Multiple Offers

[SimpleSimon]

I note that a number of people here suggest putting in below-market offers on several houses a week in the expectation that the occasional one might be accepted.

I have a couple of questions regarding this practice:

- If you're doing due diligence on each property doesn't the cost and time of title searches, building inspections etc start to get a little excessive?

- Assuming you're making cash offers in order to seek the best price what happens on the off chance that more of your offers are accepted than you are currently in a position to finance?

Cheers

Simon

[Marcus]

Hi Simon,

Not that I have exercised this to the extent of having more than 2 offers open at any one time, Dolf DeRoos preached the "Look at 100, Place 10 offers, 3 are accepted and you follow through with the purchase of the one (or more) of your choice.

- Assuming you're making cash offers in order to seek the best price what happens on the off chance that more of your offers are accepted than you are currently in a position to finance?

The offers (S & P agreements) always have "Out clauses" written into them for the concerns that you raise.

- If you're doing due diligence on each property doesn't the cost and time of title searches, building inspections etc start to get a little excessive?

Including a clause that is subject to your solicitors approval of title will also mean that you only need have accepted offers checked.

Hope this helps.

Regards,
Marcus.

[RentMaster]

If you were going to put in multiple offers, then I believe you could put an expiry date on your offer. I have not done this though.

It would also probably be safest to make it conditional on finance, just in case. I know you mention go unconditional to secure the deal, but it does sound dangerous. There needs to be a clause of some sort to allow you to get back out again if needed.

[JohnL]

I don't make it conditional on finance, but have a 'due diligence' clause which gives me a couple of weeks. I have heard of things like 'approval of your partner' etc as out clauses as well, even if your partner is your dog!!

Its certainly not worth going to have a look until you have it under contract, if you a putting out lots and lots of low offers.

John

[fudosan]

The "due diligence" clause is very powerful, but did not work when I tried it in a hot market..

[SimpleSimon]

Thanks for the replies.

I note that all of you who have replied so far have certain "out" clauses written into their contracts. This is fair enough and errs nicely on the side of caution. However, I was under the impression that in order to get the best "under market" deals it is often best to be able to make an unconditional offer. Presumably one would want to do due diligence before doing so and this would incur costs even before the offer is submitted (title searches, QV reports, builders/electricians reports, finance pre-approval etc depending on the circumstances).

I had been under the understanding that some people worked in this way - particularly in the situation of a "motivated vendor", but perhaps I had misunderstood?

Simon

[RentMaster]

Maybe if those 'some people' have cash to burn, and dont mind if more than one offer is accepted - they will buy both. If you can afford to buy both then that is fine, but if you cant, then you need to make sure you are not in a position where you are required to.

[JohnL]

You could take the due diligence period down to 1 day if you want. I only use two and sometimes three weeks because I need a valuer to go through.

A short due diligence is almost as good an cash unconditional. For most vendors, offers conditional on finance, LIM and/or sale of own house is the norm.

Also, if you are hearing about a great deal through an agent/colleague etc then you can look at the property before putting in a totally cash unconditional offer.

Its just not really an option if you are faxing off many low ball offers.

John

[MarkS]

As long as you use an "escape" clause you don't really need a time limit for acceptance. For example you are looking to buy one house, you put out 10 offers and three come back accepted (a highly optimistic example in todays market) , you check them out then decide to buy the best one then escape from the other two using your clause. This is a simple strategy but p***es off the agents if it happens too often.

Have fun.

Mark

[The_Dog]

I have been reading through this thread, and I'm glad MarkS picked up on the point he did.

I would be concentrating on building trust with a few agents, and have an understanding on what price might be acceptable without bombing in multiple low offers that might be perceived as insults. Get the agent working in your best interests. To do this, you need to demonstrate yourself as a serious buyer. Bombing in silly offers is not going to enhance your standing.

I spoke to an Agent in Hamilton, and he reported a flood of faxes each with 10 ridiculous offers on. The faxes went straight in the bin. The Agent could predict each floods arrival, as they followed the ESC seminar weekends!

