Wednesday, July 7, 2010

What Constitutes A Lowball Offer in Charlottesville Albemarle Area Real Estate? - A Reader's Question

In a post devoted to local listings, a reader poses a great question:
I'm curious what people here think is a lowball offer. Even pretend you're optimistic about the market when answering this.
Is an offer of 90% + closing costs + a small allowance for some maintenance that should have been done a lowball, when the asking price is the same price that was paid in 2005-2007??
According to a local real estate agent, that I should probably no longer work with, it's a low ball offer and I'm making him look bad.
The comment appears here.

A couple responses have already rolled in, and they're reproduced in the comments after this post.

So what about it?  What constitutes a "lowball" offer in an area that faces these issues:
With all this in mind, Is there really anybody out there who is paying asking price?  (That's a rhetorical question but the answer, shocker, is that yes, there is....)


C'ville Bubble Blog said...

These comments appear on post where the lowball questions originally appears:

Name/URL said...
Sold "Comps" don't just mean "less," they mean almost nothing. And for that matter, neither do tax assessments.

JULY 7, 2010 1:13 PM
AliG said...
Anon 7:45

First of all, you are as entitled to put in a "low ball offer" as a sellar is entitled to ask for a ridiculous, unwarranted, unreasonable price for their house.

Second of all, at 90% of bubble pricing you are probably OVERPAYING and your offer is certainly not a lowball. Obviously each house is individual and I just made a general statement. But even in this protected mecca/paradise of Charlottesville/Albemarle, prices have dropped substantially since the peak years of 2005-2007.

Finally, you should definitely find yourself a new RE agent. It seems that he is more concerned about being made "to look bad" then representing you and your interests. You should find someone who is willing to represent you and be your advocate. Believe it or not, there are still actually some of those type of REAs out there. I can drop a couple of names if you wish.

Anonymous said...

To be fair, the o.p. wasn't positing just a 90%-of-asking offer, but 90% of asking plus closing costs (bringing it to 85% of asking) plus "a small allowance for some maintenance that should have been done"--which could mean all sorts of things. If in all the o.p. is proposing a 75%-of-asking offer, then we should be talking about it in that way. I'm not saying that 75% of asking isn't TOTALLY reasonable in this market, but it would be helpful not to pile on about "how dare the REA not support the o.p.'s offer" without paying attention to what the offer actually is. (Also, of course any REA worth anything should say, "I'll put your offer in. I don't think it will work/ think it may alienate the seller/ whatever but I am your representative and I will represent you!" So, yeah, get another agent.)

It would also be helpful to have some discussion about how best to couch a "lowball" offer: is it best to do it upfront in the price or to chip and niggle away with these "closing costs," "deferred maintenance," "why didn't you update the kitchen and baths" sorts of allowances--which I remember people on this blog mocking when sellers were offering them last year. Thoughts?

Anonymous said...

i can answer that...

the equivalent would have been 86.7% of asking price. the asking price is essentially the same as was paid in 05,06. it is actually listed at 30k more, but the kitchen was updated, so we'll call it even.

John Doe said...

There's always the "Letter to Seller Explaining Your Lowball Offer" from 2008

AliG said...

In this market, even at 75% of asking my comments remain true .

Don't worry about "alienating the seller". This is about money. If they don't like the offer they will turn it down or ignore it. If you are willing to pay a higher price then you can resubmit a higher offer. Unless they are getting multiple offers (unlikely at their price point) they will swallow their pride and injured feelings from your prior low ball and accept an offer that makes financial sense for them.

With regards to getting the price down by nickle and diming, my personal bias is that that could backfire and being straight forward with a seller is the best way forward. You might explain your offer to the seller, by telling them you are taking in to account repairs, updating etc.

Humpty said...

