Tuesday, July 26, 2011
Multiple Offers from Investors
As so many investors are interested in wholesaling, this blog article focuses on different offers that a wholesaler might make to a seller to secure a deal.
So as a wholesaler, you have done your mail campaign, or your drive-bys, or run an ad, and all of a sudden, you get in touch with a seller! Now what?
I recently blogged about “pre-screening the seller” to gather information to ensure that this property is truly a deal, and to establish a rapport with the seller. You have done that, and promised to get back to the seller with an offer within a relatively quick timeframe.
It may be possible to present some options that very day, but only if you are sure you have done all necessary research in advance and are comfortable with the options you wish to present. If not, offer to get back in touch within the next day or two to present your offer.
Please do not think that price is the only negotiable term, although for many sellers it will be the most important one. Previous articles have outlined the numerous terms that are negotiable in a real estate transaction, and any offer should be crafted to address the seller’s particular set of issues.
Many investors like to present multiple offers. Like a multiple choice quiz, the respondent is very likely to pick an option, as opposed to a simple “yes” or “no” answer. The goal is to keep the discussion open and the possibility that if not now, at some point in the future, one of your options will make enough sense to be attractive. Savvy investors know that a “no” now, is just a “no” now. Sellers do come back, if they are truly motivated and can’t find a better alternative.
With options, you give some attractive alternatives for a seller to mull over or discuss with you. I like to begin with a full-price offer, or one with a very generous purchase price. Agents and sellers are usually thrilled when they hear you are making a full-price offer.
Then reality sets in, because at full price I am also going to set the terms. This full price offer may include a low- or no-down payment, deferred payments or interest, or a very low or no rate of interest on installment payments. There may be other negotiable terms, including long-term seller financing. This “high” purchase price offer will typically include a number of terms that make sense for the investor, but may or may not be comfortable for the seller.
My last option will include an all-cash, buy-it-now price for a deep discount offer. It may remove all financing and inspection contingencies, and I may offer to pay all closing costs.
I may also include 1-2 additional options, with a price between the high purchase price and the all-cash price, with terms that vary but may include simple interest or amortized payments. These can be custom-crafted to match the needs of both the investor and the seller.
This technique of multiple offers is also quite effective when you are not sure of the seller’s true needs or motivations, and will allow you to identify these fairly quickly by targeting the options that seem most attractive to the seller.
So armed with multiple alternatives for your sellers, go make some offers!