rest between those extremes with a median of -6-7%.

If they're still asking 30% more than the market tells you it should sell for, then the odds are that they're not ready to accept reality. All your -30% offer is going to do is contribute to their education. No harm in trying, though.

They're lucky you're even looking at something priced that much above market.

Yes, in today's market, cash is a plus. Too many people go to contract and then can't sell their current homes (at what "they" think it's worth) or can't get a mortgage. A bird in the hand is worth two in the bush.

for an all cash offer on what you've described i would not be shy offering 40% below ask in this market. has the place had a price chop yet? just wait...............it's coming.

ph41, look at what the competition is listing there similar apts at then make a judgement based on that. Remember the market is improving so sellers are expecting more than say 6-9 months ago.

"ph41, look at what the competition is listing there similar apts at then make a judgement based on that. Remember the market is improving so sellers are expecting more than say 6-9 months ago."

BINGO!

markets not improving. go as low as you want. this is business. insulting is irrelevant. go to where you think the price is.

Since sellers are not afraid to insult buyers with ridiculously overpriced asking prices, the buyers would do well to forget about sellers poor wittle feelings and instead think about their own wallets. JMHO.

Lobster
You start with a probe question for an offer. The agent will know if it will be insulting or not.
In my early offers, I paid no mind to this and I have "insulted" some agents with my all cash offers.

I changed my approach to "I have a number in mind but I wouldn't want to insult the seller."
The agent will either tell you a)"My client is firm or has offers near the asking price" at which point it is not a good idea for a lowball offer, or tell you b)"I am obligated to to tell my client any offer you have" which is an invitation.
If you really like an apartment and you got reaction A, before you leave make sure you ask if the agent has all your contact info. Sometimes a day later, "things change."

JuiceMan, It's a small building with low turnover so there are only a few comps- most priced over 1 year ago so that didn't provide much guidance. I thought the apartment was worth around 1.15M, my husband priced it a drop lower and our broker felt it was worth closer to $1M. For a novice buyer such as myself, this market is confusing in terms of pricing. Bjw2103, surprisingly in this case, our broker thought we were pricing it too high but thanks for your great advice about dealing with the seller and the related SE thread.

I think if you want to bid significantly below ask, having the comps to back it up really helps. You love the place or you would not be making a bid, correct? the only point of contention is the value in dollars. If you have two or three reasonable comps in your hand your gonna hear a lot of bullshit but, you politely inform all parties that you would be happy to review any recent comps that they would provide. This is the professional responsibility of the RE broker. Ask them to not get insulted just, show you, via comps, where you went wrong in your price analysis. Your not looking to steal just, pay fair value which is determined by comps. Then comes the wiggle...floor, condition, view, light, etc.. These differ, in most cases ,less than 10% of the ask. In this case if the comps determine 1M than the neg is really between 975K and 1.075M conditions dependent. Then again, you do the comps, you come up with 1M, you stick to it and 6mos. later it sold for 1.2M....go figure. All it takes is one.

Most sellers sellling in this market are STILL irrational and have NOT adjusted to where values are (or worse yet, where values are heading). they have priced correctly and you actually think its a LOW PRICE, most seller are still irrational and expect you to pay a premium to convince them to sell. You can def bid low but some may get insulted (esp IF they are not motivated to sell and expect you to still pay a premium in this market). My suggestion in today's market is make sure you get a deal. Otherwise dont bother. The pain of dealing with rising maintenance and rising costs, higher taxes, lower disposable income, a likely stagnant RE market in NYC for a few years with low rentals is not worth it. If you FALL in love with a place and think you will stay in it forever and dont mind paying 50% to own than to rent, than its your call.

You want to do due dilligence with acris as well.
If a seller is asking 1.5m and has 1.3m in mortgages,offering 1.1m and expecting the seller to cut a check to the bank for 200K is unlikely.
Doesn't mean they won't be forced to later or have a short sale situation, but it won't happen the first 2 months of the listing.

