Structure a low ball offer so it is stronger

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

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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Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
@Kenneth Mooney excellent example, thank you! I've worked some of those strategies but not 20% interest. These also worked for me when dealing directly with seller. My tactics obviously need to be modified in the MLS sphere, as there is heaps of competition
0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Eric Roloson I bought one place with a septic. The inspection showed it needed to be completely replaced, so we renegotiated with the buyer replacing the entire septic system. I was able to buy this place in a hot market because I knew the realtor and put the offer in the same day it was listed.
0 Reply
Kyle Smith
Rental Property Investor · San Diego · Member since 2019 · 109 posts · 87 votes
6y
@Eric Roloson Yep, you got it 👌
0 Reply
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:
Thanks @James Wise
I'm pulling money from a lender so the super high EMD is not possible. Any other suggestions to compensate?

Cash and a high non refundable earnest money deposit would be the only attractive parts of working with a buyer who has a low offer. Remove the no questions asked certainty of the seller having the money in a matter of days and I see no real scenario where you get an offer accepted.

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Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
@Curt Smith Thanks so much!
What if the property is zoned rural but near a larger town infrastructure? The location is fairly good and I don't think it would be on the market too long, but yes, a smaller pool of buyers. Numbers look good even allowing 10K for well repair. The listing agent says the septic worked while house was lived in last, would that influence your decision on plan of action for inspection? Thanks for pointing out checking required testing? If I can get it at the right price I have room to get those items repaired if necessary. Any other big pitfalls you can think of regarding well and septic?
0 Reply
Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
@Theresa Harris You mean the seller and not you paid for the cost of the replacement septic? You were networked well and it paid off, NICE! Did you have any indication the septic needed attention before the inspection? Was any problem disclosed or was it purely your due diligence?
0 Reply
Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
@James Wise appreciate your clear honest response
0 Reply
Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
When I am going to make a lowball, I call or text the agent first and ask them if I should. That will often give unintended insight into the motivation of their seller. If they say no, don't bother, then don't bother. They will call you when they need a lowball. If they say anything else, you are trying to find out how much room is between your lowball and what they will take, but just sending in a written lowball won't do anything. You have to work the relationships and find out any bit of the seller's motivation if possible. Even when it's a bank property, you can judge on the agent's response just how interested the bank as at this stage. Two weeks they won't care at all, no one will.
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Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
@Jonathan Greene I'm in a predicament. I chose to use a buyers agent simply because it doesn't come out of my pocket of course. However my usual agent was not available due to uncontrollable circumstances. I'm working with a new agent that simply does not communicate well. I'm accustomed to an agent that is a great communicator and has good negotiation skills. They ask the right questions to determine what the seller is looking for in an offer. They have insight into what would work best in a particular situation and understand what I'm trying to accomplish as an investor. Also they establish re pore with other agents to give me, at times, a slight upper hand. This current agent is a dud. No insight and keeps me in the dark. I don't know how they are communicating with the listing agent (email, phone, etc.) or even if they are. When I ask I get very vague responses that don't leave me settled. This is my first experience with such a person. When I first inquired about the property I contacted the listing agent directly and they were very personable and gave the impression the seller was somewhat motivated. Now that I have an agent involved what is the proper etiquette. Is it inappropriate to talk to listing agent? Would that complicate things or send a wrong message? Can I use another agent if I did not sign an agreement with them? Not sure what to do at this point. Help @Jonathan Greene! Since this is an open forum I'd greatly appreciate comments and advice from others that may read this and want to chime in.
0 Reply
Vin Somra
Rental Property Investor · Houston, TX · Member since 2016 · 19 posts · 3 votes
6y
@Eric Roloson
I am a Realtor in Houston. Make sure you didn’t sign a buyer representation agreement first. If you did, then, you can fire your agent and choose to work with someone else. I recommend you interview and meet with a realtor to discuss expectations before choosing to work with him or her. All agents are not completed equal.
0 Reply
Vin Somra
Rental Property Investor · Houston, TX · Member since 2016 · 19 posts · 3 votes
6y
Created*
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
Originally posted by @Eric Roloson:
@Theresa Harris You mean the seller and not you paid for the cost of the replacement septic? You were networked well and it paid off, NICE! Did you have any indication the septic needed attention before the inspection? Was any problem disclosed or was it purely your due diligence?

It's been a long day. You are right, the seller paid for it. There was no indication of a problem with the septic beforehand, but the house needed A LOT of work, so we weren't surprised. They also put in a new heat pump and removed the oil tank as the oil furnace had died. It was only picked up by the inspection. The seller had to pay to have the tank pumped and then I paid for the inspection. I think it was about $350.
I think I spent about $23K getting the house ready to rent:gutted the bathroom as the hot water tank had leaked and they didn't fix the damage, new kitchen cabinets, sink and counter as the existing ones were beyond disgusting and water damaged, new ceiling in the kitchen and drywall in several rooms, painted most of the rooms, flooring, some windows due to a leak they hadn't fixed and we never noticed, insulation. It was a mess, but looks great now.

