Is it an Offer? Is it an Insult? - Posted by Kristine-CA

Posted by Joe, Detroit on February 21, 2002 at 11:09:05:

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Is it an Offer? Is it an Insult? - Posted by Kristine-CA

Posted by Kristine-CA on February 20, 2002 at 21:31:13:

Hi there everyone. I have a question about low-ball offers. I’ve been making offers all over the place with abandoned properties, probate properties, tax-defaulted properties (some are all three at the same time!). I do the research and know what I want to pay. I also have a couple properties under contract and now that I’m showing them to buyers, I am on the receiving end of the low-ball offers.

I have been assuming that none of this is personal. It’s business. I have never push my rational on sellers unless they ask me. And I am not offended by sellers when they offer me what they want to pay. But there are plenty of people out there who are really offended by my offers and say so. It’s an insult. And then I have friends and family that say my potential buyers are insulting me by making low-ball offers. Really?

Isn’t just business? Is there such a thing as an insult offer? I am missing something here? Is there really time to take any of this personally. Is there some etiquette I should know about?

Thanks for your thoughts. Sincerely, Kristine

Thanks everyone… - Posted by Kristine-CA

Posted by Kristine-CA on February 21, 2002 at 13:00:42:

lots of good thoughts here. But the bottom line is as I thought. It’s business. Business is such a great bottom line. So unlike so many other issues in life. I like it.

Sincerely, Kristine

Re: Is it an Offer? Is it an Insult? - Posted by GL(ON)

Posted by GL(ON) on February 21, 2002 at 10:15:37:

People are nuts, that’s the problem. You and I know from a business standpoint about what something is worth - it’s what you can sell it for. Some people don’t believe in that, they have all kinds of weird reasons for what they think something is “worth”.

They might have a figure way above what is reasonable, or way below, or by some coincidence, about right.

So hunt out the way below ones to buy from and the way above ones to sell to LOL.

Also some people will try real low offers, if you let it roll off like duck water and make a sensible counter offer you may still make a deal What’s to lose?

Re: Is it an Offer? Is it an Insult? - Posted by Steve-DC

Posted by Steve-DC on February 21, 2002 at 07:30:04:

Kristine,

My thought is that the concept of “home” is very strong in the American psyche. People are very emotionally attached to their home after raising families there, struggling to pay for them, seeing parents live and die in the home, etc.

Therefore, the concept of price gets emotional. This doesn’t happen in other wholesale industries. My girlfriend, for example, just put her car up for sale. It’s worth $10,000. Several used car dealerships called her and said “I’ll give $5K in cash for it tommorrow…” Was she upset? No, of course not, it’s just business. But she is not that attached to the car…she’s had 3 or 4 in her lifetime.

Regards,

-Steve

Re: As the Godfather said… - Posted by DavidV

Posted by DavidV on February 21, 2002 at 06:41:48:

“It’s just business”

Re: Is it an Offer? Is it an Insult? - Posted by Kent C

Posted by Kent C on February 21, 2002 at 01:35:58:

I make a low ball offer. WHEN it gets rebuffed, I counter matter-of-factly…“Of COURSE your property is worth more. Thats why
I’m interested in it. But I am a business man. This is all I am willing to give right now…but it IS cash and it IS right now. If you wait ,
perhaps, 6 months you may get more than I am offering. Then again, you may not. Let me know if I can be of service…thank you
…good day”. And walk away.
90% of the time they will counter after this.

I try not to insult such as “are you nuts that place is a !@$!@#”. But I am not afraid to spell out a few major items that may need repaired.

I base a houses value at what I can sell it for quickly. In most cases that is no more than 80% of FMV. Tell them this.
Home value is a function of time. It is worth 100% if you have 6 months. It is worth 80% if you have 30-90 days. It is worth 50%-70%
today.

Kent C

Re: Guideline… - Posted by Julius Levai

Posted by Julius Levai on February 21, 2002 at 24:34:33:

Kristine! If they don`t spit in your face, you offered too much… Nothing personal… Julius.

