{"id":76951,"date":"2018-03-31T05:00:42","date_gmt":"2018-03-31T11:00:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=76951"},"modified":"2021-03-16T11:53:17","modified_gmt":"2021-03-16T17:53:17","slug":"2016-03-14-make-offer-on-property-sight-unseen","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-03-14-make-offer-on-property-sight-unseen","title":{"rendered":"How (and Why) I Offer on Properties BEFORE I Ever Step Foot in the House"},"content":{"rendered":"<p>The other day, I <em>flabbergasted<\/em>\u00a0a friend of mine.<\/p>\n<p><em>(I&#8217;ve always wanted to use that word in a blog post. Score!)<\/em><\/p>\n<p>I explained to him my simple funnel\u00a0for getting real estate deals:<\/p>\n<ul>\n<li>I get leads coming in (<a href=\"\/renewsblog\/2014\/04\/09\/direct-mail\/\" target=\"_blank\">direct mail<\/a>, MLS, <a href=\"\/renewsblog\/2015\/06\/18\/upgrade-driving-for-dollarscampaign-awesome-hack\/\" target=\"_blank\">driving for dollars<\/a>, etc.).<\/li>\n<li>I qualify the leads to see if they deserve a deeper look.<\/li>\n<li>I do a quick <a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\">analysis<\/a> of the property (using the <a href=\"https:\/\/www.biggerpockets.com\/analysis\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Analysis Calculators<\/a>) to see if it warrants a site visit.<\/li>\n<li>If all looks good and it&#8217;s a bank <a href=\"\/renewsblog\/2013\/03\/22\/how-to-buy-a-foreclosure\/\" target=\"_blank\" rel=\"noopener noreferrer\">foreclosure<\/a>, I make an offer.<\/li>\n<li>If the offer gets accepted, I go look at the house and proceed to closing.<\/li>\n<\/ul>\n<p>As\u00a0I walked him through this, my friend was\u00a0<em>befuddled!<\/em> (<em>Another word I&#8217;ve always wanted to use in a blog post!<\/em>)<\/p>\n<p>&#8220;Wait a minute,&#8221; he said to me, &#8220;you are telling me you make an offer BEFORE ever stepping foot in the house?&#8221;<\/p>\n<p>&#8220;Of course!&#8221; I responded. &#8220;At least, if it&#8217;s a foreclosure. If it&#8217;s a motivated seller, I still make a verbal offer.&#8221;<\/p>\n<p>&#8220;That&#8217;s crazy!&#8221; He laughed. &#8220;How would you know what to offer? And how do you know the condition?&#8221;<\/p>\n<p>As I explained it to him, I thought it would probably interest others as well, hence this blog post!<\/p>\n<p>So before I explain\u00a0<em>how\u00a0<\/em>I do it, let me tell you\u00a0<em>why<\/em> I do it this way.<br \/>\n<img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-77123\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/probate-marketing.jpg\" alt=\"probate-marketing\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/probate-marketing.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/probate-marketing-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>Why I Make Offers Before Looking at the Property<\/h2>\n<p>I realize that to newer investors, making offers sight-unseen\u00a0probably seems crazy.<\/p>\n<p>When I think back to my early days investing in real estate, I used to do exactly what my friend does:<\/p>\n<ul>\n<li>Walk through the property<\/li>\n<li>Walk through it again<\/li>\n<li>Measure everything<\/li>\n<li>Make a detailed spreadsheet<\/li>\n<li>Panic<\/li>\n<li>Walk through it again<\/li>\n<li>Get scared and overthink everything<\/li>\n<li>Then make an offer<\/li>\n<li>And the offer gets rejected 80-90 percent of the time still.<\/li>\n<\/ul>\n<p>Today, I make my offers before I step foot into the property.<\/p>\n<p>Why?<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/10\/29\/tips-offer-accepted\/\" target=\"_blank\">8 Tips to Put Your Real Estate Offer in the Best Light \u2014 And Get it Accepted<\/a><\/em><\/p>\n<p>Four\u00a0reasons:<\/p>\n<ol>\n<li><strong>I don&#8217;t have time to look at every property I want to offer on<\/strong>, knowing 90 percent will be rejected. Life is busy enough! Besides, my real estate agent would go nuts if I made him open up so many properties!<\/li>\n<li><strong>No one ever accepts the offer up front<\/strong> &#8212; they always counter-offer (negotiate with a higher number). This gives me time to see where they are\u00a0<em>really\u00a0<\/em>at price-wise.<\/li>\n<li><strong>I can estimate the rehab budget reasonably well<\/strong> based on photos and talking with real estate agents who have walked through it.<\/li>\n<li><strong>I always include an inspection contingency<\/strong>\u00a0so I can back out or re-negotiate if I find something other than I assumed.<\/li>\n<\/ol>\n<p>I love the phrase &#8220;<em>if you want to\u00a0get a prince, you are going to have to kiss a lot of frogs!<\/em>&#8221; Of course, this applies perfectly to real estate. If you want to buy a great deal, you are going to have to make a lot of offers and get a lot of rejections. But it&#8217;s OK! It&#8217;s part of the game.<\/p>\n<p>By offering on properties\u00a0<em>before<\/em> touring them, you can save yourself dozens of hours of time every week.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-77219\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/03\/wholesale-flip-case-study.jpg\" alt=\"wholesale-flip-case-study\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/03\/wholesale-flip-case-study.