|How to make lucrative offers on Investment
Custom Homes by:
|Jamar Properties Inc
Building trust and Quality in North Carolina
I still remember his comments: “You will annoy the homeowners and you are risking
loosing this property! They will refuse to negotiate with you if you insist on making this
offer”. My real estate agent was reluctant to make the offer on an investment property I
liked. He felt the owners would be offended because the offer was way below the listing
price. Against my agent’s advice, I still asked him to offer $69,000 on a property that
was listed at $89,900.
After three long weeks, they came back with counter offer of $80,000. When my agent
notified me of their counter offer, he was very satisfied. He made it known that I should
accept their counter offer. However, I still felt I could do better based on the analysis
that I had done on the property. In my opinion, it is very important to focus on the
following items in order to negotiate a great deal. First, It is vital that you understand
what motivates the seller. Second, you will need to perform a thorough analysis of the
Let’s review these factors in detail:
• What is the assessed tax value of the property?
• How much did the current owners pay for the property?
• How long has the property been on the market?
• What is the average sales price on similar properties in the area?
• How old is the property?
• Does the property need any repairs?
• Are you dealing with a motivated owner?
You are at the point where you can make thousands of dollars by making the correct
offer. However, you will need to review all these factors in detail:
Assessed tax value: your aim is to obtain the investment property from 10 – 20
percent below the tax value. To validate you number, you will also need to review the
current tax value of other similar properties in the neighborhood.
Last sales price: This is public information and your real estate agent should be
able to obtain it for you. If you are already investing in real estate, you know that this
information is also available in the Internet from several sources. This data will give
you another bench mark where to place your offer. If your potential property is owned
by an institution that does not manage real estate, they might be more inclined to
accept your lower offer.
How long has the property been on the market? : If the property got listed
recently, you know that the owner will not deal with you until they have tested the
waters. If the property has been listed from six months to a year, the owner will be
more willing to entertain an offer from an investor. A word of caution is needed at this
time. It is very important that you determine why the property has not been sold yet.
You will need to determine the factor that is preventing the sale. It could be that this
property has been overlooked by other investors. However, in most of the cases, you
will find that there is a specific reason: It could be that your property needs some
repairs, or it does not have a clear title, etc. Once you determine the reason, it can
be used a a bargaining chip in your negotiations.
What is the average sales price in the area? As you gain experience with this
method, you will be making offers a bit lower than the average sales price.
Remember when your offer is presented, there must be reason for the lower offer.
How old is the property? The age of the property is just another bargaining chip.
Older properties have more maintenance problems.
Does the property need any repairs?. We already started discussing this situation.
If your property is in need of repairs, you will need to have a licensed general
contractor advise you on the repairs before you buy. Do not skip this step. Your
profits will evaporate very soon if you do not estimate the correct repairs.
Are you dealing with a motivated owner?. The biggest mistake you can make is to
negotiate with someone who is not motivated to sell. Find out what motivates the
seller, In some instances, you can let the seller make the first offer. “Mr. owner, what
is the very best deal you can offer me on this property?” This question will put the
pressure on the seller. Whatever he offers, you can ask him to do better.
After you have screened several properties, it is time to make the offer. Using this
information, you should be able to make a profitable offer. If you do not buy it right,
meaning below market value, there is little change of making a profit.
One last tip. Always, always leave yourself a way out. Make sure that any contract
you sign has several contingency clauses. One clause should let you off the deal if it
does not pass inspection. The second clause should state that the purchase is
contingent on you obtaining a reasonable mortgage in a certain period of time.
Making offers on investment properties does not have to be complicated. In fact, it
can be quite easy if you follow the outline presented in this article.
|2200 SFT Investment Property