The way I do it is very simple. Make a firm offer with a deadline for acceptance. Itemize all your terms and conditions. Be honest and firm.
If the offer is rejected move on to your next target. Keep doing this until one catches. Bear in mind you cannot fall in love with any one property and when low balling you have to be able to close the deal or at least the seller has to believe you can close. It has to be simple and straight forward with few complications. For example if you can put 20% cash down with 80% financing you will have a greater chance of getting financing, especially if the property is priced right. An all cash offer increases your cache as an easy close. Right now many deals are falling through because buyers are not able to complete the financing process to the frustration of the seller.

It's like any other investment you have to buy at the best possible price and the only way to do this is to stay disciplined. The other essential ingredient is a "loyal broker" who will fight for you to convince the seller's broker to take the deal. Once your broker is convinced you mean business and will not stray with all this improve your offer crap he/she will let the other party know this is a one time offer and my buyer will move on. The secret to this business is to know that whatever you tell your broker automatically gets telegraphed to the other side. So I treat the broker as I would the seller and hence keep the broker's "loyalty". Never tell the broker you love this property! Au contraire! When I hear people tell me that they told their broker they just have to have this house I just cringe!

The above works best in a bear market.

anon 7:50pm said...

I've had my own agent tell me that the seller won't go below X price. Very annoying. And one of the properties that this was the case had been on the market empty for 1.5 years. I'm not sure if he's just trying to save everybody time or if he agrees with the prices at this point.

Anonymous said...

Those interested in acquiring investment property in this area have their homework to do. No property around here is really worth more than it sold for or was assessed at in the late nineties, 2001 at the latest. Operating on that basis, one must review public records of deeds of trust recorded on properties one is interested in to determine if the seller is too encumbered to BE ABLE TO SELL at a realistic price, then make offers which they are free to refuse of course, but an integral part of recalibrating the market is the persistence on the part of buyers in making offers which sellers may consider "insulting" this year, but which they may be glad to take later on. Properties minimally encumbered are the ones first likely to cave on price.
Sellers are still operating in bubble mode around here and most buyers are too, to the extent they think a discount of 10-15% from 2006 prices is a bargain, even though such a property is a stunningly bad investment if one runs the numbers on what it would rent for....

Anonymous said...

We're not looking at buying a house as an "investment" at this point just a place to live where we have control (currently in a flaky landlord situation). So anonymous 1.04 has a good process but then it's hard to know where to start the offer when the price has gone up nearly 200% from what current owners paid less than 10 years ago. This is in town and in one house we're looking at all they've done is paint, hotwater heater, new toilet, and in the other, paint and new stove/fridge (not like they're high-end). So it's hard to know where to even begin the offer process.

John Doe said...

AliG, a couple people have emailed wondering if you'd give names, as mentioned at the end of the comment linked below.

You could also email if you prefer.

AliG said...

I'd be happy to.

The first REA I can recommend is my own REA - Christine Lisle (White Coat Real estate). I have been on the market for a house (and using her) for 3+ years and have submitted 4 offers over that time - all of which were significantly less than asking (but I think fair) and none of which were accepted. Christine supported me throughout each transaction and never questioned whether or not my bid was inappropriate. Her attitude was "let's see what happens". On several occasions she has actually talked me out of placing an offer on a house because she thought it would not be a good purchase (e.g. place is poorly built, or not a good design for my family, or too much additional work would be needed.) It is clear to me after knowing her for several years that she is looking out for me. When I asked her once why she is willing to give up a possible sale (by talking me out of placing an offer) she replied that she benefits more if I am happy with my purchase since I will refer her new clients. This is true and kinda what i am doing now.

The second REA I feel comfortable mentioning is well known to this blog - Jim Duncan.
I do not know him personally and have never met him but would probably use him if I wasn't with Christine Lisle. This is because i have followed his blog and have benefited from his website search features. He is innovative, and appears to be honest and forthright. I also appreciate his disgust with the govenrment's $8000 moneygrab that is framed as a tax credit.

I continue to look for a house, but am in no hurry given the current local market (for all the reasons listed by Bubble Blog). I am also extremely concerned about the overall economic environment and feel that in the not too distant future, having cash, and as little debt as possible will be of great advantage.

