Structure a low ball offer so it is stronger

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Structure a low ball offer so it is stronger

Eric Roloson
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes

If I was to put in a very low offer due to the fact that the listed property has had no written offers in 2 weeks how would I structure that?

Example: 100k property with an offer of 60k

I know that's a large spread of 67%

What kind of earnest money? No contingencies?

What types of strategies would you implement to make it most attractive?

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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y
Originally posted by @Eric Roloson:

If I was to put in a very low offer due to the fact that the listed property has had no written offers in 2 weeks how would I structure that?

Example: 100k property with an offer of 60k

I know that's a large spread of 67%

What kind of earnest money? No contingencies?

What types of strategies would you implement to make it most attractive?

 You'd want to do a cash offer with a high non refundable earnest money deposit ($10k+) and a quick closing (14 days or less) with zero contingencies. 

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  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    Kind of hard to say without knowing more about the property. Is it in livable condition? What are the comps? Where is it located? What is the ARV? What do you know about the seller?

    An offer that is 40% less than listed price on a 2-week old listing will probably get laughed at unless it's an extremely motivated seller.

    9Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Eric Roloson:

    If I was to put in a very low offer due to the fact that the listed property has had no written offers in 2 weeks how would I structure that?

    Example: 100k property with an offer of 60k

    I know that's a large spread of 67%

    What kind of earnest money? No contingencies?

    What types of strategies would you implement to make it most attractive?

     You'd want to do a cash offer with a high non refundable earnest money deposit ($10k+) and a quick closing (14 days or less) with zero contingencies. 

    34Reply
  • Richard Queen
    Eastern KY · Member since 2019 · 30 posts · 43 votes
    6y

    Agree with @James Wise. If you can make a cash offer with quick closing, that's the strongest. No contingencies. I use a HELOC to make cash offers and then pay it off after refinancing.

    8Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    You're basing your 65% offer on a two week non-offer period?  Really?  If it was my property listed, and you made that offer in that timeline to me, I would never accept an offer from you ever again...even if it was over list price.  That's not emotion talking, that's me thinking that you have no credibility, and wondering if I accepted this offer (or future ones), could you even close...or would you think you could renegotiate just before closing.

    16Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    Two weeks is not a long time for a listing to jump in with a low ball offer.  Generally speaking for a lower offer, high deposit, no conditions, and be flexible with closing.

    3Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    6y

    I agree with @Joe Villeneuve, you would get a lifetime ban from me. 60k offer on 100k after 2 weeks on the market would only be viable if the listing was severely overpriced and you were offering with the comps. What are the reasons for your lowball? Is it a private seller or an REO? If it's an REO you are really wasting your time.

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    5Reply
  • Kenneth Mooney
    Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
    6y

    @Eric Roloson I would do as follows: provide proof of funds, no due diligence period, and 20% of purchase price as earnest money. This has worked for me personally on off market properties where I am speaking directly to the seller. It shows the seller just how serious you are. Their viewpoint becomes "Well, I know its $20,000 off from where I wanted but I know at least I would have the money in 10 days" instead of "Well, its $20,000 off from what I want and I don't even know if the guy has the money to close."

    9Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    What you need to do is learn how to make money without having to buy low at severe discounts.  You can make more money that way if you buy with the correct terms.

    3Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Thanks to all for your advice and perspective. I counted on sellers/agent may not respond or laugh off my offer. But I did not take into account they might flat out be offended! It makes sense it may convey a message that is not what I intend.

    The house is in terrible condition and needs an extreme rehab. This is not an REO. Also, there is a well and septic on the property. This is my first potential deal that is rural. Should I inspect one or both at my expense and put that in the offer?

    I do plan on increasing my offer some as it is a sellers market. Thoughts on a sensible number and terms that leaves room for repair? Obviously the septic can be a real issue. The well supposedly worked when it was lived in. Again, thank you for sharing your experience and knowledge!

