Investor · Spanish Fork, UT · Member since 2018 · 2 posts · 5 votes
Hey fantastic RE agents of BiggerPockets!
Earlier today, I was speaking with a friend of mine regarding a few properties that I am looking at. One of the property's is a SFH fixer upper and the owners are "extremely motivated" - it is vacant, they are out of state and just want the property gone. Property needs enough work that the average MLS buyer probably wouldn't be interested. The seller already had one contract fall through.
MLS asking: 200k
ARV: estimated 260k (ish?)
In talking with my friend, I mentioned I might offer 150k or even lower. You know, shoot my shot and maybe I’ll score. My friend was appalled I would do that, citing that my RE agent wouldn’t do that because of a “RE Agent Code” that essentially says that submitting offers lower than 20% would insult the sellers agent and my RE Agent’s reputation would be damaged.
Is it wrong that I want an agent to send lowball offers? In my mind, I would want to send out 20 offers and hope one works out. Am I wrong in that thinking? If my agent won’t send low offers, do I need to get a new one?
Washington, DC · Member since 2015 · 81 posts · 49 votes
6y
@Ben Petersen go for it, send the lowballs. I suggest that instead of sending 20 offers, send 20 emails or texts and reach out to the listing agents and see if they would even consider a low offer before your agent spends a ton of his or her time writing 20 of them. You’ll have much better success. Send an email feeling out the listing agent with a price range, then have your agent send the offer if they’re willing to show it to the seller. Most agents won’t even present a low ball offer even though they’re legally supposed to because it makes them look bad in front of the seller.
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Ben Petersen
You could offer $1 if you really wanted. Just be ready to explain why you feel a $150,000 is appropriate. If you're just throwing lowball numbers out there all the time with no rationale behind them (i.e. run the numbers), you're probably not going to find a realtor who takes you very seriously as an investor.
That said, before making any offer, I would spend some time trying to find out more about the seller, their motivations for letting the property go, why the last deal fell through, and if they're even open to offers.
@Ben Petersen some may disagree with me but I say go ahead and make your offer. All the seller can do is say no. If your agent doesn't want to or won't submit the offer find one who will. Sometimes you'll wind up with a great deal because you weren't afraid to try a low ball offer.
Washington, DC · Member since 2015 · 81 posts · 49 votes
6y
@Ben Petersen go for it, send the lowballs. I suggest that instead of sending 20 offers, send 20 emails or texts and reach out to the listing agents and see if they would even consider a low offer before your agent spends a ton of his or her time writing 20 of them. You’ll have much better success. Send an email feeling out the listing agent with a price range, then have your agent send the offer if they’re willing to show it to the seller. Most agents won’t even present a low ball offer even though they’re legally supposed to because it makes them look bad in front of the seller.
Find a new agent ASAP! Some of the best deals I've gotten off of the MLS were because the property was priced too high - which kept interest down. If they priced it close to what I payed for it they would have multiple offers and the deal is gone.
I bought a house off of the MLS in December for $100k that was listed for $175k. Find the right agent - which usually isn't your buddy or cousin.
I read a book years ago, I can’t remember which one, that said to get a good deal you should try to offend with your first offer. (I have looked at 1st offers differently ever since). Loosen them up a bit. If they counter at all, you may have a fish on the hook!
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
6y
The other thing we've done when offering low is to let the seller know that if the property passes our inspection and we'll buy it at our price "as is" and we're not going to try to nickel and dime them to death for every little wart found during the inspection.
We're looking for deal killers on the inspection, stuff like major foundation repairs that would price the house out of the neighborhood. Our agent will always make our offers and negotiation is her strong suit.
Realtor · ND · Member since 2019 · 54 posts · 31 votes
6y
@Jill F. that is a really great strategy, thanks for sharing. Would you be willing to share how you would word that in an offer as a contingency? or is this just worded as a standard inspection contingency, and then just telling them verbally on the "as is" intentions?
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
6y
@Ben Petersen, I think there is some truth to what your agent friend feels. Agents who primarily deal with owner occupied properties would be concerned about the perception of their offer more. Agents also value their time and aren't keen to spend the effort to write up very low offers that only have a small chance in being accepted.
What I do when dealing with a low offer is float the offer to the listing agent orally to see if it is even worth putting in writing. If it is, then I do. If it isn't nobody has wasted any significant time.
I have also considered putting together a simple offer form. Something that just lists the basic terms like purchase price, settlement date, financing type, inspections, etc. This would just eliminate any mistakes when trying to give an offer informally.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
Have a conversation with your agent, they may be completely fine with submitting the lower offer.
