Offers Getting Rejected Left n Right

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Offers Getting Rejected Left n Right

Michael Lee
Columbia, SC · Member since 2015 · 88 posts · 55 votes

Hello all,

It's been a frustrating couple weeks for me as I've been making offers to try and purchase a 2nd rental property so thought I'd ask for some feedback and/or tips on how to get better at this moving forward.  Any suggestions are welcome!

Offer #1: SFH in 'A' location for my market (Columbia, SC). List price, in my opinion, is about $20k too high based on comps and talking to other experienced RE professionals that know the market well. I think ARV is 135-137k max and it needs apprx 15k in repairs. So I offered 105k purchase price, As-is (I'll omit other relevant terms but fairly standard on those) while also sending a detailed chart of recent comps as analysis behind my offer (not in a pushy or know-it-all way). Well I feel like the other agent didn't do a great job explaining the context of the offer to the seller, and it was implied that they were very upset by the 'lowball' offer and countered back at virtually list price. I said that was fine and would circle back at a later time but when I asked the agent for details on how they got to their current valuation, I didn't really get a good/logical answer.

Offer #2: SFH in 'B+' location. This is a property that's been in a family for long time but two siblings now want to sell. Priced well for the area but does need about 20k in repairs/updates. Also, it went under contract almost immediately after listing (I'm assuming for full price) but recently came back on and based on context, I think it got ripped apart during inspection/termite report. ARV is about 145-150. I offered 92k purchase price, As-is, and was countered at 115k. No way I am comfortable paying anywhere near that with the risk involved so this one doesn't seem very promising at this point either.

Again, I realize I'm not exactly making full-price offers and most sellers would/should turn them down. But the fact that I'm getting shut down has been disheartening a bit. Do I just need to chalk it up to the game, move on, and keep swinging away or can I work on my approach to get some better results?

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Paul Bowers
Real Estate Investor · Macedon, NY · Member since 2016 · 251 posts · 290 votes
8y

@Michael Lee, don't give up.  I'm just finishing my first flip.  The house was listed at $64,900 and I offered $28,500, first time they didn't even counter.  They lowered the price $5,000 about 30 days later, I made the same offer.  I made the same offer every 30 days for 6 months.  The came down approximately an additional $5,000 after each offer I made.  Month 7, I bought it for $30,000.  

The market will prove one of the two of you right.  Wait 30 days, resubmit your offer.  The seller may eventually decide you were right and sell it to you or the market may decide they were right and it will sell to someone else at a higher price.

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    8y
    Just keep offering. If your offers are not accepted you will at least get familar with the landscape. Can anyone comment on the MLS practice of listing at one price and seeing a higher price in the listing text? The listing price says 150 k and the text says 210k?
    1Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    8y

    Hi @Colleen F.

    "The listing price says 150 k and the text says 210k?"

    If it has been on for awhile I can see an agent doing price drops and just changing the price and not the description field. Also if there is additional land available (IE for 210 you can get the 5 acres plus the additional 20 that they are planning on selling off to a neighbor).

    Just some thoughts

    1Reply
  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Colleen F. That sounds like a foreclosure / auction listing.  The seller puts a teaser price on the listing, say $175,000 but in the text, says listing price is $210,000 - which is the number they really want.

    I my market, I never see that in a non-reo situation.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    Keep after it @Michael Lee.  Glad you aren't just randomly offering 70% minus repairs.

    Good idea providing some back-up with comps and such with your offers.  

    My main advice would be to remove all zeros from your offer.  Every offer you quoted had 3 zeros in it.  5 if you included the cents.  Use specific numbers only.  $92,476 sounds like you put some effort into the analysis and is less likely to appear like the PFA balloon that $92,000 is.  

    Keep us posted on your progress!

