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.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
11y
Tell her your max offer and move on. Don't sit around waiting. You don't want to waste your time and have another deal slip through because you are wasting time with her.
"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."
So wait, have you heard back? It feels like she kind of left it up in the air. I'd reach out to her again to see if she took another look, or at least as a way to restart the negotiation. If you're ready to make another offer I would get in contact with her ASAP regardless.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
I told her to talk to her son (who has a 25K +/- tied up in it) and make me a counter offer. I haven't heard back yet. And she was saying to give her the weekend...
Real Estate Investor · Clovis, CA · Member since 2014 · 195 posts · 194 votes
11y
I would NEVER start with my max offer or jump to it quickly! I guard it like it is the secret recipe to Colonel Sanders' chicken! (I don't even like to let my real estate agent know the most I would pay or the least I would sell for because they want to automatically jump to it.) If I feel like I'm the only buyer, I'm going to get a property as cheap as I can - I don't care how much I might pay for it otherwise.
Every dollar you save on the buy side and every extra dollar you can get on the sell side are pure profit! All the expenses stay about the same. (Ok, commissions go up or down a little but it isn't significant).
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
Let it cook over the weekend like a couple bright folks, suggest, including yourself. When she gets back to you, be sure to yawn and flinch if she counters up! Always flinch, right? As an aside, I never offer nice, round (PFA) numbers. If you were to offered, say $70,000 for something, don't you inherently know it's a balloon? A floater to see if you'll take it? I get specific. $65,437.00 looks like it came from my calculator. Just a tip that sometimes helps me!
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
I normally do my negotiating and offers in person. The individuals schedule has not permitted that on this particular occasion. Which is why this process is "new" to me. Should I reach out on Monday? Or wait for her? How long do you wait for?
"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.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
11y
Interesting advice...
Today, I got off the phone with a broker representing an A Class property. We spent about 45 minutes on the phone discussing the moving parts. He advised me that they are looking for something close to $5 mil. I am about to email him that my underwriting, which I explained to him on the phone, is somewhere in the low $3 mil.
I am not low balling. In order for me and my LPs to make money, this is the most I can pay. honest to God truth. This way he knows where I stand and he can take it to his people...
I don't like to play games. I tell people what I pay cause that's what I think the thing is worth. Done.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
@Ben Leybovich First off I hope that you know that I appreciate you chiming in on my posts as often as you do.
Secondly do you always take that approach? What about with a regular seller not other investors? On market/off market make a difference? What % of arv are you making your offer at pertaining to SFR?
Third how does your aforementioned "note" process work?
1. I don't deal with "regular people". Regular people don't have any of the things I would want. I don't buy SFR, only apartments. And thus, I only deal with other investors...
2. % ARV - depends on the desired profit margin, and the amount of CapEx, and how hard I have to work for it, and how bad I want it, and what quality of asset it is, and my exit strategy, etc. Get the picture? You decide, but whatever you decide, stick to it and be honest with people. If you say you're gonna do it - do it. If you quote a strike and say that this is all you can do, be sure that it's really all you can do.
Look at what you've got. The seller knows you low-balled. You know you low-balled. What was the point?! Cause some jerk on BP told you to low ball?
Now the seller thinks you are a punk, and you're posting here asking the best way to put your embarrassed tail between your legs and go back for another chance...
I take no issue with a low offer - if that's truly what you think you can do. If they decline, you walk. Mutual respect intact since everyone knows everyone's logic. not every deal can be put together. In fact, most cannot be - not in a way that's any good, anyhow...
Do what I told you. Send an email. Call. Write a letter - doesn't matter. You'll have to let the seller come to you now, because if you go higher, then eventually word get out that this is how you do business and everyone will push you higher and higher. Be honest next time. Give the seller your best, and be prepared to walk. And if it's truly your best, then the seller might come to their senses and come to you because you are - a straight shooter...
I've bought many a time for less than others were offering. They sold to me cause it was me they wanted to do business with...
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
@Ben Leybovich I appreciate the "tough love". With the fluctuation in value I played it conservative I offered 70% of the ARV. However I also know that it comes down to the individual and their level of motivation. I have personally sold homes at 70% that need work. So It was definitely not just a figure pulled out of the air to see how cheap I could get it for. I had contractors walk through give me an estimate and made my offer based off of how cheap I can finish it for and have it worth my while.
The tricky thing with this one however is the swing in comps. I didn't feel comfortable with this one being "top of the market" because it has a blacktop driveway, no garage, 980 sqft, 3rd bedroom is an addition that is rather small, and the basement is kind of sketchy.Now if we rehabbed the home and had multiple Realtors tel us it's worth the extra 20k then my offer would be low and their would be tons of profit on the table. On the other hand if I made my offer based off of the higher value I could end up losing. The reason why I said my offer was "low" was strictly in correlation to the sellers asking price. Which was why she said she needed to dig out receipts and see what they really have invested. Her asking # was more of a random figure.
