Will a seller really refuse to negotiate with a buyer if you start the bidding too low?

Question

Is that really true? Why wouldn't the seller just come back with his offer? I was going to start the bidding at $176,000 for the asking price of $219,900. It's appraised at $192,380. My realtor said that would insult them. Is that just a ploy to make me bid higher?

Answer 1

The tax value is unreliable in finding the true "value" of the home.

Also, just remember that the decision is being made by a person and so there isn't a "yes/no" answer to your question.

With that said, alot of people are going to feel personally insulted by that offer and the only way you may get any feedback is if they are really hurting and have no other interest.

It seems like too many people these days read about the bad housing market and start under bidding by ridiculous amounts.

Answer 2

It is a ploy used by realty agents who have never met that seller in their lives.  How could they possibly know what would "insult" a stranger.  But agents know that if you are unsuccessful after 3 attempts at "low offers", you will get discouraged and fire them.  They think that is unfair. You were the one who was causing the venture to fail, not them.  But it is human nature to blame them.  So they want you to pay $218,500 and just be done with it.  You won't remember it in 4 years. /

Answer 3

The tax value has nothing to do with the real market value of a property.

Your Realtor is correct about the bid. I think your approach might be a little off.  You "start the bidding" at an auction, you make an offer on a house.  If your initial offer is too low the seller will likely think you are not a serious buyer and will reject your offer without a counter or will get pissed off and counter with list or higher.

For a list of $219,900 if you come in under $197,000 you will likely offend the seller.  Your agent should be showing you comps and guiding you to a fair offer.  If your  market area is still bad 10% below list might be fair, but the offer you are suggesting is more than 20% off list.

Remember that a house is an emotional thing for someone to sell.  They think their house where they had good times, raised their children, spent holidays, etc. is special and appreciate when a potential buyer respects that.  A lowball offer disrespects the feelings that they have for the house.

Answer 4

We have our house on the market for 189,900 and we got an offer for 150,000.  It was insulting.  BUT my realtor felt that I should counter and we entertained it by countering with the asking price

We got another offer and they refused to meet us half way at 184,000 or 185,000.  The realtor had no negotiating sense and let the deal just slide.

Always try, worse they decline.  BUt meeting them halfway means win for both sides.  Wish the buyer we had would of

Answer 5

Yes, it is true.

There is another question currently posted where the people put in a low-ball offer and had that happen!

BTW, since an appraisal isn't usually done until after the house is under contract, how do you know the appraised value? That doesn't make sense. It's also unusual for appraised valued not to end in "50" or "00".  Is $192,380 an estimated value? Are you looking at Zillow, or some other unreliable online source? Or is it the appraised value for tax purposes? If that's the case, then it is not the sales value of the property.

With the additional details, the poster below is correct. The appraised tax value is quite different from the market value, which is what you would use for a sales transaction. If tax values were valid for sales, why would the lender have an appraisal performed?

Are there homes in your area for which you know the value? Pull them up on the tax records and you'll see what I mean. Or pull up recent sales and compare them to the tax value. Depending upon the area, the tax value can be anywhere from half to slightly over the market value. And areas can differ within a municipality. Some places freeze the tax appraisal until the next sale or permit-needing renovation. I know of one woman who has been in her home since the '60s. It has a tax value of about 19,000, but would easily sell for close to - if not over - $1MM.

If you have an absolute number you cannot go above, what harm is there in bidding? If you don't bid, you won't get the house. If you do bid, and they say no, you still don't get the house, but you're not worse off than before.

With that said, if your bid is below the tax value of the home, it's very unlikely your bid will be accepted. But not impossible.

Answer 6

Your realtor is right.  You should listen to them, if you start out too low it will make them feel like you are trying to rip them off.  If the house is appraised at 192,380 start out at no lower than 185,000.

Answer 7

Starting 20% below the asking price is probably too low, and the owner may not bother with a counter offer.  You could risk it however and hope the owner will meet you halfway.

Good Luck!