Rental Property Investor · Macon, GA · Member since 2017 · 23 posts · 15 votes
Hey BiggerPockets,
I recently received a call from a recipient of my direct mail campaign about an off market property and have put myself in position to make an offer. I asked him the lowest price he is willing to take; however I plan to offer a bit lower than that. I have read a good amount of blogs on the subject and I am somewhat ready to offer that lower price. I plan to stay true to my numbers and hold fairly firm on my offer.
Does anyone have any good advice about offering with confidence and the presentation of a lower offer?
Pueblo, CO · Member since 2012 · 54 posts · 32 votes
8y
Great question! I would like to attempt at giving a good answer!
I personally think it’s funny when other investors just immediately say “throw out a lowball offer” and who cares if the seller gets upset? Well you (the buyer) should. Our goal as investors is to get the best possible deal for ourselves while also solving a sellers problem. If you don’t care if the offer offends then then why would they go with you? My approach is to get them on my side. To offend them but in a way that gets them on my side. When I am submitting a lowball offer I almost submit it in a way that Let’s them know I am super vulnerable and making the offer makes me feel uncomfortable. Like I am embarrassed.
MR seller I know you have to be at X but according to my numbers I need to be at Y. Judging by our conversation you needed to be at X because of this bill, that bill, yada yada yada. But I need to be able to make a profit on this house. And based off of what I can sell it for, the work it needs and what your asking there is simply no way to make it work. I’m so embarrassed but my offer is Y.
If you give an offer with empathy they immediately are “on my side” . They start to justify the sale and price for me. “Well you need to make money” and “ I know your not low balling on purpose”.
My point is that you should care if you offend them. Work on your negotiation skills because this business is ALL about how well you negotiate.
It’s not the deal they ultimately got ITS THE DEAL THEY THINK THEY GOT.
Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
8y
If these are the numbers you need for the deal to work then absolutely present the offer with confidence. I don't care if people get offended or not to be honest with you. I'm either going to get a good deal or walk away.
Windsor, CT · Member since 2017 · 27 posts · 11 votes
8y
@Derrick E., how do you find an agent willing to offer a low number? Or stay firm with an agent unwilling to offer low? The agents I speak to are uncomfortable offering a lower number. And I am offering about 20% off the market rate.
@Derrick E., how do you find an agent willing to offer a low number? Or stay firm with an agent unwilling to offer low? The agents I speak to are uncomfortable offering a lower number. And I am offering about 20% off the market rate.
I got lucky and hit it off with a younger agent who is investor friendly. She was like the 3rd agent I dealt with and now I don't even look anywhere else. So I can't answer for you.
My agent is awesome. She will offer whatever I ask her to offer. She doesn't care to offer half price. I think most of the agents who claim they don't want to offend are really just lazy and don't want to write up an offer that they are confident will get turned down.
Windsor, CT · Member since 2017 · 27 posts · 11 votes
8y
@Derrick E., thanks, that is useful to know. I was wondering if maybe offering 20% less than the purchase price was too low. But seeing that you and other investors offer around 50% less, my 20% doesn't seem too low. I suppose I need to keep looking for an agent willing to offer lower. Do you almost always offer less than the listed price? Even if the purchase price generates good cash flow and fit all your criterion?
@Derrick E., thanks, that is useful to know. I was wondering if maybe offering 20% less than the purchase price was too low. But seeing that you and other investors offer around 50% less, my 20% doesn't seem too low. I suppose I need to keep looking for an agent willing to offer lower. Do you almost always offer less than the listed price? Even if the purchase price generates good cash flow and fit all your criterion?
I have only bought 1 house I didn't offer less than asking and it was just such a great deal that I couldn't offer less and feel right about it.
I'm also in a buyers market so that makes things a little easier for me.
Pueblo, CO · Member since 2012 · 54 posts · 32 votes
8y
Great question! I would like to attempt at giving a good answer!
I personally think it’s funny when other investors just immediately say “throw out a lowball offer” and who cares if the seller gets upset? Well you (the buyer) should. Our goal as investors is to get the best possible deal for ourselves while also solving a sellers problem. If you don’t care if the offer offends then then why would they go with you? My approach is to get them on my side. To offend them but in a way that gets them on my side. When I am submitting a lowball offer I almost submit it in a way that Let’s them know I am super vulnerable and making the offer makes me feel uncomfortable. Like I am embarrassed.
MR seller I know you have to be at X but according to my numbers I need to be at Y. Judging by our conversation you needed to be at X because of this bill, that bill, yada yada yada. But I need to be able to make a profit on this house. And based off of what I can sell it for, the work it needs and what your asking there is simply no way to make it work. I’m so embarrassed but my offer is Y.
If you give an offer with empathy they immediately are “on my side” . They start to justify the sale and price for me. “Well you need to make money” and “ I know your not low balling on purpose”.
My point is that you should care if you offend them. Work on your negotiation skills because this business is ALL about how well you negotiate.
It’s not the deal they ultimately got ITS THE DEAL THEY THINK THEY GOT.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
8y
We have often made lowball offers (we have a margin & stick with it) & won more than we lost/offended. Our agent is awesome & has never been reluctant to present our offer.
Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
8y
Unless the seller is a bit slow, they are going to expect a low offer from someone going to the trouble to send out mailers. You have marketing cost to recapture! Bottom line, might be their bottom line, not your presentation style. Assuming they are not real slow, a big concern for them if they agree on a low price is your actual ability to execute the transaction. That would be the point most critical to drive home to most sellers.
