Preparing a lowball offer to present to a seller

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Preparing a lowball offer to present to a seller

Karsten Geib
Mc Farland, WI · Member since 2018 · 2 posts · 2 votes

Firstly, I'm pretty new to the BiggerPockets community and excited to learn about real estate!

My current intent is to find a duplex to live in and rent the other half in order to reduce my monthly rent expenses and eventually start earning income from. So far there is one duplex that has caught my eye, but it seems to be pretty overpriced for the area (by at least $30-40k judging by similar homes sold in the area). It's priced at $248k ($143/sqft) and has been on Trulia/Zillow for 77 days, so I would like to prepare a lowball offer (around $200k which falls in the upper midrange of my budget) to present to the seller if only to get their attention. 

What resources/tips should I look at in order to prepare such an offer? I'm a first time homebuyer and have access to a VA loan, should I speak with my bank right away to see what funding I can afford? Also, I will not be able to physically look at the house for at least the next two months so I can't confirm the state of the property although it appears to be in good condition from the pictures. I'll continue searching through the BP resources, but will appreciate any suggestions on where to start!

Thanks in advance!

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Jacob Perez
Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
8y

@Colin Davis The realtor should definitely be able to provide you with an ARV. With that said, low-ball offers are really property dependant. If it's a good house that will sell close to ask, no ones entertaining a low-ball despite any list or persuasion that's submitted with it.

This can definitely work on a property that has sat on the market a while, is in question shape, or has other issues (bad tenants).

Jacob

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  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Karsten Geib

    First off, congrats on taking a big step. That's awesome. A couple thoughts, not all connected:

    • First off, find a good agent in the area and a good lender. This is a chicken-egg situation. A good agent should have one or two fantastic lenders. (Likewise, a lender should have a good agent to refer you to.) Here in Denver, we often get buyers that "know" they qualify for something but after talking to a lender, they in face qualify for something else entirely.
    • The agent should be able to go by and see the place for you. (I guess I assume you can't physically see the place because you're stationed somewhere and not because the property is not allowing showings?) The agent should also be able to feel out what it is the owner is looking. Maybe money isn't the end game and you can address their needs in some other fashion. (Allowing them to stay a bit after closing or whatever it might be.)
    • Beware of Trulia and Zillow. They are the bane of real estate. They are more often behind the times, showing homes as "available" when in fact they sold a month or two ago.
    • Don't be afraid to make a low-ball offer, but don't hold your breath. A home that's been on the market for that long has probably already received multiple low-ball offers from seasoned investors. (That is especially true for a decent looking duplex or multi-family.) To catch that great deal with a low-ball offer, it's a game of numbers. You likely have to make a ton of offers before you will land one.

    Those are my initial thoughts. Would be interested to hear others. And good luck!

    1Reply
  • Colin Davis
    Toronto, Ontario · Member since 2017 · 8 posts · 2 votes
    8y

    @James Carlson and others:

    I'm in a similar situation to OP, and wondering how to justify a low offer when I'm working with a realtor - obviously they would prefer me to offer higher and close faster. Should I present a list of needed repairs and make a guess on the ARV? Should a realtor be able to tell me the ARV? I'm wondering what I can do to convince the seller when I don't have direct contact to them, and only through my realtor.

    1Reply
  • Arlan Potter
    Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
    8y

    Offer what you want,  $200 on a $248 listing is not that low.  if your numbers say you need to get it for $160 to make it work, offer $160.  don't over pay.

    0Reply
  • Justin Wotring
    Rental Property Investor · Orange County, CA · Member since 2018 · 98 posts · 138 votes
    8y
    Welcome to the community! I'm also new to the community and to the world of real estate investing. I haven't made any offers yet, as I'm still in the learning/absorbing stage. That said, @Brandon Turner has said on numerous podcasts and in his books that he likes to present several options to the seller in his offers. It changes the seller's mindset from a yes/no to choices. The trick is to find the seller's motivation and pain points. Often times this can be a win-win, even if your offer is lower than others. Good luck!
    1Reply
  • Jacob Perez
    Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
    8y

    @Colin Davis The realtor should definitely be able to provide you with an ARV. With that said, low-ball offers are really property dependant. If it's a good house that will sell close to ask, no ones entertaining a low-ball despite any list or persuasion that's submitted with it.

    This can definitely work on a property that has sat on the market a while, is in question shape, or has other issues (bad tenants).

    Jacob

    2Reply
  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Colin Davis

    I guess it depends on what kind of real estate agent you're working with. I would think they should be able to. It's really just looking at the comparable homes in the area that are updated in a style similar to your proposed renovations. This might seem obvious, but don't trust any ARV presented by sellers. (It's funny to see some wholesalers' ARV that don't correspond to any other comparable properties.

    I wouldn't worry too much about justifying the price to the seller. Either they want to sell or they don't. And either the numbers work for you or they don't. I'd just worry about what numbers work for you and present an offer that reflects that. Tell them you don't mean to offend them; that this price is the price that works for your numbers. 

    If Toronto is hot like Denver, any home that's been on the market for more than maybe two weeks can develop a stigma. The listing agent might know that, but that could be part of your argument when presenting the offer as well. 

    Good luck!

    1Reply
  • Karsten Geib
    OP
    Mc Farland, WI · Member since 2018 · 2 posts · 2 votes
    8y

    @James Carlson

    Thank you for the suggestions! I will be contacting my bank shortly to see if I can work with them to figure out a price range that I can work with for looking at a house as well as see if they have any agents. Do you have any tips for determining whether or not an agent is competent?

    1Reply
  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Karsten Geib

    Obviously, it's tough to tell how good an agent is before engaging them to represent you. We teach a first-time homebuyers' class here in Denver, and we tell attendees that experience is the biggest factor I'd look for. 

    There's something like 25,000 agents in Denver, and a small fraction of them are doing the vast majority of the deals. I want to know how many deals they've done in the past year. Are they doing one deal a year? Or are they doing 30? There's a rhythm to the contracts, to the inspection negotiations, etc. and you want someone who's done it over and over again.

    I'd be interested in what others have to say.

    1Reply
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