Offers Getting Rejected Left n Right

Buying & Selling Real Estate
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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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  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    8y

    I haven't read all of the replies here, so this may have been covered. You've only mentioned two offers being rejected here, which is not a heck of a lot! Most investors on here make dozens or hundreds of offers hoping to land one good deal. Secondly, I think you are making it a bit more difficult on yourself than it needs to be. Most markets are hot and people are paying prices based on speculation, especially owner occupiers. That's tough for an investor to compete with. I'd suggest that you make a much more aggressive offer, pay for an inspection and THEN start negotiating your price after you have an inspection report and the house is off of the market. You'll swing the pendulum in your favor a bit and have much more leverage than you would when you are bidding against 40 other people willing to pay over the asking price.

    Best of luck!

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

    @Scott Graham That is insane

    @Greg Franck Never thought about it like that but very true

    @Michael Noto Definitely...thanks!

    0Reply
  • Cameron Novak
    Corona, CA · Member since 2017 · 99 posts · 42 votes
    8y
    Keep at it.
    1Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Corby Goade That is something else that I never considered either as far as trying to get a property under contract then trying to negotiate. Great suggestion

    0Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    8y

    @Michael Lee We are constantly putting in offers, and sometimes the Sellers do not respond because it is considered a lowball for them, but for us, the list price is high and most likely will result in a project in which WE lose money on. 

    Many who have come before us have lost a ton of money investing in Real Estate. Your goal is to mitigate your risks of losing money. 

    So, when you start to think of the game this way, you just feel more comfortable with your offers. 

    Hope this helps. Goodluck. Thanks! - Ola

    NB: If anything, as you said, look on the bright side you have joined the league of forum post trenders lol  

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

    @Ola Dantis Great points...thanks!

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    8y
    Keep an eye on the sold price and back on market for houses you made offers for. I have had a number of times when I made an offer and I see a sold price on a property and know I never would have paid that. Usually that means the buyer underestimated the repair or overestimated the ARV. Or sometimes an owner occupant had to have that particular house. If you can close quick back on market is something to look for too.
    2Reply
  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    8y
    Early 2017, I offered 2.15m for a MFH listed at 2.35m.... rejected... Today it came on the market again at 1.75....and I am NOT going to make another offer... Market is starting to go down, at least in SF.... So patience will pay off big time in the next 1-3 years
    2Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Colleen F. Great point...I've done the same

    This was my thinking for property #2 actually since it went under contract then came back on after going through inspections. My assumption being whoever thought about buying it bailed bc of the condition. It felt vulnerable to me so took a shot with 'as-is' offer. Plan to keep an eye on it and revisit later if still available

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

    @Diane G. Interesting...agreed that being patient works out over the long term. Thanks!

    0Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    8y

    I can tell you about my experiences making offers in SFH A type area.

    Some people, agents have a bad idea about investors, that they are cheap, low balling, etc.

    So, they are not wanting to deal with investors form the get go.

    I think there is going to be a big wash out, margin squeeze of investors to much demand for too few SFH.

    1Reply
  • Andrew R. LucasBusiness Member
    Investor · Columbia, SC · Member since 2016 · 675 posts · 320 votes
    8y

    @Michael Lee some great info on this thread.  I was going to recommend the same as @Jay Hinrichs.

    The last property I bought was because of DOM.  I happened to see that it had been on market for 10 months so I made an offer at 50% of asking.  They immediately accepted.  (should have offered less)  

    You can cast a wide net and offer everything.  Or be selective by offering to likely motivated sellers.   Either way works, but a combo of both is probably your best shot.  

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

    @Billy Smith, @Andrew R. Lucas Appreciate the responses. Great points on perception of investors as well as properties that have tried to sell for long time. Both of your responses made me think about reframing my question and narrow its scope. With the given that I need to keep making offers and that more offers = higher likelihood that one will get accepted, how do you go about making lower/investor-type offers and not get a negative or hostile response?

