Is My Offer Too Low???
A common theme I see with most new investors is that they’re nervous to make that “low ball” offer…at least that’s how they perceive it. Here’s an example of what I mean: “The seller wants $160K and the ARV is about $200K. After taking a discount of 70%, assuming $20K in repairs and $10K in profit for us, our offer would now be $110K.” Now a lot of new (and even some seasoned) investors would think, “There’s no way they’re going to take $50K less than what they said they want!” And sometimes that might be true, but you never know.834r67
The first price a seller says is just that…the FIRST price, or a starting point. There are a million ways sellers decide on the value of their home with some of the most common ones I see being: “My tax assessor said it’s worth this much”, “I know home values have gone up so it’s got to be worth at least that much”, or probably my favorite, “It’s what the Zestimate says”. Now all of these are worthy reasons of how they valued their home…to the seller that is. Oftentimes it’s our job to educate sellers on what that tax assessment really means, or how Zillow really gives a Zestimate. That’s a whole other topic for another time but just know to the seller their reasoning makes sense and it’s our job to break down those preconceived beliefs.
So back to making that offer. If you’ve read my other article then you know that telling them you can pay $110K should NOT happen on the first phone call, possibly not even the second. Often times I will just try to get a price drop on my second phone call and then make my offer on the third call when I feel I have enough rapport with the seller. I can’t tell you how many times I have seen sellers drop $25K, $50K, even $100K once I give that offer after having built the trust and rapport with the seller. At the end of the day what do you have to lose by making an offer that works for you and them, while still allowing you to make a little money for connecting them to a back end buyer.
Always trust your numbers and you’ll be shocked by how many sellers are willing to sell to you because you made a real educated offer!