Hope this is useful.

Anonymous said...

Double dip appears to be under way or, as someone points out in article, what's actually happening is downturn is continuing

Bleed It said...

700 Locust Ave has its own lowball going: $839k to $698k, Feb to July.

Advice from Bubble Bloggers said...

Hey guys.

First off, wanted to say thank you for the very informative website. I am moving to Charlottesville in mid-August for a position at UVa Health System (one of the rare groups hiring right now, it seems). I am coming from a comparably less expensive area ($200/sq.ft would be unheard of) with a wife and young daughter.

My wife and I are desiring a city neighborhood (walkable to restaurants and coffee shops would be ideal). Despite some of the cynicism on this blog, C'ville is a pretty cool place for LOCAL great offerings of these things with a small city. Asheville NC is the only comparable town I can think of. To date, however, I am extraordinaily disappointed by C'ville city offerings. Since public school would be important to us, we basically have three choices: Burnley-Moran, Venable, and Greenbriar school districts. Only really B-M is walkable to anything and some of the prices there are just... laughable to say the least. The two on Hazel St. are probably the worst offenders. We're trying to stay under $400k.

So my question is - would it be better to wait for prices to drop (and it does seem like they will, but how long will I be waiting?) or seek cheaper housing in Western Albelmarle? I am concerned that if prices drop in the city, the "subburbs" of C'ville will be choked off. On the other hand, it could be like Richmond, where crime drove the middle class out to Henrico Co (and just now are things starting to reverse). My plan right now is to wait to see what sellers will do this Winter before decicing on anything but am I wrong to wishfully desire for city housing in C'ville?

C'ville Bubble Blog said...

Thanks for reading and asking. The BB will post some opinions over the weekend...but also hope that you'll get some comments from prospective buyers (or recent purchasers) too.

In the meantime, there's a great mortgage calculator in the sidebar of, the Crown Mortgage blog. Input numbers and it will show you the years worth of mortgage payments that you lose or gain with even 5% price drops ($15k on a $300k mortgage).

The best price matters more than ever right now if you buy at these historically low interest rate...because when you need to sell, rates will be higher and purchaser will have less bang for the proverbial buck.

Anonymous said...

hey 4:51pm...

you should definitely rent for now. not just because prices will probably continue to fall, but if you are new to town you should take some time figuring out where you'd really like to live long term.

from my 1.5 year and continuing property search, i'm amazed to see the houses I could afford -- if they were sold at their late 90s/early 2000s prices again. even at today's "depressed" prices, as sellers would call them, 400k in a walkable city location might get you a 70 year old, 1200sqft box -- but cutely renovated! these prices are not sustainable based on jobs/income in this city. we are still unwinding from the years of people spending 2/3 of their income on a mortgage.

Anonymous said...


If public schools are important to you and you are willing to consider the city system for elementary education, why not Johnson Elementary? Test scores are way higher than at Burnley-Moran for sure, possibly higher than anywhere else in the system. Parent involvement is very strong, and the school is nice and small and walkable. Historically the schools on that side of the tracks were African-American, but segregation ended a long time ago. The performance of Burnley-Moran does not in the least correlate to property values in the North Downtown area, and a whole lot of folks who live down there do not send their children to Burnley-Moran, as you might imagine.

You should also make sure you understand the trajectory after fourth grade, to Walker Upper Elementary for all 5th and 6th graders in the system. Read about it on-line. I know an awful lot of parents who have been reasonably pleased with their elementary school and then felt forced to find another alternative after fourth grade.

Vs. the Western Albemarle schools: we thought a lot about this when we moved, less from the perspective of property values in the future and more from the perspective of the different ways that social inequality is dealt with in public schools and what version of that we felt okay with. With the county system, you get the remnants of white flight from the city in the 60s and 70s; with the city system, you get one of the most vicious tracking systems I've ever seen (two schools, mostly defined by race and class, existing side-by-side at Charlottesville High School, with great enrichment programs for the upper track and a terrible drop-out and state competency exam rate for the lower track). Neither is ideal.

