what do you feel about lowballing to get house?

14 Replies

Hey guys. Thanks for taking the time to read this post and hopefully reply. Hopefully this is the best section for me to post this.
My name is Chris. I am a fairly newly licensed RE agent in San Antonio. I've got investors on the line and they want me to find a potential flip house, for which they will completely bank the purchase and repairs of the house, with me contributing zero dollars, even offering me a split of the net. An amazing offer, right? I am just having lots of trouble finding a deal, so I am thinking that I have to create one.

When trying to find a deal, do you ever find yourself lowballing to make the deals happen?

For example, I see a house that is listed at $225,000. roughly $200/sf in an area where renos are happening and the renovated properties are selling at a solid $/sf. However, this house is quite distressed, and may need upwards of $100,000 in renovation. I estimate that the sale of the renovated property would cover all of the costs, and leave an acceptable net, but only if the property is acquired at a low enough price. Does this make sense? I see lots of potential deals, but reliant on the ability to acquire the property at a drastically lower

Do lowball offers ever get accepted? Do YOU submit them? Got any tips or insight on how to get them accepted, how to structure offers (mine will be all cash), things to say to the list agent, etc etc. I don't even know where to begin.

Thank you SO much and if I ever find success in life it will because of the selfless help from people like ya'll. thanks again.


c

ps: if this has been posted, please tell me where to find it! thanks again

A lowball offer of 100k on a listed deal at 225k is very low and while someone may take it, most would see it as an insult. In order to not insult and to have success, find out the reason for the sale. That key information will let you know if it’s reasonable to send over or not. Remember writing an offer takes time and there is a value there. 

@Chris Gilbert I’m in a similar situation but from RE I know you need to know your numbers. No one will give you a slam dunk. Do the comps, know the real AVR then work backwards - rehab cost, your profit, any carrying costs... THATS your offer price. A lot of it is market specific as well. I haven’t flipped yet but I know it’s incredibly competitive and you’ll need to know your numbers and they gotta be fairly accurate.

I’ve thought about “bulk sending” lowball offers but in reality, it just don’t work without a legit basis for the price.

100% of profit made on real estate happens on purchasing at the best price possible. You have to determine what that is based on Comps, Location, Repairs, Exit Strategy, etc.  The number or percentage is different for everyone and on every deal.  I've purchased properties at up to 125% of asking price before (bidding war) and as little as 25%, because that's what it was worth to me.  

Before I make offers I find the sellers motivation to SELL> why are they getting rid of the property? 

More motivation = better deal. I only look for distressed property. Check comps and compare photos of condition and age. If there's no value add (interior or exterior) it's not on my radar. 

I drive the neighborhood and look at houses with my own eyes, NOT Google Maps. I run the numbers based on rental rates and make an offer. My offer is never a low ball offer because I did the research and know the neighborhood. 

I often think about this as well. There are dozens of homes in my market on the MLS that have been listed for 300 days+

Using the listed price the numbers don't add up.  However at 30% off they might.  The fear is that if I have my realtor shoot off a bunch of low ball offers that he might get a bad reputation and be labeled "That guy".

@Chris Gilbert I think this question really highlights one of the issues tat arises when investors want to work with agents. Agents are trained to look on the MLS for deals but when you work with investors they want off market pricing. Yes you can make lowball offers and hope that someone accepts them, but I think if an agent is working with investors that want to flip, that agent should be contacting distressed homeowners to try to generate off market leads. Obviously you need to make sure you have an agreement between you and your investor clients to make sure you get fairly compensated. In my opinion the way to add the most value to these clients is to find them off market deals, and because you are licensed, if your clients dont want the property you can always take the listing for the seller. Just my 2 cents.

@Lydia T. Licensed agents actively pursuing pocket listings is frowned upon. The idea is, the MLS is there to expose a home to all equally. It doesn't theoretically do the seller justice with limited exposure. I know it happens all the time though. Our MLS Chief legal counsel just sent us a video about that and how we have a duty to list a home for maximum exposure versus pocket the listing and show it to a few select potential buyers.

Personally, if I was wholesaling, I’d rather not be licensed.  We’re bound by a lot of different laws and Code of Ethics others aren’t restricted by.

@Phil B. Im not suggesting that he approach the homeowners as an agent to list their homes. The approach would be as a buyers agent. ‘Hi I represent an investor buyer who is buying homes in this area would you be interested in selling?’ Is the message I envision. Im not licensed so this isnt my area of expertise, but logically it would seem that if the agent is up front about who they are representing in the transaction then there shouldnt be an issue? Please correct me if my logic is flawed

As a sellers agent, I have no problem with lowball offers. It gives me something to shop around. "Hey Joe, you know how your clients looked at 123 Main? Well so you know there is an offer on the table. If they have an interest they have to move quick". It also gives me something to help try and move for a price drop later if it still sits. Now if my client said "I think we might take that 100K for our 225K house", I would say "Wait, let me drop it to 180K and see if we get traffic, let me drop it to 150 and see if we get traffic, just taking an offer less than half of asking is not in your best interest".

As a buyers agent, making lowball offers on MLS properties that have not been on for a long time is a waste of time and energy. Because of the reasons above. Low offers are good for vacant properties that have been on the market for a long time with highly motivated sellers. The best way to get your client a cheap house, is to represent your buyer and find those properties that have motivated sellers and make your offer with no competition to drive your price up.

Just my 2 cents

@Phil B.

"Our MLS Chief legal counsel just sent us a video about that and how we have a duty to list a home for maximum exposure versus pocket the listing and show it to a few select potential buyers."

Would you be doing your buyers a disservice if you found the house they were looking for off market and then tried and get it as a listing, instead of having your clients make an offer?