Is this a low ball offer or is it fair?

Question

I am looking at two homes in the Grand Rapids area. They are both in the not so great NW side. One has been on the market for 90 days and the other has be on for 120 days. Both are duplex/multi family homes.

The home that has been on for 90 days they are asking 110,000. This is above the comps in the area and it needs to be competed renovated.

The second home has been on for 120 days and they are asking 99,000. Also needs to be completely renovated.

I believe both are asking way more than they are worth simply because of the market that Grand Rapids has even though these wouldn’t be in the “hot” area. I want to offer around 20% less than what they are asking and wanted to know if that is too low.

Thank you,

-Nicholas

Randy Charboneau · Answer

@Nicholas Lan - Offers are free of charge to make! If they are set up right, you can even get your offer accepted and have plenty of outs so you're not even obligated. If you have solid data to back up your offer price, then the offer price vs. the asking price is irrelevant. The main advice I would give is just make sure you have solid reliable data to depend on when making your bid and justifying your offer price. A "Zillow Estimate" would not be reliable data. Realtors are good sources for helping you structure your bid correctly and providing excellent data you can depend on! They are usually FREE to use when purchasing as they collect commission from the sale. I highly recommend them. [Solicitation Removed by Moderators]

Kevin Sobilo · Answer

@Nicholas Lan, I don't think that is too low at all!I'm more concerned about initial offers being low with owner occupied homes. When its owner occupied, people could become personally offended with a low offer and not want to deal with you after that. With an investment property its less personal. So, even an offer of 25-30% under asking shouldn't be offensive.With an offer, I would go beyond the $$$ when presenting it. Sometimes how the offer is framed makes a big difference. Is this your highest and best offer? If so, make that clear otherwise the seller will have in their head that this is the start of a negotiation. Are you throwing out a low number to see how negotiable they are? If so, I would give some kind of indication of that verbally. Let them know you are looking for a counter offer and not expecting them to accept your offer. I would also explain why my offer is so low if there is a clear justification for it.

Kase Knochenhauer · Answer

@Nicholas Lan - it's difficult to tell what is a fair offer without performing a real CMA on the properties. However, yesterday I wrote an offer for a property on the MLS at 55% of list price because I thought the seller might be motivated to take it, the countered at 65% of list price. Don't be afraid of offending a seller with an offer price. As was mentioned earlier, just make sure you or your agent properly described why your offer is written at that price.As an agent in the Grand Rapids market, I know that homes are moving slower at this time of the year. It just snowed 6" last night, the seller are worried about the pipes freezing, they are tired of paying their gas bill, etc --- purchasing a home in the winter time can lead to some deep discounts for motivated sellers. Good luck on this house!

Erik W. · Answer

"Low ball" is in the eye of the beholder. It's a term typically the Seller or Seller's agent uses to shame you into offering more.Who cares what they think? They're out to make themselves as much money as possible while still making the deal work. You should approach your offer with the same philosophy.I heard a wise man say, "If my offer doesn't make me blush, it's too high." Have an agent pull comps within the past 90 days and submit them with your offer. Data won't convince every Seller, but in the past I've gotten folks to come down as much as 30% when they were way over priced to begin with. We ended up somewhere around 20% below comp values because they were in a hurry.You want motivated Sellers. If this one doesn't work out today, no worries. Put it on your watch list and circle back in 2 weeks or so.

Will Barnard · Answer

20% below an ask price which is above market value is nowhere near "low ball". The ask price has nothing to do with market value either so with that in mind, if your first offer on these properties is not in the zone of offensive, you may have started too high!A fully vacant, in need of major repairs building located in a not so great neighborhood with above average DOM is in need of a "low ball" offer anyways. Don't worry about hurting feelings, its business, not personal!

Bill B. · Answer

I don't like that they are empty in an area with freezing temps. I guess make sure the places have been winterized or the utilities have been left on, if they've been left on and you have any homeless I would assume squatters. If its been winterized the inspections are going to be a problem, you'll need heat to turn the water back on to look for leaks and then it will all have to be winterized again.Why would they be empty? I would understand one side being empty so an owner occupant could move in, but both sides is just poor operations. You might have an estate sale?10% under comps at least if its winterized and even that could be scary. Find out if they own it outright. If they are stuck on the price offer their price in 120 equal payments (zero interest.) Or more likely 10-20% down so they can pay their realtor and put a couple bucks in their pocket and 96-108 equal payments if the balance with no interest.

Bill B. · Answer

You don't say how much above the comps these properties are. If they are 5% above the comps yes its pry too low to get the job done. If they are 20% higher, just buy the comp instead. You can use comps to show why their property is worth less than they're asking but you have to be ready to say why you don't buy that comp instead.If you aren't really going to buy both, make an offer on the one you like more and see what the response is. These may be "cash cows". If they are bringing in $15-$20k a year in rent there's no good reason to sell for $80k.On the other hand maybe a realtor that doesnt deal with duplexes compared the sf to a single home and just priced it wrong.Pick one property and try.

Nicholas Lan · Answer

The weather has not been too bad here this winter (so far). Thank you for the support you have given me more questions to ask the owners.

Nicholas Lan · Answer

Currently both properties are vacant, it was stated that each unit rented for $600 a month. They are higher than the comps, also both have been on the market for 40+ days more than the comps DOM.