    Just as an aside, the one I bought last year I offered above list price and closed right at it bc I knew this was a deal. So it obviously depends on the situation but this is more for distressed properties, been on market for long time, or something else that makes them high risk

    0Reply
  • Michael Sessa
    Wholesaler · West Islip, NY · Member since 2016 · 30 posts · 18 votes
    8y
    Stay patient and don’t get discouraged!. You could live in NY where houses that are considered knock downs sell for 250k. It does have its benefits though. One flip in NY makes you more than 5 or 6 flips in most other stars.
    1Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Russell Brazil Your tip on using a good agent is spot-on. Planning to do that moving forward. For your point below, I wanted to ask a follow-up question. I think my characterizing that particular property as 'A-class' was misleading and confusing as it's def not that in a traditional sense. What I meant and should have said was that it's ideal for my niche of student rentals, although the neighborhood is still fairly nice. But overall, I was always told that doing repairs should come with the added benefit of value-add upside. So if a property needs 20k in work, then it should be worth 20k less and then some, to make it worth one's while. Am I thinking about this in a wrong way? Thanks!

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Michael Lee:

    @Russell Brazil Your tip on using a good agent is spot-on. Planning to do that moving forward. For your point below, I wanted to ask a follow-up question. I think my characterizing that particular property as 'A-class' was misleading and confusing as it's def not that in a traditional sense. What I meant and should have said was that it's ideal for my niche of student rentals, although the neighborhood is still fairly nice. But overall, I was always told that doing repairs should come with the added benefit of value-add upside. So if a property needs 20k in work, then it should be worth 20k less and then some, to make it worth one's while. Am I thinking about this in a wrong way? Thanks!

     There will be locations where properties that need work will be valued exactly the same as move in ready propeties. There are other areas where if a property needs $20k in work, it might be worth $20k less, or $10k.....or it might be worth much less.  Neighborhoods for instance where you should flip for instance....a property that needs $50k in work might be worth $100k less than the comps.  

    The inexperienced make the mistake though to think every location and neighborhood operates the same in terms of how to discount a properties value against comps, and it is just different in every location. Often, though not always A class areas with good schools do not trade at large discounts since xemand remains high in those areas regardless of condition.  Great example I have of this personally is last year I sold my own house...nicest in my neighborhood and I actually sold it for slightly less than I sold a house the next street over tgat was stuck in the 50s. Not by much, but about $7k less, and it would have taken about $40k to turn that house into the same niceness as mine..but that didnt matter. Houses in that neighborhood traded in a very small range. People were paying for the school district and not so much the properies themselves.

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

    @Russell Brazil Understood -- that's something I noticed when working with clients but never thought of it that way. Cool thanks!

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    I think we just discovered a new way NOT to invest.

    Not quite the same as analysis paralysis, but same result.

    Gimer Law516 Reviews
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    2Reply
  • Michael Lee
    OP
    Columbia, SC · Member since 2015 · 88 posts · 55 votes
    8y

    @Tom Gimer guilty as charged! Over-analyzing is one of my many, many weaknesses

    0Reply
  • Carson Wilcox
    Davis, CA · Member since 2016 · 595 posts · 344 votes
    8y

    You should also think about the offers you had where they countered and you were close.... I say counter back a bit lower, and get it in contract.  Once in contract you have that seller a bit more committed to seeing a deal through...  then do your inspections and full due dilligence, and adjust your price.  Especially on a high DOM house, they are likely sick of going into escrow and falling out again...  if they wont play ball, you bail out.

    1Reply
  • Robert A.
    Columbia, SC · Member since 2017 · 21 posts · 12 votes
    8y

    Have little to offer in advice, but keep at it brother, I'm positive next columbia meetup you'll be sharing details of your second property!

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

    @Carson Wilcox Yeah I think I will do that. I may not have been as far off as I initially thought.  Thanks!

    @Robert A. Thanks man!

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

    I was told by @Will Gaston that I looked like a bozo without a membership. So thanks for the heads up! I'm still a bozo but now a proud BP member

    1Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Leanne J.:

    @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.

     Glad to help you with that George. ---- Charles Parrish

    0Reply
  • Andrew Ware
    Gardiner, ME · Member since 2015 · 190 posts · 177 votes
    8y
    Michael I keep seeing you saying things like you are not patient, not creative, and over analyze. This may just be recognition but it feels like they are things you consider weaknesses to remedy. All of these things are on a continuum. You aren’t patient but that usually means you are a quick start. This can be a huge advantage. Maybe you aren’t creative but you are good at following a plan over and over. All of the people I’ve ever met that are really successful don’t fight their nature they double down on he things they are great at. And if they have some critical weakness they address it by hiring someone to deal with those details. It’s not something we usually talk about on this forum but you might find the Kolbe A Index very helpful.
    2Reply
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