By William Bronchick & Frank Pulley
Let’s face it, it’s a tight market out there! In most parts of the country, the real estate market has changed over the last couple of years from a buyer’s market to a strong seller’s market. The positive side of this is; whether you are an owner occupant or a real estate investor, it’s pretty easy to sell your property at top dollar or maybe even an amount considerably above your asking price. The downside is that deals seem to be a bit on the slim side, especially in the “hot” real estate markets. In addition, once you find a deal, then there can be multiple offers, some of them way above asking price.
Before we get into the 7 Tips for Getting Your Offer Accepted, let’s go ahead and set some parameters. First of all, you should consider removing yourself from the large herd of buyers that are making offers within the MLS system. In this market, you are unlikely to find deals that make sense financially for you as an investor. Instead, you should move away from the MLS system and market to properties that are outside of that arena. Target your marketing to properties such as probates, estates, landlords, and free and clear properties, just to name a few.
Now that you’ve got your marketing sent out, it’s time to prepare for success! Here are 7 tips to help you along your road to successfully buying an investment property:
1. Know What the Seller Wants. It’s important to find out the real reason that your seller wants to get rid of their property. While it is important to get all of the pertinent information such as what the seller owes, mortgage payment amounts, whether the seller’s current on payments or not, property condition and more, it’s also very important to find out exactly why the seller is selling! If the seller is asking for cash down, find out what they need the cash for. A lot of times, although the selling price is important, what can be equally or even more important is the reason that the seller is selling the property.
Many astute investors have successfully closed deals where they took the time to find out what the sellers really needed. In most of these situations, the sellers needed some cash to close. The sellers’ reasons for needing cash can be many, from legal, college, medical expenses and more. By accommodating the sellers’ needs, some investors have been able to close the deal, even over higher offers. In some situations, it is possible to get some additional consideration by getting a small discount on the purchase price or something else in the buyer’s favor.
2. Do Your Research. It’s important to do your due diligence to make sure that there are no surprises. Driving the area around the property, doing a title search for additional liens and judgments, running comps, finding out market rental rates, getting a solid figure on repairs, doing a thorough inspection; all of these figure into the equation on how to structure your offer as far as price, terms or both.
3. Bring the Seller Into Reality. We use a phone script that not only asks for the crucial information but also has a list of “Probing” or Test Close” questions to further spark the conversation and to test seller motivation. One question in particular asks, “Mr. Seller, if I had a magic wand and could give you the ideal situation, what would that be?” Once the seller replies, then you follow up with, “Now that I have heard your ideal situation Mr. Seller, what do you think is actually realistic?” Be careful not to correct the seller on items such as property values, but ask questions such as, “How did you arrive at that amount?” in order to have them justify their asking amount. Have some comps ready at hand when you are talking in person.
4. Leave Room to Negotiate. Always leave room for negotiation. Even if the seller’s price is reasonable, if you jump at that price, they will always think that they left money on the table and ultimately may feel unsatisfied with the sale of their property. If the seller’s asking price is way out of line, possibly offer a low cash offer but a second higher offer with seller financing (if that is possible) If the asking price is pretty close to the mark, then you might still offer a bit less. Don’t make your “highest and best” offer up front, under normal circumstances. An exception might a situation where the seller has multiple offers. If that is the case, go back to item #1 in this article, find out what they really want and then give them your best shot. Also, let the seller know that this is your highest and best offer and be prepared to walk away, if you can’t come to terms. Finally, if you concede on one point, be sure to always ask for something in return. This prevents the sellers from “nibbling” away at your offer.
5. Keep Contingencies to a Minimum. Real estate investors are masters of using “Weasel Clauses” for financing, inspections and more, in order to back out of a deal unscathed and to get their earnest money back. Instead, make sure you perform solid due diligence as far in advance as possible. If there are other bidders, then offer to shorten your inspection time period. Don’t ask for a weasel clause on funding, as long as you are secure with your funds being available. Have a solid pre-approval letter available as they are much better and carry more weight than a standard pre-qualification letter. Don’t insert a clause that you have to sell another property in order to buy the current one. Appear to be as solid a buyer as you can be.
6. Make Multiple Offers. The answer to a low ball offer will normally be a firm “No!” Instead, consider presenting more than one offer. Offer one low ball cash offer and also another, higher offer with seller terms, if possible. Give the terms offer first so as not to offend the seller. Don’t present more than two offers at a time, or you may confuse the seller. When people are offered too many choices and become confused, their natural answer is usually a “No.” Understand that the final offer you may get to, after some negotiation, may not be one of the two initial offers but possibly some mixture of the two. Keeping the choices limited to the seller during the negotiation process will help to move them forward in getting their property closed.
7. Follow Up. There is an old saying; “The fortune is in the follow-up,” and that holds so true in the real estate business. When making an offer, even if yours doesn’t get accepted initially, continue to follow up with the seller and other parties or realtors involved. Statistically, 1 out of 3 offers that are made don’t close for a variety of reasons; such as the loan falling through, a buyer has some inspection issues with the property, etc. By following up regularly, you keep yourself and your offer in front of the seller. If the original offer falls through, most folks take the path of least resistance. The path of least resistance could be your offer as you have proved via your follow up that you are a solid contender for the property.
So there you go. In order to increase your chances for success, you will have to make a number of offers on a variety of properties; it’s a numbers game. Operate outside the MLS. Know as much as you can about the seller and the property. Practice your negotiation skills. Don’t confuse the seller with multiple and complex offers. Follow up diligently as it’s in most investors’ natures to make an offer and then sit on it with little or no follow through. With a little foresight and preparation along with following the 7 tips above, you should be well on your way to capturing a deal.
Here’s to your success!
William (Bill) Bronchick is a best selling author, attorney, investor and mentor. Bill is also the son of Top Real Estate Expert, Phyllis Rockower. Before her recent death, Phyllis also ran the Los Angeles Real Estate Investor Club for many years. It was her wish to continue her legacy and to bring current and applicable information to her current and hopefully new, followers.