So you started making heaps of offers...

[Ivanhoe]

Hi all!
I asked couple of individuals same question and there were some great inspirational replies but Graeme suggested to post this question in the forum, so here it comes:

May I ask you for some help? I’m struggling dealing with agents while making low offers – could you give some guidelines how you handle the process of contacting the agent and making an offer? Do you have some sort of scenario (interview sheet?) that you generally stick to?
Your help is highly appreciated,
Cheers Ivanhoe.

[Ivanhoe]

Here comes one of the scenarios I'm using

What is the asking price? $ REALLY!? (in a disbeilif) OK, All right…
Could you tell me more about vendors motivation?
(I call mainly when there's indication of motivation in the add, or sometimes I call every listing in my target area - then I'll ask if they are motivated)
If “MOVE ON” Can you clarify it? (agents use this one heaps, open question to get more info)
If “Leaving” Have they bought tickets? When are they leaving?
If “Bought Have they bought unconditionally?
Have they bought your listing?
When should they settle?
Regarding price: Is it priced below market?
If I give them a cash offer conditional on build. Inspection, settlement to suit - will they be willing to negotiate? I need numbers to stack up, otherwise I’m just not interested…
Sorry, I negotiate verbally only when I’m dealing with vendor directly. It’ll take me 5 minutes to do numbers fax you an offer or you can arrange an appointment with vendors…
Can you give me your fax number?
....

[Ivanhoe]

Main problem I still cannot resolve:
1. Crazy ideas about what great investment is - $250k asking, $250 per week rental under "investment". Talking about 5.2% yield and around 10k per year of holding cost does not help!
2. Counter-offers at original asking price...
3. People seem not to be interested in my awesome cash offers with posession to suit and conditional on building inspection/valuation? They want asking price and above!
Also, who is buying all these 5.2% properties - it makes agents very confident and makes my work much harder! If you happen to know them, can you please ask them to stop?
Well, my intention is to keep hammering anyway, I just want to improve hammer and one who operates it!

[xris]

Hello Ivanhoe,

I am not quite sure what your question is, other than 'I want to make an offer so how do I do it?' Could you please elaborate a little.

xris

[roseneath_rat]

Ivan I can't really give you pointers on how to wrangle these kind of deals... but I can certainly see why your questioning style has put agents off. Most of the information you are asking for is stuff that the agent SHOULDN'T provide you with.

[Heg]

Hi Ivanhoe,
I've said it before and I'll say it again

'Real Estate Sales people are OBLIGED BY LAW TO PRESENT ALL OFFERS TO THE VENDOR'

As a first step ,I would try reminding the salesperson of this.

When I worked in real estate I ALWAYS informed the vendor of every offer. Yes the vendor sometimes gets upset - so what? Deal with it!! It's part of the job. But very often, you can work with the offer and make a sale. Isn't that what these salespeople are supposed to be doing to earn money?

If an agent refuses to present your offer then you could contact the manger of the branch and making a complaint.

If the vendor is actually living in the property that is for sale, there is nothing to stop you going to the property and presenting the offer directly to the vendor. (The vendor will still be liable to pay the agents commission if an agreement is reached of course.)

I agree that it is frustrating, but before much longer these agents will be finding it difficult to make sales and THEY will be approaching YOU. (You can then take great joy in telling them to naff off!)

Hope this helps
Cheers
Heg

[kieran]

Ivanhoe asked me this as a private question and here is my response.

We use a set process that we follow in many negotiations (not all though as some situations call for special treatment!) but it is a part of our new 'Buyers Advocates' business system so we won't disclose it publicly.

However I can tell you that you need to THINK HARD ABOUT THE PROCESS YOU USE TO MAKE OFFERS.

Here's some clues:

a) Pre-determine exactly how the game will be played out before you start. Establish some rules for yourself. i.e. will you negotiate and if so where should you start? or say 'my 1st offer is my best offer?' (You can always change your mind later!)
b) Take and maintain control (agents love to take control and decide what you can and can't do - DON'T LET THEM.) Tell them this is the way I make my offers and if you are not comfy with that then I will find another agent that is.
c) Use their own tricks back on them! i.e. condition them before you disclose the price...
d) Let them know there is a limited time frame on your offer (ie 24 hrs) and then it's cancelled!
e) Let them know you have real walk away alternatives (ie other props with other agents that you can be offering on too)

Some other tips:

READ GOOD BOOKS.
1) Donald Trumps latest one - 'Strategies for real estate'
2) Neil Jenmans 'Don't Sign Anything' so you can learn how the agents extract the higher prices from buyers and then reverse their tactics on them!
3) Mine! 'Grow Rich with the Property Cycle' chapters 10 and 11 in particular.

PRACTISE DOES MAKE (close to) PERFECT!
MAKE OFFERS WHEN FEW OTHERS ARE.
NEVER COMPETE WITH OTHER BUYERS.

