What either / or options to use for our first investment purchase

Question

So we're about to make our first offer on an investment property that is a tricky-plex.  It was discussed on one of the webcasts, offering optional offers such as low ball bid with no inspection or raise the bid but seller pays for all inspection items.  Can anyone offer suggestions for strategies to use on a conventional 30 loan offer with 25% down and an offer that is 28.5% off of asking?

Account Closed · Answer

Thanks for the tips Cara! Very helpful for me right now. Do you mind clarifying what you mean by "an offer less than 10% will backfire on you"? Do you mean an offer that takes over 10% off of the asking price, or an offer that is 10% of the asking price? (E.g. If the asking price is 100K, do you mean 90K or 10K?)

Thanks!

Cara Lonsdale · Answer

Wow!  That IS a tricky-plex.  LOL.

Lowball offers are really tricky unless you just don't care what the outcome is, because the truth is, more Sellers will be insulted by a lowball offer than not.  So, if it is just a numbers game, and firing off multiple offers looking for something to stick is your strategy, then be prepared to write alot of offers.

In my experience, unless the Seller is desperate, an offer less than 10% will backfire on you, as the Buyer.  You are likely to offend the Seller.

However, there are exceptions.

If the property needs extensive rehab, the low ball offer can be justified by submitting an estimate of the rehab along with the offer.

If the property has been on the market for a significant amount of time, there is an opportunity to come in with a lowball offer that has a chance of getting accepted.

In terms of strengthening your offer, you can try increasing your Earnest Money deposit to let the Seller know you are serious and willing to put up the money to prove it.

You could also make your Earnest Money non-refundable after the inspection period.  This would also be a showing of strength, but still give you the ability to inspect without losing your funds.

I hope that helps.  Best of luck to you!!