You found the perfect house that you want to put an offer on. Except, 3 other investors have the same idea and are working with the seller.
So… what do you do?
Many would assume they need to be the highest offer. They think that the seller will always take the highest offer and forget about the lower offers.
Some sellers will only look at the numbers. They take the personal out of it. What makes most financial sense for them is what they’ll go with.
Not all sellers are like this, though.
Some use their emotions and some look at the big picture to decide who they want to work with. It’s then when a low or mid-level offer might be accepted.
It won’t always work, but there are ways to give yourself an advantage when a seller is considering what investor to work with.
Make it easy for them!
Sellers who need out of their property quickly will appreciate this. They need out quickly and want someone who is serious and is able to close quickly without issues or delays.
If you have the means to pay cash and you know there’s going to be multiple bids, use this as part of your leverage!
Let them know you can close fast (have financing already in place) and will be buying the property ‘as-is’. Explain that there isn’t a need for a bank’s approval and you’ll simply bring a cashiers check to the table. Teach them that all “cash offers” are not the same as some people use lenders to get their deals funded. Ask if the other investors buying with all cash.
With a walk-through, you can estimate repairs needed but be careful to give yourself a buffer for unexpected repairs that you don’t see.
A heftier-than-normal earnest money deposit will show you’re serious about the deal.
You’re essentially buying their trust with your checkbook.
If you’re 100% vested in getting the property closed, the amount you give for your earnest money is irrelevant.
On the other hand, if you add an option to terminate the contract, this will be a red flag for the seller and you can easily lose your chance at the deal because they aren’t sure if you’re serious or not. Educate the buyer about what a termination option is and let them know that an investor with this option in their contract may not be 100% committed to the deal.
Build a business relationship with the seller!
This is most likely a difficult time in their lives. When you visit the property, make a point to get to know the seller and why they’re needing to sell the property.
Still look around and get an idea of what you can offer them, but make it about the seller and not about the house. You should learn what problems the house is causing them and give them a solution to their problem.
If you know your offer isn’t going to be what they’re expecting, prepare them for it and let them know your reasoning. This will show that you paid attention to the property and have the knowledge and experience to treat their house with care (even if you plan on wholesaling it, these repairs need to be accounted for in your offer).
Find common ground if you can and build rapport with the seller. Do they have kids or grandkids? What about hobbies? Let them know a little about you and how you can relate to them.
There will be sellers out there that don’t mind taking a lower offer from an investor who they want to work with because of the rapport that has been built. Check out our REI Classroom with Dave Payerchin over “Building Rapport with Your Sellers“.
It helps to build relationships with other investors and realtors as well. They can give you first-hand knowledge of deals they’re working on if they know you’re serious about closing deals.
Watch the property to make sure it closes!
If your offer was declined and the seller chose to work with another investor, there’s always the chance that the deal will fall through.
Check back 30 days or so later with city records to see if the title has been transferred to the new owner.
If you don’t see that the title has been transferred, contact the seller and ask them for an update (with a compliment about them/the house) on the property and let them know you’re still interested if by chance the deal fell through.
Know that you won’t get every deal.
Don’t put in an offer you aren’t comfortable with just because you’re trying to outbid the competition.
Calculate what you’re able to offer and stick to it. If asked about your offer, explain your estimated cost of repairs and any reasons that the property might go for lower than comps (close to a busy road, backs to commercial, etc).
It’s okay to walk away.
Other deals will come along. If you have other deals in progress, you won’t “feel” the loss of this potential deal as much.
Treat the sellers with respect and build a relationship with them.
You want to come off as easy to talk to. If you’re too focused on the property, they’ll be able to tell you’re only in it for the profit.
Be their solution.