Which strategy do you prefer?

Question

I realize that someone could use both at different times, and it's dependent upon the listing price and condition of the house...but of these two, which do you use more often:

1) Start with your lowest offer (maybe labeling it as highest and best), and then just move on if the bank doesn't respond, or counters too high (or submit the offer again in a month if the house is still on the market).

2) Start with an offer at or close to the listing price and then submit a bunch of estimates and inspection reports in the hopes that the bank will come way down during the inspection period.

I have only been using Method 1 so far, because I don't want to waste money on an inspection if the bank won't negotiate later. But I can see how method 2 might be a good way of getting something under contract.

Will Barnard · Answer

@ Steve - Thanks for all the kudos bud, much appreciated! I hope to see you at the BP RE Summit in Denver!

@ Bienes - Speaking about previous deals is ALWAYS helpful, it tells them you are serious. That said, rather than saying that you have done 3 REO deals, tell them that you are more than willing to give thme the "last 3" deals you have closed (which were REO's) and that you are happy to [provide the addresses so they can know for certain that you are the real deal. This way, you have ot limited their imagination, but nurtured it into thinking that perhaps you have done 10's or even hundreds of deals without ever having to lie!

Steve Babiak · Answer

Will's reply is dead on.  #2 will get people PO'd at you to the point where you can get blacklisted.  Remember, and I am borrowing this from Will, the REO business is about relationships - you will have to build and nurture the relationship to get access to the best opportunities.  You won't build any relationship by doing things per #2, you will instead break any chance of getting the relationship going.

Earlier today I was on the phone for over a half hour with a REO listing agent with whom I had never dealt before.  Things played out exactly as Will has posted many times in these forums!  I almost thought I was speaking with Will, or one of his agents.  For your own good, please take Will's advice when it comes to dealing with REO listing agents; that advice has opened doors for me with REO listing agents.

Lastly, doing things per #2 will make you look more amateurish; you want to come across as a seasoned pro with any REO listing agent, so avoid #2.

McKellar Newsom · Answer

I agree with Joel and often use the wait approach.  If I get an initial "no," I often resubmit in a few weeks.

Will Barnard · Answer

Bienes,
I prefer option #1 due to the fact that your performance history and preserving your relationships is so important in dealing with REO properties.

By using option #2, you run the risk of burning bridges with banks and REO listing brokers/agents. You also run the risk of not finding any items needing repairs that were totally hidden. In most cases, after walking an REO, I can identify very close to accurate, the amount of repairs needed and what is wrong with the home. Rarely do I encounter hidden items of a large magnitude to justify going back to re-negotiate.

If you are playing the numbers game on the MLS, then you are forced to make lots of offers and leave yourself some room for negotiating on counter offers. If you offer your highest and best off the bat, you have no room to come up when they counter, and they almost always do unless your offer was at or abo0ve ask price.

Joel Owens · Answer

I have had asset managers tell me that many view the first offer from the investor to not be their last offer.

So unless it is close to list price and terms are great to the bank the asset manager tells me they always counter to see how much higher the investor will go.

Sometimes the timing isn't right for a property yet and you wait.

I am looking at a 32 unit apartment complex right now.The seller came to me with X after I came back to him with Y.

Either he will keep it,meet my terms,come back to me again with something that I will consider accepting,or someone else will offer him something closer to what he will accept and I will  move on.

So I am waiting for that small window of weakness to capitalize for my price and terms.I have had some owners tell me a few months ago I would have considered selling for that but now I have some rents in and I am doing okay for now.

So then I wait for the next timing again when they are desperate.

Even with banks as a seller it's still about timing.

Bienes Raices · Answer

^ That's a great idea Will. Technically that's not even a white lie.

Bienes Raices · Answer

Thanks. After reading these responses it seems obvious now that Method 2 could irritate people. Luckily Method 1 is what I've been using.

This is the first time I've tried dealing directly with the SS and REO listing agents. I try to pepper the conversations with REO terms so that they know I understand how it works.

When I speak to them, I was thinking of mentioning that I've bought three other REO properties and that they can look them up on the county appraiser's website, to let them know I'm not just a tire kicker who is going to waste their time. I don't know if they would actually go to that website (maybe they already do this), but it couldn't hurt to mention it.

Which strategy do you prefer?

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