Don't delay, be "Offensive" today!
Be "offensive!"
I make a LOT of offers.
And I have learned that nobody really knows how truly motivated a seller is until the seller has a hot signed cash offer in their tiny little hands.
Not even the seller knows, LOL! Their mind starts to work on them once it is actually real.
I have had at least two agents proclaim, "I didn't think they would take it!"
And certainly I don't know.
And so I send the offers . . . .
I send the agent a REAL offer, not just a LOI (Letter of Intent). The LOI is a great idea, but it isn't real enough to trigger the proper emotion in the Seller.
I stick to the MAO (Maximum Allowable Offer) based on my estimated ARV (After Rehabbed Value) and my estimated Rehab costs based on the listing comments, the pictures, and the general neighborhood expectations based on the price range. I figure in all the other costs that new investors often overlook, and then I let the offers fly!
Over 100 new listings come to the Salt Lake area market each day, and like a crazy lunatic, I send out 5 to 10 offers a day. Unfortunately, almost all of them rejected.
I actually get a lot of rude emails back after sending out my low-ball offers, and I have even had three agents call me to tell me NEVER to send them any more offers! Crazy huh???
They tell me I have "really upset their sellers" with my "offensive" offer, and that I am just wasting "everyone's" time (they mean their own time.)
I guess it's a good thing that I have tough skin (usually) and that I am not "thoroughly embarrassed" like they say I should be. This is a business, and I don't work for them; I work for my buyers!
So don't be afraid to low-ball out there. But don't be unrealistic. Be sure to use your calculators and all your brain cells. In this tight market, don't just pick an arbitrary calculation like "70% of ARV less repairs" or "25% below asking price" but really do your homework and then get within $2k of your MAO. This gives you just a little wiggle room for later, if needed.
I have seen buyers lose deals when they were actually ready to pay more - simply because they couldn't fathom the idea that the seller had actually priced the house correctly!
After 4 years of UP, UP, UP, I think the market is finally leveling off amid the
blaring Trump-et of uncertainly and the traditionally slower winter season.
How do I know? Because I got three accepted offers in the last 5 days!
Granted, because the offers were blind and pictures lie 90% of the time, not
all three are really deals, but I think you will agree that by sending out so
many offers, I certainly have a Super litmus test for this market.
So sellers are starting to get a little bit nervous and may shortly become
"motivated" enough to give you the price you need to get your deal done
profitably.
Stay in the game. In an uncertain market for flips-- get in, rehab well, and
get out. And you will be fine. December is the PERFECT time to buy to get ready
for the spring selling season.
Comments (2)
There is plenty that goes into a "low ball offer". From the listing agent perspective (at least mine) if it has been on the market for 60 days hey it's a good thing. It allows me to do 2 things. First, have that conversation with my seller about a price reduction (Which i have already had for sure, but this reinforces it). The second thing is it allows me to call everyone that looked at the house and let them know that "We now have an offer and they have until tomorrow at noon if their client is still interested". I will also throw in "It's a little low" (Client approving of course). "If your buyers are still interested....." and get a conversation going for someone who was on the fence. I then can go back and discuss the options and even the offer.
If the property has been on the market for all of 9 minutes however. Then that same person submits it (Because they believe on jumping on the deal at the first possible second), the offer is pretty senseless on the buyers part. It basically slaps the agent in the face and says to the seller "Your agent has no idea how to valuate a property and he is a complete failure at his profession". Personally I don't get offended myself, but while I am defending my evaluation against the other agent/investor, their intellect, personal hygiene habits and amount of intercourse they have had with relatives "may" be brought into question. This of course is not a way to start down the road to a successful transaction.
The next thing is the listing agent can/should have the following line in inventory: "If you really want to accept $110,000 let me list it for a week that way, I bet we will have plenty of traffic and get a bidding war started". (assuming they actually believe it)
just my 2 cents and good luck investing!
Mike Cumbie, over 7 years ago
Great thoughts Mike. I have mainly done buyer side transactions for my investors, but I can see your well-articulated perspectives on the listing side. Same-day low-ball offers just "might" tend to put the listing agent on edge because of the valuation question! I know that some investors and agents in my area say they always wait for the homes to be on the market for a couple weeks first. This probably saves them a TON of time and increases the offer to acceptance ratios considerably. But (as mentioned) I have found that sometimes the seller gets that first offer and they say "I accept. He was first, and the numbers work for me, so let's do it." I admit this is a rare event, but are not all of us in this investing business incurable optimists? LOL.
Steve Theobald, over 7 years ago