How to Convince a Seller to Accept Your Low Offer

26 Sep How to Convince a Seller to Accept Your Low Offer

You want to get a deal. Some people say, “The money is made on the buy.” To a large degree, that is true. The lower the price you pay, the more the potential profit and the lower your risk. If you use financing, you’re borrowing less money and paying less in interest.

However, lowball offers are typically rejected. For many sellers, a lowball offer upsets them, and they won’t consider a subsequent offer from you. You lose credibility as a buyer. In other words, if you consistently make ridiculously low offers, you might not end up with very many properties at all. Maybe none! If you don’t buy any properties, you won’t build wealth through real estate.

I know many people who have said something like, “I should’ve bought an investment property in 2016…well maybe 2017…at least in 2018…2019 would’ve been nice…and definitely 2020 with those low interest rates…uh, I should’ve jumped on something in 2021…and sigh, 2022…” If a landlord had purchased a property in 2018 at full asking price (or over the ask!), that property today could be worth 50% to 100% more! In retrospect, it would’ve been lucrative to borrow money and simply pay the asking price on a lot of investment properties in 2018, and 2019, and 2020, and 2021, and 2022! If you’re wisely playing the long game, you will win. My wife and I buy rental properties that we probably will own for the rest of our lives. The mortgage payments are fixed, while rents are increased year after year. We also receive the benefit of depreciation on our tax return and appreciation in the value.

Regardless of whether you’re a flipper or landlord, with your offer you typically want to find the seller’s bottom line while ensuring that you’re not overpaying for the property. So, what are some ways to convince a seller to accept your low(ball) offer?

