Making Offers Limbo - How Low Can You Go?

Question

This is going to be another one of those ultra basic questions, but one that´s been increasingly coming to mind (and I´ve yet to really get a conclusive answer).

When it comes to making offers, how low do you go? I hear things like ¨I´m making 100s of offers,¨ ¨I offered $10k on this $200k house,¨ etc.. What I´m wondering, however, is what´s the etiquette here? More than that, given those examples above, how do you avoid making an offer on pretty much every property? To me it seems like most things can be a home-run if you got the right price - ¨Well, this 4plex is listed at $400k and fully-leased, so this could be a killer deal for me if I got it at $200k¨.

Part of me says not to make ridiculous offers, but the more BP podcasts I hear, the more ¨If you´re not embarrassed of your offer, then you´re offering too much¨ is repeated. I´d appreciate those of you willing to weigh in here.

Bill Gulley · Answer

Yes, there are the comics with little jingle sayings and while they may hit one in a hundred, there reputation is probably in the toilet operating in their local area.

Many Realtors here simply got the owner's consent not to present all offers just for the low ballers, they go to the trash basically and those that make such offers are tagged by Realtors as nuisance bottom feeders.

Justify your offers!

You can look on the MLS and see the closed sales percentage to asking price. Below that, justify your offer.

I've seen buyers offer so little that it ticked off a seller to the point that, even when the buyer came up, the seller would not sell to them unless they hit the full asking price. I'm sure that happens more than 50% offers being accepted off the bat.

If a listing says "bring all offers" then send them one, but still be reasonable, find the value, build in your profit and holding costs or rental requirements, make your offer.

Off market properties hold better opportunities.

REO, if they have had them over a year, start at 25% under asking and you should get a counter or acceptance, more than that, justify it, IMO.

In the long run, you'll be more successful being fair than being greedy. :)

John Cohen · Answer

David Hays I would say offer what makes sense for you! Even if it is a really low, as long as you justify your offer and detail "why" brokers or owners should understand. The other thing is make sure the numbers work and if the list price works don't lose s deal because you won't pay list.

Jesse T. · Answer

There needs to be some basis in reality for an offer.  For a SFH property reality is the market conditions and comparable sales.

If the market supports the typical 80% - repairs for houses in rough condition in an area $10K might actually be a reasonable offer.  If the ARV is 120K and the house needs 80K in work the formula is going to end up at $16K.  However for the 10K offer to be at all valid there would need to be properties selling for under $20K.

What is more likely is the house needs 50K in work.  The formula would get 46K.  However there may not be comps that would support it.  Why not?  Well if an owner occupant is willing to pay 75K and then put in 10K to make it liveable, the property won't end up with a flipper.  Or in hotter areas the  homes it may go for 80 to 90K with the new owner using 40 to 50K to make the home exactly as they want it.

Bill Gulley · Answer

LOL, one reason I don't listen to podcasts, at least not very often. Yes, I see all kinds of folks saying that....it sounds cool, to some, probably why they say it, like grow a pair, be bold and I didn't mean that it was just guru speak......

You can not justify doing the wrong thing, when you know you're doing wrong.

A sociopath doesn't feel guilt, neither does a crook or a predator.

It's not about how thick your skin is, how well you take rejection, it's about having a little respect for others.

Too many in this business lack ethics, some have none. For many it's because they don't know, for some it's because they don't care, there is a difference.

If someone really thinks offering 10K on a 100K property will make them successful in business and in life, that it's dealing in good faith, the right thing to do, fair, just and equitable, I'd say they have problems. If they don't know better they have more problems, if they do and don't care, they have bigger issues and should be out of this industry.

If you disagree, then why did you ask the question?

David Hays · Answer

Thanks for the continued input gents, and @Bill Gulley, it´s not that I disagree - just trying to find the right wind in a storm of answers. I appreciate hearing more opinions, and I can understand what all of you are saying.

David Hays · Answer

I appreciate the input from both of you gents, though I have to challenge this statement here, Bill - I´m not one for ´guru´ speak, and don´t spend much of my time in that realm. The comments I referenced above come directly from regular BP Podcast guests, as well as many different contributors to the forums here. I absolutely get what both of you are saying in regards to qualifying offers, especially when it´s a listed property, but tell me how one is supposed to justify a $10k offer on a $100k house (something of which ilk I´ve seen a lot of here on BP). While I´m not in the business to piss people off, I also have absolutely no problem asking for something - rejection doesn´t bother me, and if it results in some home-run deals, then all the better.

Derek Carroll · Answer

making lowball offers for listed Propeties will find you some deals but certainly isn't a scalable business model. You might find a few truly motivated sellers but be prepared for a very large number of offers being ignored or rude responses.

You might have luck with low offers for properties that have been listed for a long time, or are owned by banks.

To buy properties cheaply a better strategy would be to find deals that aren't yet listed.

Making Offers Limbo - How Low Can You Go?

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