It’s been quite sometime since I wrote anything about lowball offers – the last time was way back in 2006. In 2006, the market had noticeably cooled from the frenzy in 2005, and it was just a year before a historic real estate market meltdown began in 2007. Of course, hindsight is always 20/20 and if sellers had known then what we know today, I’m sure many more lowball offers would have been accepted!
But what, exactly, is a lowball offer? To me, a lowball offer is anything that’s more than about 3-4% below asking price. It could be that 3-4% below asking price is actually fair market value – but fair market value is a debatable number, whereas asking price is a fact. In some markets though, most offers are 3-4% below asking price, so what would be considered a “lowball offer” will vary from place to place and time to time.
These days, there’s a lot of talk about a softening – or shifting – real estate market. Given that the California economy remains resilient (for the time being) with growing wages and employment, I am not certain why the demand for housing would weaken. Supply has not significantly increased in many Bay Area markets, at least according to a few random spot checks I’ve made over the past few weeks and months.
However, you know the saying – perception is reality. If buyers are perceiving that there’s less competition out there for homes, you can expect they’ll be more inclined to lob some lowball offers out there and see if anything sticks.
I wondered, though: how many lowball offers are sticking? I ran some numbers, to get a sense of how sellers are doing getting their asking prices. I looked at single family homes sales for the past month or so, for Santa Clara, Santa Cruz, Monterey, and San Benito counties. The numbers I’m going to share with you are asking prices at time of sale – not original asking price. Here’s what I found:
As you can see, the reality of today’s market is that nearly 58% of sellers receive 100% or more of their asking price. An additional 31.5% of sellers received 95% or more than asking price, and just 7.6% of seller received 90-95% of asking price. And only 3.17% of sellers received less than 90% of asking price.
What It Means for You
For sellers, I hope it gives you some reassurance that while the market may be slower than what it was earlier in the year, most sellers are getting at least full asking price for their homes – and 44.6% are actually getting over asking price.
For buyers, it means that you shouldn’t be overly optimistic that you’ll get too far with a lowball offer. I generally advise my buyer clients that if you plan to offer less than 90% of asking price, don’t bother – and the numbers pretty much bear that out. And, realize that while it may be easier to get a low-er offer accepted than it was earlier in the year, sellers are still doing pretty well when it comes to getting asking price – or more – for their homes.