Making offers to Direct Mail responders

[Allyson Straka]

Hello BP,

We have successfully sent out a small batch of mailers directed to absentee multi-family owners who have had the property for 10 years or longer and were interested in selling. So far, I have received 3 calls from owners who may be interested in selling. 

My question is in regards to the process of making an offer to the seller. For instance, the one owner called and asked how much I was willing to offer. I told him that I will drive by the property and discuss with my business partner and then call him back. Without being able to see the inside or know pretty much anything about the building how am I to really make an offer?

Do I make an offer and then figure this information out during the due diligence period and adjust the offer if needed? Or do I not make an offer until I figure this information out, by first viewing the property with the owner (2 of the owners are out of state)? 

Any advice/direction would be appreciated.

[Cornelius Garland]

@Allyson Straka I've bought properties from investors before, but that's been the exception and not the norm in my business.

I always run my comps after the initial call. It's so important to gather the necessary information you need on the first call so you're not doubling back or giving the seller a lower offer than you can actually get them. You get better at this by talking to a lot of sellers. You'll start to generate your pattern, and eventually it'll become second-nature to you. I have a lot of virtual markets I'm working, so it's important for me to understand the exact situation with the property so I can make sure my offer is on point. The last thing I want to do is lower the price after contract. Some investors contract properties with the intent of lowering it later, but I think this is very unethical. I had to lower the price on a deal I closed over the summer in Dania Beach, FL, but the seller also didn't disclose information about some repairs to me on the phone.

I wouldn't contract the property until I see it. I always try to get the seller to name their price, first. I ask this in a few different ways. Firstly, I would ask "do you have a particular price range in mind?" If they don't answer, I'll then dig deeper into the repairs. If I Google the property and see that it's in rough condition and it looks like a great investment property, I would then ask them "well, is any price too low?" Most times, I'm able to get a price out of them then. They'll say "well, I won't take less than X dollars because I have a mortgage, put in X amount of dollars, etc". Now, we're getting somewhere! I would set up an appointment if you're in the same ballpark. For instance, if they want $100k and you need it at $50-$60k, I would go check it out. In the beginning, you're going to get a lot of experience by going out to properties, even if the seller isn't extremely motivated. It's a quick way to "earn your stripes" and expedite the learning curve with analyzing deals.

I currently make offers without seeing properties because I know my areas really well. I still send someone out to check it out so I can try and knock off 10% on my offer price. I contract it after I finalize the offer price with the seller. Below is how I suggest you handling your first couple of deals.

1. Initial Call-Gather information and determine the seller's reason for selling (i.e., pain points and motivation)

2. Do Research-Run your comps and determine your offer. I would have a cash offer and creative financing offer available. If you're purchasing an apartment complex, it isn't uncommon for sellers to finance a portion of the purchase.

3. Second Call-Followup with seller and see if they thought about a price (if they didn't provide it to you on the initial call). Hit them with your offer price range. I would say "Mr. Seller, I'm in the 50s. Are we close?" Based on their response will determine if I'd go and see the property. If they're 30-50% within my offer price, I would set up an appointment. Sometimes, we don't know why they want a certain price until you meet with them and get the full story. Oftentimes, this can only be done with a face-to-face meeting.

4. Go on Appointment/Followup-Based on the conversation, I would go on the appointment or place them on a 2 week-1 month followup.

5. Contract/Followup-Based on the appointment, I would then contract it. Or I would continue to followup with the seller. Remember, it takes about 7 touches in order to get a deal contracted. And also remember, you don't want to move too quickly unless you can provide the seller with a credibility kit on your company. Oftentimes, if you send a contract in a day and they've only spoken to you a couple of times, they may not think you're for real. That's why I always call the seller whenever I'm following up with them so I can get those extra touches in. I probably called my last seller 50 times initial touch to closing. Most of those calls were less than 2 minutes, though.

Please let me know if you have any additional questions. I'd be glad to share my experience with you.