Lowball Offers – Negotiating with Someone Low Balling You

Lowballing Vancouver BC Real Estate

Updated – September 11, 2023 by Mike Stewart Realtor

Buyers and their Realtors when then are preparing an offer to purchase a property may use a variety of negotiating tactics depending on market conditions and the buyers personality and motivations. In a soft market or a “buyers market”, low ball offers or lowballing often becomes a more popular negotiation technique.

What is a Buyers Market?

A buyers market is when real estate prices are falling or stagnant for an extended period of time and there is a high number of property listings (ie people trying to sell their homes) in Vancouver. The real estate boards across the region use a monthly sales to active listings ratio, called the “sales ratio” to gauge whether the market is a buyers market or a sellers market.

Consider these examples of the sales ratio. Imagine there are 100 homes for sale in Downtown Vancouver and 50 of those homes sell in the past month, then the sales ratio for Downtown Vancouver is 50% for the previous month. Likewise, if only 20% of those 100 homes sell, the sales ratio is 20 is 20 for the previous month.

When the sales-to-active listings ratio is below, 12% for an extended period of time, real estate prices tend to face pressure and can result in a buyers market. Likewise when the sales ratio is over 20% for an extended period of time, real estate prices tend to rise and we get a “sellers market”.

Where can I find the Sales-to-Active Listing Ratio for Vancouver Real Estate?

The various real estate boards across British Columbia provide detailed monthly statistics (Here is a link to the updated Vancouver Real Estate Statistics with sales-to-listings ratio). It is highly advised to get in touch with a qualified Realtor and review these statistics before listing your home for sale to get the best results.

What is a Low Ball on a House?

In a Buyers Market some buyers use an aggressive negotiation strategy called the Low Ball offer in order to get the best possible price on a property they are interested in buying. A Low Ball offer is a real estate offer on a home that is significantly less than the asking price (but maybe not the market value) of a property. Typically a low ball offer in the Vancouver market is around 5-10% below the list price of a property. Low ball offers are often viewed as one of the more aggressive negotiation strategies.

Why are Canadians afraid to submit Low Ball offers?

Culture.

In some cultures, haggling and negotiating for everyday items is a common skill and happens daily.

This does not happen in Canada.

Culturally, negotiating price for everyday items does not happen Canada and would result in a quick rebuff if attempted.

In this country, the only things that people haggle or negotiate on are cars (most Canadians only own 10-12 cars in their lifetime and not all are new) and homes (Canadians typically buy 4-5.5 properties in their lives).

In Canada, aggressive negotiating tactics outside of the business world are often seen by those who do not negotiate professionally as rude, disrespectful, and unpleasant.

Those on the receiving end of aggressive offers and negotiating tactics often have a strong negative emotional response.

In a soft market (more sellers than buyers with lots of negotiating room on price), a negative emotional response may stand in between a seller and getting a property sold.

For the reasons above, many buyers in Canada are afraid to submit low ball offers for fear of insulting the sellers. But low ball offers serve a purpose.

Why are these offers good for property sellers?

1. All offers in real estate are an opportunity. – Lowball offers are an opportunity for sellers to get an accepted offer on their property in a market where these are scarce.
2. Can result in the seller getting top dollar? Yes. – A low ball offer received could create the opportunity for a multiple offer situation for a seller. As soon as more than one buyer is competing for a property, the negotiating power of a seller increases exponentially. The sellers agent cannot disclose to the buyers agent how much the offers are for, they can only disclose there is another offer. A good Sellers agent will encourage low ball offers to use as leverage on other more motivated buyers to get the seller top dollar.
3. Allows a seller important market feedback about the price they have listed their property at. – Often a seller may not have received good pricing advice or the market analysis was not done correctly on the property and the seller may be unaware that they are dramatically overpriced. If a seller receives no offers and then a few weeks or months after listing the property, receives a low ball offer, this is a very clear signal to the seller their property is over priced or has some other major issue the seller was not aware of or did not take seriously.
4. Stable offers for sellers once the offer is accepted – Allows the buyer to be 100% certain they have gotten the best deal possible. This reduces buyers remorse as well as the chance that a buyer walks away from the deal if the market falls between the time there is an accepted offer and the Completion Date.

