I have a lead off my first direct mail campaign. This older man (probably in late 70's or 80's) called me and said he and his wife got my letter and wanted to know how much I would pay them for their house.
I started off the conversation asking him about his house and he told me that the house was built in 1997, has a newer roof (3yrs. old), newer AC (3yrs. old), new paint, new carpet, new wood floors, new tile, new fence and new fixtures. I asked him if the house had a mortgage on it and he said he owned the house free and clear. He let me know that he is aware that the real estate market in Dallas is doing really well and prices are going up.
It sounds like offering him the typical offer of ARV x 70% - repairs will not work and probably make him mad and destroy any chance I would have of making him another type of offer.
How would you suggest I would proceed? Or what type of offer would you make this individual?
I would ask for a meeting first at the property. Its always better to have the tough conversations face to face.
If you dont have a price in your head ask him if he has one and go from there.
The advantage is that he owns it free and clear. Maybe there is an owner financing option?
Ideally you need to see why he wants to sell? What makes him tick
Why did he reach out to you? I'm trying to understand why he would not contact an RE agent? Did you ask him what is the house worth?
With the information provided it doesn't sound like a distressed home or a motivated seller. If that is indeed the case why would you waste time? I'd tell him he has a beautiful home and recommend an agent I know to help him with the sale.
I would ask him what kind of updates he has done to the property. I would tell him that homes completely remodeled in his area are going for X. His home needs Y worth of upgrades. You can pay cash on a date of his choosing in As-is condition. That ability is worth something and you don't work for free. So therefore to bring his home up to par its going to cost you Y in rehab. You need to make a certain ROI in order to satisfy your investors so your offer is _________.
@John Hixon Sellers get emotional about these things. It's your job to remove the emotion. If you are paying all cash out of your own pocket you can afford to pay a bit more. But keep in mind you still have to leave room for a profit.
I honestly don't really let a seller's asking price phase me. I make the offer of what it makes sense for me to pay. The most I have offered is 75% of the ARV - Repairs. But I almost lost on that deal.
Thanks for the reply. I am supposed to speak with him later today. He made it pretty clear that the house does not need any updates because he has already done, new paint, new carpet, new hardwoods, fence (3yr old), roof (3yrs old), new a/c, new tile, new fixtures.
I will see what he says later today and go from there. He might not be motivated enough to sell but that's okay because its just one no closer to a yes.
I would make him an open ended cash offer. I would explain that it sounds like he has maintained the home great but in order to get top dollar.... Does he have SS appliances, Granite counter tops, etc.
Just make your offers. Doing DM you'll get a lot of people like him. I typically tell them I need to walk through the property to make an offer as it's based off of the condition. Build value in what you bring to the table. No commission, no inspections, no closing costs, cash, etc. Make your offer. If he scoffs... so what.
Thanks for the reply. I asked the seller what he was wanting for the house and he said he didn't know but he just wanted to call and see what I was offering him since he knew the real estate market was really going up. He definitely is not distressed and said he does not need to move but just wanted to call because if I was offering enough he might consider it.
Sounds like a tire kicker, while good karma goes a long way, this is a business. Don't get me wrong I'm guilty of doing this myself. This is a people business. Some time now might lead to a deal later. Just I would not invest a great deal of time in trying to make a "see what I was offering" into a deal.
Cash or Terms
For Cash - never more than 80% of FMV in great shape.
It costs 10% to sell with an agent, and you need to buy 10% equity, so dont over pay.
Terms on free and clear houses, perfect shape, I will give 100% of value on my private terms (installment sale).
Check out podcast #77....great one for negotiating price!