Help Submitting Offers

26 Replies

Hi guys, 

Over the past few weeks, I have been reaching out to property owners and submitting offers on properties. My goal is to do 3/day and by next month raise that to 5/day. I have a few questions that I've been thinking about as I've been going through this process: 

-For houses that are on the MLS, is it "unkosher" to send a letter directly to the owner and bypass the real estate agent?

-How do I know which properties have owners who have high equity in their property? 

-What have you found is a good way to ease the tension of offering such a low amount on a property? For those familiar with the enneagram, I'm a 9 which means "confrontation" is difficult for me. 

-Has anyone paid for marketing in order to purchase a primary residence for themselves? 

-Any other advice or input that you have would be appreciated! 

Why so many offers?  You need to do a bit of research through the Maricopa County Assessor and Records.  You will get a lot of insight as to when the property was purchased.  2005-'07 means the owner bought at the top of the last market.  2009-'12 means they picked it up right.  1990's is the best because they have paid it down and have room with plenty of appreciation.

As far as the MLS goes the owner will have to notify his agent who works for him. BTW are you an agent?

@Henry Kaldenbaugh thanks for the reply! I should clarify-- I'm not submitting actual offers on those properties, rather I'm reaching out to the property owners to see if they are interested in selling to me. I should also make one other clarification: I'm not actually using the MLS, only the 3rd party listing sites such as Zillow, Trulia, etc. I'm also driving for dollars.

Excellent. That is very helpful in regards to looking at the purchase date. 

If a property is listed on the MLS, the listing agent has the exclusive right to market the property. Contacting the owner directly on those properties is inappropriate and would leave the perception that you don't know/understand the real estate business.

And, considering that buyers do not pay a commission, why wouldn't you seek out a realtor who works with investors to do a more targeted search on your behalf?  Again, you - as a buyer - would not pay for the service and an investment oriented realtor would also have off-market leads/properties that are shared only with his/her clients.  

Why so many offers?  What if 3 of them all accepted your offer?  Only submit offers for places you are serious about buying, it isn't a fishing expedition.

If a house is listed with MLS, the seller has to go through them for any sales.

If it's listed, why would you bypass the seller's agent? The seller hired them so they didn't have to deal with people contacting them. And then asking if they're interested in selling to you? Of course they would sell to you, or anybody else who'd pay their asking price. I'm not sure I understand your strategy.

If you're trying to start a negotiation with someone, I have found that throwing out a low number rarely works. Best to get them talking and find out their needs. Often people aren't as concerned about the price as much as they are something else, like selling it quickly and not dealing with a lot of showings, so if you're focused on price and not meeting the seller's needs, you won't get anywhere, no matter how good you think your offer is.

Well it sounds like the overwhelming response is to work with the realtor--check! It makes perfect sense, especially considering it's free to me.

@Daniel Pitner

Working with a Realtor that understand investment can help to identify properties that are about to go into the MLS, so you can take extra advantage of that. Also they can help you identify and avoid wasting time on properties that already are under contract. Not only is "free" to you, but you start building-up relationship if you want to continue in the REI business. He also may have good recommendations for lenders, inspectors, contractors, etc. which ultimately will be beneficial to you.

Good solid properties are often shown as new/available on Trulia/Zillow when in reality they are under contract and seller don't want to hear investors with low ball offers.  

use an investor friendly agent.  Using just a regular one won't understand why your offer is so low, and won't understand that its more about the numbers than the "emotional" value

@Daniel Pitner One clarification - yes, work with a Realtor - but NOT directly with the seller’s agent.

That person is a fiduciary of the seller, meaning that they are obligated by law to get the best possible deal for the seller.

Once you have signed a buyer’s broker agreement with a buyer’s agent, that person is YOUR fiduciary.  They are legally obligated to work in your best interest.

@Charlie MacPherson I am a new investor, could you please elaborate on signing a buyer's broker agreement with a buyer's agent...for example, I have been in contact with an agent, as a buyer, and am receiving listings off the MLS for analysis. No offers have been made yet and I haven't signed anything. It's in it's infancy, if you will, and we have only talked via phone/text. Should I be expecting to receive such an agreement if I were to make an offer?

@Joseph R Fornwalt  Sure. If you work with an agent who represents you, they should ask you to sign a buyer’s broker agreement.  This document states that if you buy a property, you’ll buy it through them.

We do that because almost all agents work on 100% commission.  So if we run all over creation showing properties, running comps and writing offers - and you then find a prettier agent and buy through her, we receive nothing for our time and efforts.

An agency agreement can be created if the parties act as if there is such a relationship, but it’s normally formalized with a buyer’s broker agreement.

I recommend working with the agent a bit and seeing if you feel like that’s someone you want to continue working with.  If you do, I’d sign on.

@Grant Rothenburger no, that was a separate thought. We are planning on purchasing a primary residence in the next year, separate from investing

In AZ you can submit several verbal offers. Nothing written means unenforceable. So even if 37 say yes you aren’t under contract until you write it and sign it.

You can use the sellers agent as your own. Just in the offer email ask them to lower the buyers side commission between them and the seller to represent you. As an agent I’d agree to that.  Especially for an investor. Win-win. And if they aren’t comfortable they can get an office mate to step in instead. 

