How to compete with off market cash offer

Question

....I am not the one with the cash offer!

I am first in line for an off market 5 unit value add.  Great location.  I look to stabilize and wait for long term appreciation in my investment strategy.  I don't need tons of cash flow up front.  My bank will finance 100% with equity in another property as my down payment collateral. My other option is to sell my single family and 1031, but that slows the process down.

Another buyer got wind of the sale and has approached the seller with a cash offer.  Does anyone have good suggestions on how to make my offer stronger?  The seller is a friend....but this is of course business, meaning she's being transparent and above board, but she also will take the best offer.  I told her I'm not in a position, nor do I have the desire to get into a bidding war.  Purchase price is 650.

Denise Supplee · Answer

If price isn’t where you want to compete, focus on certainty and ease. Shorten contingencies, show proof of funds and lender commitment, offer flexible closing or a rent-back, and limit retrades. A clean, reliable close with minimal friction can be just as attractive as cash, especially if the seller values predictability over squeezing the last dollar.

James Mc Ree · Answer

Do your calcs and decide how much you are willing to lose it for. If your friend will tell you the current bid, you can decide if you want the property or not. If not...

Ideas (if you don't already have them):

- Discard contingencies

- Offer to pay seller's closing costs

James Hamling · Answer

I don't know about you @Brendan Chase but I've never seen a closing where seller was paid in chickens.....

Everything is cash at closing, when there is any proceeds to be had. Cash offers, financed offers, all offers.

I'd start with that clarification.

Second, run the numbers. Get your MAO, and stick to it, end of story.

Most sellers care about there net from closing. They Think a cash offer = better net, and rarely does it. Often a "cash offer" is various iterations of smoke & mirrors where the "buyer" simply want's to tie things up, to shop-it too convey the buy to another who may be an actual buyer, or not.

That is generally pretty easy stuff to sell against. Because 95% of those "cash buyers" come off very pushy, obfuscating a lot, not being clear and with all kinds of catches in the fine print. If your legit, not pushy, friendly and informative, stating where you stand matter-of-factly, win loose or draw you got nothing to worry about.

You win you win. You loose because someone exceeds you MAO, you win.

You need to focus on yourself and not psyching self out on what others do or don't do, have or don't have. If you don't trust your #'s and pitch, how can anyone else?

Kevin Sobilo · Answer

@Brendan Chase, if you are someone confident in your ability to see issues with properties could you possibly waive inspections in your offer to make it more appealing to the seller.

Inspections are one of the biggest reason a deal doesn't close or that the seller ends up conceding more $$$. So, if your offer waives that can make your offer appear stronger without paying more.

Perhaps suggest that she go back to each side for 1 highest and best offer. That would give you an opportunity to make this change with inspections. You could also add in an escalation clause so you can keep your offer the same BUT automatically escalate it to beat the other offer up to a maximum amount.

For example, if your offer it $650k but you are willing to pay $700k MAX and you add in an escalation clause to beat any other offers by $1k up to that amount. If the other person offers $675k, then your offer is automatically $676k without creating a bidding war where you go back and forth.

Jules Aton · Answer

Generally net proceeds, contingencies or rather lack of contingencies and shortest time to close drive the winning deal. I would move forward with best and final offer. Hope it works out for you.

Kyle Vogeler · Answer

The appeal of the cash offer is the security it provides to the seller. That being said, you counter that offer by making the seller feel just as secure with you bid.

Here are some options:

- Provide a large Earnest Money Deposit (up to the amount you need to put down). This shows the seller that you are serious and confident in your ability to close.

- Provide the documentation showing that you have financing for the deal secured

- Offer a quicker closing timeline if possible. If your lender is comfortable with you, can you close in 2 weeks? This strengthens your deal.

- Remove the financing contingency. This lets the seller know you wont back out easily, and if you do have to back out they get the EMD.

Jake Yuskaitis · Answer

you could offer a seller financing option where the deal is in favor of him and you refinance after let's say 5 years. He's making money on his money for 5 years and then gets a lump sum at the end of it.

he is making interest on it then you could also arrange for him to manage is and get compensation for that. something i've seen borrowers do in the past.

Don Konipol · Answer

I don’t compete with competing offers - and I find 75% of them never close.  The offers that don’t close reasons range from property not passing inspection; financial information provided (or assumed) not accurate; buyer couldn’t obtain financing or didn’t actually have the funds; buyer merely looking to tie up the property with a contingency clause and “flip” the contract; buyer hoping to lower purchase price by “haggling”; seller never having an actual offer , often just a verbal expression of interest; seller and buyer get into a “pissing” contest; buyer credit issues pop up; buyer indicted for criminal activity; and about 100 other reasons. The 25% of the time the deal with the other buyer closes I move on; there’s only about 10 million properties for sale in the U.S. at any one time.  The 75% of the time the deal doesn’t close the seller will (usually) come back to me - and I’ll typically tell them I’ve already purchased or identified another property, which I’m getting at a lower price/value.  However, if they want to match that other deal by lowering their price, I’d be interested in closing. Any investor doesn’t HAVE to do any deal - their are only a very few which are so GREAT that the investor should just grab it with both hands.  As examples of those deals I personally had experience with was the half interest in a property worth $400,000 I purchased (closing had to occur that day!) for $15,000; the 60% ownership my partner and I obtained in a 2 retail centers (equity valued at $500k) for no cash, just using our borrowing ability to replace a 13% mortgage with a 4% mortgage; the 4 parcels an investor acquaintance of mine picked up in bankruptcy court for $200,000 and sold one of the parcels 6 months later for $935,000.  Anything less and I’m prepared to walk away if my terms aren’t met.

How to compete with off market cash offer

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