3 Steps to Making a Successful Offer
A little while back, I bought a house on a street called Bridle Lane. In just six days, my team and I went from having a motivated seller find my website to closing a deal that brought in over $60,000 in profit. During those six days, I spent only 90 minutes of my own time working on that deal. I was able to spend little time on the deal because my team and my entire process is set on automatic.
One thing in particular truly helped make the deal on Bridle Lane go through: my acquisitionist and I were able to bring the seller down from their initial asking price of $100,000 to accepting my offer of $80,000. Making a successful offer on a house is key in the investing business.
If you don't know how to make offers that benefit you and the seller, you won't get very far. To help you and your business, I want to share my three-step process for formulating a great offer:
Train Your Acquisitionist Right
The first time you talk to a seller, determine if the deal is worth pursuing. I have an acquisitionist that has been with me for 12 years. She knows how to get all the information we need on the lead sheet, talk about the possibility of seller financing, and negotiate down to the lowest offer. You or your acquisitionist will also need to know how to handle sellers that get upset if they don’t like what they’re hearing.
The Magic Question
When you or your acquisitionist asks for the lowest price a seller will accept, the number you hear first is rarely the lowest the seller is willing to go. When my acquisitionist first got on the phone with the Bridle Lane seller, he insisted that the lowest amount he’d settle for was $100,000. Her response was the "magic question."
“If we could get you all cash, without needing to get approved for a mortgage, without having to get any appraisals done, and close within seven days, what’s the least you’ll take?”
That one question saved me $20,000 instantly as the seller dropped his price to $80,000.
Math Makes the Decision
Including the "magic question" in your negotiation is important for determining exactly where the seller stands regarding the value of the property — but it’s not the end of the negotiation. Next, send your contractor out to the property to determine the cost of repairs.
Last year, I made a deal on a house that had an after-repair value of $175,000. The repairs were $80,000, and the seller started at $80,000. The "magic question" got him down to $65,000. But after looking at the numbers, the best offer for us was $20,000. My acquisitionist justified the offer, and the seller accepted. You never know what a seller will take until you make the offer.
Know What a Good Deal Looks Like
After my contractor went out and crunched the numbers for the repairs on Bridle Lane, I used this information to make my first offer. I reviewed the numbers and told my acquisitionist to offer the seller $60,000. It wasn’t long before she got back to me.
Naturally, the seller was livid. It’s not the first time a seller was unhappy with my offer. He threatened to come down from where he lived in Ohio and finish the rehab himself before he was willing to take a penny less than $80,000. In his mind, he’d already given up $20,000.
Fortunately, my acquisitionist knew exactly how to deal with these emotions. Following a script I had given her, she told the seller, “Jay has not been to the house. All he’s doing is looking at numbers. So let me ask Jay to personally go look at the house, and we’ll get back to you. I’m sure we can work something out.”
The next day, I personally went to the house, and I saw why this man wasn’t taking a penny less. There were brand-new cabinets, doors, windows, HVAC, and even a new roof. The house was over halfway done! The next time my acquisitionist called the seller, she told him that I now understood why he wouldn't go lower than $80,000.
At this point, the seller happily took the offer. It wasn’t the $60,000 I’d hoped for, but when I looked at the house, I knew the deal I had on my hands. I wasn’t going to lose it by being needlessly stubborn.
I developed this negotiation strategy over years of trial and error. I let great deals slip by early in my career because I didn’t have a coach and, therefore, I didn’t know how to make the right offer.
Remember: The more offers you make, the more houses you buy, the more money you make. I wouldn't be able to make these great offers and profits without having private money lined up prior to making offers.
If you'd like to learn more strategies and tips for finding and funding deals to flip houses, head on over to www.jayconner.com/linkedin to grab two free tickets to my upcoming live event. Spaces are limited and filled on a first-come, first-serve basis, so register today!