How To Make The Right Offer When Flipping
Knowing the steps to making the right offer with help teach you How To Purchase Real Estate.
Imagine for a second that you are looking to purchase a house to invest in. You search through listings on MLS, in the newspaper, on Craigslist and even drive around town looking for “for sale” signs.
Finally you find it: the perfect house for your flip. The asking price is even below 70% of the ARV. Everything is working out great.
Except that you aren’t the only one looking at this house. There are more than a few other investors taking the same bait as you, and you are on the brink of a bidding war.
When you are the only one making an offer on the house, you can influence the seller to meet your needs. However, if there are multiple bidders, you don’t have time to play hard to get.
Do You Want To Know How To Purchase Real Estate? Make The Right Offer.
You will need to quickly re-tune your buying strategy to beat the competition. Below are a few great tips to steal the spotlight from other investors and seal the deal with your offer.
Cash, Cash, Cash
As you’ve probably heard before, when you are selling a property after the rehab is complete, a cash offer is often more appealing than a finance offer. Cash offers are quicker, simpler, and you won’t have to worry about the buyer failing to get the approval from the lender like you would with finance. Sometimes, it’s even wise to accept a lower offer if it is cash to avoid all of this hassle.
The same goes for when you are buying. The seller wants to an offer that is fast and isn’t going to fall through. He or she doesn’t want to have to put the house back on the market because the finance didn’t work out, and will always gravitate toward cash.
If possible, you should offer cash. This might not be a realistic idea for new investors with little expendable income, but if you can afford it, it’s usually a smart choice.
If you do choose to offer cash, make sure you get a proof of finances statement from your bank to show the seller that you do indeed have the money you say you do.
Offer Above The Asking Price
The reason that you have a lot of competition when buying a house might be because the house is listed at a very low price. If this is the case, than it might be a good idea to actually submit and offer well above the initial asking price.
This might seem counter-intuitive at first. After all, you are trying to get the best bargain possible, right?
Well, in some cases, you can play coy and lowball all you want, but in the end you won’t end up with the property. If it is worth your money, you should offer an amount of money higher—sometimes as high as 20%-- above the asking price.
Just make sure that your offer is still below 70% of the ARV, or else you might lose money on this venture.
Say You Can Close Very Soon
In real estate, time is money. The seller is losing money the longer he holds onto his property and often wants to get it off his hands as soon as possible. This might be the reason that the asking price was lowered, as mentioned before.
So to stand out in a sea of other investors, you need to evoke the message that you mean business. You want to indirectly say, “I want to buy your property, and I want it now.”
The best way to do this is by telling the seller that you are willing to close within two weeks or less. Chances are, the buyer will need a little more time, but your message will work none-the-less.
Cater To Your Seller’s Needs
All sellers are different. Each has his or her own agenda, motivation, and desires. Some people are selling their own property meaning that they are less experienced and more easily influenced. Maybe the seller has just suffered from a divorce and is more eager to get rid of the property than anything. In this case, speed might be better than a high offer.
Others, like wholesalers or banks who sell REOs, sell houses for a living and can’t be fooled. You need to show a level of professionalism and transparency to peak their interest.
Whoever is your seller, just get to know them and find out what they’re all about. Don’t beat the cards, beat the player.
Get An Inspection Immediately Or Not At All
As you’ve probably heard before, getting an inspection can be an incredibly important part of house flipping. During the inspection you will be able to find out if there are any serious problems with the house, and what exactly needs to be fixed.
However, many sellers are intimidated by the thought of getting their house checked. Not usually because they know of anything that is wrong, but because of the unpredictability of the outcome of the sale.
Usually, in a purchase agreement, there is a clause that states that the sale will be finalized if and only if the house passes inspection. If, for any reason, the house isn’t in ideal condition, the buyer can opt out of the purchase. If this were to happen, the seller would have to start all over and re-market the house.
To make things easier for the seller, and in doing so make your offer look more attractive, you should do one of two things:
1. You could have the house inspected immediately, so that you would not have to waste anyone’s time.
2. You could simply NOT have the house inspected at all. This technique might be reserved for the more experienced house flipper, who knows what to look for in a property and can make a proper judgment without an inspector. If you do choose this route, you will most likely be the most appealing candidate to sell to.
Whichever route you choose can only help you better your position in the mind of the seller.