If your due diligence results in a price that may be considered a low ball offer, it is what it is. I've had this same experience. I'm an all cash buyer looking at something priced at about $1.3MM. I think it's worth ~$1.0MM and even though I love the apartment, I can't see overpaying given the current market environment (and my bearish outlook for the market). Sellers are very emotional and they think that they can get exactly what they paid for the apartment. Unfortunately, my seller overpaid in 2004 and is asking $75M more than he/she paid. In addition, the same apartment, albeit one floor lower (view is the same) closed in 2005 at around my offer price. Given this, price per square foot and comps, I think that my all cash offer is right on the money. I made the offer and the buyer countered with a $50M price reduction...alas, I think that the buyer will have to sit on the market a little longer to grasp reality.

falcogold's advice is very good and I second it. You also may want to take a look at this thread on negotiating. Lot's of people had interesting things to exchange: http://www.streeteasy.com/nyc/talk/discussion/8657-negotiating-better-fundamentals-of-effective-negotiating

just curious - after presenting comps to seller/selpler's broker showing that the asking price is too high considering comps presented, what has been the response? I am assuming that you have actually done this.

KW, Falco?

Are you asking me? sometimes it begins a dialogue (negotiation) and sometimes the seller is unmovable and there's no counter.

You can't make someone negotiate with you. If the ask is terribly unreasonable, that would suggest the seller is unreasonable and not all that rational, or has unsound basis for the ask price (like they are just thinking about what they paid for the place and the fact that they cannot take a loss). It's going to usually be impossible to cut a deal and your "lowball" ain't gonna get a deal going most of the time in these situations no matter how you present it. BUT, if you don't ask then the deal will 100% not happen. Never hurts to ask. But you do it respectfully, complement the place a little, explain yourself and thinking. Worst they can do is say no.

In my case, comparing this unit to other similar sized units in the same building won't work because the last 2 bedroom sales were over a year ago (and much higher priced). I'm basing my price estimate upon two factors: 1) our experienced real estate broker's assessment of the unit's value and 2) other 2 bedroom condo units in similar neighboring buildings. It's hard to read a seller's mind and we can only offer what we can afford to offer keeping in mind that we will need to extensively renovate if the offer is accepted. It's difficult for us to judge where the market will be going in the next few months and what effect this will have on RE prices. Best to give it a shot since we are long term renters and really do want to own our own place. Thanks to everyone for all your tremendous guidance and insight.

you can't worry about "insulting" the seller. If you paying the market price has teh seller insulted, it's his problem not yours, because he isn't selling. If you are trying to find on the open market a property to buy at 30% below it's actual current market value, you don't have to worry about insulting the seller because no one is going to sell to you.

You never know what the seller is going to get "insulted" at. I've seen sellers get insulted when someone offered anything less than full ask. It's the broker's job to worry about the seller's feelings, not yours. Offer a fair price and you've done your job. Try "stealing" an apartment and get nothing. That's about the size of it.

I have another problem. I was setting up some appointments to look at rental lofts tomorrow. One of the brokers said to me: "You understand, this listing requires the renter to pay the broker fee of 15% of the annual rent".

My problem? I pretty much laughed out loud at her. I just couldn't control myself. I just thought that was the funniest thing I've heard in a long time. The way she said it was so yesterday! Back when brokers were on top of the world and could dictate shit like that.

After laughing, I just kind of "uh her'ed" her. But I thought maybe laughter was a bit rude, so how do I react next time I hear those funny words?

If I decide to make an offer, it will be a flat monthly rent to the owner, who can pay a broker whatever they damn want. I ain't paying a dime to a broker to rent an apartment, much less $20k. I'd rather sublet from NYCMatt first.

