My husband and I are just getting started in REI (Buy and Hold), and made an offer on a property Oct. 6, the first day the seller would accept offers (property was listed 10/2, we saw it 10/3 and our agent put the offer in first thing the morning of 10/6) . Here are the details (if I have left anything important out, please let me know):
- List price of $125K
- ARV of $140K (possibly higher as there were two almost identical homes - lot size, floor plan, sq. ft - under contract on the same street for $150K - $160K that could have positively impacted comps depending on what they ended up selling for.)
- Rent of $1,150 - $1,200 (based on other rentals on the same street)
- Great school district and location
- Cost of Repairs - $8K-$10K (based on our limited experience - we would have had it inspected and looked at by a GC in due diligence had our offer been accepted).
- Our offer - $105K cash, 7 days for seller to respond, 7 day due diligence and close date of Oct. 27.
I received notification via Zillow (where I had added the property to my favorites) on Oct. 8 that the property was under contract (our agent was never notified).
I would love some feedback on whether our offer made sense. Did we miss out on a deal because we underestimated comps and could have offered more? Or because we overestimated repairs (there was definitely a roofing issue - possible replacement, and a big hole in the ceiling on the first floor with water leaking into a bucket below it)? Other thoughts?
Thanks in advance!
It is quite possible that the seller got a better offer. It sounds like your offer was reasonable, I would think that a seller would be more inclined to go with a cash buyer since the questions of banks & financing is removed from the equation. Generally, when I make an offer, I give the seller 48 hours to respond. By giving them 7 days you allowed them to wait for other offers to come in & pick the best one. If you had gone with a shorter term, you force them to give you an answer (reject or counter) without the luxury of waiting a week for other offers to come in.
When I put an offer on a property I like to give myself a few exit's, I know some on here don't agree, but if something doesn't work out I like to have the option.
If you went through a buyers agent have them call the sellers agent to find out what the deal is.
Hope that helps.
No one can determine if your offer made sense but you. Some people are willing to make less/pay more. It also may have been snagged by an OOC that just wanted a good deal. Last, it may have been a pocket listing and you never had a chance.
Have your realtor ask (in a non-confrontational/accusatory way) the listing agent why your offer wasn't accepted. They likely won't tell your agent via email but a phone call may work and you can find out if it was another investor, an OOC, etc.
@Julie Kern Sounds like it might be a desirable area since it sold so quickly and you indicated is was in a great school district. It can be very difficult to grab a great deal in a highly sought after area since the competition is higher. A cash offer gives you a leg up but maybe the other offer was cash as well but slightly higher. My question is if you offered more would the deal still make sense for you? For me it is all about the numbers...
@Bill Sargeson , that's the part I'm a little unsure of. Based on our estimates of the ARV and repairs, going any higher wouldn't make sense. But if we were high on the repair estimate or low on our valuation, then that means we were off on our offer amount and removed ourselves from consideration. Which leads to another question... should we have offered higher initially (say $110K) and then, if repairs came in around what we estimated, used that information to negotiate back down to the original offer (or whatever price made sense at that point)?
I'm going to keep an eye on this property and watch what happened with the other properties that were under contract, what this one ended up selling for, etc. as a sort of case study to help us in the future.
Thanks for your reply!
@Jesse Waters , thanks for your reply. Our agent did tell us that 48 hours is customary but said that there are investors who will leave the response period open-ended so we used 7 days as a middle-ground option. That being said, the property went under contract within a day or two of the day that they began accepting offers. I think in the future we'll stick with 48 hours.
Sorry this one didn't work out for you. Dust yourself off, learn from it & the next deal will be along shortly.
Originally posted by @Julie Kern :
@Troy S. , I had to look up pocket listing. The listing was on the MLS, so could it still have been a pocket listing? And could you define OOC for me? I will certainly take your and @Jesse Waters advice and ask our agent to contact the selling agent. Thanks so much!
Yep, pocket listings, at least in my area, generally do hit the MLS but show as pending almost right away. The agent will put them on the MLS so it looks kosher if they ever came under scrutiny for not exposing the property to the market (which would generally be in the best interest of the home owner they're listing the property for). However, they wouldn't get to double end the deal if they did that...
Most likely, in this instance, you were just outbid.
OOC is owner-occupant. Someone that plans on buying and living in the house. They don't need as big a spread as an investor and may be buying strictly on emotion.
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