Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
I made an offer on a home that was in the middle of a flip where the family ran out of time/money. I made a low offer hoping that she would counter and meet me in the middle well.....
"Hi Ryan. Without using up any more of your time, I do not think that an offer of $65,000 is going to work for us at this time. I will go through my papers and double check my numbers just to be sure that your offer can or can not be worked with. Thank you for your time and best of luck to you."
Now what? I realistically have a good amount of room to increase my offer. She does sales for a living I assumed she would counter.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y
If you want to make money, then you should have made your offer based on what your maximum offer was to make money. Did you, or did you just throw a number out there that sounded like it might get you the property?
First, you need to see what your maximum offer is.
Second, if your maximum offer was what you offered, and got turned down, then wait it out....DON'T raise your offer...unless you like not making money (sometimes referred to as Losing Money).
Third, your seller's reaction wasn't a turn down. Read between the lines. There are more words used by her to say she is going to recheck her numbers. That tells me a number of things are most likely happening here:
1 - She hasn't gotten any higher offers...otherwise she never would have stated she was going to "go back and review" her numbers on your offer.
2 - She is negotiating with you. She's trying to tease you into raising your offer a little more by saying it's close. Again, read between the lines. If it wasn't close, she wouldn't be looking at them again.
3 - ...and this is the big one, when you put #1 and #2 above together, it tells me that your counter response should be, "sorry, but based on my numbers, my offer is as high as I can go. If you change your mind please let me know as I'm very interested in your property. I'm looking to make a move on my next property. I've been looking at a number of properties and this was one of the ones that looked like it would be a good fit for me. Unfortunately my offer is as high as I can go on it. Too bad. I really liked it."
4 - I bet within 7-10 days the seller comes back and asks if you're still interested. When they do, and they will come back with a counter that raises your original offer, your response will depend on if your original offer was your maximum "analyzed" price.
A - If it wasn't, then you have some wiggle room to counter. They may come back with an offer that works.
B - If that was your maximum offer, whatever they come back with, you CAN'T go up past your maximum "analyzed" price. Your reply would be that you are still interested, but not for long as you are negotiating with another deal right now that looks promising. If that deal comes through, then you would need to pass on this one, but whichever deal you come to terms with first, you'll go with. Again, unfortunately, the numbers won't let me raise my original offer.
5 - Patience is and always will be the REI greatest negotiating tool, right behind analysis.
Wheaton, IL · Member since 2014 · 89 posts · 35 votes
11y
Did you go through an agent to submit the offer?
I would try to ask if they would be willing to do a land contract or carry their current financing in exchange for an increased selling price. If you have room to negotiate, come up with your highest possible offer, and meet somewhere in the middle between that number and what you've already offered them. Clearly they're just looking to get it off their hands at this point, either they'll dump it for a very low price now, or you just keep an eye on it for a few weeks and check in with them again.
Whenever I head to the casino for a weekend gathering, I always decide how much I am willing to spend before I get there.
While I don't encourage anyone here to spend their time at a casino, I think bidding on a property is essentially the same process. What's your max? Can you inch up there? Most importantly, is the max justified by numbers?
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
I personally hate "negotiating" some people really don't like "playing games". If you want the house, figure out your number offer it, if she says no walk!
In addition it doesn't sound like they are "that" motivated.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
She has told me multiple times that they are motivated but not desperate. House has been sitting for 2 years. Property was found off market via my DM campaign. This one is tricky to comp where arv on it is anywhere from 130-160k. So I was playing it safe I could realistically probably pay closer to 75k. They bought the house for 45k 3 years ago. They had the basement sealed/fixed which cost them 12k and they demo'd the kitchen and started putting the bath back in. I knew she wouldn't accept 65k but was hoping she would come back at 80 and get it done for 75. Without a counter I don't know how to justify just offering more. That seems "shady". I don't want to come across like a used car salesman when the customer is walking out.
Real Estate Agent · Fort Worth, TX · Member since 2014 · 187 posts · 113 votes
11y
"Whats the least you can see yourself taking knowing that the price we agree on is the amount you'll recieve at closing. I know you can't give it away but you've gotta help me out if you want me take this off your hands. I can't buy every house out there and I'm looking at two tomorrow who actually want my help."
