Don’t Be Afraid to Offend When Making Offers on Real Estate

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I had a good friend call me the other day and tell me that she and her husband had found some land in the mountains they wanted to place an offer on.  Knowing I work in real estate, she called me to ask for advice.  I gave her the advice she was looking for and some she did not expect.  But I think she was very happy with both.

Some Shocking Advice

As our conversation progressed I started asking about the land and the offer price.  Where was it?  How much is your offer?  How long has it been on the market?  Her answers made my real estate investor brain kick in.

She said the property was in a place where some of our other friends had a cabin.  The price was $100,000 and it had been on the market for a few months.  Something did not sound right.  I know our other friends had built their cabin years ago and the property they were looking at was in the same subdivision.  That told me that the property had been on the market a lot longer than a few months.  Most likely it had been on the market for years.

I told my friend to offer half price, $50,000.   “Good grief!  I can’t do that.  I don’t want to offend the seller!”   I said do not worry about offending the seller.  The seller is going to be happy that they have an offer since the property has been sitting for so long.  They will most likely make a counter offer, which is what you want.  I could not convince her to go down to $50,000.  I did however feel pretty good when she said she would make an offer of $60,000.

Well, the offer of $60,000 was accepted without a counter offer (I know, she bid too much, but what more could I do?).  My friend was very thankful that I had saved her so much money.  I jokingly told her I would pick up my commission check later.

Don’t Be Afraid of Low Ball Offers

The fear of being offensive when making offers is something I see in many who are new to the real estate business.  I also had this fear when I started out.  “How can I offer so much below the asking price?” I would think to myself.  This fear is a good thing.   It means we are not jerks.  But this fear is something that any good investor has got to get over.

Getting over this fear does not mean that we have become rude and pushy, far from it.  It means that we have to make objective offers based upon our knowledge and experience.  Yes, you may very well offend the seller, but just as often the seller will be very glad to have an offer.

The key is to always be courteous, respectful and professional.  The seller may yell at you for making your offer.  That is OK.  Walk away and move on to the next deal.  Sometimes those offended sellers will end up calling you back in a few months when no other offers have been made.  Sometimes, because you were professional, they will call you back even if other, higher offers have been made (I have seen this happen).

So don’t be afraid to offend when making offers.  But always be professional and courteous.

Photo: Alex Schweigert

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About Author

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

18 Comments

  1. Always good advice. New investors frequently don’t want to bid too low for fear of being labelled time wasters or general ‘bad guys’ by the listing agents, who they assume have a wealth of both experience and contacts and can squash their new business in a heartbeat. It’s understandable, but consistently making these low offers toughens one’s skin. This is no business for the fragile!

  2. We’re one of the few cultures where people are offended by haggling . . . if you start too high, you’ll never have any room for negotiation. We Americans need to get over our sensitivities to the entire negotiation process.

    • Kevin Perk

      Josh,

      Great point. Everywhere else in the world the price listed is not the price. You have got to haggle to get to the true price. It is hard to do at first, but you get used to it rather quickly. And it can be fun.

      Thanks for the comment,

      Kevin

  3. This is right on. The only thing that I would add, is that doing business is equivalent to building relationships, and one needs to be careful not to damage the relationship with a low-ball offer.

    At the moment, I’ve got a 10-unit under contract at a price which is $100,000 less than the asking price. The caveat – this deal has been evolving for over a year. Time and circumstance are the only forces that change people’s minds. As a negotiator I am very aware of this. It took the seller a year to arrive into the “deal-making” frame of mind…

    • Kevin Perk

      Ben,

      It certainly can take time to work the deal. It had taken me months to work some deals. Sometimes you just need to build rapport with the seller. No other way you can do that but with time. You are right, it can be tricky making a low offer sometimes. Sometimes you will just have to walk away. Other times like you said, the seller will come around.

      Thanks for reading and commenting,

      Kevin

      Kevin

  4. Great post! Do you all have a percentage that you follow? Have you found that low ball offers work on REOs?

    I offered 19K, and the list price was 30K, and it was accepted. This was a private seller. I just wonder about REOs. I know banks want to unload, but have any of you made like a 50% offer and got it accepted without a counteroffer?

    • Kevin Perk

      Cheryl,

      It depends on the bank. Some will work with you, others follow a formula when analyzing offers and will not. Many times it simply takes the property sitting on the market for a while before you can get them to work with you. Be patient.

      I do not have a specific formula, I just run my numbers and make the offer based on them.

      I have made offers of 50% and had them accepted. It means I paid too much. Many get upset about that. I generally do not as I know I got a good deal :).

      Thanks for reading and commenting,

      Kevin

  5. If it is an REO I will lowball all day long; a private seller, not so much – it is easier for them to get offended and if they do then it makes it that much harder to structure a deal.

    Remember, a lot of the times this is their home and they have a lot of their ego and self worth wrapped up in it. If you come in and low ball them you are basically spitting on them.

    • Kevin Perk

      Robert,

      Dealing with a corporation is often much easier than dealing with a person personally attached to a property. That second scenario often takes a bit more finesse and the building of rapport, which can take some time. Sometimes, depending on the situation, the homeowner may be grateful to have your offer. Yes, sometimes they will get mad at you, don’t worry about it. move on to the next deal.

      Thanks for reading and commenting,

      Kevin

  6. My family own a real estate brokerage firm and one thing they told me years ago and I have always remembers is “If your first offer does not insult them, it was too high.”

    Now, I always use that with a grain of salt, but to this point all my real estate offers have been for places I want to live in and have a harder time walking away from.

  7. What I have learned through experience, and what I teach, is that purchase price is only one of many negotiable terms which establish the validity of the investment and the magnitude of the investment returns in real estate.

    What is a real estate deal? It is a meeting of the minds – an agreement which answers the needs of both sides to a satisfactory degree. This sometimes lends itself to lowball offers, but many times it really does not. This is why, for a sophisticated real estate investor, it can be dangerous to allow yourself to get into a frame of mind whereby the purchase price is the only factor that establishes whether you do the deal or not. At times it is the highest price that drives the seller’s decision-making process, while other times it is the residual cash flow, tax implications, feelings, etc. If all we know is to place low offers, we will need to place 1000 of them to find Waldo who finally bites on one. We must have more tools in our tool-bag.

    While I’ve bought property for 30 cents on the dollar, and I’ve also bought property whereby I knew that I was paying more than the market value at that time. This is because in my opinion, some of the other elements of the structure of those transactions were beneficial to both sides.

    For example, which would you chose: an opportunity to purchase a triplex for long-term hold for $110,000 but requiring 25% down, or an opportunity to purchase the same property for $125,000 but requiring $0 down-payment? I would hope that you would choose the latter – pay $15,000 more on the purchase price, but no cash out of pocket! Why? Because even though your cash flow would suffer a bit due to financing an extra $15,000, by having no cash in the deal your Cash on Cash return is infinity. You are making cash flow without any cash investment.

    This is just one example where paying more on the purchase price actually garners higher ROI. There are many other negotiable terms and conditions of a purchase which can gain the upper hand over the purchase price when structuring a real estate deal.

    • Kevin Perk

      Ben,

      There are many ways to work the deal and the price is only one part of that.

      I think there is a future blog post in here somewhere :).

      Thanks for reading and offering your advice,

      Kevin

  8. How about 1/3 ? Can I offer 1/3 of the asking price? Or will that actually be offensive?

    I’m asking because I just put in an offer at 27% and now I’m thinking that maybe I should raise it and spare their feelings more. What do you think?

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