I recently contacted a broker about a property he was listing. It was decently priced and was a great rehab property. He told me the house was in escrow but that he had 50 offers on the house before that.
Firstly, I know he might be talking nonsense, but the way this property was priced and with the amount of investors the area I wouldn't be surprised.
Out of these "50 offers", how many of these offers are REAL? In your experience, how many are just verbal offers with no real intent and how many are actual offers from real investors willing to follow through?
Lets say that only 10 of these 50 offers were from legitimate investors and the house was priced at $210,000. Lets say for arguments sake that all of these 10 investors offered near or full asking price. What is it that would separate the winning offer from all the others?
I guess this question is better geared towards agents, but I figured everyone's experience is valuable! Thanks in advance!
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
While I would assume the "50 offers" is at least somewhat exaggerated, in cases where there are lots of offers, my guess is that statistically, there are going to be at least a couple that are a good bit higher than the median offer price. This could be because the buyer(s) are owner occupants and don't care about "the numbers," it could be that the buyer(s) are newbie investors who aren't good at doing "the numbers," or it could be that the buyer(s) have some knowledge or experience where they'll be able to offer more than everyone else and still make their desired profit.
So really, it's just a competition among those outliers, not all the offers. And, in general, sellers are all looking for the same thing:
- Low Risk (Cash Offers, No Contingencies)
- High Reward (Top Price)
- Quick Turnaround (Close Quickly)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
While I would assume the "50 offers" is at least somewhat exaggerated, in cases where there are lots of offers, my guess is that statistically, there are going to be at least a couple that are a good bit higher than the median offer price. This could be because the buyer(s) are owner occupants and don't care about "the numbers," it could be that the buyer(s) are newbie investors who aren't good at doing "the numbers," or it could be that the buyer(s) have some knowledge or experience where they'll be able to offer more than everyone else and still make their desired profit.
So really, it's just a competition among those outliers, not all the offers. And, in general, sellers are all looking for the same thing:
- Low Risk (Cash Offers, No Contingencies)
- High Reward (Top Price)
- Quick Turnaround (Close Quickly)
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
14y
Hi Elliot,
I've encountered this many times with properties that are listed considerably below market. In the end they probably end up getting market price or above market. Many agents like to create a bidding war type situation to get buyers to pay more than they intended.
One way you can avoid this might be to look for properties that have been on the market for a while. Most likely there won't be much activity and the sellers should be more motivated because it has been sitting.
I noticed that you are from Tarzana . I live in the San Fernando Valley too. Was this property located in the SFV?
What is your intended strategy?. Fix and flip, wholesale , buy and hold?
J, thanks for the reply. Greatly appreciated. When you say no contingencies, do you mean not asking for an inspection period, etc?
Joseph, the property was located in the SFV. It was in Encino. I didn't really have a strategy when calling, I am just driving through neighborhoods close to me and looking up prices of houses/etc... Trying to learn the area a bit. Eventually I would like to fix and flip. Hopefully soon!
Real Estate Investor · Bellingham, WA · Member since 2008 · 407 posts · 90 votes
14y
The object of getting many offers and selling quickly is to price it right. If you have several competing offers then they bid up the price to where you want to sell. In many areas right now you will get a ridiculous number of low ball offers from "investors" who have been told to offer 1/2 the asking price and many listings hoping one or two get accepted.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Elliot A:
J, thanks for the reply. Greatly appreciated. When you say no contingencies, do you mean not asking for an inspection period, etc?
Exactly...no inspection period, no financing contingency, no appraisal contingency, etc. If you don't have any opportunity to back out of the deal, the seller can be more comfortable that you'll actually close.
Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
14y
Originally posted by J Scott:
Originally posted by Elliot A:
J, thanks for the reply. Greatly appreciated. When you say no contingencies, do you mean not asking for an inspection period, etc?
Exactly...no inspection period, no financing contingency, no appraisal contingency, etc. If you don't have any opportunity to back out of the deal, the seller can be more comfortable that you'll actually close.
He's indicated that he's very new. Probably not something we should suggest to him, not that you are.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Elliot A:
So without doing an inspection or say for instance a title lookup, how do you protect yourself?
First, as Joe pointed out, if you're going to lose any sleep at night over not getting inspections or not having an inspection period, it's better to have those things in the contract, even if it makes your offer less strong.
Now, that said, something else to realize...
From the time you receive verbal agreement from an REO seller until the time you get all the final addenda and have to sign/return them, there is usually 2-4 days in which you could be doing your inspections and getting contractors out to the property. It's not a lot of time, and not time that you're supposed to be using for inspections, but you can. If you find something that bothers you, you can just refuse to sign the addenda and you're out of the contract, no penalty (other than pissing off the agent/asset manager).
This is what I typically do. No inspection period, but then use the few days between verbal acceptance and signing to do my due diligence. Only once have I had to go back to the seller and say, "I can't sign the addenda because I found an issue after verbal agreement," and that was just last week. I asked for a reduction in price, and we're currently negotiating it.
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
14y
The best way to piss off an agent is to call him on a property he has listed that is in escrow. Especially if its one he's had a lot of activity on.
Why? Because everyone calling off the sign or whatever has the same basic questions that generally amount to nothing.
If you're driving around, looking at properties without a strategy, I don't want to hear from you. Now if you're driving around, see a property you like, go home and do your research on it, then call me to ask me where your cash offer with no contingencies needs to be in order to be considered a competitive backup offer, I'll probably tell you.
Otherwise you're just wasting my time, and yours too.
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
14y
Right, but you still called the guy to ask a question you could have easily found the answer to on the internet, likely from the very same phone you called him with.
That tells him either:
A) You don't know how to find homes on the internet and thus are probably not worth his time.
or
B) You think your time is more valuable than his.
Either of these are likely to get you a dismissive, blow-off response.