    5Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    8y

    @Michael Lee Chalk it up to the game, move on, etc.  It's a "hot market" and the entire planet knows it's a "hot market".  That means you'll get some people that are out there listing properties for sale not because they need to sell but rather, because they think they can get a good price.  "Hey, we're at a peak, why not explore selling before we spend ___ in rehab?"  It mean, it's logical, it makes sense, and it's probably good advice.  My purely anecdotal experience over the past...I don't know...6-12 months...is that there are a lot of multi-unit properties that are going on the market and then being taken off the market after 90-120 days.  Not selling, just going "off market".  In one case I found out (after the fact) that I was the only person to even make an offer.  And there are plenty of cases where "context" just doesn't matter.  The number they want is the number they want and it doesn't matter if you have 500 reasons why their desired number is wrong.  Basically, they don't have to sell unless they get their number...so...you end up where you end up.  You can't be frustrated with the process, it's just part of the game.  That said, I still get frustrated with the process so I'm being a touch hypocritical.  

    1Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Anthony Dooley, @Annette Hibbler, @Colleen F., @Steve Vaughan, @Andrew Johnson Thank you for your individual responses and advice!

    Just had a great conversation with my broker and I think I'm doing exactly what I advise my clients/friends/family NOT to do in these situations which is getting too emotional about it. Great reminder to myself, and to everyone out there, that this should be fun and not stressful. I plan to hit the refresh button and come back with a better perspective moving forward

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    8y

    hard to judge without the actual listing price to compare but it seems of your two offers you got two counters, one seemingly serious (the 115K on your 92K?). I'm not sure you are doing as bad as you think...

    And keep in touch with the second one especially, maybe even do a thorough walk through, etc so that when no one else bites and they get more ancy, you have more information than anyone else.

    Be nice, walk away, then have a bunch of those properties on your "second round" and I suspect you would have a decent hit percentage.

    my partner and I have bought a couple this way...especially good idea in somewhat illiquid areas...

    Jon

    1Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    8y

    @Michael Lee By the way, if you do have a good broker it doesn't hurt to ask them their perspective.  Do they think you're offer terms are crazy?  Do you think the counters for the sellers are reasonable?  I know my agent will be open with me about if my offer is fair, low, etc.  That doesn't mean that I change my offer terms.  The doesn't mean that she won't wing a low offer out for me.  It just helps me manage my expectations.  And there are times where I have to offer lower than someone else because the deal might seem riskier to me than to someone else.  Maybe it's out of my "sweet" spot.  Maybe I'm weary of taking on $____ more debt.  There could be 100 logical reasons why my offer is different than someone elses.  And despite having solid logic behind it some of the time, there are times I just "feel" like I need a larger cushion in the deal for some random emotional reason.  Maybe particular street doesn't "feel" as nice to me as the neighboring block.  Regardless of the "why" it doesn't really matter, I offer what I offer and my comfort is where it is.  No amount of the seller's agent explaining why my logic isn't correct is going to change it.  So I'm sure I've frustrated a seller with my offer just as often as a seller has frustrated me with their listing price, counter, etc.  Again, just all part of the "game". 

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @Michael Lee look for motivated sellers. Days on market, price drops and vacant properties are good signs. 

    Property 2 you say would be worth $145-$150K after $20K rehab so that puts the value around $125K. You offered $92 and they came back at $115K. Just using the numbers you gave me, your offer was 73% of value. Their counter was 92% of value. You are really low balling. That may work in a bad market, but most markets are pretty hot right now.

    If you can get killer deals off the MLS in this market, that is great. Realistically, I think you will struggle. Maybe look for off market deals or adjust your expectations. Or make WAY more offers.

