Ask or Offer?

Question

When making an offer on a property do you prefer to first ask what they are looking to get or offer what you are looking to pay?

Alexander Felice · Answer

When negotiating:

HE WHO SPEAKS FIRST, LOSES

always let someone make their offer first if you can!

Gilbert Dominguez · Answer

Do you want to make you time worthwhile? You can spend an awful lot of time making offers that never get accepted because the current owners may have a situation they need to solve. For example let us say the market price of a given property is $100,000.00 and you want buy in at 20% below market so that there is some meat in the deal for you to work on getting out. However the current owners may have from one or even more loans against the property and they owe $90,000.00. Already you are not helping them solve their problem and so they will probably turn your offer down. Where are you at financially and determine how much you need to make out of each deal you want to make an offer on. All this information can be gotten by asking the current owners many questions. If the deal does not or will not have enough meat on it for it to make it worth your while then you would pass on that particular deal.

There is allot that can go into a deal if you want to make sure your offers will get accepted and you will also make enough of a profit. Here is one example. The current owners have $40,000.00 in equity. Let us say for the sake of argument that the current market price of the property is again $100,000.00. Your offer  $65,000.00 however your offer does not present the sellers with an adequate solution to their problem and will not leave  with enough money to do anything with the proceeds of the sale because they might have calculated they will need $14,000.00 to get a new start with another property or a rental. That would indicate that to solve their problem they will need a sales price of $74,000.00 and of course this is not considering the cost of the real estate agent's commission , closing costs etc. but just for an example you can see where your deal has to be a fit for the sellers.

You can either concentrate on structuring deals that will be accepted and will close assuring you of some profit and success or you can play a numbers game where you make 100 offers and only 2% get accepted. You can do it being well informed or you can do it blindly. This is all a part of doing your due diligence and of learning how to structure deals that will get accepted.

Let us say you are dealing with the sellers agent, In this case you may not have a good experience or good luck in getting the needed information as the agent no matter what the owner's circumstances will be interested in getting the highest price possible in order to generate the highest commission for themselves.

Assuming you have direct access to the actual owners and sellers you will have a better chance of getting all the needed information to think clearly what kind offer to make and how to structure your deal.

Just generally I would say to look for motivated sellers meaning people that for whatever reason want to make a deal sooner than later. That does not mean there will not be deals that can prove well worth taking your time with them and working over longer periods of time to get a contract and a closing on them.

You can decide to practice always getting the sellers to give you an asking price and seeing how that works out for you. There is just no telling which approach will produce the greatest amount of desired results until you try it. Deals and sellers can differ as much as night and day. Also keep in mind market and timing as well as your particular location. You may be in an area where many people work for the same company lets say that has in that area traditionally employed a great number of people and then suddenly laid off a high percentage of their work force and perhaps allot of people in your area will be motivated at that particular time to sell their house and move on with their lives. There are many variables that can have an effect of motivating people to sell their house and any number of particular circumstances that will produce the same level or even a greater level of motivation. I do not think you can say or think there is one particular approach to always use but some would beg to differ with me I am sure.

Brandon Turner for example always recommends to buy 20% under market no matter what and he basis that on his experience. Write down your goals and figure out how to best achieve those goes in the time you have allowed yourself to get those milestones and beyond.

Dan Mackin · Answer

It depends where your offer is compared to market value. If you're lower than market then I would throw out the offer and see what they say. If you're near market then it may be worth seeing what they think they want and start negotiating from there.

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