Good morning all,
I was reading a post by one of the Guru's on this site. He was explaining how to get started in REI and the steps to take to achieve a financially stable goal. One of the points he mentioned was in order to open the possiblity in getting properties under contract, it is important to be making tons and tons of offers every week by way of a Letter of Intent (which he included at the end of his post). He said to just fax the LOI over to the Realtor or brokers office and they would receive it and respond yes or no or counter. My question is, are the LOI's sent before actually seeing the property? I mean, would doing due diligence on the property first, and then making an offer suffice? or should you actually go out and view the property and THEN make an offer?
I usually get the listings from my Realtor and then I set up a time and day to go out and view the property with my Realtor. I then run my numbers the same night and get back with my Realtor the next day as to whether or not I want to make an offer. My Realtor will then fax over the Letter of Intent for me and he will then wait to hear back from the Seller's Realtor and then will respond to me.
I don't know....this is usually how the process goes for me. Maybe it should be the other way around like the Guru said, and I should not wait for my Realtor, but just send out LOI's on properties (offering 20-30% below MV) that I see, and go from there?? Maybe this is the reason it seems like it's taking me sooooooooooooo long to get another property under contract???? because I'm not making enough offers.
I look forward to hearing your comments!
No, no Marvin,
I understand your question completely. Your saying that even though you make an offer of 30% below fmv what if the repairs are of high value, which in turn makes the deal not such a good deal after all? I get it. But, to answer that simply, I think I would just make offers on homes that seem to not need that much repair by what the advertised property description is. Remember, your LOI is not a legally binding agreement, so after your offer is accepted, you are more than free to go and look at the property, and you can always amend your LOI determined on what you find wrong with the property, especially if it would make your deal not a good one for you.
I think I explained it? lol
Anyway, that's just how I see the answer to your question.
Sending out LOI's are a waste of time. They are non binding and so don't carry any value for either you or the seller. You should get experience qualifying properties to the 80% confidence level over the phone. Then submit a contract with a copy of the earnest money check and make sure there is an inspection period in the contract. If the property is not like it was advertised you can cancel per the inspection period.
I agree with the verbal offer. The best question is "what's the minimum you can sell for if I can close within X days"? You fill in the X based on how you are going to fund the deal. Once you've arrived at a price you can then right the contract with a proper inspection clause in it.
I agree with Charles, sending out lots of offers is just silly (although that's what some of the so-called gurus promote). Instead of doing that, get out of the house and meet people. Once you've done that, people will call you when they have a house that they need to get rid of NOW on your terms.
I'm interested in knowing the answer to your question as well. I mean, if you are making an offer on a property that you haven't seen, you could not possibly know a Repair Value. So, you couldn't subtract that from the formula. I think that you would use the same formula without subtracting the repair value and then once you go out to view the property you can negotiate with the seller about repair costs, and then simply amend the contract to reflect this. I don't know..... :roll:
I used to work with alot of investors who were big into sending out 100 or so contracts all far below market in hopes of getting 1 or 2 good deals. This idea does make sense on some level but it can also hurt your investment business as much or more than it helps
The problem with sending out mass offers is that after recieving 3 or 4 of your low ball offers, realtors will just throw them away and it can bring down there impression of you as a serious buyer.
I have had much more success making a phone call which is equally as fast as putting together an offer if done correctly. I will say hey this is eric I noticed you had a listing at 133 Bigger Lane, and I was wondering if you would give me a call if the sellers become really motivated to sell or if there is a large price change coming up.
I have bought 15-20 properties this way. Realtors will call me before the price drop hits the mls, or if they have a great listing coming before it hits the mls. If I was just faxing them random offers, I would not have had a chance.