0 Reply
George Mattice
Real Estate Agent · Thatcher, AZ · Member since 2019 · 5 posts · 0 votes
6y
Eric, its been my experience if you are paying for the septic inspection and pumping to wait after you've done your due diligence and inspected the property. If something comes up on your home inspection that makes you want to back out of the deal you won't be out of a septic inspection.
0 Reply
Eric Roloson
OP
Flipper/Rehabber · Kelso, WA · Member since 2017 · 67 posts · 23 votes
6y
Thanks for sharing @Theresa Harris!
Sounds like you handled that wonderfully. Way to go! I like hearing testimonies of plans working out. It was a mess, but looks great now...YES!
0 Reply
Jermell Shavers
Member since 2019 · 295 posts · 159 votes
6y
@Eric Roloson 2 weeks ?? I would be thinking to myself this guy must think I’m either stupid or he is crazy. Don’t go that low especially so soon. I would have some choice words with your realtor and just ignore any offer or really make you pay for it as in 140 for you since you want to waste my time then I’ll waste yours.
1 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
6y
Originally posted by @Eric Roloson:
@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?

Make another more realistic offer using an LLC as the "buyer"...and hopefully, nobody on the seller's side will notice it's you. If you get it accepted, they will know it was you that the LLC reps, and your reputation will be saved...maybe...hopefully.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
6y
All offers, on any property, should be based on two things:
1 - Your analysis of the market, and thus the value of the property, and how that translates to you. The Market Analysis tells you what the property is worth, which is the potential "exit" number. Your business/REI analysis (your current situation) based on your current financial situation and goals (your plan's timeline criteria), tells you what your "entrance" can/needs to be.
The spread between the two gives you your maximum offer.

2 - The Listing History of the property for sale...and 2 weeks isn't enough of a history to tell me anything.

I rarely negotiate. I just make my offer. I either get it or I don't.
9 Reply
Quincy Lockett
South Holland, IL · Member since 2017 · 374 posts · 432 votes
6y
@Joe Villeneuve
If I could upvote your comment 1million more times I would.
0 Reply
Nicole Cowden
Member since 2019 · 10 posts · 3 votes
6y
@Eric Roloson First find an agent who can guide you who is an investor or investor friendly who can help you on comps... You need your comps & ARV to make a legitimate offer... Your not covering bases & with a well & septic in play that can cost you potentially all of your profit. Run your comps, do your ARV, price a septic & well in your rehab costs, write a detailed offer stating why your offer is what it is. Sellers do get highly offended if they are emotionally attached, if it's business they just do not reply... You really need to get your numbers together before doing anything...
0 Reply
Trin Nagireddy
Rental Property Investor · Cumming, GA · Member since 2017 · 66 posts · 15 votes
6y
@Eric Roloson I would not spend any money before accepting the offer.. I would only do it in due diligence period. Yes septic. Would be change .. some city may not accept the current one , you can not use the flow line for nearly 20 years, of course depends on the city. Good luck .
0 Reply
Kenneth Mooney
Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
6y
@Eric Roloson I would use this same strategy and possibly add in a letter explaining what your plans are for the house. There have been times where I have "pulled on the heart strings" and explained that I was going to make their house beautiful again and that I would love the opportunity to show it to them afterwards (have to execute). Also, on MLS you are going to have to become buddy buddy with the agent so that they make a sales pitch on your behalf.
0 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
6y
Originally posted by @Eric Roloson:
@Jonathan Greene I'm in a predicament. I chose to use a buyers agent simply because it doesn't come out of my pocket of course. However my usual agent was not available due to uncontrollable circumstances. I'm working with a new agent that simply does not communicate well. I'm accustomed to an agent that is a great communicator and has good negotiation skills. They ask the right questions to determine what the seller is looking for in an offer. They have insight into what would work best in a particular situation and understand what I'm trying to accomplish as an investor. Also they establish re pore with other agents to give me, at times, a slight upper hand. This current agent is a dud. No insight and keeps me in the dark. I don't know how they are communicating with the listing agent (email, phone, etc.) or even if they are. When I ask I get very vague responses that don't leave me settled. This is my first experience with such a person. When I first inquired about the property I contacted the listing agent directly and they were very personable and gave the impression the seller was somewhat motivated. Now that I have an agent involved what is the proper etiquette. Is it inappropriate to talk to listing agent? Would that complicate things or send a wrong message? Can I use another agent if I did not sign an agreement with them? Not sure what to do at this point. Help @Jonathan Greene! Since this is an open forum I'd greatly appreciate comments and advice from others that may read this and want to chime in.

Then make the offer with a different agent...that is, unless you did something foolish...like sign an exclusive with this agent.
0 Reply
Jason McVey
Flipper/Rehabber · Buckeye, AZ · Member since 2017 · 28 posts · 16 votes
6y
@Joe Villeneuve
Curious your thoughts on giving a bigger picture of your low ball offer to not offend the agent.
"I'm at 155k on your 200k listing, and here why....40k rehab..ARV is 255k ... so you think your seller would be interested? If so I can submit my offer"
2 Reply
Lesley Resnick
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
6y
How do you even know how much the property is worth? There is a trend of just offering 60% regardless of any other factors. The property could be worth nothing, extensive termite damage and a non-conforming lot that the city will not let you rebuild. The property could be worth more than the asking and is undervalued by the seller. If the model is, "I want value for my money and to pay a fair price", then you can find deals all day long. If you need to steal the property, then you may eventually find something. However, it is not scalable and you will develop a reputation that no one wants to work with you.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
6y
Originally posted by @Jason McVey:
@Joe Villeneuve
Curious your thoughts on giving a bigger picture of your low ball offer to not offend the agent.
"I'm at 155k on your 200k listing, and here why....40k rehab..ARV is 255k ... so you think your seller would be interested? If so I can submit my offer"

Not sure what you're saying/asking.
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