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Will, I think that you will be fine as long as you show the Seller respect throughout the process. You can explain that your business model requires that you would have margin to allow for your expenses and marketing costs in order to sell it yourself at a profit. The Seller is not going to begrudge you the opportunity to make a profit. However, coming at them in a disrespectful manner that makes them feel pressured, or taken advantage of will rub them the wrong way, and they will most likely tell you to pound sand, and then bad mouth you to anyone who will listen.
@Derrick E. do you mind telling us how many transactions you have done (just a ball park). Reason I ask is because as an agent, if someone came to me and said I want to buy ONE deal, and I will likely offer 50% less than market on 50 properties with hopes that I get ONE, I can't say I'd be ecstatic to work with them - even more so if the buyer isn't willing to give me exclusivity as their agent. I see that is something you do with yours, and it appears it has worked well for you. Cheers!
@Derrick E. do you mind telling us how many transactions you have done (just a ball park). Reason I ask is because as an agent, if someone came to me and said I want to buy ONE deal, and I will likely offer 50% less than market on 50 properties with hopes that I get ONE, I can't say I'd be ecstatic to work with them - even more so if the buyer isn't willing to give me exclusivity as their agent. I see that is something you do with yours, and it appears it has worked well for you. Cheers!
I am new and have done a total of around 9 transactions if you are also counting some raw land I purchased.
I do not bug my agent to make tons of offers. I do a lot of work on my own and have usually contacted the sellers agent before reaching out to my agent. I basically just use her to do the formal written offer and to represent me when it gets to that point.
Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes
8y
I'd say make the offer whatever you want it to be. But at least have your numbers lined up so you can discuss them confidently. If you are lowballing for the sake of lowballing i'd tell you to screw off. But if you can explain rationally WHY you are at that number, then i don't think you are offending anybody. It's just numbers. Make sure the Realtor knows the numbers so when the agents talk, everybody is on the same page.
Many years ago, I found a B of A foreclosure that the bank was selling for $89,000.00.
I told a local agent to submit an offer for $60,000.00. The agent told me they would laugh. I told the agent "you might not be laughing if I find another agent".
ARRT, RT(R) / Rental Property Investor · Newport Beach, CA · Member since 2017 · 360 posts · 242 votes
8y
Ugh...
(Posted before I finished.)
Anyway, @Vika Bha, the agent submitted the offer, and then the negotiations started. They finally sold it to me for $77,000.00. The goal is to START the negotiations. By the way, I let go of the agent. She lost. I saved $12,000.00.
Never be afraid to offend someone with an offer. :)
Windsor, CT · Member since 2017 · 27 posts · 11 votes
8y
@Daniel F. Harb, thanks for the encouragement. From the advice of all of you and a couple of investor family friends I have spoken to, it seems it is the norm to make lower offers. In fact, investors I have spoken to so far that have told me they made a market rate offer just once or twice.
@Greg Hamer, I do have a particular criteria and I will make an offer based on the criteria. I was even willing to make a full price offer recently because the price was already so low but the property got sold already.
Honestly , no matter what I am buying, I always negotiate . Some people say "You can't do that"... Uh~Huh..
EVERYTHING in life is negotiable. Whether I am buying a cell phone, or a car, I negotiate. In fact, I just bought a car cover yesterday and I respectfully asked the store manager for a discount because I was a good customer. He said, "We appreciate your business, so I'll give you 10% off". Boom! $15.00 dollars saved. (I love saving money!!!)
My point is real estate is ALWAYS negotiable. If they won't budge on the price, get other concessions. Negotiate on every single thing in life. :)
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
8y
I always try to get the property below market price by atleast 25%. However, I have also ran into older investors in their 70s who held their houses for over 20 years and asking for the right offer. In that case I basically offer what they asked for but also ask to contribute 2 to 3k towards closing. My last two deals were exactly the same and they gladly did it. I gained instant equity. Bottom line, there is NO set rule. You assess each deal individually. I have also submitted list of issues for seller to see so I can get lower price.
Investor · Miami, FL · Member since 2015 · 363 posts · 143 votes
8y
@Will Peters we ask the listing agent to be our agent also or if the property is not listed, we go directly to the seller, show the offer, ARV, repairs estimate, and also we explain that we need to make some profit after the repairs
I recently received a call from a recipient of my direct mail campaign about an off market property and have put myself in position to make an offer. I asked him the lowest price he is willing to take; however I plan to offer a bit lower than that. I have read a good amount of blogs on the subject and I am somewhat ready to offer that lower price. I plan to stay true to my numbers and hold fairly firm on my offer.
Does anyone have any good advice about offering with confidence and the presentation of a lower offer?
Explain why your offer is what it is. If what you say is correct & reasonable it will resonate with some folks. Note not all folks. Vast majority of the time a deal cannot be had it's only a small minority of these that you are looking for though.
Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
8y
Great thread, and agree with many of you that I may sound like I disagree with. There is more than one way to win negotiations, some people respond better to ego stokes, others to blunt no nonsense. No nonsense is more my personal style, it certainly has its pros and cons.
@Derrick E., how do you find an agent willing to offer a low number? Or stay firm with an agent unwilling to offer low? The agents I speak to are uncomfortable offering a lower number. And I am offering about 20% off the market rate.
Guys it is YOUR offer at the end of the day. Attach a spreadsheet to the offer explaining why the offer is low. If the agents you are working with are "uncomfortable" its because they are putting their interests above yours. Your agent should be acting in your best interest that means offering what you want. Unfortunately a lot of agents are concerned about their own images and ego over their current clients best interests.