Yes, it can be difficult but the better the SYSTEM you use (and refine) the easier it gets.

Keep trying and sooner (or later) you will get the 'deal of the century' which others will not be able to believe! Trust me on that one, I know it's true as I have proven it many times over!

You will find agents will change their attitude (and welcome ANY offers) once the Slump really starts biting and sales volumes drop!

I hope this helps.

[Don and Liz]

Hi Ivanhoe,

I love this topic. Negotiating deals is one of my favourite things about real estate investing. To often in this techno age people try and force formulas and rules down our throats about what is and is not a good deal.

Real estate and business is about people and relationships between individuals. I agree with Keiran that you will learn some great strategies by reading BUT you need to hit the pavement and make some offers.

Gain confidence in this area by doing it.

Always Always be in the same room as the person you are submitting the offer too. Some people will tell you that you can make offers over the phone, fax and net. (tell them they are dreaming)

I will hopefully come back to this post another time and write more. It is some much fun. I remember buying my very first property (a few weeks after my 18th birthday) and I think I made every mistake in the book.

Remember it is all about people.

Cheers

[Ivanhoe]

Hi all, thanks a lot for your feedback...
I'm afraid I cannot clarify my question any further - It's something that people who do it every day will understand, I guess...
Funny to see that some suggestions here are conflicting with what I heard from other people, especially regarding vendors situation which is the key to getting great deals...
That's why I'm somewhat confused - I'm trying to be me and doing it my way yet still afraid I could be making some grave mistakes - I hear you Don And Liz (you are one (well, two) of Barbara's birddog team, aren't you?) - but making every single mistake is not sustainable, I'm afraid...
Anyway, I would like to say THANKS to people who helped me here, on the phone (thanks, Ron!) and will help in near future (thanks in advance, Dean! )
It's like stumbling in the dark blindfolded, if you know what I mean...

[cube]

Hi Ivanhoe,
I've said it before and I'll say it again

'Real Estate Sales people are OBLIGED BY LAW TO PRESENT ALL OFFERS TO THE VENDOR'

Doesn't that apply only to written offers?

cube

[cube]

Regarding Kieran's post, and touching on something that others have mentioned before.

Rather than chasing listings, are you able to find an agent who will work with/for you - you explain what you are trying to acheive and what your criteria are and let them go and find the properties.

One important thing to remember here is to make sure that, if a property that meets those criteria is found, don't change your mind. You'll lose credibility instantly. If, when you have a property that met the original criteria, you find that its not quite right, adjust the criteria ready for the next time.

cube

[Cliffy]

Hi Ivan,

I have found having lots of offers out there at the same time means I'm not pinning my hopes on any one deal and therefore don't sound upset or anxious if they won't negotiate (if you are like this it will come across).

Also, find one agent at an office, talk to them first about what you're doing and then submit all offers in the area for that 'brand' through them (see Chris Ashenden's parable of the photocopier and the cappucino).

Having done Global Business Ideas' Sandwich Lease Options and Mulitple Finance Strategies courses has given me other 'creative' ways to still make a deal if they are motivated but still stuck on price, e.g. vendor financing, sandwich lease option, etc.
Basically ways to pay full price but have final settlement years down the track when a tenant/buyer has paid principal down significantly for you to still make a profit. Read 'Nothing Down' by Robert Allen for some ideas on this - you will just need to interpret the american terms.

Persistence pays off. You just need to keep going and wait for the 'lag' effect to kick in as John Burley says.

Cheers,

[Ivanhoe]

Cube, it's an interesting point and something I still have to investigate - finding right agent would add lots of leverage... I found great agents (will use them to sell!), similar-minded people etc but not someone who will go out there and try to destroy their credibily in the industry (bullsh!t, I know) by presenting 25% below offer to other agents - that idea makes them pale and I think they are so scared they vomit all night after even considering this idea...
Rgarding verbal/written - I never mention any number exept for yield - the reason is that I 100% sure - any price I mention will get "no, no, no they will not accept that" reply... now agent is a middleman yet they cannot make decision so by suggesting price via WRITTEN offer I do not sacrifice negotiating range - if you know what i mean...

[Heg]

Hi Cube,
Are there any other kind? Very hard to PRESENT a verbal offer.
In my book, verbal doesn't mean diddly squat.
Wouldn't give one and wouldn't accept one.
Cheers
Heg

[orion]

Hi Ivan, below is an excerpt from my book on negotiating which I still use now.
Will answer some of your other questions below this.