I hope that clarifies my intentions and where I'm coming from. In this business I strive for every transaction to be mutually beneficial and honorable.
Real Estate Investor · Clovis, CA · Member since 2014 · 195 posts · 194 votes
11y
At this point I would follow the advice in the last post by @Steve Vaughan . There isn't ever any shame in making an offer, I don't care if it's low or not. The shame is in not making an offer at all!!
I went to the tire shop last week that sold me a couple of tires about 6 months ago. I asked if they had any used tires because one I hadn't replaced had a slow leak that couldn't be fixed. (I'm selling the truck in a couple of months and don't want to put much money into it). They couldn't find a used one, so they said let me see what I can do on a new one. They quoted me about $40 dollars less than I payed, each, for the first 2. I said that I had gotten better quality ones there about 6 months ago. He asked for my phone # to look it up. He said, "No these are the same ones, I just stripped off the markup since you were looking for used ones". I said I would take 2!
I was pretty motivated the first time I went in, and not so much the 2nd time. These guys were smart enough to recognize the difference!
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?
You must not do well at the casino. If you always go in with a negative attitude you are surely going to lose...
3 - The property has been on the market for 2 years...unsold
4 - ...and, "She has told me multiple times that they are motivated but not desperate"?
Yea, right...and I'm going to be the next President. Come on. What is above is the definition of desperate. All you have to do is contact her, tell her what I told you to say in an earlier post here...word for word, and wait about 7-10 days...and DON'T contact her, she will contact you.
Like I said earlier, right after analysis, patience is the most important tool in negotiation.
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
11y
@Joe Villeneuve The property is not listed. It was one that we found off of our DM campaign. They haven't been working on the house because the kids moved away and she can't do it herself. We asked her plan when we initially viewed the home and she said if we don't buy it she will wait for the next person who reaches out to her. If we did there must be others.
I am giving her some time. I offered 70% - repairs and could realistically up my offer but couldn't pay more than 75%. From all of the podcasts I have read and threads it seems like most people offer 70 % so I don't feel I was being a punk.
Its interesting from reading this thread how split and passionate people are about their offer approach. I wasn't aware there was such a firm divide!
I guess if Ben can offer 2 Million less than asking because it makes sense numerically then I shouldn't feel bad about 25k.
Atlanta, GA · Member since 2013 · 42 posts · 13 votes
11y
How badly do you want it? She was being vague so it would buy her time to consider it & maybe get a better offer. I would give her a week or so & then contact her again.
You could say that you hoped she had time to do her calculations & you were interested in what she'd decided. Then give the reasons why you thought your offer was a fair one- based on comps, condition of the property, amount of work to finish it, etc.
To close, you could say that you look forward to discussing the property further in hopes that the two of you could come to an agreement that was mutually beneficial. That way you show you're still interested, that you acknowledge the property has worth & that you're willing to negotiate.
@Joe Villeneuve I would vote for you twice, if I could. I could not agree more. Bset advice. WAIT! Don't answer yet.
Do you find that too many investors are so anxious to get the property that they end up negotiating against themselves? You see that sometimes on the BP posts too.
@Joe Villeneuve The property is not listed. It was one that we found off of our DM campaign. They haven't been working on the house because the kids moved away and she can't do it herself. We asked her plan when we initially viewed the home and she said if we don't buy it she will wait for the next person who reaches out to her. If we did there must be others.
I am giving her some time. I offered 70% - repairs and could realistically up my offer but couldn't pay more than 75%. From all of the podcasts I have read and threads it seems like most people offer 70 % so I don't feel I was being a punk.
Its interesting from reading this thread how split and passionate people are about their offer approach. I wasn't aware there was such a firm divide!
I guess if Ben can offer 2 Million less than asking because it makes sense numerically then I shouldn't feel bad about 25k.
Ryan. This is from your original post:
"I made an offer on a home that was in the middle of a flip where the family ran out of time/money."
This is from another of your posts:
"She has told me multiple times that they are motivated but not desperate. House has been sitting for 2 years"
She is telling you they are not desperate, but when they keep doing that, they know they are...and they know your are (should be) thinking the same thing, so they keep trying to convince you they are not desperate.
If it were me, I'd tell her what I spelled out in a post on the first page, word for word, and then not contact her. She would probably contact me within 7-10 days with a counter...because for 2 years the house has been sitting, no work done, no hope of getting work done it her workers (family) has "left the building".
You call her back with a different number, and/or to see how things are going as a follow up, and you'll be negotiating against yourself. Patience will get you a lower number as a buyer much sooner than making a lower offer.