In my recent real estate investment series, I outlined some of the most important features to look for in a property, how to get started in real estate investing, and even shared an interview with a local agent who is (in my humble opinion) an expert resource for investors.
However, one important topic I didn’t really discuss was writing a competitive offer when you find a property you want to buy. If you work with a realtor, he or she can and should write the offer for you, but it is smart business practice to know exactly what you want included in that purchase agreement. If you are not currently working with an agent, this information will be tremendously helpful for you as you represent yourself with sellers.
These tips are a blend of my own personal experience and some investigating I did around my office in Evansville. You could certainly utilize them if you’re interested in purchasing a new primary residence, but I compiled this information for investment purposes. These helpful hints are specifically geared toward those who have found a prime investment property and need to lower the price significantly or stand out among multiple offers.
- Include a letter with your offer, especially if you offer a purchase price that is substantially less than what the sellers are asking. Describe what you want to do to upgrade the home and share your passion for your business. Let them know the home will be in good hands.
- Waive your right to inspection or only do an inspection for informative purposes. As a savvy buyer, you definitely want to know the condition of the property, but don’t ask for repairs. The inspection is a source of stress in many transactions, so take that weight off the sellers and let them know you will coordinate and finance all repairs. In contract terms, you’re offering to purchase the property “as is”.
- Make non-contingent offers on properties you’re interested in buying. Pay cash or be assured your financing is secured to compete with cash offers. Minimize the risk for the seller by making a clean offer. Don’t ask for closing costs or a home warranty, and ask for a quick close.
- When you submit an offer on a property, especially if you know it’s a hot commodity, be competitive. What I mean by that is offer a fair market price. The sellers know there is a lot of interest in their property, so they will assuredly ignore any offer that is comparatively low. Offer your highest price and best condition the first time and you might eliminate any need for negotiation.
- Include proof of financing with your offer. If you’re paying cash, get a letter from your bank that states you have the funds to pay cash for the property you want. If you’re financing with a mortgage, include your pre-approval letter with your offer so the sellers know that funding will not be an issue in the transaction.
- Make your offer good for only 24 hours. Put a little pressure on the sellers to say yes or no. If they say no, you can spend your time moving on to the next property instead of waiting around for an answer. Remember, this is a business transaction. When one offer doesn’t work out, don’t take it personally. Find the next opportunity that interests you.
- Offer a generous amount of earnest money. In every market, there are general amounts that buyers submit as earnest money depending on the price of the property. To show the sellers you’re serious about this transaction, double your earnest money amount. It will stand out to the seller and isn’t cashed until closing, so you can use this tactic when you really want to make a statement.
Those are some of my best tips for crafting an aggressive offer. If you try any of these, I’d love to know how they work out for you. I’ve seen a few of them pan out terrifically well for buyers, so I hope you can utilize one or a few in your next offer. Good luck!