The Dog

(NOT the partner of JohnL!! - another Dog).

[ChrisAshenden]

Thanks for the replies.

I note that all of you who have replied so far have certain "out" clauses written into their contracts. This is fair enough and errs nicely on the side of caution. However, I was under the impression that in order to get the best "under market" deals it is often best to be able to make an unconditional offer. Presumably one would want to do due diligence before doing so and this would incur costs even before the offer is submitted (title searches, QV reports, builders/electricians reports, finance pre-approval etc depending on the circumstances).

I had been under the understanding that some people worked in this way - particularly in the situation of a "motivated vendor", but perhaps I had misunderstood?

Simon

Hello Simple Simon,

You are quite right. IF you know your market and understand the property dynamics well enough then there is no problem putting in multiple LOW cash offers. Note the capitals on the word IF. This is NOT a beginners strategy. Assuming that you comply with the above then go for it. There are plenty of risks, adjust your offer to compensate. I buy 2 out of every three houses now with a cash unconditional offer and I am way past 100 deals so I guess there might be some efficacy to it. It also stands to reason that I know what I'm doing (most of the time) and that I only play in ONE market with this strategy. When I started ALL offers had sufficient ratchet clauses to allow a safe exit.

Caveats now in place, if you are worried about being in the miserable position of too many good houses than you are able to buy at one time I suggest you do two things.

1) Place a reasonably long settlement date on the contracts
2) phone me

Regards,

Chris Ashenden

[Marcus]

Caveats now in place, if you are worried about being in the miserable position of too many good houses than you are able to buy at one time I suggest you do two things.

1) Place a reasonably long settlement date on the contracts
2) phone me

I like it.
Welcome to the forum Chris, it's great to see you posting mate.

It's about time we caught up for a coffee.

Cheers,
Marcus.

[ChrisAshenden]

Hello Marcus,

Cheers mate. Same rule applies to everyone who finds a good deal they can't move on

Coffee on me next time you're up this way big fella.

Chris Ashenden

[Dean@Massiveaction]

Me too.
I must say that for any of you serious about building a property portfolio get in the habit of making lots of offers. I put in up to 20 a week and have developed the following rules that may be of help to some of you.
1. Always use my own name on the S&P so that the vendors don't think I'm an investor. Vendors are emotional and often want to know their property is going to someone they like who will "look after it" I always try and take my wife or female property manager to viewings to look like a couple
2. Never ever ever be conditional on finance
3. Only have one clause that looks as simple as possible. I use a couple that have the phrase "the purchaser being satisfied with all aspects of" either a LIM report, inspecting the council envelope or a registered valuation. This wording means I can walk away if I am "dissatisfied" for any reason.
There are a whole bunch of good clauses that sound harmless enough and get you under the agents radar but still let you walk if you want to

My experience of standard due diligence clauses is that vendors are being warned off them big time by agents, so being a bit creative helps a lot.
For any more, sample clauses info or help give me a yell http://www.acumen.co.nz/wa.asp?idWeb...;idDetails=117

[fudosan]

Hi Dean,

Thanks for generously sharing with us.

1. Always use my own name on the S&P so that the vendors don't think I'm an investor. Vendors are emotional and often want to know their property is going to someone they like who will "look after it" I always try and take my wife or female property manager to viewings to look like a couple

Excellent point! I'd better change to using my personal name when making offers.

3. Only have one clause that looks as simple as possible. I use a couple that have the phrase "the purchaser being satisfied with all aspects of" either a LIM report, inspecting the council envelope or a registered valuation. This wording means I can walk away if I am "dissatisfied" for any reason.
There are a whole bunch of good clauses that sound harmless enough and get you under the agents radar but still let you walk if you want to

Can you show us one or two simple clauses you have used with success?

What's your experience in making unconditional offer?
Do you carry out any of the following tasks before making such offers?
- Check the condition of the house thoroughly YOURSELF (if so, what do you look for?)
- Instruct your lawyer to do a quick legal title check
- Do a property file check (service available in Auckland city)