Submitting multiple offers to seller (3 offer approach)

[Kevin Stein]

Hello,

I've always been aware that you can structure deals multiple ways, and submit multiple offers to the seller, but it has never completely clicked for me.  Could someone give me a real world example of what this looks like and why each option make sense for both the seller and me as the buyer?

I'll set it up this way so the math is really easy:

ARV = $100,000. Repairs = $20,000. MAO = $50,000 (100,000 * .7 - 20,000).

Obviously $50,000 would be the "all cash" price I'd be willing to pay (please don't crush me on the 70% rule, I'm just trying to make the numbers simple).

What would a owner financed offer look like?

How about a partially owner financed offer?

Again, I understand conceptually that having the owner carry back the loan means you don't have to pay origination fees to a bank or the higher interest rates of a hard money lender.  But I'm having a hard time determining how much that is actually worth (i.e. how much more I could offer the seller).

Thanks for any advice!

[Michaela G.]

I'll give you an example on a property I closed on today. 

It was listed at 30K

I offered 10K cash total, 10K earnest money, as is, where is

They countered with 20K cash, but would also be willing to do some owner financing

I then countered with a triple simultaneous offer:

1) $ 20,000 purchase price, all owner financed - 10% interest only payments - 5 year balloon

2) $ 15,000 purchase price, 5K down, 10K owner financed,payments based on 30 year ammortization at 10%, with 5 year balloon

3) $ 12,000 all cash

They countered with

1) 20,000 purchase price, 10,000 down, 10,000 @ 10%, 200 per month and 48 month balloon

2) 15,000 all cash now.

I took 15K cash, which was my initial goal anyway ;-)

1 would have been more attractive for someone who is looking for total price, but not really needing the money now. 

2 is a combination

3 is for the person that is really looking for cash now and is willing to take less, in order to get money right now. 

It will show you the motivation of the seller, plus it often makes them not really look for other offers, but concentrate on choosing between those 3