Presenting Low Offers Without Offending a Seller
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?
I would definitely find an agent that is willing to offer lower than asking. You are going to miss out on a lot of deals by continuing to work with that agent. I know many people that will write their own offers if they are sending out a lot of them. Your agent should be able to help you out with the teaching you how to do that, especially if it is going to be saving them a bunch of time.
I always include a cover letter with my offers, especially when submitting a lower offer. This shows that Im a serious buyer and that there is legitimacy to the offer amount. Ive always had positive experiences going this route and I feel like it also makes my offers stand out from the rest.
I have NO emotional response to business. I make the offer that works for me. If the seller is too emotional to take business personally that is their problem.
With regard to the realtor they are REQUIRED to present every offer you tell them too. If I had an agent even balk at making an offer I told him or her to I would immediately fire them and report them to the licensing board.
Wow, thanks everyone for the great responses. I have done all of my research and plan on sticking to my numbers and presenting the offer with confidence. I think keeping the seller happy will be key. Hopefully tomorrow goes well, thanks again for the great advice.
@Will Peters - personally I'm in agreement with the forums feed. You're the one making the investment and the numbers must work for you. I like the suggestion about attaching spreadsheet outline 'why'; however, wouldn't want to get caught up in the weeds of 'he said / she said'. Though I'm betting the individual that suggested has a plan. And most likely would use in competitive situations, or similar. Here in Grand Rapids, MI, we have one of the lowest vacancy rates in the country, and the out of state investors I work with are willing to work with me to find the right number. I'm an investor, as well as an agent, and recognize each buyer/seller has unique criteria specific to their needs and goals. Personally, it's better to lose the battle, win the war. From my corporate sales days - "100% of no commission is worse than X% of some commission" (within reason - effort and complexity of relationship. I'll "fire" clients for not being reasonable or professional). Keep the conversation flowing... good stuff.
jacquescyr.com
A seller can counter any offer made. If they don't get that--well, too bad. If they are working with a real estate agent, shame on the agent for not simply pointing that fact out. In fact, as a previous commercial real estate agent, I was more than happy to get any offer on a property I had listed--it's a place to start a negotiation. An offer shows interest. There's no negotiation if no offer is ever made.
@Derrick E., do you contact the sellers agent, see the property and then if you decide to buy it, purely use your agent to present an offer? Or do you write your own offer letter and then only if it accepted, then contact your buyer's agent to step in?
@Dave Passey, do you write your own offers and then have your agent step in once the offer is accepted. I like this idea as it doesn't waste too much of my agent's time and I'd be able to obtain properties at a discount. Win win for both.
@Vika Bha I do contact the sellers agent and ask all the general questions I might have about the place. If I like the answers to whatever questions I might have then I will at the very least do a drive by and check out the street, neighboring houses, and see what the outside of the house looks like, etc etc.
If I still like everything I see then I will get on the county assessor's online site and pull the info. See how much the owner paid for the property, how long ago they bought it, etc. This gives me another idea as to how much I can low ball. Houses are not selling in my area so I'm not afraid to low ball but I still like to improve my odds.
After all of this, if I am still interested, then I will ask my agent to make contact and set up an appointment to look at the place. She knows that I'm going to low ball, but she also knows that I'm going to make an offer on just about every single house we go look at because I've done a lot of homework before hand.
If it is an off market deal then I do EVERYTHING myself. I typed up two deeds this morning as I closed on a house and extra lot today. No reason to use lawyers for all of that.
I personally don't use an agent at all for my offers and closings. I have a real estate attorney that handles anything usual that would come up. The standard closings are pretty straight forward. Agents do have value though if you are not knowledgeable about the closing process.
I just know that many of the agents that I have worked with in the past get fed up real quick sending out so many offers for investors when they know that they aren't going to go through. That's why I would say write them yourself. It only takes a quick minute for them to get you some very basic info (that you can really find on the tax records yourself when you know where to look) and then you can do the time consuming part (10 minutes per contract) and send it back to them to send out.
So, I can't say for sure that my plan works because I'm still in the process right now, but I've been prepping a For Sale By Owner for a future low ball offer. I've told them that I'm an investor and I can't pay what a regular homeowner can pay or I wouldn't make any money. I also told them that there isn't a right or wrong answer, but they have to decide if they want to wait for a homeowner who can offer more or if they just want to be free of the house and if we can do it, I will do my best with an offer, but it won't be what they are asking.
I twice told them "no offense, but the house isn't in very good shape" and I also told them they were asking over what the county says it's value is. (I'm trying to help them see that their asking price isn't realistic.) I told them I'm trying to help them and am asking other investor friends to take a look at the property too, in case one of them wants it because I want what is best for the house and the neighborhood. The house is boarded up and I told them that isn't good for anyone, so I'm doing what I can to help.
I've told them it's a seller's market right now and most houses in our area are being sold between 1 wk and 1 month after going on the market, so if this house has been for sale longer than that (it has) and he hasn't had any offers (given the condition and location, I'm assuming not--I'm looking to use it for Section 8), he should really consider an investor's offer.
I also told him that, no offense, but most homeowners wouldn't be interested in the house because most homeowners want a nicer house, even if they end up trashing it later. I told him that if he sells to an investor, they will rent it out and will then have to take good care of the house to keep it rented. (Or at least in theory they will.)
He hasn't paid his taxes yet. (I suspect it's an inherited house.) I plan to look at the house inside in person (I'm out-of-state) next week and will tell him about the taxes, whether I decide to offer or not. If I decide to offer, I'll tell him about the taxes and that I'll pay them if we can get into a contract before the end of the year.
I'm trying to slowly let him see that his offer isn't realistic and that I want what's best and am not just out to gouge him. When it comes time to offer, I'll list all the things that need fixing and how much it will cost so he knows I'm not just making up offers. But since the county says the house is only worth $22k (he wants $25k), it won't be long before I'll reach that in repairs if the inside looks like the outside. If I need to, I'm not beneath offering him $1 just to get it off his hands. But I'm hoping not to go below $5500 because that's what the land is worth, so it only seems fair that he should get at least that. We will see...
Oh, and I'm keeping him up to date about other people's interest levels, so he knows I'm honestly trying to sell his house. I told him I don't care if it's me that buys it, but I want someone to because it's what's best for the house and the neighborhood. But whenever someone says they aren't interested, I use that opportunity to gently remind him of what he's up against in selling this house. ;-)