    1Reply
  • Julie N.
    Real Estate Investor · Unionville, CT · Member since 2016 · 260 posts · 167 votes
    8y
    Just keep making offers. You will find the right fit eventually.
    1Reply
  • Courtney Fricke
    Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
    8y
    If you're looking for deeply discounted deals and are a cash buyer, have you considered finding wholesalers in your area to be on their cash buyers list? If so, worthwhile to network to find said wholesalers in your area. Find any or all of them and get on multiple lists.
    3Reply
  • Sarah Nowak
    Realtor · Grapevine, TX · Member since 2017 · 23 posts · 13 votes
    8y
    I second Courtney’s reply. Many of my clients don’t even want to look at retail properties because it’s rare to find one (in my market, at least) that is priced well for investors. Remember that if it’s listed by an agent, their commission and the commission of the buyer’s agent is built into the list price. When you go through a wholesaler, they take a much smaller cut and typically aim for offering their properties at 70-75% of ARV. You can go even further and begin procuring properties yourself in the same way wholesalers do. Have a “I buy ugly houses” magnet made for your vehicle, bandits signs, call homes that are in preforclosure, contact homeowners of expired listings, go to auctions etc. And of course as others have explained, you’re playing a game of odds here. The more offers you make, the more times you’ll hear a yes. Good luck!
    2Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Jonathan R McLaughlin Great advice...thanks. That's how I left it with that agent and I think we're both going to follow up with each if anything changes

    @Andrew Johnson Sorry, I meant my broker-in-charge. I wasn't using a broker in these two negotiations, which as @Russell Brazil mentioned, may be something I need to consider (will elaborate more on that below). But earlier when I discussed the details with him, he made some great points as to what I did well vs what I did not so well haha. One of which was providing my own comps as this may have come across as unprofessional/disrespectful when I thought I was being logical/reasonable

    @Joe Splitrock, @Julie N., @Courtney Fricke Thanks for your responses! As for cash offers, I don't think I'm able to do that quite yet unless it's $70k or below but def will keep wholesalers in my area on the radar

    0Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    Really appreciate the awesome responses from everyone so far! I've had some time now to reflect on this experience and assess why exactly I was frustrated. Oddly enough, it didn't have anything to do with my offers getting rejected since, as many of you have pointed out, you don't make 'lowball' offers thinking they'll get accepted (esp in this FIRE hot market). But I think I was frustrated by 1) not being able to start any sort of dialogue with the seller or other agent. I think this is all I was looking for with either of these deals bc neither one were 'deals of a lifetime' or anything like that. I was interested in them and wanted to gauge if my analysis/numbers had any chance of working. I feel like this didn't happen bc I either communicated poorly to the other agent or came across as inappropriate/unprofessional which was not my intent. This is something I need to work on moving forward. Also, 2) as mentioned before, I was getting too emotionally involved in the negotiations and when I didn't get the results I wanted, it made me second guess every little thing that I did, whether it was on the phone speaking to the agent, via email, etc. I think my confidence took a hit which is silly based on what we all know.

    One takeaway from all of this is I think I need to consider working with an agent when I'm trying to purchase a property for myself. After all, there's a reason why there are agents, lawyers, etc bc it's a completely different dynamic when trying to represent/advocate for oneself compared to doing it for others. That's why I spoke to my BIC to ask if he'll help me on deals moving forward. He asked why I never asked him before and all I could think of was that I didn't want to bother him when I could do it myself. In hindsight, this was incredibly short-sighted by me as I have a network of people around me who are more than willing to help. I learned two things from this experience: 1) leave the emotions out as this will dramatically decrease the stress level during what should be a fun process; and 2) ASK for help

    1Reply
  • Alicia H.
    Rental Property Investor · Oreland, PA · Member since 2017 · 51 posts · 32 votes
    8y
    This is a great reminder for a newbie like me to remember that patience is the name of the game. I’ve been looking and placing offers for 6 mos and haven’t landed my first deal yet.
    1Reply
  • Courtney Fricke
    Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
    8y

    Hey @Michael Lee, $70k cash is definitely something to work with for purchasing a property.  And remember, that "cash" is needed for the purchase but you could use a loan or other types of financing for the rehab.

