How to present 3 offers

Question

Hi! New to real estate and new to PRO!

I’m getting ready to put my first offer on a side by side duplex that has been completely renovated by a seasoned investor. In order to not sound like a complete idiot and/or make the deal fair does anyone have suggestions on how best to structure a 3 offer deal? Is there any sort of guideline to try and follow?

These are my thoughts (please let me know if this sounds reasonable but please be constructive if this seems way out of whack).

Asking price $254,900 (he already told me his target based on comps was $250. His wife is the listing agent, we would like to go in without an agent to save the $7k in commission)

Offer #1

Cash $200k

(Although my “cash” would be $100k 401k loan..5.75 rate and  $100k heloc on my personal residence...2.49 fixed till 10/20 then variable prime plus 0.25 after 10/20)

Offer#2

$230k conventional mortgage with 20% down 4.5% fixed 30 year

Offer#3

$250k seller financing. 10% down, $225k loan at 4% for 30 years.

The seller financing part is where I’m definitely unsure...do you tend to offer higher purchase price? Should I offer higher interest rate than what I could get conventionally in exchange for less money down and closing costs?

Thank you, this site has been invaluable as I take the next step in my journey!

Brandon Frulla · Answer

Hi Michelle, welcome to BP!

There is a lot of value in presenting multiple offers, as I'm sure you know (turns a simple 'yes or no' to a choice of 'which one?').

Based on your brief outline, I think it is very unlikely that they will take the cash offer, since it is sounding like you're buying a flip, the ~$50k reduction on that offer is likely their entire profit margin (or more). The second offer sounds like your strongest of the three, again because of it being a flip (I think), they likely will not be interested in carrying the property through seller financing.

I think at most you should consider making two offers, one slightly below asking with a conventional 20% mortgage, and one at asking but as a owner-occupant so that you only have to put 5% down, or less! You'd only have to live in the one unit for a year, and you can rent your current primary residence out in the meantime. After the year is up, you could move back out and either repeat the process or fill the half of the duplex that you vacated with a new tenant.

Follow up questions that are important to the context of your question:

Are either you or your partner a licensed realtor?

How long has the property been on the market?

Can you make a higher cash offer?

Mike Cumbie · Answer

I'm guessing the one on Woodlawn. The projected rents seemed a little high but not terrible. That one does assess out at $115,000. Granted a rehab was done so make sure you re-figure your taxes closer to the 250K range to accommodate where they will end up. Looks like he did a nice job.

Michelle Schrader · Answer

Thanks for the feedback! I’ve just heard Brandon and a few other guests on the podcast and webinars promote the multi offer deal to get buyers to say which one instead of yes or no. I agree after sitting down with this investor it was much more of a discussion than a typical paper offer I’ve experienced buying and selling my personal homes.  This process has been a ton of fun to learn and expand on knowledge. This website and community have been invaluable.

James Maradits · Answer

I've heard the concept of the multiple offers strategy on the podcast, but tend to agree with @Doug Smith that it would likely be best to try to have a "meeting of the minds" vs overwhelming them with 3 offers.  I definitely don't think this multiple offer strategy would be effective in this case given that the seller is an investor, but could perhaps work with an off market seller or a property that has been rotting away on the MLS.  In this case, I would have to believe they would be willing to have a brief discussion where you can propose your ideas and perhaps get a better sense of what their needs are in order to come to a potential agreement.

I do, however, think that you can gain some leverage by working with the seller/list agent directly since there will be less hands in the pot and commissions payable.

As a side note;  Although a lot of the creative strategies discussed on the podcast and forums sound appealing and may have worked for someone, some are (in my eyes) actually going to hurt you in a lot of situations.  One that comes to mind is the idea that coming in with an offer like $139.427.42 is going to make it look like you're a really well calculated and serious  buyer, when in reality most agents are sellers are going to be confused or annoyed that you didn't offer $139,500.00 and in turn will assume that you're going to be a high maintenance buyer which will likely not help your case.  If you're going to nickel and dime an offer over $72.58 (.05% of the deal) it's safe to assume you're going to nickel and dime over inspections and generally be hard to work with.

Nicole Heasley Beitenman · Answer

Hi @Michelle Born! Thanks for posting this. We are also trying to come up with an offer formula, so your examples were helpful. I notice you mentioned you've made 2 offers that were not accepted. First, congratulate yourself for making 2 offers! That's more action than most folks take in a life time.

After hanging out on this site for 2 years and listening to nearly 300 podcasts, one of the top lessons I've learned is you will likely have to make a LOT of offers to get a deal. Episodes 43 and 170 will shed some perspective on the amount of effort it can take to get the first few deals.

Michelle Schrader · Answer

We went in at $240, no agent 25% down conventional 30yr mortgage at 4.375 but got outbid by full asking price of $255k. Had another brrrr back up plan so called on that today and sold to someone else literally this morning ..rough start to this investing thing but I’ll keep learning and trying!

Doug Smith · Answer

Personally, I wouldn't muddy the water with multiple offers. I would go with one offer to start a discussion and then verbally go back and forth until you have a "meeting of the minds". One point to keep in mind is that a listing contract between a seller and the listing agent is for all of the commissions together. It typically doesn't break out what the listing agent and the selling agent (buyer's agent) receive, so when the deal closes, the seller is going to be obligated to pay the full commission amount (both buyer and seller side commissions) to the listing agent anyway. We always use a great buyer's agent in each jurisdiction. Good luck!

How to present 3 offers

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