Good luck to you!

AliG said...

Hi Advice,

welcome to CVille! It is a great place to live - in fact I know of no better place for me and my family. The cynicism you detect at this blog, I imagine, is mostly related to the cost of housing relative to the demand. Some REAs and sellers (and even buyers) also feel that the downtown area is such a wonderful place to live that it justifies outrageous prices. The reality is, that unfortunately, the downtown area has some substantial drawbacks which should temper those fanciful asking prices, but to date hasn't. The result currently is pretty much a stalemate. Asking prices have not come back down to reality, and most buyers are not buying. However, the force of economics is on the side of the buyers, so inevitably, prices will eventually come down instead of buyers continuing the folly of the 2005-2008 bubble.

With regards to your particular situation, my advice would be for you to rent in the area that you would like to buy. You can currently rent the same place for a lot less then the mortgage would be. That would give you time to get to know the area and the property market better, decide if you really want to live in the city versus the surrounding areas and more than likely watch pricing drop substantially. Ask your real estate agent if he/she thinks that prices will go up in the near future, and if you should be in a hurry to buy. If the answer is yes, then your agent is either incompetent or dishonest and you should find another one. Certainly, time is on your side here.

Neg60K Lady said...

According to Cville Abode, "the price-to-rent ratio was between 9 and 11, which indicates sale prices are at or near their low, making buying a better option than renting in Albemarle County." To support this line of reasoning, they write that for an average home selling for $299,000, the average monthly rent is $2400. This seems off to me - I have a friend in California who is renting a $750,000 home for $2400 / month.

Full story can be found online at the following address:

Anonymous said...

rent:buy ratios are going to be more reasonable here than in CA, but there is no way the Cville article is right.

please note i will be referring to Cville City, i do not really follow the county.

here is 1 example from today's craigslist:

rent: $1400 (recently lowered from $1600)
current assessed value: $355k
last purchase: $260k in 5/07 (was this a foreclosure?)

If you were to consider buying this house instead of renting it, you'd want to see a price at or below $252k. Clearly, this is unlikely, as I have almost never seen a Cville property listed at under assessed value unless it is a foreclosure/short sale.

right now, the number of rentals is skyrocketing along with the for sale inventory. owners are dropping the prices on rent much faster than the for sale prices. this makes buying even less appealing.

here is another example of a house both for rent and for sale:

Rent: $2200/mo
For Sale price: $389k

When you look at the for sale price, it doesnt seem THAT bad..but that's just because we've quickly become used to bubble pricing. How about that rent? Woah! For a 2-3BR, 1300sqft house? The market rate for a rental like that is probably around $1500. Which means all of those renovated small, cute, older houses in Cville are not worth buying until prices fall back into the mid-200s.

Name/URL said...

I'm going to go with the "rule of thumb" that the house should be no more than 15x annual rent, which is easier to understand:

12x monthly rent, take total and then x15 = price you should be paying if you buy.

If somebody is paying $2400 for those $299k houses in the cville abode article, my response is "huh?" It seems they used average rent, not the rent that the house itself would have gotten.

We're a good example of renting better than buying here in the City.

Monthly: $1600.
Purchase price using above formula = $300k.
House on the market for $500k - $475k. Hasn't sold.

Be careful where you rent. You might find yourself there for longer than you intend to be and therefore need to take into consideration the schools where you're renting. We know some people who have been waiting to buy because prices are coming down now but are renting in an elementary school zone they don't want and the pressure is on because their oldest is 4.

AliG said...

Rule of thumb:

Use a healthy dose of skepticism with regards to anything The CVille has to say regarding local real estate.

Jim Duncan said...

AliG -

Another rule of thumb - read multiple sources skeptically and come to your own conclusions. :)

PS - thank you very much for the kind words. I sincerely appreciate them.