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/03\/wholesale-flip-case-study-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>How I Make Offers Sight Unseen: Two Real-Life Examples<\/h2>\n<p>So, let&#8217;s walk through a couple quick examples that have happened to me in the past week.<\/p>\n<h3>1. The Motivated Seller<\/h3>\n<p>I talked with a motivated seller yesterday (after\u00a0church, of all places).<\/p>\n<p>She knew that I did real estate, and thought I might be able to help.<\/p>\n<p>She told\u00a0me that she is the Power of Attorney for an elderly woman in a nursing, and due to complications with Medicaid, the elderly woman needs to sell her house FAST in order for Medicaid payments to kick in.<\/p>\n<p>The first thing I did was asked some questions, like:<\/p>\n<ul>\n<li>Where is located?<\/li>\n<li>What&#8217;s the condition?<\/li>\n<li>How much do you\u00a0think it would take a contractor to fix it up?<\/li>\n<li>What&#8217;s the roof like?<\/li>\n<li>Do the floors slope at all?<\/li>\n<li>What kind of price are you asking?<\/li>\n<li>If I could pay cash and close in a week or so, what&#8217;s the lowest you&#8217;d take? (With this question,\u00a0I know where negotiations are going to START.\u00a0She told me $140,000 is what the county assesses it at, but that was way higher than she was thinking.)<\/li>\n<\/ul>\n<p>I\u00a0got a\u00a0LOT of information about the property this way. Not everything, of course, but enough to paint a decent picture and make an offer!<\/p>\n<p><em>(If I had been home and not at church, I could have also headed to my local county assessor&#8217;s website, where I&#8217;d find recent photos of the property, and I could\u00a0take a virtual drive on <a href=\"https:\/\/www.google.com\/maps\/streetview\/\" target=\"_blank\" rel=\"noopener noreferrer\">Google Street View<\/a> to see the neighborhood and what I was dealing with. Luckily, however, I knew the neighborhood well!)<\/em><\/p>\n<p>Because I know my area well, I already knew a general &#8220;after repair value&#8221; for this property &#8212; or at least close enough for now. If I hadn&#8217;t, I might have run over to Realtor.com to\u00a0see what other similar houses were listed at to at least get a ballpark. For this property, the ARV was likely around $150,000.<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/02\/19\/embarrassed-offerhigh\/\" target=\"_blank\">If You\u2019re Not Embarrassed by Your Offer, it\u2019s Too High: Here\u2019s Why<\/a><\/em><\/p>\n<p>To determine how much I might pay, I turned to the often-misunderstood &#8220;<a href=\"\/renewsblog\/2014\/02\/14\/70-rule-bible\/\" target=\"_blank\" rel=\"noopener noreferrer\">70% Rule of Thumb<\/a>.&#8221; This rule of thumb is often used by flippers to ballpark an offer price. (Had I wanted to rent this house, I might use the 50% Rule of Thumb instead.)<\/p>\n<p>The 70% Rule of Thumb says:<\/p>\n<p><em>The maximum amount you should pay for a property is 70% of the After Repair Value, less expenses.<\/em><\/p>\n<p>In other words, whatever the home would sell for when it&#8217;s 100 percent fixed up &#8212; multiply that times .7 and subtract out the repairs. That&#8217;s the offer price.<\/p>\n<p>Based on my conversation with the seller, I estimated the rehab to cost around $25,000. Therefore:<\/p>\n<blockquote><p>$150,000 x .7 &#8211; $25,000 = $80,000<\/p><\/blockquote>\n<p>Now I had a\u00a0<em>very<\/em> rough ballpark estimate. So, I made a verbal offer! The funny thing is my offer was made in such a way that didn&#8217;t sound like an offer at all! It was just a conversation.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-76893\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/sell-real-estate.jpg\" alt=\"sell-real-estate\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/sell-real-estate.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/02\/sell-real-estate-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p>I said something like:<\/p>\n<blockquote><p><em>&#8220;Great! So, for me, it&#8217;s a fairly simple mathematical formula to figure out if I\u00a0can buy the property. I haven&#8217;t done all the numbers yet and haven&#8217;t even see the property, but I&#8217;m guessing I&#8217;ll be somewhere in the $75,000 &#8211; $85,000 range, but again, that really depends on what I see at the house. Does that sound like at least ballpark? Can\u00a0we set up a time for me to come look?&#8221;\u00a0<\/em><\/p><\/blockquote>\n<p>Notice that I didn&#8217;t commit to that $75,000 &#8211; $85,000 price; I simply threw\u00a0it out there to see if it was in the realm of possibility.<\/p>\n<p>In this case, the seller might say, &#8220;It&#8217;s a little lower than I was hoping, but feel free to come look. It really is in good shape.&#8221; And, in fact, that&#8217;s pretty much exactly what she said.\u00a0I know that if my $75,000 was offensive to her, she wouldn&#8217;t want me coming over.<\/p>\n<p>But since we&#8217;re at least in the ballpark, I&#8217;ll come check it out and do a more thorough job of analyzing the deal.<\/p>\n<p>My appointment with her is tomorrow morning. Will I get the property? Who knows! But at least I&#8217;m not wasting my time\u00a0looking at a deal that I have no chance of getting.