So, you’ve been looking for a place to buy and you’ve finally found one. You’re all set to make an offer… what do you do? Well, your friends are telling you to send in a low- ball offer, something ridiculously low, just to see what will happen. Should you do it?

The Montreal real estate market is still relatively strong, so if you are planning on submitting a ridiculously low offer on a place, I would not seriously expect it to work out. For example, if a condo has an asking price of 250k, and (this is important) comparable condos have recently sold for around that price, then there is really no sense in putting down an offer for 200k, or even 225k. No seller will ever fall for it, ever.

From the sellers perspective, when somebody puts in a low ball offer, the listing agent will immediately get excited. The listing agent will call every other interested buyer who has visited the condo in the past and will tell them that the condo is in play, and that somebody has put in a low ball offer. The listing agent will usually be able to entice at least a few other buyers to put in competing bids, and before you know it, your low ball offer is left in the dust, and you now have to compete against other buyers.

The listing agent will use your low ball offer against you and to his advantage. So beware, usually low ball offers as a complete waste of time for the buyer.

But, there are several occasions when I would suggest for you to offer substantially below the asking price. For example, if a condo is asking a ridiculously high price compared to other similar places on the market, then for sure, go in there with a lower offer.

Also, low offers are useful on revenue properties, where the ultimate price of the property can be calculated based on the amount of income that it generates. In Montreal, a typical revenue property will sell at about 14.5 times net income, maybe 15.5 times net if it is in a very good location, but not substantially more than that. If you have a seller who is asking 16 times net, then don’t be shy about giving him a lower offer, perhaps 12.5 times net…

Also, with revenue properties there is usually less emotional attachment to a property, so if you low ball an offer and it doesn’t go anywhere, you will probably not feel too badly about it. Whereas if you lose your dream home because you listened to your cousin Ed and low balled, well… sucks to be you.