How to Make Great Offers To Motivated Sellers That Help You Win More Deals
Making great offers to motivated sellers is one of the key skillsets that separates successful real estate investors from the pack.
Since it can be challenging to get a seller on the phone in the first place, making a good offer, one you won’t regret is critically important. Make a bad offer and you may lose a deal or overpay and lose money.
How do you make smart offers?
Know Your Market
Knowing your marketing well is one of the most important factors. From property values, rental rates and rehab costs by specific areas, each of these will play a role in your offer. It helps bring confidence to your deal as well. As they say, knowledge is power.
It’s also how you separate yourself from the competition. For example, you may be able to offer less, but still win the deal because you know how much you can really rent it for and you may have a better handle on local trends that will effect the neighborhood. Sometimes you may have a contractor who can work better and cheaper than the competition.
Taking the shotgun approach to making low-ball offers is a rookie mistake. Often they base their lowballs on the asking price or some Zillow estimate. That’s not wise. If a property is overpriced by $100,000 and you offer $50,000 less than asking price, you still aren’t getting a good deal.
If your tools to run comparable sales are lacking, you might lose a great deal that was priced perfectly for an investor “in-the-know.”
Lastly, making a ton of lowball offers burns bridges and connections with agents and sellers alike. You tie up their time, aren’t taken seriously and when you really want a deal, they won’t even look at your offer.
Low But Educated Offers
You should make offers based on the numbers. Sometimes it can look like a lowball offer, but it’s not if its backed up with real data. This allows you to accompany your offer with the justification and works will with negotiation. This is much different than the shotgun approach to lowball offers.
Most times, we come up with our offer based on our calculation of the worst case scenario, which pretty much means we’re protected on the downside.
Protect Your Interests
Another way to protect yourself is with contract contingencies. You may not be able to get in all of the contingencies you’d like but it can be great points on which to negotiate.
Perhaps you increase the number of days you have to inspect, appraisal reports, title reports, and finance contingencies. You want to find out what may be typical in your area and create your offer so that it’s more likely to be accepted but at the same time protects your interests.
Ultimately, making offers gets easier the more often you do it.
Armed with the right information, understanding of how to talk to sellers and elicit what they really want, the sky is the limit. Once you begin to understand the nuances of creative financing, a whole new world of possibilities open up allowing you even more opportunity that your competition won’t see coming.