Anonymous said...

Anybody considering "walkable" to downtown neighborhoods should do the walk at night a couple times and then see what you think.

Also, anybody thinking of buying or renting on the Market Street side of the Downtown Mall or near Downtown Belmont should check out what happens at 2 am when the bars close. Traffic noise, drunken patron noise, people shouting on their cellphones, fights. Not every night, but enough to be annoying.

Star Chamber said...

"Dunning-Kruger Effect" applies to many RE agents in this market. Incompetence masks the ability to see the incompetence. They just don't have the skills to know what's missing. (see link below).

This sounds much more like an insult than I mean it to. The fact is, most agents in this area (and most in general) just don't have the econ or finance education to help a buyer. Or for that matter a seller to accurately see the market locally. Let alone where it fits in the big picture.

Many local agents truly believe in the value of the properties and that the rapid rise in prices was justified. As is the slow correction.

So actually this is "Caveat Emptor." The buyer has to beware in a way the agent does not. The agent's done once the transaction is over.

Remember, here, as in many bubble markets, all many of the agents had to do for years was fill in the blanks on contracts.

Isn't renting a "rule of thumb" for 6 months to a year before buying when moving someplace new?


Anonymous said...

Another rental example..

Rent: $1225/mo
Last Sale: $309k in 2004
Assessed Value: $348k

'rule of 15' - buy below $221k, rent above $221k.

Last sale under $221k: $160k in 1998

prices belong around 2002 levels?

2011 Buyer said...

Hi, Advice, welcome to Cville. Congrats on job.

We've been watching the market for about two years. We'll probably buy next Spring, all things considered. We wonder if we're wrong to think we'll eventually find something "affordable" in the City, too!! But we've waited this long, why not a little longer??

Anyway, some things we've learned:

1. When the listing says "Priced to sell," it usually is not. LOL!! ALso if listing mentions "below tax assessment" they're trying to indicate you're getting a "deal." (And they may think you believe an assessment is an appraisal!)

2. Knock on doors!! Not only do you learn about the neighbors, you learn about the house. Especially useful if house is empty or has been a rental.

3. Make sure you look up tax records for every house on the street to see who paid what and when they paid it. In the county you can also see by how much the tax assessments have declined over the past few years.

4. If you decide on the County you really have to educate yourself on the recent budget cuts and school budget cuts. The property tax rate hasn't been raised and everything's being cut. Search the Daily Progress site for stories.

Nobody can say when the tax rate will be raised and/or how much more in County and school budgets will be cut!! But something has to change.

This is potentially serious if your kids will go to public school.

Good luck!!!

Jim Duncan said...

Advice -

This is a story written by one of my clients ... How to search for a home without a Realtor:

Scott_R said... two thoughts:

1) rent, don't buy, right now...capitulation is only just starting in this market. I see it, in a couple of places (listings), but it's just the start. The offerings will get more reasonable over the next 12 months.

2) Your realtor: realtors like to make a lot of rhetorical claims (noise) about their "adversarial" system of representation (ala legal system) that supposedly puts your interests (price) ahead of any other, and results in the best possible (most efficient) pricing market. Any realtor that tells you your offer "embarrasses them" is de-facto telling you they are putting other interests ahead of yours. Moreover, they are doing so not only in propping up this deal, but in propping up "comps". Not only does it 'put the lie' to their claims about the current system/market, but you should most definitely get another agent (or better, just bypass the agent and their commissions, but get a lawyer and do your own damn deal). What exactly are you paying 6% for?


Advice... said...

Thanks a ton to everyone for their feedback - to the site owner for their specific post on this blog, and to Jim Duncan for his thoughts on his blog (I'm already an avid reader). Didn't think my comments would get so much attention! A few responses:

1) I am very cognizant of the interest rates being a "false trail" of incentives by the government and very fearful for this market when interest rates inevitably rise again. My goal would be to time it such that I can take advantage of the positive effects of low interest rates on my mortgage but also not overpurchase on the home. However, it could be argued that that is impossible and maybe we won't get true market capitulation until mortgage rates return to "normal" levels without FHA involvement.

