Investors totally unrealistic and crazy low ball offers

54 Replies

I put a Condominium Triplex for sale to investors only. I did all the needed analysis for a fix and flip type investors. My price = After Repair value (based on detailed comps analysis)- Detailed & accurate Renovations Cost-Hard Money Loan Interest (9 months at 10% interest rate include 90% of list price+ Renovation Cost)- Loan Cost (5 points)- Realtors Commissions-Taxes-Maintenance-Other costs. Their profit based on ARV list price is 15% to 20%. Yet every investor who showed up wants to reduce my price by $ 80,000 to $ 100,000. What the hell? Are these people for real? How do they even get a deal with such crazy low offers? I think their hit ratio is 1/50 if they are very lucky, the idiots I met probably have a hit ratio of 1/100.

End rant.

Throw out enough offers and  one will stick 

Originally posted by @Matthew Paul :

Throw out enough offers and  one will stick 

In this case Matthew I doubt that these are successful investors, it seems that their business moidel is just based on pure luck i.e. not a real business.

How many investors have made offers? If only a couple, they are probably just going for a homerun deal. If you have had 20 offers of $80-100k below... there might be another reason.

I say put the property on the market and get that higher price you want.

Also consider the possibility that your numbers are wrong.

Originally posted by @Brian Pulaski :

How many investors have made offers? If only a couple, they are probably just going for a homerun deal. If you have had 20 offers of $80-100k below... there might be another reason.

I say put the property on the market and get that higher price you want.

Two investors showed up to actually see the property and offered me $ 80,000 less than my asking price. Other investors did not show up but got the information from a real estate agent who deals with a network of investors and she came to inspect the property. She relayed the information to her network of investors and they came back offering $ 80,000 to $ 100,000 less than my asking price.

@Joseph S.

I had a similar experience when selling a very inexpensive house a few months ago.

Here I was selling a house for $15k and some investors were offering me $8000 and $9600. I literally laughed in their faces as they tried to explain how that was all the house was worth. A week later I sold the house for $21k ($6000 over asking price).

It boggles my mind that someone would be given a slam dunk deal and still try to squeeze even more out of it. Oh well, their loss.

Originally posted by @Eric James :

Also consider the possibility that your numbers are wrong.

Eric, I actually put more money in Renovations than what they will actually pay. My renovations costs were based on the estimate of a good contractor I know plus numbers I confirmed through my own detailed analysis. Renovations include new kitchens, new kitchen appliances, new bathrooms, new hardwood floors, new heat boiler for two units, replace all the windows for all three units, interior and exterior paints for all three units, debris removal, and added another $ 10,000 for other unexpected costs. These are not serious real estate investors but hit and run type people who want to get lucky in 1/50 offer or even 1/100 offer. Waste of time and insulting.

Originally posted by @Anthony Gayden :

Joseph S.

I had a similar experience when selling a very inexpensive house a few months ago.

Here I was selling a house for $15k and some investors were offering me $8000 and $9600. I literally laughed in their faces as they tried to explain how that was all the house was worth. A week later I sold the house for $21k ($6000 over asking price).

It boggles my mind that someone would be given a slam dunk deal and still try to squeeze even more out of it. Oh well, their loss.

Exactly Anthony, I laughed in their faces and I told them no deal. But also I was furious and felt insulted after a while.

@Joseph S.  I have never seen someone selling a house get the numbers right . Unless they have flipped a house or rehabbed a house . So if you had more than 1 offer from investors that much lower than your asking , you are probably  too high 

So list it already and see what the Whole market says.

Originally posted by @Matthew Paul :

@Joseph S.  I have never seen someone selling a house get the numbers right . Unless they have flipped a house or rehabbed a house . So if you had more than 1 offer from investors that much lower than your asking , you are probably  too high 

Actually my renovations cost estimate is probably higher than what they will actually pay. I got a contractor to give me estimate for renovations cost and I confirmed his estimate through my own analysis, I did a lot of renovations on my residential home and I know what things cost. I even added $ 10,000 for unexpected other costs. As I said it seems the vast majority of investors are hit and run get lucky type investors hoping to get a deal in 1/50 or 1/100 offer and try to get 30% to 40% profit on ARV price. They are not serious people, waste of time, and insulting to deal with them.

Were those low ball offers or strategically placed offers? If there were several experienced rehab and flip investors that made offers, then they probably know what their costs are. Did this make you recheck your numbers to see if they are correct? Many of us figure the ARV, deduct the profit we want, and the holding and rehab costs. What's left is the price we buy it at.

You could always counter, if you want to.  You could also show your figures to a bidder to show why your price is justified.   They may be upgrading the properties more than you would do.  

Or, you could rehab them yourself, and then sell at retail price and make all that profit for yourself.

Some investors submit several offers a week.  They know that most will not be accepted, but if the seller is in a bind, they might say yes.  I have made several offers a week myself when I see properties not selling after 3 to 4 months on the market.  In this hot market, they should have already sold. Most sellers will offer a counter proposal.

I wish you good luck in getting it sold.

@Joseph S. can you share the actual numbers and scope or no? If you had one or two that low, I would agree. It sound s like you have quite a few all falling in at $80k and some as high as $100k below your ask. That would lead me to believe either the realtor who brought them info missed (although their offers line up with those that saw it), or the value you think could be wrong.