    2Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Obviously you would need the numbers to give accurate advice. I am talking more about what percentage margin you leave yourself to negotiate, like 10%. Also what is the maximum percentage you will offer below listing, as a general viewpoint, as each and every deal is different.

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    You should inspect the septic and well.  But if your offer is still really low, even if it fails one of the two, don't count on them negotiating.  Septic will need to be pumped before the inspection.

    0Reply
  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    6y

    Good advice above re strong offers, high earnest, no due dilligence (do it before offering), cash.  

    BUT I suggest you stay away from rural AND wells until you get to know wells.  If the well or pump is bad its $6k to $10k for a new well.  Wrecks of a house in rural are tough to fix, getting contractors to a rural house, then who will be your renter or buyer.

    Go after deals with larger buyer pool once the deal is done.  Septic is no problem, get it pumped after rehab, which is after you run some water through the system from rehab use, but wells are a wild card.  Buyer or lender may require testing in your area.  Ask a local agent who sells in the area.

    1Reply
  • Kris L.
    San Antonio, TX · Member since 2019 · 930 posts · 836 votes
    6y

    @Eric Roloson

    2 weeks on MLS? Seller probably isn't sweating yet. After 100+ days of no offers, lowballs start to look a lot better.

    3Reply
  • Josh Dillingham
    Rental Property Investor · Brattleboro, VT · Member since 2015 · 204 posts · 174 votes
    6y

    @Eric Roloson cash offer with a 2 week close.

    2Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    @Bob Okenwa the house is not even close to livable condition. The house is not too far out from a small town and near a major highway. ARV is around 200k. I have a pretty tight budget is the reason I'm offering on the low side.

    Have you offered at 40% and had much success?

    1Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Thanks @James Wise

    I'm pulling money from a lender so the super high EMD is not possible. Any other suggestions to compensate?

    0Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Thanks @Richard Queen, that HELOC sure comes in handy when you need it! I need to do the same :)

    1Reply
  • Diana Jing
    Rental Property Investor · Dallas, TX · Member since 2019 · 48 posts · 121 votes
    6y

    @Eric Roloson Any idea what rates we are seeing on HELOCs right now?

    0Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    @Joe Villeneuve @Jonathan Greene thanks for shedding light on consequences of a low offer. What if I get no feedback from listing agent. How do I get back in "good graces" with listing agent?

    0Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    @Diana Jing I believe around 6.5%

    0Reply
  • Richard Queen
    Eastern KY · Member since 2019 · 30 posts · 43 votes
    6y

    @Diana Jing I got a HELOC for 4.75% for 80% of appraised value on a free and clear SFR I have. It's a great tool to have in the tool box.

    1Reply
  • Kyle Smith
    Rental Property Investor · San Diego · Member since 2019 · 109 posts · 87 votes
    6y

    @Eric Roloson A tenet of REI says ‘it doesn't hurt to just put in an offer and see what happens.' In this case though, it certainly can and probably will hurt your long term prospects. Offering such a low ball number after only two weeks will probably only irritate the other side.

    Unless your market is The San Francisco Bay Area or NYC, two weeks isn’t an exorbitant amount of time for a property to be listed and probably doesn’t warrant such a low offer.

    With all that said, if you’re dead set on that number, make it more appealing by offering all cash, no contingencies and fast close.

    Good luck!

    0Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Thanks @Theresa Harris

    Have you had a lot of experience with well and septics? 

    0Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    Thanks @Kyle Smith I should come up based on the feedback. I've done some private sales without agents and apparently that is a whole different ball game due to different needs. Didn't even realize I'd rub them the wrong way. Even though there should be no emotion involved like "thank you for your offer, but your need to come up substantially higher to be considered". I don't want to burn my bridges 

    1Reply
  • Eric Roloson
    OP
    Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
    6y

    @Kris L. based on the market and how fast listings go pending 2 weeks sounded like a long time. Sounds like I need to cool my jets and face the fact that 2 weeks is short comparatively

    0Reply
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