Multiple Offers How To Get Yours
To The Top
By Steve Steadele
The author has permitted the reprinting and redistribution of this
article.
“Was it good” my wife asked as I tried to lift my
bloated gut from the dining room table. My eyes were clearly bigger
than my stomach. I felt like I had gained 10 pounds. I was completely
stuffed and ready to take a nap.
“It was very good,” I replied. “You
outdid yourself.”
She smiled and started to clear the table. Though the living room couch
and my favorite blanket were calling my name, I jumped in to help her.
After we finally got all the dishes to the kitchen, she filled the sink
with water, added a little soap and started washing them. I grabbed a
towel and asked, “Can I dry the dishes”
She passed out. (Okay, not really.)
But you get the point. Some offers are no-brainers. Others are a little
more difficult to get accepted. What I want to talk to you about today
is how to get sellers to accept your offer when you expect multiple
Purchase and Sale Agreements (PSAs) on an apartment building.
If you find a property that’s not on the market and
you’re negotiating with the seller, it’s not so
difficult to get an offer accepted. That’s because
you’re the only game in town and you have time to negotiate
without the fear of someone else coming in to rip the carpet out from
under you.
But what if you find a property that’s on the market and the
value makes sense Chances are there will be several buyers writing
offers on the same property. If you suspect that to be the case, try
these helpful tips
Standard form
If you’re buying a large property (or a building from a
seller who owns several hundred units), they’re likely
familiar with the PSA and probably have an attorney who will look at
your offer as well. Even so, I’ve found that most sellers are
more receptive to offers written on standard forms. Agents are
especially appreciative because they know what it says and
they’ll sound much more credible when presenting the offer to
the seller. The chance of getting your offer accepted, instead of
another offer from a different buyer, is much greater if you use a
standard form for your area.
Price
Don’t get greedy. If the property makes sense and you think
there will be multiple buyers, present the seller with an offer at or
slightly above the purchase price. That doesn’t mean you get
stupid. The property has to be priced right to begin with,
that’s why there are multiple buyers. The nice thing about
apartment buildings is that they rarely ever check out exactly as
represented. That means you’ll have items to use in the
negotiation later.
Closing date
Some sellers will push you to close quickly and others need time to
find another property to complete a 1031 tax-deferred exchange. If you
can, be flexible. Find out what’s important to the seller.
Even if the seller wants a long closing date, I’ve found that
writing an offer with a fast closing timeline is usually best,
especially if agents are involved. Agents despise extended closing
dates and when two offers are similar, they’ll almost always
push the earlier closing date. You can always add a clause that gives
the seller the right to extend the close of escrow to give them time to
find their next property, just be sure to remember the lending process
and be mindful of the interest rate. If you play your cards right, this
can work in your favor in the negotiation.
Inspection and financing contingency
Most PSAs consist of an inspection period and a financing period. Some
brokerage companies will break it into several other contingencies,
such as books and records and title report. For the purposes of this
article, we’ll assume the inspection contingency includes
physical inspection and the review of books, records, and all other
documentation. Depending on your experience level and the size of the
property, the inspection period usually takes between 21–30
days. Read the agreement. Most of them say that the clock starts
ticking once the buyer has received all necessary documentation. For
this reason, I’ll usually write a very short inspection
contingency because chances are, the seller andor their agent is going
to miss something anyway. Most of the time, I can get through due
diligence in less than 10 days, if absolutely necessary. Make sure you
give yourself enough time, but be aggressive. Sellers want to know
you’re moving ahead as soon as possible.
As far as financing is concerned, I’ve found that sellers and
agents alike trip over themselves if I write an offer without a
financing contingency. Don’t do this unless you’re
absolutely, positively sure you’ll get the loan and
you’re willing to do anything it takes to get it. Presenting
an offer without a financing contingency tells the seller you have the
means to get the loan and ultimately close the transaction, but
it’s not without risk.
Earnest money
Some investors refuse to write an earnest money check payable to escrow
because if things go south, the seller can make it difficult to get the
money back. I’m in that same group. Generally I prefer to
write a promissory note, however, if I believe there will be multiple
offers, I’ll write a check instead. I usually instruct escrow
not to deposit the earnest money check until I’ve removed the
inspection contingency.
Resume
If you have bought and sold real estate before, give the seller a list
of properties you own. Sellers like paperwork that tells them you are a
serious buyer. I’ll also include a letter of interest from a
lender if I think it will help.
Good properties don’t stay on the market long. That means you
have to position your offer to look like a no-brainer. If the seller is
serving a great meal, sometimes it just makes sense to offer to do the
dishes. Ask a lot of questions and be aggressive. Put your best foot
forward—it’s a small price to pay and the couch
will be there when you’re ready to take a nap.
Steve Steadele is the author of the book Multifamily Millionaire, a
Real Estate Investor, Broker, and Teacher. Visit him on the Web at
httpwww.SteveSteadele.com
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
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