The biggest challenge that real estate investors face is to make offers that get accepted. Buying properties is the basic foundation of real estate investing.
Unless you buy properties, you cannot make any money.
Here is how to make offers that get accepted.
The offer you make depends on the type of property you are buying.
1) Buying from motivated sellers
It is important to have the following pieces of information if you buy houses from motivated sellers:
a) Market Value
Do your due diligence to find out conservatively how much the house would be worth in a perfect condition. You must have this information before you can make any offer.
b) Mortgage balance
You must get this information before you can make an offer. A seller who is not willing to disclose this information is not motivated enough. Move on to a motivated seller.
The mortgage balance must allow you to buy the house and still leave you with a profit. Thus means that the offer you give must allow you to own the property free and clear and still make money.
c) Repairs needed
It is possible to estimate repair costs with the information provided by the seller.
You must know how much you need to fix up the house before you can make an offer. Of course I like to see the house and do my own repair estimates.
d) Asking price
Given the above 3 pieces of information, if the seller is asking for too much, the deal might not be worth it.
A good asking price must take into account the market value, mortgage balance and repairs. You can then make your offer lower than the asking price. If at all the mortgage balance and repairs allow you to make an offer that can leave you with a profit, by all means do it.
No offer can be too low, but you also have to take into consideration the seller’s needs. If they are facing foreclosure, then they probably need some money to move, or their asking price might be just enough to get away from the property.
It makes no sense making an offer when mortgage balance is so high you cannot make a profit. Move on to the next deal.
When all is said and done, the only bad offer is the one you have not made. Make as many offers as you can. You’ll be surprised how many get accepted.
2) Buying foreclosed properties
The asking price and repairs are the only important considerations to make in this case. Banks selling these properties are willing to negotiate.
Most REOs are listed below market value. If your numbers look acceptable, by all means make an offer.
Remember the banks are willing to negotiate, so always make an offer lower than the asking price.
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