The Simple Technique I Used to Beat the Competition and Snag a Deal Which Made Me $34,450

18

One thing I’ve learned is when it comes to actually making the offer on a property, you really want to keep it simple.

And what I mean by that is the more contingencies you put in, the more you have your attorney work on it to protect your interests, the more complicated it’s going to get.

And in the end you may not just get any deals because there’s too much going on in the contract.

Of course, you want to protect yourself as much as possible, but you want to balance those interests by not getting too complicated either. You certainly don’t want to buy anything that could be problematic with title issues or any other complications that could hinder your ability to sell the property later on.

Ideally, you want to present your offer in the least complicated manner as possible.  But at the same time, you want it to be a strong offer.

And when you’re first starting, it’s a little more complicated – usually because you’re doing your first deal and you probably want to protect yourself as much as possible from downside risk.  But at the same time you don’t want to over protect yourself where your offer gets pushed off to the side and in some cases, not even considered at all.

Keep. It. Simple. Stupid.

KISS. Great band…even better principle when putting in offers in real estate. (KISS = Keep It Simple Stupid)

Ideally, you want to present your offer as simply and as attractively as possible. In many cases, if you can present it as an all-cash offer, which will immediately be favored over someone that’s putting in an offer and they’re subject to financing.

And from a the bank’s perspective, especially if it’s an REO property, and you are offer number one and your offer comes even below other offers that are subject to financing, your offer is immediately more attractive to the bank.

Does it always happen this way? No, it doesn’t. But cash offers are very often times far more attractive, which is why learning how to raise private money is so vitally important to your success as a house flipper.

Submitting KISS Offers: Case Study

Let me give you an example of the KISS method for offers that may be a bit on the counterintuitive side.

About a year ago, I purchased a flip that started from an all-cash offer at $120,000. There were three offers higher than mine. Not only that, but they were other investors too.

I believe there was an offer for $145,000 from an end buyer, but it too was subject to financing. I’ve been following this one closely and the deal could fall apart on two occasions prior to my offer.

What I found out was that the other offers were most likely retail buyers or homeowners looking to get into this deal and they were subject to financing or subject to inspection. The property had a failed Title 5 and the bank was getting fed up with offers falling through and having the property on its books for such a long period of time. They had even toyed with the idea of putting it back out on the open market.

They had actually dropped the price way down to really where my price was actually higher than asking price. Not looking at the actual asking price I figured if I could offer $20,000 over asking price, I would not only make a great profit but I also have a far greater likelihood of the offer being accepted.

And of course, if you need to learn how to flip houses with no money, make sure you read this post here. And this one too.

Don’t Get Greedy and Remember The All Important ARV

This underscores the importance of an investor understanding the numbers and most importantly ARV.

If I were to put an offer $100,000, the offer would likely not be accepted due to the fact that there was other competition. I knew there were other investors competing for it, so I offered over asking price.

Not only were their prices higher than mine but there were also some very lowball offers at $70,000, $80,000 and $90,000, all of which were not accepted.

In cases like this, it’s good to not get greedy, identify a good deal and make an offer that works for your numbers. When all that happens, there is a greater likelihood of the deal actually happening.

So I put in my best and highest offer after doing all my due diligence and I got it.

And believe it or not, I didn’t get it by much!

I later found out later that I was only $1,000 higher than the next cash bidder.

Use Contingencies and Time to Your Advantage

There were a few other aspects to this offer  in addition to the fact that it was a cash offer.  I also had waived my inspection to make the offer even more attractive.

The bank was in a difficult situation where they had lost money for five months and they were trying to get more money for the property, but at the same time they had lost more money by keeping it on the market for too long.

This is a difficult situation for many banks when they finally realize they need to open up the bidding to other investors. And for an investor who comes in with an all-cash, waived inspections clause, this kind of offer is very attractive to a bank.

In fact, they were very motivated to accept my offer over other higher offers because they had been burned with contingency clauses and financing issues in the past.

In some cases, I put in a time contingency, saying that I can close in seven days, knowing full well that the bank probably will not close in seven days. Sometimes, this makes my offer far more attractive versus some of the other cash bidders. An offer like that will be far more attractive to the bank than one with contingencies and if you do it, you may end up getting the deal just because they realize you are motivated to close fast.

We got it, closed in 14 days and ended up making $34,450 on it.

Which ain’t too shabby for keeping it simple, stupid….

 

And if you’ve made it this far, please leave a comment below! I’d love to hear from you about what you have done to get offers accepted. 

And if you haven’t EVER put in an offer on a property, that’s cool too…leave a comment and ask for more info on how to do it!

