The Multiple Choice Offers Strategy: Attract and Close More Deals

[Lori Greene]

Maybe you’ve heard of the marketing tip where a salesperson should never ask a yes or no question.

For instance, “Would you like to by it” is a Yes or No question and often ends with a No. But, “Which one do you like the best? This one or this one? What do you like about it?”, often ends with the customer choosing and option and stating what they like about it. This kind of strategy closes more deals and is well known in the sales and marketing industry.

One day it occurred to me to use this strategy to make offers. I call this strategy the Multiple Choice Offers Strategy.

It worked so well for me the first time I tried it, that I ended up getting 5 offers accepted in about 30 days. And it’s now one of the main strategies I teach.

Here’s how I did it. I started by putting out ads, bandit signs, car decals, direct mail, etc. You know, the usual.

The day that first ad went out, I started getting some phone calls. Promising full market value got people excited. And you’re probably wondering, “How can you make a profit offering full market value?”

How I Can Make a Profit at Full Market Value:

1. First of all, Full Market Value is a relative term. It all depends on what comps you’re using to prove what buyers are willing to pay for a property. It’s my job to do a thorough analysis of the comps. That way, I can help the seller understand my opinion of their house value.

2. My ad says, “Full market value minus repairs.” So, it’s also my job to show the seller what issues the house has and what needs to be done to the property to get it into sellable condition. Then I can discount my offer by the cost of those repairs and maybe also some upgrades.

3. When I submit my multiple choice offers, I encourage the seller to sell the property to me as a For-Sale-By-Owner. This way, I can discount my offer by the amount saved in Realtor commissions and closing costs.

4. And finally, I always encourage the seller to use Seller Financing. I do this by presenting Multiple Choice Offers. I always have my lowest offer as the cash offer, my highest offer as the seller financing offer, and my middle offer as the split seller financing offer (small down payment & seller financing the rest).

Using all of these options not only gives the seller several options to choose from but it also allows me to make a discounted offer. Along with my offer, I also them a numbers analysis that compares the end profit they would make with a full price offer through an agent vs my FSBO Offer.

And I always craft my offer to show the seller a slightly higher profit if they accept my offer rather than a conventional offer through an agent. Look at the figures below to see how I can present the seller with a higher profit than a full price offer through an agent while still leaving myself room for a profit.

Here is an Example Multiple Choice Offer I Made:

• Offer A: $210,000 100% Seller Financing for 3 years.
• Offer B: $195,000 with $15,000 Down and Seller Financing for 2 years of $180,000.
• Offer C: $179,000 all cash now.

Illustration of End Profit, Real Estate Agent vs. our Offer A:

Potential Full Price Offer through a Real Estate Agent - $240,000 – Selling Costs: 6% REA commission ($14,400) + 3% Closing costs ($7,200) + 4 mortgage payments at $2,000 while waiting to sell ($8,000) = $29,600 in selling costs.

$240,000 - Purchase Price

- $34,050 - in selling costs

$210,950 - True Purchase Price after selling costs

-$135,000 - your loan pay-off

$75,400 - your end profit, full price offer through agent

Our Offer A of $212,000 - Full Market Value

$212,000 - Purchase Price at Full Market Value

-$135,000 - your loan pay-off (no selling costs)

$77,000 - your end profit, FSBO Offer Today

Here’s how it all worked out. They were current on their mortgage payments, they had a lot of equity and their house needed no repairs. The husband was being transferred for his job needing to relocate and they needed to sell quickly. That’s why they called me, for a fast sale.

They were hoping to get $249k because their neighbor's house sold for $240k. They shows me an appraisal of $263k. They owed $135k. I showed them that their house would not sell for more than $240k by showing them my lower end comps and showing them why the comps used in their appraisal were too far away in a higher end neighborhood.

After going over my 3 offers above, they countered at $212k all cash now because they saw my logic in the numbers and their end profit after saving agent and closing costs. And they also pointed out that they wanted nothing to do with Seller Financing.

I countered back at $195k all cash now. They countered again at $205k all cash. I countered at $200k all cash now. They said no. I accepted their offer for $205,000 all cash now. My high comps were 247k. There were no repairs needed. I sold within about 60 days at retail for $239k as FSBO, giving me a $34,000 gain. After about $16,000 in selling, holding and closing costs, my end profit was about $18,000.

Now, here's another example of a Multiple Choice Offer I made from that ad:

Offer A: $101,500 100% Seller Financing for 3 years.

Offer B: $95,000 with $5,000 Down and Seller Financing for 2 years of $90,000.