What to avoid when low balling as a buyer?

1. Offering what you will pay – Your Low Ball offer should initially be below the amount you actually want to pay. The Low balling Buyer wants to create the impression in the Sellers mind that the Seller has a good deal because they have got the Buyer to raise their offer price.
2. Walking away from a sellers counter offer – A Low ball offer allows a Buyer to assess the Sellers motivation. Some Sellers may be desperate, but try to create the impression they are not by responding to a Low ball with a high counter offer. If the Buyer doesn’t respond to the Sellers counter that’s the end of it. You can’t get anywhere in a negotiation if you’re not negotiating. Persistence pays when Lowballing.
3. Time is your friend – In my experience, time is the best solvent for stubbornness. A seller may reject a low ball offer out of hand and then think twice about it after only to become far more flexible the next time the buyer submits another low offer.

How to make these offers more acceptable

Give the Seller something. If you are going to come in low on price, make sure to add a sweetener like a quick completion date or a short subject removal date. The seller may look more seriously at your offer if you add these sweeteners.

Make a good case for the low price. If you’ve done your homework and you have some documentation to support your offer you may find the seller comes around. A seller may not have known about a recent transaction that has impacted the market, if you let them know, they may go for your offer.

With a Lowball offer it’s like anything else in life, if you don’t try, you’ll never know!

Negotiating with Someone Low Balling You as a Seller

Negotiating with someone low balling you as a seller?

Quick bit of advice  – Don’t over price your listing!

Low Ball Offer FAQ

1. What is lowballing in the context of British Columbia real estate?
   • Lowballing is an aggressive negotiation strategy where a buyer submits a real estate offer on a home that is significantly less than the asking price, typically around 5-10% below the list price in the BC market.
2. When is lowballing a common negotiation technique in BC?
   • In a soft market or a “buyers market”, where real estate prices are either falling or stagnant and there’s a high number of property listings, lowballing often becomes a more popular negotiation technique in BC.
3. What defines a “buyers market” in British Columbia?
   • A buyers market in British Columbia is characterized by falling or stagnant real estate prices over an extended period and a high number of property listings. The sales-to-active listings ratio, or “sales ratio”, is used to determine whether the market is a buyers or sellers market in BC.
4. How is the sales-to-active listing ratio calculated for BC real estate?
   • The ratio is calculated by dividing the number of homes sold in a month by the total number of homes available for sale. For instance, if 50 out of 100 homes are sold in a month, the sales ratio is 50%.
5. Why might Canadians be hesitant to submit lowball offers in BC?
   • In Canadian culture, aggressive negotiating tactics outside of the business world, such as lowballing, are often perceived as rude or disrespectful. This cultural perspective, combined with the fear of insulting sellers, makes many Canadians hesitant to submit lowball offers in BC.
6. How can low ball offers benefit property sellers in BC?
   • Lowball offers can serve as an opportunity for sellers to get an accepted offer in a challenging market, potentially lead to a multiple offer situation, provide important market feedback about the listing price, and result in stable offers once accepted in the BC market.
7. What should buyers avoid when low balling in BC?
   • Buyers should avoid offering the exact amount they’re willing to pay, walking away from a seller’s counter offer immediately, and not utilizing time as a negotiation tool in BC.
8. How can buyers make their low ball offers more appealing to sellers in BC?
   • Buyers can add sweeteners like a quick completion date or a short subject removal date and provide documentation or reasoning to support their low offer in British Columbia.
9. How should sellers respond to a lowball offer in BC?
   • Sellers should avoid overpricing their listings and consider factors like recent market transactions and the buyer’s rationale behind the lowball offer. They can also refer to resources on how to avoid lowball offers and strategies to handle them effectively in BC.
10. Where can I find more resources or advice on British Columbia real estate?

Mike Stewart’s website offers a range of resources, including videos for first-time home buyers, a BC real estate map, and detailed posts on various real estate topics in British Columbia.

Check out my post on How to Avoid a Lowball Offers for Sellers of Vancouver Real Estate

Looking for advice on buying a property in Vancouver? Check out my First Time Home Buyer Videos!

Looking for MLS listings in the BC Lower Mainland? Check out this great Vancouver Real Estate Map

If you have any questions feel free to drop me a line!