How to Overcome Your Fear of Making Low (But Fair) Offers to Sellers

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When it comes to negotiating with sellers, it can often feel pretty uncomfortable making offers, but I want to include some actionable tips here that will help you navigate the waters.

Before the negotiation process even begins, in order for you to first get there, you have to be make sure you’re sending your direct mail to the right people. If you are struggling with that and find yourself not getting as many appointments as you would like, I recommend reading my previous posts on setting up an effective direct mail campaign and some of the common mistakes real estate investors make when they market.

The more you do this, the more appointments you will have and consequently the more opportunities you will have to make offers. If you think you are failing because you are weak on the phone, I suggest checking out this article I wrote to master taking calls from motivated sellers.

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Making the Offer

When I first started making offers on distressed properties, this would be the part of the appointment I would look forward to the least. I had spent my time first building a rapport with the seller on the phone, then took the time to walk the house with them and really get to know them. Sellers often feel so comfortable with me that they may begin to tell me stories about when they used to live there as a child (if it’s a relatives house), or they may relay gossip from the neighbors or discuss their favorite sports teams.

Related: The Clever Psychology Trick You Need to Successfully Negotiate With Type A Personalities

But eventually, you have to cut the small talk and get down to business. If you are new to this and uncomfortable making an offer in person, here is what I would recommend. Let them know that you need some time to run the numbers but that you are still definitely interested in the house. Try to get back in touch with them within a few days and ask for their email address.

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Then, once you have had the time to make sure your offer is where it needs to be, send them a letter of intent to purchase the property. Along with the letter, I would include proof of funds, any testimonials you might have, and the estimated cost of what it would cost the sellers to fix the property themselves. Oftentimes people have little understanding of the reality of flipping houses. They see all these shows on TV that are likely fictitious (or at the very least exaggerated) and just see the big numbers. You need to take them back down from orbit and explain this to them. I do this by listing out a complete itemized list of the repairs needed with their cost, the closings costs, and a reasonable estimate of the home’s ARV based on comps in the neighborhood (which I also attach).Chris Feltus Realtor

I do all of the same things in person, but it can be a bit more intimidating to do so. If you go the email route, it’s much easier to bundle everything together in an email attachment and send it off. What I do is usually walk them through the math step by step, showing how much they will net selling the traditional way (MLS) versus fixing and selling with an agent versus selling to me today as is.

When you walk them through it, I find it’s much easier to explain the process and to help illuminate any areas of confusion, and it also helps them understand why your offer is what it is. Being in person also has the added benefit you being able to answer any questions they might have. Sometimes I even go and drive some of the comps with them to show them why I think their home is worth “X” amount.

You SHOULD Feel Uncomfortable Making Offers

When you are new to this it can feel like you are about to insult them when you make your offer. But the best way to get over this fear is just to get enough practice. If you are making them fair offers based off. They know they can sell their house for a little bit more if they list it on the MLS – or they decide to put some sweat equity into the project. That is not why they are contacting you. Often times these sellers are at wits end due to the culmination of multiple problems that have been building up.

Related: 6 Key Steps For Fearlessly Negotiating Great Real Estate Deals

Most of them are. Again, the key here is giving them a fair shake. If you just go around low balling people unrealistically don’t be surprised if people don’t take to kindly to you. However, if you are respectful, genuinely care about them and make a fair offer you don’t have anything to be embarrassed of.

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What Happens if They Say No?

The numbers will either work for them or they won’t — simple as that. If you didn’t try to steal the house from them, then there is no shame offering at where you need to be in order to be profitable. People tend to fear offending the sellers, but I have done this for many years, and only in a few instances has anyone ever been offended by my offer.

Sometimes you can renegotiate or bump up your price; other times you won’t be able to come to an agreement, and that’s OK, too. Maybe right now is just not the right time. Thank them for their time, and follow up with them several months down the road. Keep them in your database. Many times I find that a few months later, they are still in the same situation and finally decide to sell for the offer they initially declined.

What negotiation tips would you add to this?

Let me know with a comment!

About Author

Chris Feltus

Chris is an active real estate investor who buys and flips houses in the Dallas real estate market. He enjoys helping others along on their journey. In addition, Chris operates as a licensed Realtor in the Dallas-Fort Worth area.