KW, Falco, yes i was asking. Have you actually begun negotiations by quoting comps? And what has been the actual response? I couldn't quite understand from your previous post.

modern, if that is your position then if a broker says you have to pay a fee, smile and say you don't do that. What else is there to say?

ph41: my experience is sometimes it works to get a negotiation going that would otherwise have likely died a stillbirth. that doesn't mean it gets a deal done. in one case for an apt I loved, the seller was utterly unrealistic and didn't acknowledge the estate-like condition of her apt and the hundreds of thousands of $$it would take to get the place livable. I gave it a shot. I opened 25% off ask with explanation (in 2007) and a dialogue began. There were 3 rounds of back and forth, and in the end the seller came to understand and essentially agree with our reasoning on the appropriate price point. Problem was she "couldn't afford to sell" at that price but did realize she couldn't sell at the price she "needed." So she sublet the place for 2 years. Her sublet is about done now and I can't wait to see what she does now since our offer back in 2007 would seem like a gift in today's market. Her mistake. And our win since the second place we bid on and bought was a better fit for many reasons. In the second case, the seller was dead-on with pricing her unit and verylittle negotiation was needed. Still, there's always room to negotiate a little and we did. But little explanation was needed since we were so close to start with. Instead, we emphasized our financials and the fact that any board was highly likely to approve us.

But explaining yourself when negotiating generally is a good idea in any context--autos, how late your teen can stay out, plea bargains, etc. People don't like or respond well to anything approaching an ultimatum or a bid that seems thrown at them. I like to get a conversation going. It works for me. I find it effective. Maybe others disagree, but I pretty much negotiate for a living and talking is an important part of it--not just tossing out numbers.

"Most sellers sellling in this market are STILL irrational and have NOT adjusted to where values are (or worse yet, where values are heading)."

I think one can make the exact same argument about buyers. I've seen countless threads on Se from buyers who lowballed, only to be outbid.

"30yrs - they didn't lose their shirts, after buying at the peak - and it went to contract pretty quickly at 20% under ask - which is fairly standard now, no?"

sorry I didn't see this when it was originally posted, not ignoring you ph41. I posted that more for "completeness" than anything else. I don't think all that much, in one way or another, can be derived from it. But I thought some would find it relevant and didn't want to hear any complaining that I left out a "significant event" when posting data.

sorry, i have NO idea how that post ended up in this thread. Please ignore it.

ph1,
Your going to offer a price. If you get a counter than it's a moot point. If you make an offer and you hear it's insulting...well...You want the property, here's the recent comps that spured the offer...the property if for sale...............right? Think it over......you know I want it, I want to pay fair value...how about a few recent comps to justify a price. If your dealing with a stubborn seller you have two choices...meet the demand of the seller or walk....It's a big town with new inventory every day.

What about if the seller is a bank (represented by a hired broker)? Would a bank tend to play the bargaining game rather than a accepting a one-time offer? Would they prefer cash over a higher-price longer closing process?

was just reading a book about commercial real estate investing that claims that the asking price should be 100% ignored. wonder why residential real estate works so different, seems to me that 99% of buyers take those asking prices almost too seriously. never heard somebody say that the asking is irrelevant for residential, for ex.

A bid, or even an asking price should never be considered "insulting". Unrealistic, maybe....but that is for the marketplace to sort out. We are talking cold, hard cash here - not milk and cookies.

I think the word 'insulting' is not exactly the focus.
How do you present a bid that is VERY far away from the ask without putting yourself out of the game?
I think this is a worthy topic as long as we agree that there is no one answer b/c there is no one seller. Above, there are some good ideas.
Insult is really a way of saying that the bid elicited no responce or negative feedback that resulted in no counter offer. The presentation of such 'precieved' low ball offers has to me made carefully. Bargining is a game, play the game or just cat call from the sidelines.

i think you should frame it as eloquently and politely as possible; the ultimate reaction of course has everything to do with where the seller (and his/her advisors) is mentally and financially. One thing for sure in my mind is that the further we get into this current situation the more likely these types of bids will succeed.

"was just reading a book about commercial real estate investing that claims that the asking price should be 100% ignored."

