Many areas of housing market show decline in lowball offers
4/22/2012WASHINGTON -- A report from the National Association of Realtors offers cause for optimism about the housing market.
A year ago, according to researchers at the organization, one out of 10 members surveyed in a monthly poll complained about lowball offers on houses listed for sale.
The latest survey -- conducted during March among a sample of 4,500 agents and brokers across the country and not yet released -- found hardly any. The focus of volunteered comments has shifted to declining inventory levels and multiple offers on well-priced listings.
A lowball offer typically involves a contract submitted to a seller on which the price proposed by the purchaser is 25 percent or more below list. Lowballs increase sharply when there's a glut of properties is available, asking prices are out of sync with local economic realities, and values are depressed or uncertain.
In high-demand, high-cost markets that have rebounded from recession slumps, sellers are now firmly in control; they pay scant attention to lowballers. Jayne Esposito, an agent in Los Gatos, Calif., said multiple offers are "the rule, not the exception," in her area, and many transactions end up with final contract prices higher than the listing.
Similar trends are under way in more moderately priced markets. Wes Neal, an agent in Olympia, Wash., said "lowball offers are down a lot because we're seeing more homes come on the market that are more realistically priced."
Even when buyers submit shockingly low bids, sellers no longer are so insulted that they send the contract back without a counteroffer. Now they negotiate aggressively and the final number ends up close to the original asking price. For example, Mr. Neal said, a buyer recently came in with an offer of $150,000 on a house listed for $250,000. Although the seller was irritated, after a series of negotiations the buyer accepted a final price of $230,000.
In the northern Virginia suburbs of the District of Columbia, well-priced houses in good locations move quickly, sometimes pulling in multiple offers within 48 hours of listing, agent Chris Ann Cleland said. Sellers who encounter the occasional outrageous lowball offer tell listing agents "don't even bother" with them.
In the suburbs south of Chicago, agent Judy Orr said lowball frequency and efficacy depend on the neighborhood or town.
"We still see them, and we try to work with them" in communities where prices are soft and the impacts of tough economic times persist, she said. Elsewhere, she urges sellers to negotiate. Recently a lowballer came in $40,000 below the asking price. Through negotiations with the buyer, Ms. Orr closed the gap to $2,000 below asking.
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Update: After a recent column on FHA's tightening of rules on collection accounts, the agency postponed the effective date of the policy change to July 1 from April 1.