Playing Lowball

From the Reasonable To the Ridiculous, A Guide to Small Offers

In the year and a half that Ann Page has struggled to sell her five-bedroom McLean home, she has received an array of lackluster offers that fell below her original $2.499 million price tag. None was as exasperating as when the businessman from Dubai offered $1 million less than the asking price.

Even after she rejected his offer and lowered the price to about $2 million, the businessman asked Page to set up a call with her mortgage lender. She sat stunned during the three-way call as he attempted to negotiate a deal with the lender to buy the home directly -- at a discount.

"I just thought it was ridiculous. If you want to pay $1 million, then go to the neighborhood next door," said Page, a commercial real estate agent. "He doesn't seem to understand that I can't just give it away. This place has 10-foot ceilings, a three-car garage and an elevator."

Falling home prices have unleashed bargain hunters offering to pay well below the price listed by sellers.

These bidders see an opportunity to pay a fair price after years of spiraling home values or to get a good deal from a desperate seller. But sellers might view those offers as annoying or even insulting if they are convinced of their homes' value.

As a bond investor, Matt Watson, 26, said he found the lowballing strategy naturally appealing when he began searching for a home. "The way you make money on bonds is by buying it for a low price and making money on the yield. It is the essence of lowballing -- buy low, sell high," Watson said.

Watson's first try failed. He attempted to buy a one-bedroom condominium in a new building in Southeast Washington for $270,000, nearly $60,000 off the list price. The developer was willing to negotiate and lowered the price by about $11,000, but Watson decided to move on when it became apparent that he could not wrangle the price below $300,000.

Next he set his sights on the Madrigal Lofts, in a trendy neighborhood near downtown Washington. The condo he wanted was originally listed at $343,900, including a parking space. Watson signed a contract for $283,900, including the coveted place to park his car. He also got $5,000 in closing-cost help.

But it was not an easy process. It became a part-time job as Watson endured four rounds of counteroffers and negotiations, he said. "You have to look for desperation because with desperation comes a willingness to negotiate," he said.

While some home buyers such as Watson have had succeeded with a lowball strategy, it is not a process for people who are uncomfortable with tough negotiations -- or those focused on high-demand neighborhoods where competition remains fierce. The bargain hunter must first research the neighborhood and recent sales to determine whether a property could be vulnerable to a lowball offer, typically defined as more than 10 or 20 percent less than the asking price. Home shoppers must also be patient and willing to accept rejection, negotiation experts said.

Sellers should be similarly tolerant as they try to move an overly lowball offer into acceptable territory. First they must determine whether the offer is from a serious buyer and what their prospects for other offers may be, experts said.

One of the central policies for both buyers and sellers is to remove emotion from the process. "The single biggest mistake that people make when they negotiate is they become too emotionally involved," said Herb Cohen, author of "You Can Negotiate Anything."