Re: Is it an Offer? Is it an Insult? - Posted by Matt Y

Posted by Matt Y on February 20, 2002 at 23:07:01:

Kristine-CA,
I have a couple of thoughts I’d like to share with you on the idea of low-balling offers…
First, the term “low-balling” has gotten a pretty negative connotation with sellers and agents alike as a sort of frivilious offer with no real merit. To this I say “B.S.!” My reasoning is this… obviously in order to make money wholesaling property or buying fix-ups and re-selling them at or below market value requires you to get the property originally at some kind of a bargain price. There’s nothing negative about you buying something at a good price and giving yourself room for fix-up, commissions (if any) and profit. Sellers often have a perceived value of their property (whether real or imagined) and often this perception is fueled by agents who are looking for a listing. Of course they sell the seller on the fact that they can get top dollar for their beautiful property in the hopes of securing the listing so that they can earn a living. This unfortunately leads the seller into believing that their property is worth more in some cases than it actually is. Hence, when an investor such as yourself comes along and offers them a realistic dollar amount their dream bubble is burst and of course this could lead to them being "insulted."
You’re right when you say that this isn’t personal. Just as you shop around for gas, clothing, food etc., and sometimes you even bring a coupon or two to the grocery store, does this give the store manager any reason to be insulted that you would honestly expect money off of his superb stock?!?! I think not!
Ok, that was a little far-afield but stay with me here.

No, you are not intentionally attacking the person for the condition of their residence, you are merely stating facts when you negotiate these prices. You know what your additional costs will be if/when you buy the property, fix it up and try to resell it and they as sellers must realize that you have additional costs. No, you don’t necessarily need to make them aware that you are going to fix it up and resell it but surely most of the properties you’re making offers on will need some sort of repairs (and if the current owners don’t know it they’re dillusional) so it shouldn’t be too much of a surprise to them to see your offer.

I too have been approached on several occasions to sell my already rehabbed property at huge discounts by homesteaders even. Should I be offended that they make such low offers? NO! I’m extatic that someone has offered me anything so now I may begin negotiating. Without an initial offer there isn’t even anything to talk about. Regardless of what they offer it’s at least a starting point, don’t ever be offended when someone says they’re interested in your property even though their offer may be a bit ridiculous.

Lastly, you ask if there is any sort of etiquette that you should know about and I would answer absolutely, without a doubt, NO. Etiquette is for a night out at the opera not making offers on houses. Etiquette is not something you can easily spend when bill time comes. Etiquette is something for the real estate agents to worry about when dealing fairly with their clientele. You on the other hand need to consider your “low-ball” offers as “fair and equitable compensation in trade for solving their unfavorable situation.” Sellers of less than top-notch property know that their homes are run-down, neglected, and in disrepair. This is not news to them. Stick to your guns when making your offers. As NCPaul said, do not apologize with a larger offer and get yourself into trouble. Realize that this is most definitely a business and it’s not always for the meek.

I myself make as many offers for property as I can. Sometimes those offers will be as low as 40 to 50% of market value and in every situation such as that it’s because the property will need a great deal of work done before it can be sold as a comparable to those that have been kept up. Again, I did not neglect the property, I am not the one that abused it, I did not create their unfortunate circumstance and I must say I DO NOT FEEL RESPONSIBLE NOR UNETHICAL for making a realistic offer when warranted. If the seller is truly offended with your offer they will flat out decline it in which case I would resubmit at the next interval (keeping in mind I have a top-dollar commitment I can make) and see what their response is to that. Yes, you do run the chance that they will completely disregard any further offers (if they are truly hurt by your actions) however if they need to sell eventually they will, either to you or someone else.

I hope this helps you realize that you are doing the right thing by making your offers when/where you can and by not taking it personally. Again, it is a business and if you are like me and doing it for a living keep the bottom line in mind at all times.

Happy Investing!

Matt Yohnk
MPD Investments Inc.
myohnk@mpd-investments.com

Re: Is it an Offer? Is it an Insult? - Posted by NCPaul

Posted by NCPaul on February 20, 2002 at 21:51:11:

It just depends. (I’m sure you love that specific answer 'eh?) The “insulted” seller may just be flinching at your offer to get you to come up fast thinking that you will quickly “apologize” for the insult with a higher offer. This sort of thing does work and it’s part of the business. It’s usually a negotiation tactic. If it turns out that it’s not some tactic but the seller is actually insulted, you probably aren’t losing anything by passing on that property anyway. Just be sure you never “apologize” with an offer higher than you really want to make. For some really good advice and help with negotiating check out Roger Dawson’s material. He was at last years convention and his workshop was worth the entire price of admission by itself! I think they sell his stuff on this site, if not ask JP and I’m sure they will get it for you. (If it’s got anything to do with R/E invesing and you want it, JP will sell it to you!)

Good Luck

People are Nuts…(I love it) NT - Posted by Kent C

Posted by Kent C on February 22, 2002 at 02:34:36:

q

Re: As the Godfather said… - Posted by Gerald-DC

Posted by Gerald-DC on February 22, 2002 at 16:48:21:

Actually,

Sal (Sally) said this as they were taking him away to “exterminate” him for betraying Michael by setting up a bogus meeting.

His last line “tell Mike, it was only business.”