Do you own it or are you wholesaling this deal?

Originally posted by @James Barnhart :

Were those low ball offers or strategically placed offers? If there were several experienced rehab and flip investors that made offers, then they probably know what their costs are. Did this make you recheck your numbers to see if they are correct? Many of us figure the ARV, deduct the profit we want, and the holding and rehab costs. What's left is the price we buy it at.

You could always counter, if you want to.  You could also show your figures to a bidder to show why your price is justified.   They may be upgrading the properties more than you would do.  

Or, you could rehab them yourself, and then sell at retail price and make all that profit for yourself.

Some investors submit several offers a week.  They know that most will not be accepted, but if the seller is in a bind, they might say yes.  I have made several offers a week myself when I see properties not selling after 3 to 4 months on the market.  In this hot market, they should have already sold. Most sellers will offer a counter proposal.

I wish you good luck in getting it sold.

James, my numbers are correct and they did not even debate my renovations costs and the other costs. However they told me that even though my ARV estimate are accurate based on current sold comps there is a risk that the real estate market can drop by 20% in 6 months from now and they have to factor this risk in their offer. Now that is crazy talk because not a single analyst in the country think that this would happen but rather the opposite is true. You are correct, I may rehab these condos myself and sell them at ARV market price but I need to get a loan to do so. I just wanted to try the investors route first to see if works but I ended up very disappointed dealing with them.

If the numbers aren't coming in close to your "detailed analysis" why not just do the deal yourself and make some money?

Why are you getting upset or feeling insulted? It's just business, move on to the next person. 

@Joseph S.   Are you using a Realtor?  If so, have them add a private note on the listing.  It should say... "Do not expect a response to lowball offers."

There are "gurus" that will tell you that if more than 1 in a 100 offers are being accepted you are offering more than you should.

I hate that game.

On the other hand, I have seen someone take $20,000 for a property that had been listed for months at $200,000. It was not a typo. The person took 90% less than they were asking. There had not been any notes on the MLS suggesting they would do it.

Originally posted by @Brian Pulaski :

@Joseph S. can you share the actual numbers and scope or no? If you had one or two that low, I would agree. It sound s like you have quite a few all falling in at $80k and some as high as $100k below your ask. That would lead me to believe either the realtor who brought them info missed (although their offers line up with those that saw it), or the value you think could be wrong.

Do you own it or are you wholesaling this deal?

Brian: I own these condo and all three are rented. My asking price: $ 360,000. ARV: $ 600,000 (based on accurate comps analysis). Renovations cost estimate: $ 60,000 (based on accurate estimate by a very good contractor). Additional $ 10,000 in unexpected cost. Taxes for 9 months $ 6,500. Realtor Fees: $ 30,000 (3% of purchase price & 3% of sale price). Hard Money loan Interest: $ 28,000 (10% interest based on loan amount= 90% of asking price+renovation cost). Loan cost: $ 19,0000 ( 5 points basis). Debris removal: $ 2,000. Profit: $ 84,500.

Originally posted by @Matt K. :

If the numbers aren't coming in close to your "detailed analysis" why not just do the deal yourself and make some money?

That would be my next step.

Originally posted by @Michael Biggs :

@Joseph S.  Are you using a Realtor?  If so, have them add a private note on the listing.  It should say... "Do not expect a response to lowball offers."

There are "gurus" that will tell you that if more than 1 in a 100 offers are being accepted you are offering more than you should.

I hate that game.

On the other hand, I have seen someone take $20,000 for a property that had been listed for months at $200,000. It was not a typo. The person took 90% less than they were asking. There had not been any notes on the MLS suggesting they would do it.

Good points Michael. I think that the vast majority of the crazy low ball offers only work on desperate people who have no loans on their property and they just want cash, any amount of cash will do for them.

Originally posted by @Christopher B. :

Why are you getting upset or feeling insulted? It's just business, move on to the next person. 

Chris, I hate the cliche phrase "it just business, it not personal". When someone insults you in your face and shows his sleaziness it is personal.

Welcome to the FSBO market. Now if you want to get the real value for your property hire a good agent to sell it.

Originally posted by @Joseph S. :
Originally posted by @Christopher B.:

Why are you getting upset or feeling insulted? It's just business, move on to the next person. 

Chris, I hate the cliche phrase "it just business, it not personal". When someone insults you in your face and shows his sleaziness it is personal.

It's not an insult if they don't agree with you... that's their number, you have yours. If you two, or in this case multiple investors, don't agree then you go separate ways and it's no big deal. If they made derogatory comments to you that would be considered an insult to your face. 

@Joseph S.

It appears that you may be a little too emotionally involved in this deal. As others have said, rehabs come with risk. Everyone has different criteria that needs to be met for their risk threshold. It's personal to them. But you shouldn't let low ball offers offend you. The market will pay what the market will pay, in this case your market is investors. It's important to KNOW the value of what you have. If you know your value is at x then hold onto the property until you can get x.

I had a company offer me a job paying 32k when the market was paying 75k, I just laughed a little and said "no thank you, have a great day". It is truly just business. The company offered what they could afford to pay me. They didn't mean to slander me, just eyeing margins. Just gotta shake it off!

I'd list it with an agent.

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