Many people visit Jamaica to see waterfalls, parrot fish and nude beaches. But the Jamaican scene that investors enjoy is the bustling marketplace where people are passionate about buying and selling. Want one of those wood figurines? Some jerk chicken? Ackee fruit? Well . . . time to negotiate.
Investors thrive on haggling for the best deals. Unfortunately, most are buying REOs from US banks not Jamaican marketplaces. Bidding on REOs can leave an investor wishing for some Jamaican style bargaining. Problem with REOs: No human is around to dicker back and forth about price and terms. Everything is done remotely via email or fax. So what can the investor do to negotiate the best deal when the only way to bargain is through the use of a bid?
Below are a few tips to help you negotiate better through bids.
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8 Tips for Bidding on and Buying REO Properties
1. Cash Is King
Need I say more?
2. Be an Oddball
Most people submit bids with round numbers such as $50,000. Why not try investor Steve Babiak’s idea and use oddball numbers? 14 is my lucky number so my bid would become $50,114. If someone else bids 50K, the bank would take the offer for $114 more.
3. Holiday Boom
Choose your time to make an offer. To get properties off their books, banks are willing to negotiate at the end of the quarter or year. Save some time between Thanksgiving and Christmas to double up your bidding efforts.
4. Inspection Contingencies: Inspect It Quick
Have short or no inspection contingencies. Not having an inspection contingency is not for the neophyte, but having no contingencies does work. You must make sure you will pull the trigger or feel comfortable forfeiting your ‘earnest money deposit’ or EMD. For those of us who need to hire an inspector, decrease the normal inspection period to 3-5 days. Often banks have a specified inspection period anyway, but the shortened time “shows” the bank that you are serious.
5. Close It Quick
Decrease the number of days to close. Write in contracts that you will close in 10-20 days, rather than the standard 30. Don’t worry if the bank can’t close fast. Your quick close bid is “telling” the bank to go with you, a strong buyer.
6. Make Offers with Motivated Banks
Find out which bank owns the property. Foreign banks and smaller non-local banks are more likely to say yes to a lower price.
7. Make New Friends with Listing Agents
Get to know the listing agents. If agents know you have experience with rentals or flips, they encourage banks to accept your offer. Investor Will Barnard says: “My successful REO deals have usually been through relationships. The listing agent ends up gloating about me and my offer.” Another investor, J. Scott, solidifies relationships after closings by personally bringing the commission check, lockbox and sign back to the listing agent. Making life easier on the listing agent can help them remember you for the next deal.
8. Learn to Hint
When buying a lower end property, I write a special stipulation asking to add an HVAC cage before closing. By asking the question, I accomplish a few things. First, the bank sees that I’m willing to invest money before a deal closes. I’ve even had them split the cost of the cage with me. More importantly, I’ve “communicated” to the bank that they need to be worried about the security of their property and would be wise to accept my offer and close quickly. Also, if the HVAC disappears before closing, the bank is more likely to cough up the funds for a new unit.
Landing good deals is what it’s all about in this business. Don’t just sit back and write in the same old offers if you aren’t getting contracts. Try some creative ideas to see if you can acquire more deals. Getting good deals through REO bids can allow you to earn more. With your newfound earnings, you could take that Jamaican trip and brush up on your everyday negotiation skills.
Reader Question: What other creative bidding ideas have worked for you?