<\/p>\n<p>Now, let&#8217;s look at another quick example &#8212; this time, a foreclosure listed by a real estate agent.<\/p>\n<h3>2. The Foreclosure<\/h3>\n<p>Last week, I offered on a foreclosed\u00a0property, but never stepped foot in the house. The property was listed on the local MLS for nearly $80,000. Instantly, there were a few things I liked about it:<\/p>\n<ul>\n<li>1950&#8217;s construction (better than 1920&#8217;s, like most of my leads)<\/li>\n<li>1 story<\/li>\n<li>3 bedroom, 1 bathroom<\/li>\n<li>Great neighborhood<\/li>\n<\/ul>\n<p>Looking at the photos online, I could tell a few things:<\/p>\n<ol>\n<li>It likely needed new windows.<\/li>\n<li>It likely needed a new roof.<\/li>\n<li>It likely needed all new paint, inside and outside.<\/li>\n<li>The cabinets looked OK.<\/li>\n<\/ol>\n<p>Knowing this, I estimated the rehab to cost around $30,000 for the project. It might be $20,000, and it might be $40,000. I&#8217;m not sure, but I think $30,000 could be close. That&#8217;s good enough for now.<\/p>\n<p>I also know that the value of this property, when fixed up, (the ARV) would be conservatively around $130,000, based on a list of &#8220;comps&#8221; I received from my real estate agent.<\/p>\n<p>And because I want to <a href=\"\/renewsblog\/2014\/01\/07\/flipping-houses\/\" target=\"_blank\">flip this property<\/a>, I used that 70% Rule of Thumb again and determined that:<\/p>\n<blockquote><p>ARV = $130,000 x .7 = $91,000 &#8211; $30,000 = $61,000<\/p><\/blockquote>\n<p>So I officially offered them $60,000, with a five-day inspection contingency, using my real estate agent to do all the paperwork. In fact, I signed the offer on my iPhone, and it took about three minutes from beginning to end.<\/p>\n<p>The next day, they countered at $68,000. <em>They wanted to play ball!\u00a0<\/em><\/p>\n<p>However, I couldn&#8217;t do $68,000. I could do $60,000. So I told them, &#8220;No &#8212; I can do $60,000.&#8221;<\/p>\n<p>Now, at this point, I could have gone and looked at the property, to see how close my $30,000 rehab budget was.<\/p>\n<p>Instead, something funny happened.<\/p>\n<p>Remember my friend I mentioned earlier? The one who was flabbergasted?<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-76316\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/01\/rent-survey.jpg\" alt=\"rent-survey\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/01\/rent-survey.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/01\/rent-survey-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/10\/20\/get-comfortable-make-offers\/\" target=\"_blank\">How to Get Comfortable With the Uncomfortable Task of Making Offers on Homes<\/a><\/em><\/p>\n<p>In that conversation, I used this foreclosure\u00a0as an example of how I make offers. And while I was\u00a0explaining this to my friend (who has been dying to flip a house for several years), it hit me: this property is FAR better for him. He is planning to do his own rehab work, which means he can pay a bit more than me. He could do this whole rehab for under $20,000. It&#8217;s also a great &#8220;first flip&#8221; sort of deal &#8212; a nice &#8220;base hit.&#8221;<\/p>\n<p>And we know the bank is OK\u00a0at $68,000. I told him to make the offer.<\/p>\n<p>He did, and he&#8217;ll be closing next week on his first flip!<\/p>\n<p>&#8212;<\/p>\n<p>So, should you make real estate offers sight-unseen?<\/p>\n<p>Maybe, maybe not. Obviously, I have a bit of experience with this, so I know how the game is played. You might be newer, and going to look at properties would likely be a fantastic learning experience. But I hope this post has helped you see that making offers is not a scary thing. You <em>can<\/em> do it without stepping foot into the home.<\/p>\n<p>And remember, the more\u00a0times you offer, the more accepted deals you&#8217;ll likely get.<\/p>\n<p>So get out there and start making some offers!<\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars?utm_source=renewsblog\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>We are republishing this article to help out our newer readers.<\/em><\/p>\n<p><em>Investors: Have you ever made an offer on a property sight unseen? Why or why not?<\/em><\/p>\n<p><strong>Leave your comments below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Want to land more deals? The key is to make more offers\u2014and a GREAT way to do that is to become comfortable making offers sight unseen. Here&#8217;s how.<\/p>\n","protected":false},"author":710,"featured_media":90145,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4252],"tags":[],"class_list":["post-76951","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deal-analysis"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/76951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=76951"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/76951\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/90145"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=76951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=76951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=76951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}