When a buyer makes an offer on your home he’ll do so using a standard contract that has been developed by the Greater Lansing Association of Realtors. The contract will include the buyer's offering price, desired closing and occupancy dates, contingencies (such as home inspections, and securing financing), proof of funds or mortgage pre-approval letter, and an earnest money deposit.
The buyer’s agent will deliver the offer to your agent. Before presenting it to you, your agent will prepare a "net sheet" detailing your selling expenses and provide an estimate of how much cash you will receive should you accept the buyer's price and terms. You can then accept the offer, reject it, or counter it with price and terms you feel are more acceptable.
If countered, successive counter-offers or addendums, with deadlines for responding and meeting various conditions and contingencies, will be exchanged between you and the buyer until a mutually-satisfactory pending agreement is reached or the negotiations collapse.
Buyers generally offer less than the asking price and/or have closing and occupancy requirements that may differ significantly from your own. Worse, you may have been presented an unexpectedly low offer and/or the buyer could be asking you to pay his closing costs.
A low ball offer, or one asking for closing costs, can be upsetting, but it doesn’t have to be. This is a common way of doing real estate business. Realtors know how to deal with it.
The most common reason why buyer’s submit low ball offers is because they feel the home is not worth what it’s listed for. Sometimes this may be true, other times it may not be true. Other reasons why home buyer’s make low ball offers include:
Most sellers find a lowball offer insulting and would rather ignore it, but you are better served by acknowledging the offer and beginning the negotiating process. Keep in mind that the buyer, after visiting all the properties matching his/her criteria, has chosen to make an offer on yours. The seller wants to purchase your home. Countering with price and terms you'll accept will most likely keep negotiations alive and often motivates the buyer to pay your price.
It's easy for a seller to fixate on the offer price, but other aspects of the offer are just as important.
First time home buyers often have great credit and money for a down payment but lack the funds to pay their closing costs. Lender rules allow sellers to pay buyer's closing cost, so it's become standard practice for buyers to request as much as 6% of the purchase price as a seller concession for closing costs.
Should contributing to the buyer's closing costs reduce the seller's net proceeds to an unexceptable figure, the seller may counter the offer with an amount he can live with. Example: the list price is $180,000. The offer is for $175,000 with seller contributing $5000 to the buyer's closing costs. The seller must have an offer of $172,000, without closing cost concession, to cover his own expenses. To enable the buyer to proceed to closing, the seller counters at $177,000 and agrees to a seller concession of $5000. In this way the buyer is actually paying his own closing costs by having them financed in the mortgage.