2) Johnson Elementary - I've considered that school district since it looks "great" on sites like, but am concerned about the high % of underpriveleged kids that attend. Not that that itself is a problem, but sometimes sites like greatschools are misleading by the numbers and don't reflect the actual education taught at the school. Glad to hear it is a quality place. My larger issue is that there are fewer places to live in the Johnson district that are high quality places to live. One exception would be Johnson Village but was not terribly wild about that neighborhood upon visiting.

I have also heard mixed things about the upper elementary and C'ville High School. On one hand, my brother-in-law (C'ville resident) referred to Charlottesville High School as a "breeding ground for local gangs" and on the other hand I've also heard that they have more AP level classes than any other high school in Charbelmarle (is that true?) and some awesome arts programs and advanced level stuff, provided you have a motivated student.

Regardless, I appreciate everyone's feedback. We are definitely renting in the area first, but appreciate everyone's thoughts about WHEN the market with capitulate here. I'm especially interested in what the national economy does in the next 6 months. I'm guessing the market prices will drop regardless this winter due to normal variations, but if the economy continues going down the tubes (and indicators are that it might) it could accelerate things here.

Regardless, it IS a good time to be a buyer provided you have your head on straight.

C'ville Bubble Blog said...

Wow, Advice, that was quite a deluge of opinion.

Don't forget - this is all opinion. What you say in your #1 poing about capitulation due to mortgage market issues may prove true here. AND it's possible that there will suddenly be 1000 new high-paying jobs descending upon this area so demand will suddenly meet current oversupply. You know the old saying "Anything's possible, but not necessarily probable."

With these disclaimers in mind, a couple more points:

1. The best response to any hogwashy statement made by a seller or a seller's agent (or your own buyer's agent): Where's the data to support that?

2. Current buyers aren't looking for "investments," they're looking for a place to be that offers stability/security.

3. Conversely, sellers have been literally trained for years if not decades to believe that a house is an "investment." It's practically a God-given. Many sellers at this point "have to" "make" a certain amount on the sale, due to paying a bubble price or adding a HELOC. Then there are long-term owners who hire a professional to tell them the value of the house, and the professional compares it to other houses on the market. The long-term owners have seen many others make big coin in selling, and often can't believe that market no longer exists.

Then there are the short sales that are just trying to avoid foreclosure. Foreclosures are cheapest, if you can get your hand on one. (Sign up for RealtyTrac if you're interested).

4. DIA/NGIC will be used by some as a reason to keep prices where they are. There are many more affordable, larger, and easier commute houses available in Greene, Madison, and Culpeper than this area, so why anybody would endure a 1.5-2 hour daily commute for the glory of paying Cville Alb prices would be a mystery.

5. You will also hear some patent idiocy from some RE "professionals" (who ioho should not longer be in the biz) as exemplified here:

6. The CAAR is hoping, as ever, that prices are going to stabilize in the coming months. All Together Now: SEE #1.

Scott_R said...

I have also heard mixed things about the upper elementary and C'ville High School. On one hand, my brother-in-law (C'ville resident) referred to Charlottesville High School as a "breeding ground for local gangs" and on the other hand I've also heard that they have more AP level classes than any other high school in Charbelmarle (is that true?) and some awesome arts programs and advanced level stuff, provided you have a motivated student.

A very late follow up - CHS is probably no worse than Monticello in terms of thug life, perhaps of a more urban rather than rural flavor, but...

However, it is most certainly true that they are far in a way the best public school in the MSA for the top 25%. In fact, if your kid is in the top 25% or has special education needs, the city is outstanding. By a lot. If your kid is middle of the road...Western Albemarle. I'm a former teacher.

Anonymous said...