When making offers, do they have to be official legal offers?

Question

Hi BP Forum

I'm just getting into real estate. I have my eye on 4 properties. I'd like to make some offers on them. Some have realtors and some are just FSBO. When I make an offer to either, do the offers need to be official letters, with legal jargon, etc? Or can I just send an email or letter that basically says I'd like to buy your property for $200k?

For Example, I'm looking at a commercial property REO listed for 300k. I want to offer $180k for it. I've talked to the realtor who has it and also emailed her. Can I just send her an email that says i want to offer 180k?

Where are the best practices her to make official offers?

Nick G. · Answer

@Chris Purcell Easy, that's because most prequals/preapprovals are worth about as much as the toilet paper in your bathroom. A decent agent who looks out for their seller will always independently verify the ability of the buyer to purchase the property, which means at a minimum looking over their proof of funds, and oftentimes their credit worthiness too.

Just FYI, just because a lender has "preapproved" you doesn't mean squat, you've still got two to three weeks left of real vetting to look forward to before you're actually approved. Obviously this will vary from lender to lender, guys like Chris Mason and other investor-friendly lenders have ways of doing it faster, but the point still stands.

Sam Shueh · Answer

Min 3% ernest deposit, proof of funds, credit info, how to finance it (preapprove letter from a major lender ) or reputable local mortgage. Purchase offer letter signed.

If some one approaches me I won't even look at the offer and terms unless all above is included.

Andy Stroman · Answer

Thanks all for the advice.It sounds like it really just depends. I've read a lot about making a lot of offers and it could be very time consuming.

Would these be accurate assumptions:

If dealing with a realtor showing the property or even over email, I should be very professional about it. I should present my bio, proof of funds, etc.  It's their job and they don't want to waste time.

If it's FSBO, I can be more personal, especially if I have met them and they have shown the property. I can write an offer and we can go over the details later. But we could get an understanding informally and then get the official offer.

Regarding this particular property, It's been on the market for over 2 years. She says the bank really wants to get rid of it.  I could offer them cash and ability to close in a week. I guess we'll see. The Property needs some work but once fixed and leased would probably get a 20% cap.

Amy Kendall · Answer

Just out of curiosity, how did you come up with your offer price? Is the building damaged by fire or flood?  Are there major issues with the property that you have knowledge of? Have you already discussed that offer price with the listing agent?  There may be something I am missing here too so take this with a grain of salt.

I agree with what has been said, they want to know how serious of a buyer you are, and how far ahead you have thought. You may be able to secure a property with serious intent, but that is a seriously low offer.  I am not saying it isn't possible for you to secure it, just want to play devils advocate for a moment.

Put yourself in the sellers shoes for a moment though, if you were the seller (I know this is a REO, but I have done many REO deals and believe me, the notion that they just want to "get it off their books"  has not been my recent experience, especially recently), if someone came to you with an offer for $180K when you were asking $300K, would you not think: "wow I could prob drop my price on the mls to $250K and see what happens."  Not saying it wouldn't happen, just if they have an agent already they are probably going to advise the seller to do something like this vs take an offer that low. I hate to be such a downer, but that agent has a fiduciary responsibility to that seller, even if it is REO.

Dave Toelkes · Answer

@Andy Stroman

You can always make inquiries or send non-binding letters of interest.  Use the Realtor's purchase offer forms to execute a legally enforceable contract.

Sam Shueh · Answer

Agree with the above. Over the years the investors approach me often with an online hard money letter or tell me how much funds they have.  Those who showed up at the office(many do not show up, I had one from BP the other day) do not give me their bio and track record. One lady came in sent me her stats.  I looked at it and stated you made more than you claimed. She politely stated it is was not a 50-50 contribution. She gave her FT job resume also. We signed the agreement and she offered me to list if I find her deals. Truly a well qualified client.

Chris Purcell · Answer

@Sam Shueh

Why do you need proof of funds and credit report if your lender already pre-approved you

Chris Mason · Answer

If you have an agent, which you should if you're starting out, your agent can write the offer. What that offer looks like, varies by state. I'll let some Utah folks chime in on that. In California, the offer looks like a purchase contract that you have signed, but not the seller. The seller accepts the offer by signing the contract, and boom you're in contract with no pointless middle steps. In theory buyer's agents could write offers in the form of an email that checks the "is it in writing?" box, but that's generally considered highly unprofessional and a waste of several days.

If you do not have an agent, your offer can consist of an email in plain English outlining the terms of the offer, as no one expects that level of professionalism from a non-agent. The seller is, in California at least, required to present the written offer barring other instructions from the seller such as "do not even bother showing me lowball offers." And from there, if the seller accepts, the buyer's agent writes it up in a contract that the seller has signed, that is then sent back to you to sign confirming.

For your FSBO sellers with no agents at all involved, I've seen one page contracts in plain English. I've also seen folks hack up state association of realtor contracts and all sorts of messiness. We call both of the above "redneck real estate contracts," meant in a "hmmm ok I guess technically you could consider duct tape a repair" sort of way, just like any agreement that's signed, has consideration, etc etc, is 'technically' a binding contract. In theory if one of these deals went to litigation (thankfully, I've never personally seen that), I suspect the "winner" would be whoever pays for the most expensive lawyer, because obviously there is a reason most folks use contracts that have been checked out by lawyers.

I'm generally given to understand that the above is ubiquitous, but again I do not know Utah specifically.

When making offers, do they have to be official legal offers?

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