‘Bottom Feeders’ Anger Even Anxious Sellers : Realty: Scavengers’ low-ball offers insult homeowners and rarely lead to a successful purchase.

They’re known as “bottom feeders” and they’re out in force trying to buy homes from distressed sellers.

Not mere bargain hunters, bottom feeders are scavengers and grubbers. Feeling empowered by the buyer’s market in many U.S. communities and inspired by favorable mortgage rates, bottom feeders fancy themselves as having shrewd business instincts.

But their ridiculously low opening offers--sometimes 30% to 50% below market value--are rarely successful. That’s because many sellers are so insulted they refuse to negotiate further, said Norman D. Flynn, past president of the National Assn. of Realtors.

Realty agents are obligated to present all offers to a seller, no matter how low. But Flynn recalls a number of instances in which very low offers drew a flash of anger from sellers, who often take such offers as a personal affront.

“An angry seller will take a ballpoint pen and write ‘REJECTED’ across the contract in big capital letters, or he’ll rip it up and throw it away,” said Flynn, now a realty executive in Madison, Wis.

When sellers receive low-ball offers, the ball usually drops there.

“Since it’s quite obvious that the purchaser is trying to take advantage of the seller, he insults the seller, who therefore doesn’t come back with any counteroffer at all,” said Brenda Flagg, a sales manager with the Coldwell Banker realty chain.

Bottom feeders are also known as “bottom fishers.” The terms refer, metaphorically, to creatures that feed on what falls to the bottom of the sea. In the stock market, a bottom fisher is an investor who specializes in picking up shares at the lowest-ever price--especially shares of bankrupt or nearly bankrupt companies.

In real estate, bottom feeders are a source of annoyance to agents because they present themselves as legitimate buyers yet, in the last analysis, rarely wind up consummating a deal, according to Flynn. As a consequence, there’s no commission earned for the agent, only aggravation and wasted time.

“Some of these bottom feeders are terrible. They’re tighter than the bark on a white oak tree. They would out-fumble anyone at the restaurant when it’s time to pay the lunch tab,” Flynn joked.

But the reality is that not all bottom feeding is motivated by stinginess. Some bottom feeders are simply inexperienced home buyers who believe they are acting in their own best interest--making an exceptionally low initial offer on a home they genuinely intend to buy. They see no problem starting on the floor and gradually elevating their offers in the course of negotiations.

What they fail to realize is that the home seller may see things differently. Many people are so ego-bound to their property they feel a sense of personal rejection or humiliation when a buyer undervalues their home, realty specialists say.

Also, keep in mind that many home sellers have a bottom line in the financial sense.

In the current real estate market in many U.S. communities, those who must sell--because of a job transfer, job loss or divorce--will be strongly motivated to cut a fair deal to unload their property. But that doesn’t mean they’re willing or even able to give their homes away, Flynn said.

Suppose, for instance, a seller has a 20% equity stake in his sprawling suburban ranch house. Offer him 75% of the value of the place and he would have to write a check to his lender to pay off his mortgage when he walks away from the home. Few sellers are willing to do that.

Even if you’re buying a home from a seller who purchased the property years ago and has paid the first mortgage down substantially, it is very possible he may have a second mortgage on the property.

Home-equity loans, a new version of second mortgage, became very popular in the 1980s among homeowners who took them out for anything from credit-card debt consolidation to home renovation.

There’s nothing wrong with bargain hunting, and sometimes it can be sensationally successful. But remember, while enlightened bargain hunting may pay off, scavenging rarely does.

Here are pointers from realty specialists on how to play the buyer’s market to advantage:

--Gain a realistic picture of the home’s market value.

This may or may not be close to the asking price, pointed out Carolyn Janik, a New Jersey author of several books on real estate, who insists that the key to real estate is to understand market value.

Your realty agent should help you locate comparable sales from your community. It is wise to have at least three comparables on which to base a judgment on market value, said Janik, whose new book, “How to Sell Your Home in the ‘90s,” covers bottom feeding from the seller’s perspective.

As a general rule, Janik said, it is realistic for a buyer to propose a first offer that is 15% below market value, given current market conditions in many communities.

--Try to determine how much debt is secured by the property, including both first and second mortgages, so you will be a more informed bargainer.

This may not be as difficult as it sounds. Your realty agent may give you the information. Or you can find it in most communities by checking public land records kept at a local courthouse or government office.

--Don’t make a personal appeal to the seller based on your own lack of means or admiration for the property.

A young couple with good taste made such an appeal to the professor who owned a beautifully appointed townhouse in a university community.

“We’re young and the best offer we can make is 30% below your asking price, but we love your home and promise to take wonderful care of it,” the husband told the professor. But the argument, coupled with the low-ball offer, left the seller cold.

Personal appeals do not work in real estate. From the seller’s perspective, house deals are business propositions. Faced with an emotional appeal and a low-ball offer, Janik said, the seller’s reaction is: “If you love my house so much, why are you offering so little?”