How to submit an offer?

Question

Hey guys so I am wondering how submitting offers works. I know that I will get lots of offers turned down because they are of course lowballs, But if I find a property and make an offer should I have seen it first? I obviously will want to see it before I commit to buy but I can not go see every house before I make an offer If 99% will get rejected.

So do I make an offer based upon my calculations of what I am willing to pay with the contingency that I inspect the property before we close? If so at what point is earnest money involved and do I get it back if it does not pass my inspection as long as its in the contract?

Any advise would be great guys thank you for your valuable input!

Charlie MacPherson · Answer

I'm assuming that the home is on the market.

If I were representing the seller, I'd consider your offer exceptionally weak.  In fact, I'd advise my seller to decline it, even if I had no other offers.  An offer in the blind like this means that you have zero skin in the game - not even the gas to see the property!

You're asking the seller to take a property off the market for an offer that can be withdrawn on a whim.  Yes, the same threat exists with a standard home inspection contingency, but in your case the risk is even higher as you have not even laid eyes on the property.

When the whim strikes you and you withdraw the offer, I have to put my client's property "back on market", where it's now stigmatized.  Other prospective buyers will see that the listing went under contract and that the sale failed.

Crystal Smith · Answer

If you're just getting started then I recommend going to see the property first.  After a while, though I recommend the following:

1.  If the property is listed on the MLS then most likely the standard contract will include an inspection period provision.  You can make an offer sight unseen on a property & if your offer is accepted, put down the EMD.  As long as you complete your inspection before the end of the inspection period your EMD is not at risk.  There is a caveat using this approach though.  Some listing agents and/or owners will not accept contracts sight unseen.  If this is the case then go see the property to satisfy their requirement.

2.  If the property is off market, go see it before making an offer.  Most off market sellers don't have inspection periods for you to take advantage of.

3. Regarding low ball offers- Before making a lot of low ball offers you should hire a Realtor & ask for the last 6 months to 1 year of data showing closed sales price versus list price % in the area that you want to make offers.  If the data shows that the ratio of closed prices versus list price is low then maybe your strategy of low ball offers will work.  If however, the data shows that the final sales price versus list price data is over 90%, then you'll be wasting everyone's time making low ball offers.  For example,  We have a couple of submarkets in Chicago where last spring the average % sales price/versus list price was 105%.  This was for distressed properties.  The average winning bid was 5% higher than the list price.  It was a waste of valuable time submitting low ball offers in that area.

Lynn McGeein · Answer

Your strategy of many low-ball offers sight unseen would be more viable in a bad market, which we don't have right now, at least in the areas where I work and invest.  This may work better with FSBOs who may not understand how weak the offer is, so maybe concentrate on them.   I don't know of any agents who would let their sellers sign a low-ball, sight-unseen, and also contingent on a home inspection offer, at least not without a fairly large non-refundable deposit.

Earnest money is usually presented at time of offer and must be deposited in escrow within x days of acceptance. Buyer's agent usually submits a copy of the check with the offer and is responsible for delivery to proper party once contract is signed.  If no agent, you usually present it to seller with the offer, made out to escrow company, not seller.   It is customary in some states to use Promissory Notes for earnest money to be deposited in specified escrow account within 3-7 days of contract acceptance.   That would make it easier for you if it is practiced in your area.

I would find a good buyer's agent, someone who'll do some basic research first to see if sellers have enough equity to even accept a low-ball offer (tax records showing what they paid, recorded mortgages, etc.), maybe preview if it meets your criteria, send you pictures during the preview and schedule a showing asap if it's a possibility. Let them narrow down your options for you if you don't have the time, yourself.

Mike Cumbie · Answer

Hi @David S.

I recommend you see properties before you put an offer in on them. How do you even know if it's even worth your lowball offer? If you don't want to do any research and even look before sending them out, it's easier to go to Zillow, take their Zestimate multiply that by .5 and then send offers out to whole neighborhoods at a time. It would take a fraction of the time and have the same success ratio. Possibly better because most won't have an agent to explain how bad the offer really is.

Account Closed · Answer

@David S.

My advice first off would be to ask local realtor to send you a blank copy of the standard real estate contract which is what you would sign when putting in an offer. You can review this and ask them any questions you have regarding its contents. They would best be able to explain the different contingencies and way some you could legally back out of a contract if needed and legally get earnest money back. Getting your earnest money back is easy either through attorney review or inspection contingency if the property ends up not being in the proper condition as long as you follow the guidelines laid out in the contract.

In your case yes it would be a waste of time to view every property! In my market in Chicago most of the time there's not even enough time to view a REO set a price attractive to investors. As they come on the market and are gone within a day or two sometimes!

Do your best with the pictures given and make your offer with proper contingencies!

David S. · Answer

Thanks for the advise. My problem is that I live an hours away from any town I would invest in because I personally live in a very rural area.

How to submit an offer?

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