    For example, with $40k I purchased my primary residence from a bank and it took $5000 to rehab it. Then I got a HELOC (home equity line of credit) on it and during that time it was appraised for $75,000. With cash from that HELOC I purchased my first rental for $20k, I'm in the middle of the rehab but if I finish under or at $40k all in I'll be happy. Comps show $75-80k ARV and it will bring in $750-800 in rent each month. Takes a lot of things. Creativity and patience are a few of the traits needed. Keep at it!

    Lastly, I would echo what others mentioned previously. Broaden your search perimeters. The market is saturated with investors that you will have to outwork and outsmart in your area to get good deals from the MLS. Seek out wholesalers. Look for FSBO deals, etc.

    3Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Joe Splitrock I just re-read your response and wanted to ask a follow-up. I had to leave out certain details in my original post but for Property 2, the 20k repair estimate were for things that I knew needed to be done just from what I could see, i.e. new roof, hvac, painting, etc.  But the house has old termite damage, potential flooring issues, and other things that will likely need to be addressed. So how do you factor in this additional risk or cushion for the 'unknown'? I thought I was doing that by offering 92k and was willing to come up a bit but just did not feel comfortable with 115. Thanks

    0Reply
  • Jeffrey Hotz
    Real Estate Professional · Dublin, OH · Member since 2013 · 251 posts · 165 votes
    8y

    problem is our focused too much on the numbers and making the property work for you and not focused on what is reasonably best for the seller.

    We’re not in the investment business, we’re in the people business!

    At least that’s the way we look at it here at HomeVestors.

    0Reply
  • Jeffrey Hotz
    Real Estate Professional · Dublin, OH · Member since 2013 · 251 posts · 165 votes
    8y
    Originally posted by @Jeffrey Hotz:

    problem is our focused too much on the numbers and making the property work for you and not focused on what is reasonably best for the seller.

    We’re not in the investment business, we’re in the people business!

    At least that’s the way we look at it here at HomeVestors.

     After posting I realized your dealing with on market properties and listing through agent.  My apologies as I don’t deal with those more than motivated sellers that call us direct.

    0Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Courtney Fricke Very cool what you've done so far! I am naturally NOT creative and NOT patient so will have to actively work on that haha. Thanks for suggestions on hunting for deals elsewhere as well.

    0Reply
  • Courtney Fricke
    Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
    8y

    @Michael Lee lol you'll get there. You seem eager to learn so that's half the battle. 

    0Reply
  • Scott Graham
    Westford, MA · Member since 2016 · 113 posts · 106 votes
    8y

    @Michael Lee We are getting crushed left and right on our MLS offers. We are putting in offers over full price and still getting out bid by $40K! Its nuts! Inventory is clearly low. People are desperate for work. Stick to your numbers. Don't let low inventory cause you to make rash decisions. Find a way to start working off market deals. Its the only way to get face to face time with a seller.

    1Reply
  • Greg Franck
    Investor · Saint Louis, MO · Member since 2016 · 72 posts · 65 votes
    8y
    If the homes are in your wheel house and you plan to keep them in the portfolio why wouldn’t you simply place more reasonable offers? Keep in mind that loan amortization and the 6% YoY average appreciation we are seeing right now should do very well for you alone. You can keep sitting on that money (downpayment) or put it to work. IMO too many folks are trying to low ball sellers for homes that they know can make money at higher valuations. As long as you are making a smart investment that has limited downside risk I say take the leap and manage it for prime equity performance.
    1Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    8y

    @Michael Lee In my experience as an agent and active investor one of the big things I see is people being afraid to pull the trigger on low offers and it costing them deals. As others have said, if you are trying to purchase a house for significantly less than market value it will take some time and offers to land a deal that meets your criteria.

    Just keep on making offers that fit with what your numbers are telling you and something will happen. Just keep consistent. 

    1Reply
  • Leanne J.
    Severna Park, MD · Member since 2017 · 44 posts · 29 votes
    8y
    @PaulBowers Thank you for that nugget about reoffering every 30 days!!! I have a property I’m eyeballing and they turned me down. If it’s still on the market next month, I’m gonna do this.
    2Reply
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