I have clients who submit low offers all the time which I have no problem doing for them as long as they know the risks associated with doing so. If they are OK with submitting the offer I am ok with writing it up. Can't win if you don't play.
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
I'm completely comfortable making low offers for clients, when the situation warrants it. I don't work with clients that just want to shoot offers with 30% discounts at every listing on the MLS, but if there is a reason to believe a lower offer will be considered, then I'm more than happy to do so. I just like to be sure we're making good use of our time. I like to shoot for a 1 in 10 acceptance rate. I've worked with clients in the past that have spent years making low offers that were never going to be accepted (I was young and foolish once). Continuing to work with them was really a disservice to both of us.
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
Like others mentioned:
1) You have to work with an agent who understands the "game" of investing. (Majority...and I mean majority...don't know what a good deal is. Most would say getting a 260k ARV at 200k is an 'amazing deal' because they don't know all the numbers of RE investing)
2) I'd just reach out to listing agents directly. You don't need a buyer's agent to do any of this. Throw together a RE contract, maybe get an RE attorney to look at it quickly, then use that. I recommend (and use) this strategy because then you're networking at the same time you're making deals. With a buyer's agent, you never get to talk to other RE agents who will then know you're looking for deals. I'm still learning this...but this business is all about networking.
3) If you justify a 150k price, it's easier to swallow for them. Yes, the seller may still get offended and the sellers' agent may laugh (even berate) you for making such an insulting offer. You shrug and move on. (easier said than done as I'm still learning this as well).
Real Estate Agent · Reston, VA · Member since 2017 · 296 posts · 163 votes
6y
@Ben Petersen A buyer can offer whatever they think the property is worth to them. You can contact the seller’ agent and feel them up. You can work yourself into their head. The right approach helps and may soften the seller. Sellers also know this is the start of a negotiation. But yes the wrong approach can anger some sellers and would not want to deal with you.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
6y
When I submit low ball offers I reach out to the agent before hand and get a feeler. Always have comps and bids to support why you are offering 20% below ask. As others said you want to be reasonable why you are at the price you offered for. Agents shouldn't take low offers personal either, business is business.
Rental Property Investor · Denver, CO · Member since 2019 · 76 posts · 70 votes
6y
@Caleb Brown
Hey, one of the things that keep people from going is they get stuck not making offers, my thinking just go for the offer. Finding deals is a funnel, so get as many into the pipe line as possible.
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@Ben Petersen well to the part of your question about having an agent submit 20 offers? That’s a bad ask...wasting time for an agent and having their name on a lot of “never gonna happen” stuff. I wouldn’t do it. Do that stuff yourself.
But what you are describing is different. Back on market property, motivated seller, unappealing to owner occupants, needing work and there is a pandemic going on....they are expecting maybe a bidding war?
Any agent worth their salt could frame this. “Hey, I’m sending you an offer from an investor. It’s low, but he’s run his numbers and feels like this is where he needs to be to be sure of making money. I can tell you he has the money and he will close. Let me know. How are the kids?”
You can close right? Your financing or cash is solid?
There is some value to the seller even from a lowball since their agent can connect with formerly interested parties and try and get better offers.
Sharing your numbers with your realtor could help you too. Good conversation can run something like “ he’s actually a pretty straightforward guy...I can forward you his numbers if you want to see them.”
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
@Ben Petersen I’m fine making low offers but there should be a justification for it. Are you offering cash, as-is, no contingencies with a quick close? Sure, I’ll write that offer up. There’s a saying in the industry: “Your price, my terms. My price, your terms.” If you’re a highly qualified, serious buyer and are willing to be flexible such as by having few contingencies, waiving inspection, closing quickly/ working within whatever the seller’s timeframe is or meeting any other wants and needs they may have besides price to work out some sort of win-win, then you’ll have a much better chance of getting a low offer accepted. The problem with making offers at 75% of asking price with no reasoning behind it and no understanding of the seller’s position is your offer will have a low probability of being accepted or even countered. Usually the seller just says no and that’s the end of negotiations. Most agents that work with investors are okay with making low offers if the offer is justifiable, however when dealing with owner-occupied properties there’s definitely a risk of offending the owner with a low offer as people have pride in their homes, and agents that deal mostly with home owners are less likely to agree to making low offers for this reason. If you’ve offended the seller before you even go under contract, it’s hard to come back from that. However if there’s a good reason for your offer, there may be a path forward.