Offer C: $86,500 all cash now

This seller told me he had recently built a small house with a plan to rent it out as a cash flow investment. He didn’t have luck renting it out, so he had rented it to a friend for $500/mo when his mortgage payment was $850/mo (a $350/mo loss). He was about to start school which was going to be expensive, his friend was ready to move out and his wife was threatening divorce if he didn’t sell that house!

After running comps, we could see that the property value was no more than what he owed the bank. He had zero equity (no bargaining room). So, we had to get creative to make room for a profit.

Knowing that we couldn’t offer him less than he owed the bank, we realized the only strategy that made sense for this particular situation was a Seller Finance Rental. Our plan was to make his mortgage payments for several years while we rent the place out, in which time the house value would appreciate while the mortgage balance would decrease, creating room for profit in the end.

The value of the property at the time was about $105,000 and he owed $101,500. Appreciation in the area was about 6%/yr at that time. We projected that would be worth about $118,000 in 2 years and $125,000 in 3 years.

Our rental market research revealed that we would only be able to rent the place out for about $650/mo. Since the place was almost brand new, we wouldn’t have any rehab costs. So we asked that he also pay $200/mo towards the mortgage (hey, a $200/mo loss is better than a $350/mo loss, right?).

This One Worked Out Well in the End:

We knew he wouldn't be able to accept offers B and C because he owed too much and was short on cash. But the beauty of Multiple Choice Offers is that unappealing offers make the other offers look better. That's the whole point.

He ended up accepting our Offer A for full price with 3 years Seller Financing while we rent the place out. He was willing to pay the $200/mo towards the mortgage because it was saving him $150/mo. He was also relieved to turn everything over to someone else and get out from under that house that had been nothing but stress for him.

After about 3 years, we sold that house also for a great profit.

Steps to the Multiple Choice Offers Strategy:

Step 1: Create a Detailed Seller’s Questions Sheet.

Step 2: Put Out the Ad in as many places as you can: “I will buy your house today for full market value minus repairs.”

Step 3: Interview Sellers when they call in. Keep your Seller’s Questions Sheet with you. Get inside the Seller’s head to understand their motivations so you can craft your offer to meet their needs.

Step 4: Preliminary Due Diligence and Analyzing the Deal. This step is one of the most important and requires further explanation.

Doing in-depth research on a property is critical to a successful deal. But the secret to getting more deals done is a quick elimination process. So don’t spend too much time on it until your offer has been accepted.

It’s okay to start with sites like Zillow.com, Trulia.com, Redfin.com, Realtor.com, etc., to get a vague idea of a house’s features, photos, and value. But beware that those sites can be extremely inaccurate.

You can do a simple test to prove it. Do a Google search for: home value websites. Compare the values you get from the various property value estimation sites for the same house. You’ll see how widely the values will differ.

The only way to know what a house is really worth is to get real comps from a local agent and analyze them carefully. The formula for analyzing comps for an accurate house value is a discussion in itself.

I know it's tempting to use those sites because investors typically get held up trying to get a realtor to run their comps. I can help you with that. Just let me know. I always get my comps within a day even when I'm needing comps everyday. It's easy if you know the tricks to it.

* * * If you base your offer on an inaccurate value from an instant house value site, you could lose thousands. Don’t risk your investing career. Use a Realtor for comps!

Once your offer is accepted, you can use your due diligence period to do deeper due diligence to confirm with county records things like how much the seller owes, whether they are current or delinquent on their mortgage loan and more.

This is also when you should have an inspection done. Never skip the inspection. It will reveal many things you didn’t know about the property that will directly affect the profit you make in the end.

Step 5: Visit the Property. Make sure to visit the property and the seller in person to confirm the repairs, the condition of the property and their motivations. While you are there, make sure to take a look at any comps or appraisal the seller has. Then show them your comps (which you have previously analyzed very carefully). Show them all of the details that confirm your property value number.

For example, if your comps are more comparable in size, age, proximity or condition, make sure to point it out. If they have no comps or appraisal, just show them all of the details of the comparable homes in order to help them understand your property value number.

This step will help tremendously with the amount of offers you get accepted.

Step 6: Create and Present Your Multiple Choice Offer. Now is the time to take all of the information you’ve gathered so far to craft several offers that will appeal to the seller as I did in the offer examples above.

Step 7: Email the Sellers a letter explaining the logic of your offer and illustrating numbers crunches that show how they will make as much or more profit from your FSBO Offer vs a Full Price Offer through an agent. Then call them or visit them in person to go over all of the particulars of your multiple offers. If they don't choose one of your offers on the spot, follow up with them a day or 2 later after they've had a chance to think it over.

Using this strategy for the first time, I bought 5 houses in 30 days. Once I started making Multiple Choice Offers like this, I became a much more successful investor.

I'd Love to Hear Your Feedback and Questions about this strategy or others. Please Post!