13 Comments

  1. Wesley Emison

    This article was exactly what I was looking for today – thank you for writing this and providing detailed tips on how to bridge the gap between a high asking price and a realistic offer. I have a few questions for a situation I am in this week:
    Question 1: The situation is that another real estate investor is selling a 3plex in my area. I’ve looked this person up in the county deed registry and see a history of buying and selling in my target area. I think the asking price is far too high. The property has sat on the market but not for a long extended amount of time and doesn’t appear to be distressed, although the county taxes are 2 week delinquent. It also appears that this is the last property this person owns and that they have been selling over the last few years. I have several valuation reports, from two different 4plexs I have purchased within a 1/4 mile of this property. These reports value units in this area at around $22,000/unit, thus I approximate the value would be approximately $66,000. The listing is for $125,000. From the get-go should I avoid even making an offer if we are that far apart? I would probably offer $75,000, which is still $50,000 less than their listing (but higher than what the bank may apprise it at).
    Question 2: I am looking to leverage, with putting 20% down. It is my understanding that the bank will only loan @ 80% of the appraisal, not the purchase price. To my understanding this means if I were to get into this property I have mentioned for say, $90,000 after negotiations. I would need to bring $37.2K to the table as the bank would only loan $52.8 (80% of 66K valuation based on comps in question 2). Am I understanding this correctly with the bank financing perspective of apprised value vs. purchase price?

    Any insight or follow up questions is appreciated!

    • Josh Smith

      Rule #1 always make an offer if it is something you are really interested in! Maybe you can come up with some creative financing tactics, maybe they would be willing to owner finance if an agreed upon number was hit. Just because your number is lower doesn’t mean you don’t try.

      • Wesley Emison

        Good insight, I was thinking only about bank financing because I have access to low rates (4.2%/15 year amort w/ a 10 year balloon). Maybe there is a way to make the financing work but I wouldn’t want to find creative financing just to justify paying more.

  2. Tyler Chartrand

    great article. I struggled a lot with this at first in the wholesaling game the offers are LOOOOWWW. What you have to realize is just how valuable the actual money is. Chances are the property is not a fresh, clean MLS listing or your low offer will have no chance so likely there is something needed for the property to be at full potential. There is also a very strong MOTIVATION that your seller has and it is your due diligence to find a SOLUTION that benefits all parties. Good Luck everyone!

  3. Deanna Opgenort

    Need to know if you are comparing apples to oranges. Are your $22k/door units similar construction/similar age, similar amenities? Are yours 30-year-old all-original, heater on last legs, roof needs repair, w/section 8 while his are impeccably maintained with granite kitchens, vaulted ceilings & rented to Drs & Dentists.
    He could just be shooting the moon, seeing what the market will bear, or the market really could have changed that much if you bought yours a couple of years ago (woohoo! yours are worth more than you thought)

    • Wesley Emison

      These are mainly similar. While I have 2 2/1 and 2 1/1 in each 4 plex he has 2 2/1 and 1 3/1. Same area, same tenant class, same condition, same type of deferred maintenance typical for the area. He has window air units while I have the nicer built in wall units, mine have been gutted in 2007 and 2010 respectively down to electrical and plumbing and his was gutted a few years prior to mine, so a little more dated than my upgrades. I bought my first 4 plex in Dec’15 and the second in Jan ’16 so my market valuations are still warm from the printer. One or two perspectives on his being nicer is that the 3plex is all brick with a more level lot and more parking. Mine is street parking mainly, vinyl and a sloped lot. I would say they are more alike than different. Thanks for the input and based off this what your approach would be!

  4. David D'Errico on

    Great article. I’m looking to get in to wholesaling and want to start a direct mail marketing campaign soon. This was very insightful and helpful. I like the email idea, that way they can look it over on their own time and analyze it. Then when you follow up they have had time to read through it instead of trying to rush over it at the dining room table with you looking over their shoulder.

  5. Kevin Peguero

    Hey Chris, great article.

    I was curious. Since you are both a RE agent and RE Investor, how do you position yourself when sending your direct mail campaign? Do you offer all services that both investor and agent can provide or do you only offer investor services? Hope you can help.

    Thanks!

    • Josh Smith

      MY partner is a realtor. On our direct mail we let them know that there is a realtor on staff in the disclaimer, but when i talk to them I don’t mention the realtor benefits unless the house is just retail ready and they want retail price. I let them know we have a realtor but we are not representing them as a Realtor

  6. Casey Murray

    Awesome article, Chris. I really like the concept of being genuine with the seller. People want to do business with people they like, know and trust. Sellers sense BS a mile away and become hesitant to pull the trigger on a “low” offer.

  7. Karl B.

    I’m not the first to say it but this article is exactly what I needed to read. It’s such a great idea it should be common sense but to include a letter of intent as well as expected fixes and their costs will definitely aid me in making an offer that doesn’t set an angry knee-jerk reaction off on the seller. This is awesome. Thank you!

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