Opportunity is missed by most people because it is dressed in overalls and looks like work. – Thomas Edison
Mistakes made and lessons learned seem to be topics that investors are interested in. Why not learn from mistakes of others so that we can avoid them ourselves?
I wish I could say that it was difficult to come up with a mistake that I’ve made. In reality it was difficult to choose which one, as I’ve made a lot of mistakes!
I’ve been getting a lot of leads and I tend to get a little lazy when it comes to wanting to go and look at the houses; this is a huge mistake to make!
Download Your FREE copy of ‘How to Rent Your House!’
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Most Sellers Will Not Start With A Great Asking Price
The problem is that most sellers will try to hide their motivation and will not give you a good price when they first talk to you on the phone. I tend to focus on the ones that seem really motivated and give a reasonable asking price from the get go. This is the lazy way of doing things and leaves a lot of deals and profit on the table. Don’t fall into this trap.
One of the most important questions to ask a seller during the initial phone call is, “How much is owed on the house?” Most sellers, motivated or not, will tell you the honest answer to this. Beginning investors hesitate to ask this question because they feel it is too prying. Don’t worry about it. You are trying to help the seller, and in order to do so, you need this information. You need to ask the question in the same way you ask how many bedrooms the house has. It’s a normal question and you need the answer.
More important than how much they are asking, is what they are willing to take. If they owe more than you could ever possibly offer them (and they are not in a situation that lends itself to a short sale), you don’t need to waste your time or their time. They may mention a high asking price, but only owe a fraction of that amount. These are the ones that you must go and look at, if there is any inkling of motivation.
After looking at several unmotivated sellers‘ houses and having your offers rejected, there is a temptation to feel that most sellers will not be interested in what you are going to offer. Many opportunities will be lost as you weed out a lot of possible deals in order to save yourself the trouble and hassle of going to see the houses because the seller did not ‘seem’ that motivated. Don’t do this.
Regardless Of What You Assume, If There Is Room, Make An Offer
If there is enough equity in the house, you need to go and see it AND make an offer. A lot of the time you may feel embarrassed by your offer and be tempted to not make it for fear of upsetting the seller. As the real estate investing saying goes, “If you are not embarrassed by your offer, you are offering too much.” Make the offer anyway. I still feel embarrassed about almost all of the offers I make.
The seller might sigh or seem completely deflated and uninterested, but this doesn’t mean that all is lost and that it was a waste of time. This is where following up is very important. Even if you feel the seller will never accept the offer, make a note to call in a couple of days and ask them if they had given it anymore consideration. A lot of times, they will thank you for calling but tell you that the offer was just far too low. At this point, ask them what amount would not be ‘too low’. At times, I’ve had people tell me just a couple thousand more and it just blows my mind that I would have lost the deal had I not called again. Keep following up, as time changes a lot of minds.
A Recent Example
Just recently I got a great deal under contract that I had immediately felt the seller would never be interested in the offer I would need to make, as the house was practically brand new (though it does need paint and carpet) and she did not seem that motivated. I forced myself to drive the 30 minutes across town to see the house. During that first visit, I made my offer and was quickly shown the door. Several days later I called her and asked if she had given my offer any more consideration.
At this point she dropped her price another $30k and asked if I could pay that. I told her that I could not but that I could come up $5k, but that would be the most (I had left room for negotiation). She was still not interested but I could definitely sense that her motivated was much higher than I had anticipated.
The next day, she called and asked if I could pay $5k more than another investor (which would be $10k more than my highest offer). I decided to take my wife to see the house as an excuse to visit it again and negotiate face to face with the seller. After looking at it again, I told the seller that I could not come up on my offer. After a little negotiating in terms of closing quickly and giving her a week to move out after closing she agreed to my offer, even though it was $5k less than my competitor’s offer!
Had I not forced myself to go and see the house and make the embarrassing offer, I would have never put this one under contract. Take this to heart. If the seller has room to negotiate, go and see the house and find out just how motivated they are. Don’t just assume that you know based on your initial conversation with them.
Time does also change people’s minds and it is always important to follow up.