Submitting multiple offers to seller (3 offer approach)

4 Replies

Hello,

I've always been aware that you can structure deals multiple ways, and submit multiple offers to the seller, but it has never completely clicked for me.  Could someone give me a real world example of what this looks like and why each option make sense for both the seller and me as the buyer?

I'll set it up this way so the math is really easy:

ARV = $100,000. Repairs = $20,000. MAO = $50,000 (100,000 * .7 - 20,000).

Obviously $50,000 would be the "all cash" price I'd be willing to pay (please don't crush me on the 70% rule, I'm just trying to make the numbers simple).

What would a owner financed offer look like?

How about a partially owner financed offer?

Again, I understand conceptually that having the owner carry back the loan means you don't have to pay origination fees to a bank or the higher interest rates of a hard money lender.  But I'm having a hard time determining how much that is actually worth (i.e. how much more I could offer the seller).

Thanks for any advice!

If they are unwilling to go as low as your cash offer you can inquire about seller financing. If it were me I would increse the offer by the amount of money I am saving plus a little more since I have less capital at risk. You would need to determine how much your hard money costs are then add that amount to your offer plus whatever you feel is fair for allowing you to do a deal with less capital. 

If neither of these options work, I offer to list it as an agent. 

I'll give you an example on a property I closed on today. 

It was listed at 30K

I offered 10K cash total, 10K earnest money, as is, where is

They countered with 20K cash, but would also be willing to do some owner financing

I then countered with a triple simultaneous offer:

1) $ 20,000 purchase price, all owner financed - 10% interest only payments - 5 year balloon

2) $ 15,000 purchase price, 5K down, 10K owner financed,payments based on 30 year ammortization at 10%, with 5 year balloon

3) $ 12,000 all cash

They countered with

1) 20,000 purchase price, 10,000 down, 10,000 @ 10%, 200 per month and 48 month balloon

2) 15,000 all cash now.

I took 15K cash, which was my initial goal anyway ;-)

1 would have been more attractive for someone who is looking for total price, but not really needing the money now. 

2 is a combination

3 is for the person that is really looking for cash now and is willing to take less, in order to get money right now. 

It will show you the motivation of the seller, plus it often makes them not really look for other offers, but concentrate on choosing between those 3

For those of you that use an approach like this, do you equally like each offer that you put in the same? Or are you trying to make it look as though one of the offers is a better option?

@Michaela G. - I assume you would have been satisfied if the seller accepted any of your 3 offers? Or were you trying to make it so that the interest rates and proposed amortization schedules steered the seller to the cash offer?

@Ryan Landis , I would have been ok with the other offers, but I preferred the cash one, but I just wanted to give them more interest than a checking account or other normal investments would give them, since they brought up owner financing.