The VAST VAST majority of emails announcing commercial leasing listings that I get don't even list an asking rent.

a good RE seller's broker will keep a record of offers. i've twice in the past been approached a couple of months after my offer with some interest from the buyer. this hasn't been the case the last few years, but if you are interested and you honestly feel there is significant room for downward pricing, and that's where you are comfortable bidding, bid. you're the one taking out the mortgage, committing for most likely the longer term now. if they say no, they say no. and in a few months, they may change their mind. this is actually one example of how a broker may add value. they can continue to monitor the situation, and put out feelers after a certain amount of time. in my case the sellers' brokers called my broker and asked if there was still interest. i don't know if they would have called me directly.

Aboutready, I certainly hope that this seller's broker is as competent as you are. We made our initial offer which was basically dismissed as completely inadequate and although we will likely make one or two further offers, I'm not optimistic that we will come to an understanding with respect to this apartment. It's good to know that some seller's brokers (hopefully most) keep detailed records and may even look to begin the negotiation process again at a later date. Of course, we could always try to begin the process again at a later date as well if we are still looking.

I agree with that book, 30 Years - neither sellers nor buyers set prices ... the market does. If an offer is "insulting", ignore it ... if you are priced appropriately someone else will come along. If you continue to get "insulting" offers, rethink your ask. Ditto on the buyer side - make whatever offer you want to pay. If you keep getting rejected, the market is telling you to rethink your bid.

I love my home but I get that someone else might not value it the same way I do. Ditto my spouse.

as the seller, unless you are unwilling to budge at all, why not make a very high counter offer? this wasting my time business has never made sense to me. how much time does it take?

i reduced my offer by 20% and eventually it was accepted but i didnt take the property....i think 20% is a good number but its variable based on condition of apt, etc.

this is an interesting thread. I absolutely agree with whoever said each seller's response is different (bjw, falco , cc?) when it comes to low offers. I'm a strong believer that getting a good real estate deal is 99% circumstantial. And i love truthskr's approach (letting broker know you have number in mind but don't want to insult anyone). Great way to extract info from the other side. That one's going in my pocket. I have mixed feelings about comps. I'm not exactly sold on their value unless, of course, the place you're interested in is grossly overpriced compared to what else is out there. Other than that, you're just comparing one inflated asking price to another. And, I'm all for going in for a "steal". It happens, your stars just have to be properly aligned. But, I get off on getting good deals. I may still be a little high from getting my $650 double stroller for $470 this weekend. Oh, the little things. Best of luck!

Here's one that may appeal to the "lowball" offerer.

Asking price is $1,400,000

"OWNER IS VERY NEGOTIABLE - WILL PROBABLY SELL FOR $1.2K I!!!!!!!! "

http://www.streeteasy.com/nyc/sale/405358-coop-167-east-61st-street-lenox-hill-new-york

Broker gets a gold star for diverting my attention away from the maintenance for a whole 10 seconds!

Trump Plaza has another problem which turns off buyers - it's on a ground lease - the only trump building which is a coop, and that was the reason why.

I think you can (with analysis of comps in last 2-3 months) you can make offers in the 3%-5% discount world if the apartment is realistic and "near current market pricing." I negotiated a deal 3 months ago at a new construction condo (85% sold) from $1.005 Mill to $830K with transfer taxes being paid by sponsor. So, if you have savvy buyer's broker or you are a savvy negotiator it can get done. There are many ways to add value without offending the sellers.

"I'm a strong believer that getting a good real estate deal is 99% circumstantial."

From my experience, definitely - the thing is, you can greatly improve your chances if you're prepared to act swiftly when those stars align for you. That's the major reason I roll my eyes at people who are totally ok with sitting around and waiting for great prices on great apartments somehow to just come to them by the truckload, and all they'll have to do is point and say "I'll take that one!" I'm being a little facetious of course, but I do feel there's a sense of self-entitlement when it comes to finding a great, well-priced apartment.

bjw - totally agree (though i've never purchased real estate; just rented). still, i think you have to give yourself time (not time constraints) and be very keen when such circumstances present themselves. in order to do this, i think you really have to know the market.