Banks rejecting low ball offers
Photo by Odalaigh
We had an offer rejected today by a bank. It never feels good to have your offer rejected, but at least in this case we were expecting it. We thought we would explain our expectations, because we think it says a lot about the current market.
First of all, lets get clear what “rejected” means. An offer can be rejected, technically, by initialing a box at the bottom of page 8 of the standard California contract. Much more common is what happened in this case, when we received no response until we called the agent and she said the seller had rejected our offer. Either way, a rejection signifies that the seller has reviewed the offer and a counter offer will not be coming.
This property was priced in the $430,000 range and we submitted an offer for $350,000. In South Orange County, in 2008, for properties priced under $500,000, the average discount is about 5% off of the list price. So, for a $430,000 property, you could expect to pay about $410,000 on average. In Ladera Ranch (know your markets), the average discount is about 3%. So, on average, looking at Ladera Ranch, you could expect $10,000 off of list price. On this information alone, I would suspect at best a counter offer was coming.
In this case, the bank had multiple offers. There was at least one full price offer in the mix. You would think in an extreme buyers market that full price offers would be rare, but of the 45 Ladera homes sold this year up to $500,000, 14 sold for full price or more.
The lesson is that bank-related properties (short sales, REOs, etc.) are what everyone is looking for, so be prepared for possible multiple offers close to, at, or above full price. And if you are going to submit well below asking, be prepared for rejection.