How I Negotiated a 30% Price Reduction and Saved $100,000… During a Bidding War

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“Let us never negotiate out of fear.  But let us never fear to negotiate.”
-John F. Kennedy

I love negotiating.  Some people HATE it, some people SUCK at it, and some people LOVE it.  I’m in the latter camp.

People say things like “they are so irrational” though, in reality, people are very rational – but they position themselves to protect themselves.  In this positioning, the opposing party believes this is irrational.  Did I just jump into the deep-end too quick?

A Negotiation Case Study

Here’s a true story to show you what I’m talking about.

An acquaintance of mine owned some nice rental properties in a very nice area of town.  Every year, I would call this guy, who we will call “Jim” and offer to buy a particular quadplex.  Nothing high pressure, but I would always just ask for the sale.  Every year, he politely turned me down, saying it is a cash-cow and he has no interest in selling.  This went on for five years but on the sixth year, before I got my call in, I notice the property pop-up on one of my screens.  It’s the property I’ve been trying to buy for five years AND the price is only about half what I would have paid.  After further research, I discover it was empty and in foreclosure!

I’m sure you are asking yourself a million questions as to why “Jim” didn’t simply sell me the property.  The truth is: I don’t know why – but this is what I think happened: he was protecting (see above) his ego and pride.  Rather than sell me something at a discount, or sell it all. Jim would rather just lose it.  Some would say this is irrational.  However, if you approach it from a different angle you can learn how to deal with this.

Develop A System

Most people reading this blog are BiggerPockets members, which means you guys and gals are smarter than around 80% of real estate investors out there.  It also means that you guys are looking for great deals, not just the good deals that are on the MLS everyday.

Most of you have made an infinite amount of low-ball offers only to waste your time and the time of everyone involved.  Please, do not misunderstand me – I am all about making low-ball offers and getting a great deal.  However, as you probably have already experienced – blindly making a ton of low-ball offers doesn’t get you far.

Instead, why don’t you design a process that is repeatable, scalable, and works within the parameters you define and what works with whatever negotiation style you prefer.

My Real Estate System

Let me give you a real case-study of a process that I have defined for myself.

It was early December and we were currently renting, but my wife was VERY tired of living in a 1 bedroom place.  Additionally, we were having our second child in February so she couldn’t help move and pack if we waited any longer.  My wife found three houses that were the size we wanted and in the location we wanted.  When we walked into the final house we knew this was the one; everything was already remodeled and we loved everything.  At this point we knew it was obviously empty and on the market for awhile.  I also saw where it had never been lived in at it’s current state, as it was previously a duplex.

Additionally, the price was way out of our budget.

After going through a number of failed low-ball bids, my wife and I tried a different strategy this time.  We made the low-ball bid, but also included a letter explaining the offer.

This is the letter we sent:

November 30, 2010

Dear Seller

I’m writing to let you know that I would like to make a bid on your property. I love your house and would love to raise my family in this wonderful house.

But given that my offer is well below your asking price, I also feel I owe you an explanation.

I am a credit analyst at a bank and my wife is a photographer.  We were pre-approved for a $225,000 purchase price and my parents agreed to help us with another $15,000.  This is how we came to our proposed purchase price.  Even though this offer is below the asking price I feel there are several positive items in our offer that I would like to highlight:

  • This offer is not contingent on us selling a house.
  • We are getting conventional financing, not FHA.
  • We can close within 30 days
  • Although we do plan on getting a home inspection, we do not plan on asking for any type of credit after the inspection.
  • We can change the purchase price terms to minimize your capital gains tax.

Thank you for considering our offer.  We look forward to hearing from you.