Photo: ~PhotograTree~

Subscribe to our mailing list

* indicates required Email Address * First Name Last Name

About Author

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

18 Comments

  1. Great advice Michael!

    I got a deal that was actually 25k below an already discounted price. The house had fallen out of contract three times. The listing agent knew me and said if I removed all my contingencies and upped my earnest money to 5K he might get my offer accepted before more offers came in. I was happy to donut at that price and he got my offer accepted.

  2. Great article and spot-on. I am a Realtor that also works with investors to buy/rehab/flip for my own account and I have purchased several properties using exactly these same techniques. Cash, Fewer Contingencies and Quick Close are huge points of leverage that can help win deals especially when faced with offers from occupants who will need financing and inspection contingencies. I always do a thorough property inspection myself and also put together a fully detailed budget and I also run comps so I know what my exit price range will look like BEFORE I ever present the offer. This way I know exactly what my purchase price range looks like in order to strike a deal that makes sense. Very worthwhile read here. appreciate it.

    • ARV is for sure. I looked at 2 properties today in markets I am not familiar with and have seeked out qualified agents that are. Met with one of them after the walk thought to really hammer home the importance of getting that numbers spot on as that is how we determine our purchase price. Nothing better than having that conversation face to face. The next time I walk that property will be when we sell it and I pick up the lock box now that I feel good about the ARV.

  3. I want to leave a note telling you how much I appreciate your post. I have made a lot of offers and I sometimes want to find out what the highest offer is but the listing agent won’t disclose that, I supposed in an attempt to start a bidding war. I’d like to know if you have any suggestions on how to get around that. I am making offers all the time, and I was wondering why my offers weren’t getting accepted. I always placed a 14 day contingency and never added anything about closing quickly or 7 days like you mentioned.
    I truly appreciate your comments and thank you sincerely.
    I’ll be looking for more posts from you. They are totally helpful.
    -Angel.

    • Hi Angel- They are not going to tell you what the highest offer is as to stay fair with all the other offers coming in. Sometimes you may be privileged to know where you need to be in a range but getting that number would be tough. As long as they are being fair with all the investors the same way then you have a good chance as they do. You can always ask them how the offers are being submitted and if there is a deadline you may want to submit at the end of that deadline to have your offer in last as oppose to first.

      All the best.

  4. I got my house this way! I came in with an all-cash, no inspections offer that was some $80K below what the bank was asking. It was not easy to scrape up all that cash. I emptied my
    bank accounts and sold some gold coins I had laying around.

    The last $25K was interesting. I have this credit card that constantly sends me offers of
    a year and a half interest free – just fill out the enclosed check. Well, there is a 4% transaction fee, but I consider that reasonable for using the money. I signed the check and added the $25K to the kitty. Why is that interesting? Well, it happened to be the SAME BANK that was selling the property :).

  5. So Michael, this was a great strategy with the bank. But what about the private (non-istitutional) sellers? What are your strategies to stand out from the rest of the pack. The competition is starting to get really serious at this point, and the deals are scarce.

    Thanks in advance,

    David

    • There are many David and many different seller types as well so you have to structure your offers with the information you have gathered and one important tip is to always know their why? You are there to solve their problem. If you do that better than anyone else then you will get the deal.

  6. HI Michael,

    Why is it good to submit your offer at the last before the deadline as you mention in one of the responses ?

    -James

  7. I have used most of the stuff you mentioned and others have in the comments.

    Hear is a story more from the perspective on the poor guy that missed out by $1,000.
    I once lost out on a place by $168.
    How do I know that it was such a pathetically small amount? It was a HUD house and you can’t really do anything special on your offer in regards to closing date, inspections, financing type (Just FHA loan on anything else). The only thing you can really do is add in a closing cost request.
    So on this particular place I actually got an email from the asset manager saying I won it but immediately got a follow up saying that it was a mistake. Obviously peaked my interest so I checked up on it on the MLS until it sold. My offer was HIGHER than the sale price listed (Which I assume is why they made that mistake) so the only way they would have had a higher Net to HUD was because I had a closing cost credit in my offer (Like to have them pay some of my HML points!). Doing the math the MOST that it could have been higher was $168!
    This was the only time I ever wished that HUD actually would go to people and make individual counters, as I would have said yes if they asked me to go up $1,000 or something along those lines as it was still in my wiggle room.

  8. I will submit offers with the financing contingency (rehab loan/hard money) but then also include a bank statement that shows enough cash to close so they know its going to close. I *think* this gets around it and haven’t been proven otherwise.

    I only include the inspection contingency if there is something I actually want someone else to look at that could prove to be expensive (septic, foundation, etc). For other things, if I miss it, its just not that big of a cost.

    I try to offer non-standard numbers, especially when overbidding list just in case there are multiples at list. My last I think I got b/c I bid $70,700 on a $70,000 list (HUD).

    I have read/listened to those who send in comps, work estimates, etc, and I have done the same. I haven’t seen the value in this yet and basically stopped.

Leave A Reply

css.php