How Do I Negotiate Well, When Buying Houses?
You will, no doubt, develop your own techniques and strategies that suit you over time, but these are the steps that I do in the majority of offers (not mortgagee sales, tenders or multiple offers on the same property) on houses. Some of these points are covered to some degree previously.
1) Know as accurately as possible what the true market price is for the house. This comes only from the experience of looking at many houses in the price range, and in a similar location.
2) Know what the top price you are willing to pay is.
3) See if you can find out any clues as to how motivated the vendor is, and also what they may be prepared to accept.
Make your first offer 3 - 5%* below what your top price is, that you have set for yourself. Have several conditions in this offer such as subject to finance, valuation, title search, LIM (Land Information Memorandum) report etc. Don’t have too many conditions to start off with though, if you can avoid it. When the vendor counter-signs your offer, you will often know how negotiable they are by the price they have counter-signed at.
* When I say 3 —5 % below your top offer, I do mean this exactly. Your top offer must still be at a good buying price, but it is done on houses with motivated sellers only. So many beginning investors will either read a book or go to a course where they are told to make hundreds of offers on houses for 20%, 25% or even more below the asking price or the market value, and see if you get any offers accepted. If not, go out and do it again until you get one accepted. In other words, throw enough mud at the wall and see if any sticks. Unfortunately, if you throw mud in this way, all that will happen is you’ll get a dirty name with all the agents. If I did that in the area I live in, with only a few good agents to work with, I would have to resort to buying private sales only. No agent would ever deal with me. In the early days, when I was still searching for a few good agents to work with, some agents would still get upset with me. They would call me about houses with highly motivated vendors, and try to give me some indication (they are obviously working to get the best price for the vendor, and so can’t reveal too much) of what it might possibly sell for, if I was interested in making any offers. And then, when the vendor refused the offers and got annoyed at the sales person for presenting them, the sales person would get annoyed with me! If you get an agent like this, move on until you find someone more suitable. Most agents are more suited to the average Joe Blow buyer looking for a house for themselves to live in, and not dealing with investors like me. Sometimes, you’ve got to kiss a lot of frogs to find one prince. But, once you find them, keep them on your side and look after them. The other mistake beginners often make is submitting just one offer and refusing to increase it if the vendor counter-signs their offer. In other words, if the offer is not accepted the first time, they walk away. By doing this, they will not buy many properties either. The vendor wants to see some movement, or flexibility with your offers, even if it is only a few thousand dollars. If they don’t see any flexibility from you, why should they be flexible? So, rather than going in immediately with your best offer, make your first offer 3 - 5% below what your top price would be, and work up in small increments if you need to. I use the exact same strategy when selling houses too: that is, start a few thousand dollars above what I’ll accept, and adjust my offers down accordingly from there.
4) If the counter-sign was, in your opinion, fairly reasonable, add $2000 - $3000 to your offer with the same conditions as before. If all is going well, the vendor will make a larger drop in price than what your small increase was.
5) Put in your top price (another $1000 - $2000 higher) and make it cash! Delete all your clauses and make the offer cash. Sometimes I will also put in a time that the offer will expire, if not accepted; eg, “This offer will be withdrawn if not accepted by the vendor before 4pm Wednesday” (the following day). Now, before you rush away and do any of this, you naturally need to know that your finance is already approved, the valuation will be fine, the title is okay, and that you are happy that the LIM is okay. I do all this before I make the first offer. By negotiating this way, you are making your offer more attractive to the vendor with each counter-sign you do. You are also showing the vendor that you are willing to be flexible, to move on your price, and that you are a serious buyer.

This technique has helped me buy more than 90 houses in the last four years. By buying each property on average for about $15,000 below market price each time, this soon adds up to a large sum of money that is added to my overall net worth. This was achieved simply by negotiating well at the time I was buying each property.

Main problem I still cannot resolve:
1. Crazy ideas about what great investment is - $250k asking, $250 per week rental under "investment". Talking about 5.2% yield and around 10k per year of holding cost does not help!

It may be to some people a good yield, what are your rules though Ivan? What is accepatable and what is not. If 5.2% is not acceptable, keep looking until it fits into your rules for investing. My personal one is 7.0% on asking price which understandably is still too low for many investors.

2. Counter-offers at original asking price...

Probably offending vendor if happening too often.

3. People seem not to be interested in my awesome cash offers with posession to suit and conditional on building inspection/valuation? They want asking price and above!

Why are you buying through agents anyway? It is very rare that I buy any property through an agent these days, why compete with everyone else buying the same house? Buy privately, you're already saving the real estate fees before you even start to negotiate as above.

Also, who is buying all these 5.2% properties - it makes agents very confident and makes my work much harder!

Why does it matter?

If you happen to know them, can you please ask them to stop?
Well, my intention is to keep hammering anyway, I just want to improve hammer and one who operates it!

No use in keep hammering if you are not getting anywhere Ivan. It should be easy and fun, you need to change what you are doing as mentioned in all the above to get a better result.

Regards
Graeme Fowler