Best Regards,

Jimmy & Brittany Moncrief (Ada 2 years old & # 2 due to arrive in Feb 2011)

Breakdown of the letter

  1. It began with a positive note – establishing the tone
  2. The offer’s justification did not use quantitative data (repair costs, fair value estimates as well as qualitative factors (conditions))
  3. It listed all positive aspects of your offer – references, fast closing, etc..
  4. It listed more positives and benefits for them – (really think about the sellers condition and what they want – everybody says money, but that’s not even close to the full story.)
  5. Thank you – established the tone at the end

I want to emphasize one major point – DO NOT SOUND LIKE A PROFESSIONAL REAL ESTATE INVESTOR! They will immediately shut-you off if you take an impersonal, business-tone.  Try to keep the tone as friendly as possible.

Below is the Process I use for my own Personal Residence

  • My Wife likes it (I don’t need to waste time with anything else if this doesn’t work)
  • Empty House (passive sign of distress)
  • Bonus points for it being on the market over 6 months
  • Another bonus point if it’s an investor or out-of-town owner (less emotion)
  • Write a letter explaining the offer

Obviously, this approach takes some time on the front-end and you can’t just take a “spray-and-pray” approach to your offers.  However, I have found that when you take a methodical approach to your offers and invest some time on the front-end and work within the confines of your own parameters, your success rate will dramatically improve.

I want to emphasize that this process took years of refinement and I had to really think about the positives aspects I have as a buyer.  This will probably be very different from your positive aspects, because we are all different with different positive aspects.

Differentiate Yourself

On the BiggerPockets Podcast, Episode 23 – I LOVED two things James Vermillion said that compliment this article:

“Don’t pick a strategy and build your life around it.  Look at your life – and build a strategy that fits your needs.”

Another key point that James pointed out was how he differentiates himself as a buyer in Lexington, KY.  I’m going to paraphrase, but it was something to the effect of:

There are thousands of homes for sale her, thousands of buyers, but there is only 1 buyer who buys homes with mold and foundation problems, and that’s me.

Think about that!

In a town, with over 301K residents, his is the only buyer for a particular type of home.

Now that is a powerful negotiation tool!

In summary, I want to challenge you this week to be a hunter instead of a farmer.  Think about your individual positives and negatives, put them down on paper.  Write a letter to a seller and let me know the results in the comments.

“In business, you don’t get what you deserve, you get what you negotiate.” Charles L. Karrass

Photos: Tristan Martin

About Author

Jimmy Moncrief is a bank underwriter and real estate investor. He blogs at where he talks about all things real estate. He also is the creater of free evernote templates for BiggerPockets members to learn how to better organize and automate their real estate investing.


  1. Jimmy, I used method to negotiate a 20% reduction on my primary residence a couple years back. After due diligence I discovered that an elderly couple was selling to move back to their farm to recover from a series of surgeries. As such, I constructed the letter accordingly and demonstrated the positives of the transaction. It also helped that this time was close to winter… I dont take credit for this but having read a book by Dale Carneigie, I just put it all together…. Thanks for sharing

  2. Great information. Did I miss the details on the 100k price reduction during a bidding war?

    The writing a letter thing really can work if it is personal and not a list of repairs. A letter full of a list of repairs indicates the seller and their Realtor did not see the repairs and don’t know how to value a property. Even if the home is overpriced, telling the seller and their agent they don’t know what they are doing is never a good way to start negotiating.

    We used a letter to buy our personal residence and it consisted of why we loved the house so much and complimented the sellers.

    I am an REO agent and I laugh at the agents that send me low ball offers over and over again. They send them to me on HUD, and those have to be submitted online, which shows the agents and buyers aren’t even trying to pay attention to the listing type. They send 50% on the dollar on my already best priced homes. I can’t imagine they get anything under contract.

  3. Mark

    HUD is a totally different animal in and of itself.

    I don’t know what you mean by: “Even if the home is overpriced, telling the seller and their agent they don’t know what they are doing is never a good way to start negotiating.” I never implied this in my blog post.

  4. Spray and pray approach, that’s a good one and also sadly what I think 90% of investors go with.

    I am a big fan of buying property pre-foreclosure, on all occasions a land trust is formed, the deed is changed (but not necessarily recorded) and the original owner is out of the picture.
    All that said I marvel at the barrage of letters and post cards mailed to the property from investors.

