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How To Make A Winning Offer On A House

by DougClark   August 09, 2012 at 4:00PM  |  Views: 4,407


Image: Vstock/Getty Images

Offers: This simple word by itself doesn't seem too scary, but if you ask many people who want to be in the house-flipping business this word seems to make their heart skip a beat. This is such an important and what should be considered a non-emotional part of the business.

Everyone assumes that price is the number one most important aspect to making an offer. This is not necessarily true. It can be assumed that the seller of a house is most interested in someone who will perform and actually close. Anytime we receive multiple offers on a property we will always take the strongest offer, which is rarely the highest number. Here are some great ways to increase your chances of having the winning offer:

Commissions

Many potential buyers and investors will drive past a property with a For Sale sign and immediately find an agent to call on the house and inquire about the details. One great method to increase your chance of getting the house is to call the agent that has the house listed and have them represent you as the buyer as well. Many counties will allow the agent to represent both sides of the transaction with proper disclosure to the parties. By allowing the agent to represent you, it doubles the commission that the agent will receive. This is a great way to motivate the agent and gives you the upper hand.

Inspection deadline

So many buyers set their inspection deadline for many weeks out and typically just a day or two before the closing deadline. This gives the buyer such a long window of time to back out from the deal and get any earnest money back. There is no reason that inspections should be pushed off - get them done the first week or two and make the offer accordingly. You will really stand out from any other offers.

Closing deadline

The standard real estate deal seems to be a 30-day close. Typical inspection deadlines are 21 to 29 days out. With deadlines this far out there are plenty of ways "out" of the contract and the seller knows this. Any contract with a closing date further out than 30 days just seems like a way for the buyer to hedge their bet and continue to shop for other properties. When I really find a house that I want, I make the closing deadline 1 day. The seller, who is usually the bank, can never actually close that quickly but they know that I am serious. Try your best to close as quickly as possible to strengthen your offer and increase your chances of getting your offer accepted.

Earnest money

I can tell the seriousness of the buyer from the amount of the earnest money alone without knowing any other details of the offer. Most offers we receive had a standard $500 to $1,000 earnest money payment attached. This is a low number and represents either the buyer's financial weakness or the fact that they may back out from the deal and don't want much money on the line. There are many appropriate ways to get your earnest money back, so why not strengthen your offer by increasing the earnest money? Imagine how much a $5,000 or $10,000 earnest offer would stand out when your competitions offers are likely to be $500. Recently I purchased a bank-owned property that received 10 offers in 1 day alone. I really wanted the property so I made my purchase price and my earnest money check the same amount. I offered $46,000 for the property and my earnest money check was $46,000. Needless to say I got the deal and made over $45,000 in profit alone.

Strength of the buy

Present as much supporting documentation as you can to strengthen your position. This can include bank statements, qualification letters, proof of funds, or even a quick personal letter to the seller explaining your excitement and willingness to purchase the property. Sellers prefer to sell to people that are emotionally tied to the property and most people skip this step.

Making offers is something that professional house-flippers do on a daily basis. There are many components to a strong offer other than price. Use these tips and get out and make offers. Report back to us on Twitter at @Demo_Doug and @FlipManMike by using #FlipMen. Don't forget to tune in to all-new episodes of Flip Men airing Sundays at 10/9c on SPIKE.

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