Rental Property Investor · Sarasota, FL · Member since 2018 · 112 posts · 23 votes
6y
@Ben Petersen
Before I start working with a real estate agent I let him know I am an investor. I make sure he is OK with sometimes offering a lowball offer. The next couple months I’m going to amplify the amount offers I put out which will be way below the 20% mark just because of where we stand. If a Realtor doesn’t like it there’s a lot of them out there. You could find one that will put in the offers for you. Why would it matter if you keep buying houses off the same person.
Investor · Montgomery County, PA · Member since 2018 · 14 posts · 3 votes
6y
@Ben Petersen
If your friend is not comfortable with sending that offer (which sounds completely reasonable with knowing the limited details) then I would just find an investor friendly realtor for this one. Also, try including a letter with the offer to include who you are and everything you plan on doing to the property to restore it.
Investor · Spanish Fork, UT · Member since 2018 · 2 posts · 5 votes
6y
Thank you all for your awesome feedback.
I spoke to my agent and we're going to submit my desired offer. I'm going to do a more rigorous rehab estimate and submit that, with a little letter, explaining the offer. Thanks all!
Real Estate Agent · Chicago, IL · Member since 2018 · 659 posts · 376 votes
6y
@Ben Petersen I’m a realtor in Chicago. To me, it’s the nature of this business and it’s something agents have to do. If I have the numbers to support what my client wants then I can make a case for value. If a seller can’t understand or see the bottom line then we wait them out. Patience is key. Nothing feels worse on the listing side than time. Waiting can be a great move when negotiating. It’s a big part of the game. If you feel like this was the only property out their for you than my methods would be a bit different. I always tell my clients if the offer is might be too low to get excepted or a counter but ultimately I have to write the offer they want.
Writing a rejected offer usually gets me more respect from my clients; than trying to save my clients (and myself) some type of embarrassment from being told no.
There is no 20% rule of list price. The property is worth what your numbers say it’s worth. You can disregard the list price, the only number that matters is your number. If you make a low ball offer, I always attach a list of repairs and cost to justify the offer. I find it interesting that sellers aren’t worried about offending buyers with a high list price so why should you be worried about offending the seller with your view of what the property is worth. You are correct, some brokers won’t submit the offer. Find a broker that will. If you are trying to buy at discounted rates your going to need a real estate friendly agent.
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
6y
@Ben Petersen
After 40 years of buying property, buying notes, originating notes, private financing, selling property, etc. I’ve developed some strategies that work for me. Whatever strategy you decide on must fit your personality and what you’re comfortable with. If you’re worried about insulting intermediaries, then don’t ( but maybe you should rethink being a real estate investor).
My thinking is I don’t care at all what the broker thinks. I only care what the seller thinks from the Viewpoint of wanting to make the deal. Otherwise, I don’t care if he’s insulted by my offer or not. Btw, insults by low offerings goes way down in a buyers market.
So here’s what I do care about. Why the seller wants to sell, and how desperate he is to sell the property. Most sellers claiming or their brokers claiming that they’re highly motivated are either barely motivated or not motivated at all. Highly motivated to most brokers means willing to sell at market price.
So, if I want to purchase a property and learn that the seller is not highly motivated to sell, which to me means he's not desperate, I will make an offer on the lower side of fair market value (the as is FMV), hoping to pay no more than average price. If I'm interesting in purchasing because I think I can get the property way below market, I will want to identify the pressure on the seller, his possible alternatives, and where he's at in his progression to "reality". To get the answers, I'll often tell the seller that I can only make a very low offer, and that he's better off marketing the property/waiting for a buyer user/other buyers will pay more, etc. it is at this point that the real desperate seller will explain why he's desperate, I.e. why he can't wait even 2 days. If I feel he's making a big mistake and is being irrational I'll tell him so and if I know of a solution to his problem that saves him money I'll share it with him. Often, they'll tell me they don't care, they want the deal done now.
It’s at this point that I decide how low I can go. No, these unbelievable opportunities may only occur once every five years, but when they do I’m very glad I made offers so low others were afraid to. Let me give you some examples.
1. 1/2 ownership of small retail center worth about $145k. I offered and paid $5k. Sold it to other half owner for $115,000.
2. Triple net lease operating convenience store, worth $600k. My offer of $250k was accepted. I still own the property, and I’ve collected net rent of $4000 per month for last 7 years.
3. Auto repair facility the seller wanted $300,000. Purchased it, including equipment for $130,000. Sold to tenant 3 months later for $302,500.
No, I wouldn’t just randomly make low ball offers on every property listed for sale ( although it might work for somebody else). I need to know that there’s a good chance that the seller is desperate or motivated enough to seriously consider my low offer. And guess what, there have been occasions I’ve been on the desperate to sell side. But that a story for another day. LOL