    I wonder what are these folks are thinking; my most memorable item was an offer that read “Call at once to hear about our lease buy back program!” Just thinking from this homeowners point of view what was this investor offering? Did he want to buy the lease?

    One investor send a five letter mailing one letter every two weeks, the letters where at first comforting and then threatening, the last letter was a offer to take the deed if I shelled out $5000 to clear a utility lien on the property.

    The reason the owner allowed me to pay him $10 for the deed was simple. I appealed to his needs. One he didn’t need the property or for that manner want the property. Second he like the idea of skipping the bankruptcy and having the bad debt removed from his credit report.
    He was a young guy, I mentioned he would have a long wonderful life ahead of him, but the bankruptcy would always be there to hold him back, maybe even chase away the furture Miss Right.

    In the end I got him to sign papers that allowed me to do just about everything I could think of doing with the property. I ended up with a short sale wiping out $60k of debt and buying a $125k three unit property for $32k. During the short sale I rented two of the units bringing in $1000 a month in cash flow, as I was not paying the mortgage or the taxes the lender was doing so.

    Approaching each person in life in positive upbeat manner will always give you an in others will not have. Something about REI that causes people to forget the Golden Rule.

  5. How would this work in a bidding war if other offers are all cash and way above your offer price? I’m in the SF Bay Area where all houses are bid by 10-15 people, 50-75% all cash and all bid way over asking price. We’ve written several letters but all have gotten lost in the much higher offers. I’m hard pressed to think that writing a more compelling letter would have worked in these situations. Thoughts? I’m curious, can you give stats like I did for your area? Do you buy solely off the MLS? We’re just leaving the MLS strategy for an all marketing strategy, but its still really interesting to me that you seem to be making the MLS work!!

    • Amanda – thanks for the questions and kind words!

      TO answer you question, try to dig in and learn as much as you can about the seller’s motivation to sell, his or her situation, etc..

      In my case, I dug in and here is what I found:

      The seller bought it to convert from a duplex to single family home to flip.
      Tried selling it himself for a year
      Then listed it with his Aunt for 9 months.
      So while the MLS said just 9 months, I knew it had actually been closer to 2 years!

      Additionally, this was DECEMBER! I love buying houses in the winter – because when is the last time you heard about a bidding war in the winter? Yea, I haven’t heard of that either.

      One more point, I noticed you are in a new market and a hot one at that! I originally hated wholesalers. I thought “I could do this and not pay their fee” That was a VERY big mistake on my part. The good wholesalers work there tails off and are always willing to let you have a good deal because they want you coming back as a repeat client. The bad wholesalers never last more than 1 year.

      Hope this helps!

  6. Good article. I’m new to REI so I would have never thought to reach out to the seller to explain a low offer, but that’s a good supplemetal tool to use. Thanks, I will definitely utilize this method.

  7. Marlon Messer on

    Great article and I agree the thoughtful and emotional letter accompanying your offer does work. I bought a property in the Los Angeles area from an out of state owner who had recently inherited it following her grandmother’s death. Without having any knowledge of the foregoing information, my better half stated how much the backyard reminded her of spending time at her own grandmother’s home years earlier. We decided to include this information in a thoughtful and heartfelt letter alomg with our offer. We could have wrote about how outdated the home was and pointed out all the problems, but that was obvious. We were later told by the seller that the letter was what sealed the deal over the numerous other offers. Our letter connected with the out of state seller emotionally, as she too had spent lots of time in the same backyard with her grandmother. Again, thanks for the article.

  8. Patrick Shawn Faherty

    Hi Jimmy, are you still out there? I was wondering what you had in mind when in your article you stated: “We can change the purchase price terms to minimize your capital gains tax.” I’m interested in writing a letter to a prospective seller for a primary residence. Looking for creative ideas on why he might want to take it off the market and sell it to me! He has had it listed for 100+ days with two price reductions. Thanks.

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