How many times have you came up with an offer on a property only to second guess yourself and not present it because it seems so ridiculously low?
Has this happened to you before?
How many times have you told a seller how much you can offer and they immediately became angry and even hung up on you?
If this has happened to you, I can promise that you are not alone.
The bottom line is that the numbers have to work in order for it to be a deal that meets our buying criteria. The problem is that more often then not, these offers are well below what the seller is hoping to get.
The million dollar question is, how can you present these very low offers without completely offending the seller?
This is exactly what I am going to cover in this post. How you can soften the blow of your low offer so that the potential deal doesn’t blow up in your face.
Create a Simple Presentation
A great way to present a very low offer to a seller, if you are going to be face to face, is to put together a simple presentation.
This can be on paper or even on a tablet device such as an ipad if you have one.
In this presentation it is important to include the following:
Benefits of your offer
Your cash offer compared to listing on MLS with an agent
Pictures of fully rehabbed (fixed up) homes
List of repairs/updates needed
This is where you want to highlight all of the benefits of your offer.
Here is a list of some of the benefits I highlight when I present a cash offer to a seller:
No commissions to pay
No closing costs
As-Is. No repairs need to be made
No appraisal contingencies
No loan approval needed
Quick closing on your date of choice
These benefits are very attractive to sellers. What seller wants to pay extra costs when selling there home? That is a pain point for them. It only eats away at their bottom line.
Showing that there are no loan contingencies or appraisal contingencies is a big plus for them because they know there is much less chance of the deal falling through.
Being able to close around their schedule is a huge benefit as well. Many homeowners will need sufficient time to find a new home and or pack up their belongings. They don’t want to be rushed out. This is a big step for them.
You Versus the Agent
Our biggest competition as investors is really other agents.
Most homeowners think of listing their home on the market with an agent as the first option. When they consider the commissions that they will have to pay they often consider other options as well.
A great way to illustrate why it is better to go with your cash offer is to show a simple chart, which outlines the pros and cons of each.
You can use all of the benefits above for the pros of your offer. The con is that your offer is adjusted for the condition of the property.
The Pros of going with an agent are that they might receive a higher offer and they will receive representation.
The cons of listing their home on the market with an agent are:
Price is uncertain
Closing date is uncertain
Multiple property showings/Inspections
1 out of 3 or 4 chance of falling out of escrow
Completely Remodeled Pictures
Having pictures of beautifully remodeled homes to show the seller is a must.
The large majority of sellers believe their home is in great condition even if it is grossly outdated or in need of repairs.
When you can show them a picture of a gorgeous kitchen that has been completely remodeled from floor to ceiling, it is a real eye opener for them.
Let them know that the end goal for you is to bring the home up to the standards of todays picky buyers. You are going to make it look brand new.
List of Repairs
This is where you would break down the costs of updating their home.
If you are not completely sure of the costs for updating each area of the home you can always give them a total cost to complete the transformation.
A breakdown can really help them understand how much costs are associated with rehabbing a home though.
Comparables or comps, are a key part of presenting the offer.
When you can show evidence that similar properties in similar condition are selling for near what your offer is, it really helps to build your case.
You can show recently sold properties, ones that are active, pending or even contingent.
Make sure that you are familiar with the comps in the neighborhood. Some sellers pay close attention to the market in their neighborhood.
Many times though, they will say the homes are going for x amount in the area. The problem is they are only looking at what is active on the market and not what is sold. This is a big difference that they need to understand.
A home can be listed at whatever price the seller and agent agree to list it at. Often times homes are priced well above their true market value. This is mainly due to agents over promising to get the listing and or sellers that just feel their home is worth far more than what it really is.
Breakdown of the Offer
I like to show sellers how I arrived at my offer rather than just throwing a number at them without any justification.
Many investors make this mistake. If you just tell them you can offer x amount with out going into any detail, they are going to think you are just low balling them.
An effective way to soften the blow of your offer is to show them how you arrived at your price.
The way to do this is show them a chart or slide that shows a breakdown of your costs to fix up and sell the home. This includes:
Closing Costs- Title & Escrow
Carrying Costs- Any loans, Utilities, Insurance, HOA dues, taxes, landscaping, etc
Closing Costs- Title & Escrow
Lastly, show the profit that you need to make as well. It is important that they know and understand that you need to make a profit in order to take on the risk of the project.
Non Face-to-Face Offers
There may be times when you must present your offer via email due to the seller living out of the area or you may not have the time to meet with every one of them in person.
In this case, you can still email a presentation with the some or all of items listed above.
This route is most effective when you can speak with the seller as they are looking it over. Otherwise it may seem overwhelming to them. Also, you can address any questions and concerns right then.
If start to use the advice in this post when you submit your offers you will find that you have a much higher closing percentage than you ever did before.
Rather than completely offending or pissing off sellers with low offers, soften the blow by putting a little extra effort into a presentation so that they can understand why you need to buy at the price you are offering. When you do this, you will greatly increase your results.
I hope that this post was very helpful to you. If it was, please share with someone who you think may benefit from it.
Here’s to your success!!!