She has told me multiple times that they are motivated but not desperate. House has been sitting for 2 years. Property was found off market via my DM campaign. This one is tricky to comp where arv on it is anywhere from 130-160k. So I was playing it safe I could realistically probably pay closer to 75k. They bought the house for 45k 3 years ago. They had the basement sealed/fixed which cost them 12k and they demo'd the kitchen and started putting the bath back in. I knew she wouldn't accept 65k but was hoping she would come back at 80 and get it done for 75. Without a counter I don't know how to justify just offering more. That seems "shady". I don't want to come across like a used car salesman when the customer is walking out.
If she were represented by a realtor, you would have gotten either the flat rejection you did, or an invitation to submit your "highest and best."
So submit your highest and best. The seller is under no obligation to name a number, and if she is smart (which she appears to be) she will not.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
My response was:
"Thank you for the prompt response. I feel like this is something we can come to a mutually beneficial agreement upon. Did you have a counter to our offer?"
Hopefully she suggests something close to what I am willing to go up to. If she flat out says no and thanks for your time. Then I'll give her best and highest. I don't have anything to lose at that point.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
Has she given any indication of what she is looking to get? Do you know how much she paid for it?
It may be really hard for them to sell for less than they paid for it. Where I think you should get a steep discount is any work that they put into it.
Also if they do a put a number out there, ask them to follow up with an analysis for how the deal can work for you. Obviously they underestimated the repair costs once. If they are continuing to do so, it may be easier to point that out, especially if the ultimate ARV is reasonable.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
@Jesse T. They paid 45k for it 3 years ago. They had the basement sealed/waterproofed that cost them 12k. They tore out the kitchen, replaced support beams on the deck, started remodel on the bathroom, installed tile in the bathroom and kitchen. They also had the wood floors refinished in 2 bedrooms. She said "I think we have about 90k into it. " I asked if she was wanting to cut her losses and moved on and she said she would like to get that 90 out but is motivated. She keeps saying motivated not desperate.
I don't see her having 90k into it. The work they had done does not equal 45k. She said she can check her receipts but that's what she thinks.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y
If you want to make money, then you should have made your offer based on what your maximum offer was to make money. Did you, or did you just throw a number out there that sounded like it might get you the property?
First, you need to see what your maximum offer is.
Second, if your maximum offer was what you offered, and got turned down, then wait it out....DON'T raise your offer...unless you like not making money (sometimes referred to as Losing Money).
Third, your seller's reaction wasn't a turn down. Read between the lines. There are more words used by her to say she is going to recheck her numbers. That tells me a number of things are most likely happening here:
1 - She hasn't gotten any higher offers...otherwise she never would have stated she was going to "go back and review" her numbers on your offer.
2 - She is negotiating with you. She's trying to tease you into raising your offer a little more by saying it's close. Again, read between the lines. If it wasn't close, she wouldn't be looking at them again.
3 - ...and this is the big one, when you put #1 and #2 above together, it tells me that your counter response should be, "sorry, but based on my numbers, my offer is as high as I can go. If you change your mind please let me know as I'm very interested in your property. I'm looking to make a move on my next property. I've been looking at a number of properties and this was one of the ones that looked like it would be a good fit for me. Unfortunately my offer is as high as I can go on it. Too bad. I really liked it."
4 - I bet within 7-10 days the seller comes back and asks if you're still interested. When they do, and they will come back with a counter that raises your original offer, your response will depend on if your original offer was your maximum "analyzed" price.
A - If it wasn't, then you have some wiggle room to counter. They may come back with an offer that works.
B - If that was your maximum offer, whatever they come back with, you CAN'T go up past your maximum "analyzed" price. Your reply would be that you are still interested, but not for long as you are negotiating with another deal right now that looks promising. If that deal comes through, then you would need to pass on this one, but whichever deal you come to terms with first, you'll go with. Again, unfortunately, the numbers won't let me raise my original offer.
5 - Patience is and always will be the REI greatest negotiating tool, right behind analysis.