• Make a cash offer (even if you borrowed the money from a Home Equity Line of Credit or private investor). Some sellers are willing to take a lower cash offer over an offer that involves financing. Why? Some sellers are worried that the property won’t appraise, which will cause the buyer to back out or negotiate a lower sale price. Some sellers need the money right away and don’t want to wait the 30 days or so for a loan to be processed. That takes us to the next point…
• Close quickly. Some sellers will take a low offer if you can close in 7 to 14 days. Two decades ago, my then business partners and I made a low offer and the title company said they could close the very next day! (But, our offer was too low and the seller rejected it. The seller was upset and didn’t want to deal with my business partners and me. Had we offered a little more, I think the seller would’ve accepted it.) Not every seller will want to close quickly, but they may still accept your low offer. How? Read on…
• Ask the seller what is their ideal closing date, and have the settlement on that day. Once there were three offers on a townhouse. The investors’ offer had the lowest price, and they agreed to hold the closing 90 days later since that’s what the sellers wanted. The sellers lived in the house and needed time to find their next home. The other two competing buyers wanted to close in 30 days, which made the sellers uncomfortable. The sellers accepted the offer from the investors. Convenience trumped price.
• Waive inspections. Some sellers will take a low offer if they know the buyer will accept the property without inspecting it. When you waive inspections, you’re saying you’ll take the property with all faults. The seller knows you won’t back out (unless there’s a title issue or if you have a financing or appraisal contingency that is not met). Some sellers are worried about what a home inspector will find. Some sellers may be fed up with previous buyers backing out and just want someone who won’t have a formal inspection.
• Do inspections for informational purposes only. This is a contingency where you tell the seller that you’ll perform an inspection but won’t negotiate a discount if you find adverse issues. However, you are allowed to back out of the deal and get your deposit money back if there is a major issue found. The seller may be relieved with the knowledge that you won’t seek any concessions due to inspection results.
• Have an extremely short inspection period. Sometimes my wife and I might conduct all inspections in a 3-day or 5-day period. That way the property is not off the market for very long. Some buyers ask for a 14- to 30-day inspection period, which can make a seller nervous. Who wants to wait 30 days to find out if the buyer is still going to go forward with the deal?
• Make a sizeable earnest money deposit. Many buyers want to make the smallest acceptable deposit to minimize their risk of loss if the deal falls apart. Some sellers would take a lower offer if the buyer makes a substantial deposit (even if it’s a refundable deposit). A large deposit is reassuring. That conveys the buyer is serious. My wife and I tend to include a large deposit to show that we really want the seller to pick our offer.
• Make a nonrefundable deposit. Some sellers will love that the earnest money deposit is nonrefundable. They may accept a low offer because other offers involve a refundable deposit. Obviously you’re risking the deposit up front, but your risk is reduced if you’re buying at a lower price.
• Waive the appraisal contingency and add an appraisal gap contingency. Some sellers worry that a low appraisal value could wreck the deal. If you’re getting financing, you can waive the appraisal contingency as long as you either: 1) Have the cash to make up the difference in the event of a low appraisal value, or 2) You know your lender won’t conduct an appraisal (some don’t if you’re making a significant down payment).
• Schedule the appraisal immediately. The typical process is that an inspection is conducted first. If the buyer decides to continue with the sale after reviewing the report, then the lender schedules the appraisal. After all, it’s silly to pay for an appraisal if you decide to back out of the deal due to adverse inspection results. However, a seller who is worried about a low appraisal value might be willing to accept your offer if you agree to conduct the appraisal as soon as possible.
• Agree to remove debris at your expense. Some sellers fret over all the junk they’ll have to haul out of the property. They may not want to pay a junk removal service. They might not have the physical strength to load unwanted items in a dumpster or drag those items to the curb for trash pickup. They might not want to deal with the emotions of throwing away things that elicit memories. You can make an offer that states that the seller can leave behind debris and unwanted personal belongings.
• Offer the seller the opportunity to earn interest on a first or second mortgage. Some sellers are sad to give up the asset but pleased to still receive some future income. In some circumstances, a seller may agree to deed you the property while holding a note. That way they don’t have the legal liability or management responsibility of ownership, but they receive mortgage interest passively. Some sellers want a big payoff but are willing to hold a second mortgage. Now, if you are going to receive financing from a seller, they might want a higher price in exchange.
• Allow the seller to have post-settlement occupancy. Let’s say the seller needs two weeks to move out. So, if you have a closing on October 16th, you could agree that they move out by October 30th. Having a little more time can take some of the stress out of moving. My wife and I bought a fixer-upper house in a multiple-offer situation because we agreed to give the seller two weeks after the closing to move out. The seller was a disabled veteran and really wanted the post-settlement occupancy. We made it easy for him to say yes to our offer even though it was below the asking price.
• Conduct a sale-leaseback. In a sale-leaseback, a seller wishes to collect money for their equity but they want to retain possession. The seller gets to collect cash and agrees to pay rent for future use of the property.
• Barter, or buy some of the seller’s personal property. A creative deal could be worked out in which you trade a property with the seller. While rare, there are instances I’ve seen in which a buyer offer cash and real estate in exchange for the seller’s property. Also, you could offer to buy some of the seller’s personal property. Some sellers may be happy to receive extra cash for something like their furniture.

While it’s not always easy to find out what the seller wants, when you establish rapport or ask the right questions, you might find a win-win solution. Getting real estate deals is a numbers game, in that you have to make a lot of offers while also knowing what your maximum allowable offer will be for each property. Getting deals is also an art. Asking intelligent questions, building rapport with the seller, thinking creatively, and being decisive are skills that make you a better investor.

One more thing to keep in mind: Sometimes offering the asking price or more is a wise move. If you see an opportunity, don’t get caught up in the asking price. What matters is what is the property worth to you? What is your max allowable offer? On our most recent acquisition, my wife and I paid $16,000 over the list price. The house was in a great neighborhood and was still acquired well below the After Repair Value.

Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania.  He became a full-time real estate investor in 2004 after serving in the U.S. Navy.  Tai made colossal mistakes in investing (and learned some things along the way).  Tai has coached hundreds of entrepreneurs, real estate investors, and real estate agents on how to increase their income and net worth. He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Amazon.com. Tai may be available for coaching and speaking engagements on a variety of real estate topics.  Send an email to tai@investandtransform.com.