Originally posted by @Joseph R Fornwalt :

@Charlie MacPherson I am a new investor, could you please elaborate on signing a buyer's broker agreement with a buyer's agent...for example, I have been in contact with an agent, as a buyer, and am receiving listings off the MLS for analysis. No offers have been made yet and I haven't signed anything. It's in it's infancy, if you will, and we have only talked via phone/text. Should I be expecting to receive such an agreement if I were to make an offer?

It's not customary in Ohio. When you submit an offer, agent will sign an Agency disclosure and still will receive the comission in the sale, which he's the procuring cause.

Some states do it all the time (PA) but here the exclusive buyer agreement usually used for off MLS properties (when seller doesn't pay comission, auctions where buyer pay comissions, short sales).

Everything from MLS is already regulated and doesn't need exclusive buyer agreement

@Daniel Pitner 5 offers a week is quite ambitious. I’m curious to know how you are coming up with so many houses you would actually purchase in what I hope is a narrow geographical market. How are you even coming up with reasonable offers? Are you walking inside them? Or are you just kind of throwing offers at the wall and seeing what sticks. It’s not a bad strategy, I’m just trying to understand where you are coming from with the offer amounts.

As long as sellers have enough equity to close the deal, what does it matter how much they have? Also, you can simply ask them what they owe and find out that way. I just don’t want the misconception to be the more equity a seller has, the more willing they are to accept an absurd lowball offer.

Yes it’s unkosher to cut out agents. Not need to go any further there.

Why is there tension? Investors solves problems. Distressed sellers are looking for ways to sell their home without listing with an agent. Sellers LOVE offers. Maybe tension isn’t he the right word. They should be at least willing to talk about where your offer might land short, I just don’t know where you are running into confrontation.

To cut any tension between a seller is going to require building some rapport. Impossible to do this with 5 sellers a week every week. Or maybe by giving them examples and reasons why you arrived at this absurdly low amount for their Home. A place where they have lived their whole lives, raised their children, so on and so fort.

Sure you can market for a home to live in. I’m sure there are a plethora of examples of agents and investors coming across a home they end up buying to live in, while they were marketing for their business. Retail buyers do it as well to try to cut out agents and “save money”. Or if they want to live in a particular neighborhood they will write letters to only those houses until they find one ready to sell. Very common.

Wait you are not writing 5 offers a week, but actually 5 a day? Haha. Mind blown. Please elaborate on how that is possible.

Why don't you just make offers with the listing agent?  To find high equity, most local public records can be sorted to find that.  In regards to 'tension', that's in your own head.  It's all about perspective and experience. 

This path is well worn.  I get postcards weekly with someone trying to buy my house cheap.  And I've talked to a few of these guys.  It is a numbers game.  They probably inadvertently send some of their postcards to listed properties.  

A sophisticated way is to send a contract (offer) to various properties.  An even better way is to talk to the owner, which takes more time to find them.  But you are timid about making an offer.  So ask them if they would consider selling.  And then ask them how much they want, before you make your offer.   If the properties are value add, maybe you'll get the answer you want.  

You're on the right track when you make 5 per day. Fishing low offers on the MLS for functional properties will probably result in few deals. It is not easy, but I've made purchases from the MLS.

Originally posted by @Daniel Pitner :

@Grant Rothenburger no, that was a separate thought. We are planning on purchasing a primary residence in the next year, separate from investing

 Gotcha

Originally posted by @William C. :

Wait you are not writing 5 offers a week, but actually 5 a day? Haha. Mind blown. Please elaborate on how that is possible.

 I think it's not real offers - these are low balls or even lower.

You can do 100's per day - highly unlikely anything will be accepted.

If there is any reasonable offer was submitted, it would be already accepted.

Even in low ball offering it's like 1 offer on 10-50 is accepted, depending on how low.

It's not 2010 anymore

@Irina Belkofer you are right.  I reread the thread and OP clarified these were "letters" to the owner.   But the actual original post asks questions that imply they are real offers, so I was a bit confused.  I'm all for submitting many offers since few will be accepted.  But just sending arbitrary purchase prices out to sellers for the sake of hitting your goal of 5/day doesn't seem like a viable long term strategy.  

Originally posted by @William C. :

@Irina Belkofer you are right.  I reread the thread and OP clarified these were "letters" to the owner.   But the actual original post asks questions that imply they are real offers, so I was a bit confused.  I'm all for submitting many offers since few will be accepted.  But just sending arbitrary purchase prices out to sellers for the sake of hitting your goal of 5/day doesn't seem like a viable long term strategy.  

 It's not a strategy at all, more of that - it hurts your reputation as an investor.

One of my client has an amazing saying:"don't send a boy to do man's job"......every time I try to persuade him to decrease his offer, he answers me like that....lol

I like low balling and it does work sometimes but even low ball has to be reasonable: you give the comps, repair costs and everything should be reasonable....especially when a seller is OO. Banks don't get offended on any offer but even with them you can get cut off and won't get a counter - they will work with a serious buyer.

This thing "5 offers a day" keeps your purchased properties away.

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