Residential Real Estate Agent · Salt Lake City, UT · Member since 2014 · 156 posts · 50 votes
11y
I would offer at 70k and go from there. She said herself "I will go through my papers and double check my numbers just to be sure that your offer can or can not be worked with."
To me, this means that the number is *close* to working but just not quite there since she rejected the offer. That 5k difference might be enough to make the numbers work Or, she is playing hard to get and the 65k works but, since she knows the sales game, she is playing it knowing you will come back and offer $70-75k.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
Would you consider holding it as a rental or is it strictly a flip?
I think you have 3 options to make your offer more attractive:
1. start at 45K and add on the actual value of the work that has been done - I expect that would end up near 65K, but showing it may make them consider your offer more seriously
purchase 45K demo - 0(can't live in a house with no kitchen)
basement - 6K(this probably had to be done, but doesn't add 100% value)
deck - 3K(it was likely expensive, but doesn't add 100% value)
flooring - 5K(this may be too generous)
bath - 3K(again maybe too generous)
misc - 2K(supplies, paint - if there is enough for the whole house)
2. if holding it as a rental is an option - offer a down payment and interest only financing - you could give her 73K over 5 years with 10K down on a 55K - 3% interest-only loan
3. a last ditch effort, but point out that the "35K" loss is tax-deductible, that could be worth 10K+ if it can offset short-term capital gains, doing this deal now would give them time to cover a lot of taxes on a flip, if they want the money to try again
Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
11y
Tell her to make a counter offer. Tell her you don't know if you can but you will re-run your numbers and try to make it work. Tell her you want a win/win situation.
I don't think there is a wrong way. Some people take your number as gospel and don't even try to counter. But on the other hand there are people that will negotiate no matter what. Plus I have made low offers and had them excepted before, so why offer more then you have to when there is a chance they could accept?
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
Thanks for all of the good responses guys. I did not make my max offer. It seems like there are two schools of thought. Some people offer low, let them counter, and meet in the middle at their max purchase price. Others give max offer up front with a take it or leave it approach. As a relatively new investor I am still trying to figure out what works best form me. This house is tricky to comp. So I went off of a conservative value and offered 70 % of the ARV - repair costs. That leaves money on the table and room for unexpected costs. I could probably afford to pay up to 75 % but that leaves me with thinner margins.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
What I am running into is there is a solid 20k swing in value where it could go either way. I went conservative. As an investor I have always gone with the approach that you want to set yourself up for a quick sale once your flip is done. Not be at the top of your market and hope it goes well.
Investor · Springfield , OH · Member since 2014 · 32 posts · 22 votes
11y
Remember, you are a REI. Don't get emotionally involved. Your intentions are to make a profit. Don't be concerned about what the sellers have done to the home.
Your only concern is what will it take to get it livable, mortgage, taxes, and insurance vs the rent you can collect.
Make your offer based on that and move on to another.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
11y
She is not ready to sell. Walk!
But, before you do, send a note back to here that reads something like this:
Thank you for the opportunity to submit an offer. I think there's probably some way we can structure this thing so that it works for everyone. If something changes, will you please give me a call - I really do think we can work together.
Ryan
Cream comes up to the surface, Ryan, but you need to let it COOK. She's not ready to sell
Developer / Investor · Denver, CO · Member since 2014 · 64 posts · 31 votes
11y
You could offer to partner and help finish the project. Tell her you'll finance the rest of the renovations and split the profit 50/50. Run the COCR numbers and see if they make sense.
You could offer to partner and help finish the project. Tell her you'll finance the rest of the renovations and split the profit 50/50. Run the COCR numbers and see if they make sense.
You could also use this tactic to make your offer seem stronger. If you propose the partnership that would give her between 45K and 90K, you might be able to get her to counter with a number where she can just be done with it. If you illustrate you would need to sell for between 170 and 180 to give her 90, 65 or 75K would look a whole lot better.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
I think I'm going to give her a day or two to see what she counters with. If not I like the idea of seeing if she will split profit with us. That's definitely outside of the box and something I'm going to add to my arsenal. Well done @Scott Lewis