What if the Broker or Seller Says My Offer is Too Low?
Modified on: Mon, 4 Sep, 2023 at 6:50 PM
You've written up your offer and sent it off to the broker or seller. Now what?
Follow Through Immediately
First, I would make a habit of calling the broker (or the seller if the property is not listed) immediately after sending in your offer. You want to let them know to look out for your offer. You can also use this call to gather information, in many cases. Ask: "When should I expect to hear back from you?"
This sets up the expectation that they are going to respond, regardless of whether or not they are considering your offer.
They may tell you that they will only be calling if the seller likes your offer. In which case, you will need to be prepared to follow up on your own.
There are basically only 4 things a broker or seller can do when you make an offer:
Ask you to make a higher offer (without giving you a lower number)
Reject your offer (or ignore you)
Counter your offer
Accept your offer
ASK YOU TO MAKE A HIGHER OFFER
Please don't make the mistake of negotiating against yourself. Wait for a written response back from the seller before you commit to any other figure than your original offer. Even verbally.
Seller’s agents will oftentimes call you back and tell you the seller is interested, but needs to be at $XXX. Or they may tell you, "We aren't that far apart. How much 'wiggle room' do you have?" There are a million tricks - and they are often very believable! Just follow this rule and you won't make the mistake:
NEVER COMMIT TO A NUMBER OTHER THAN YOUR WRITTEN OFFER UNTIL YOU HAVE A WRITTEN COUNTEROFFER FROM THE SELLER!
REMEMBER: Nothing is real unless it's in writing!
Keep in mind that the seller doesn't want to show their cards unless they believe you to be a serious buyer. For example, if the asking price is $2 Million and they counter you back at $1.5 Million, there's a fear that you are going to tell everyone that's the price and they've effectively negotiated against themselves on any future deal if you aren't able to put something together.
If the seller tries to squeeze a little bump out of you before sending you back a written offer, be vague without shutting the door. I like to say:
"I'm a reasonable person. I assume the seller is reasonable too. If that's the case, it makes sense to me that we can come to reasonable terms so let me know what you think a fair middle ground might be."
In saying this, you've basically put the burden back on the seller to come back with reasonable terms AND you've left the door open (in their mind) that you are willing to work with them to figure out a price and terms that works for everyone.
REJECT YOUR OFFER (or you get no response back at all)
The broker or seller is not obligated to respond at all to your offer. In most cases, if you haven't heard back from them by your offer deadline, that's because they've rejected your offer. However, we don't want to just assume that's the case. The best way to handle this is by following the instructions above - call immediately after you've presented your offer and understand the ground rules for how the seller plans to respond to offers.
If you haven't heard back by the offer deadline, you should call the seller and say:
"The deadline on my offer has passed. I assume that means the seller wasn't interested in working with me. Is that the case?"
NOTE: The acceptance deadline in Peter’s Standard Commercial Contract is right above where the seller signs the contract. It says your offer expires at 5:00 pm Eastern Time two business days after the date of the contract.
Don't be shocked if they tell you, no...the seller IS interested. However...(something came up, there are multiple owners and getting them all to agree is taking longer than expected...). If this happens, ask when you can expect a response, but let them know you aren't going to wait around forever. Say something like:
"I understand. However, I would like to know when I can expect a response. We have other properties we are wanting to move on if this isn't going to work out."
And, don't be shocked if you get no response at all. If you get no response at all, the seller is not motivated, move on to the next deal.
If your offer is rejected, then say:
“Thanks so much for considering our offer. We’ve evaluated the property and came up with an amount that we are confident will work for us to take this to a successful closing so that everyone can get paid. Just so I have something to take back to my partner, please let me know what sales price would be acceptable to the seller. If we can work together on this, who knows, we may be able to find a common ground that works for everyone.”
COUNTER YOUR OFFER
A counter can go many many different ways. Because of this fact, it's impossible to say, "if they do THIS, then you should do THAT".
A good rule of thumb, when you get a counter offer, is to bump your offer by HALF of whatever they dropped from the selling price.
Asking Price - $2,000,000
Seller’s Counter Offer - $1,800,000 (Seller came down $200,000)
Your Offer Price - $1,400,000
Your Counter - $1,500,000 (You came up ½ of the amount the seller came down)
Keep in mind that ANY offer you make should be in line with the max offer amount you’ve determined you can pay for the property. This max amount can vary depending on how you’re going to fund the deal.
Most counteroffers will fall into one of three buckets:
If the seller counters your offer by dropping their price by 5 percent or less, the seller is not motivated, you should probably get ready to move on to the next deal.
The seller may come back and provide more information about their situation or the property. For example, the seller might say “I need $X for the property so that I can pay off my divorce.” Or, “I have to get $X because I have a loan coming due on the property.”
This is good news because once you are able to find out what the seller’s real problem (or motivation) is, then you’re in a much better position to figure out a way to solve the seller’s problem. This may open the door to having the seller consider creative financing such as owner carry, so dig in and find out as much as you can then use that information to try and find a way to get the deal to work for everyone.
If the seller counters with a good-sized price reduction, we'd like to see close to halfway between the asking price and your offer, that's a good sign they are ready to deal.
Asking Price - $2,000,000
Seller’s Counter Offer - $1,700,000 (Seller came down halfway to your offer)
Your Offer Price - $1,400,000
Since the seller is motivated, your next move can be to increase your offer a small amount, something in the 5 to 10% range, in this example:
Your Counter - $1,410,285
(We like to use odd amounts so that it looks like we really took a fine-tooth pencil to our offer)
See if you can get the seller to come down more while following this rule:
Don’t try to turn a good deal into a great deal.
If the seller is ok with a price that works for you then sign the contract so that you get control of the property before someone else makes an offer. You may be able to nibble the price down a bit more, later, by either renegotiating or by asking for a repair allowance.
90% of the deals you get will come from consistently following up with all the brokers or sellers that previously said no to an offer that you made. If they can’t find a buyer at the price they had hoped for, they may reconsider your offer. Or if another buyer ties up the property for a few months but then is unable to close, then suddenly the seller may be willing to accept a lower price so they can get the deal done.
Follow up every 30 days until the property has been actually sold and closed.