How to Make an Offer to a Seller

I invest in real estate. And I recommend it to everyone. And I think this is a fabulous time to be buying.

Last night, at our Mastermind meeting in Greensboro, NC, the main topic was how to present your offer to the seller. This is the most important part of the entire buying process and, done right, it takes time. Don’t just hit someone over the head with your offer, take time to sit and talk with them, in depth, about how you came up with your offer.

Before you meet with the seller you’ve already done your homework and determined that you want the property, the market value and what you can pay for it. You’ve determined that you can resell for a profit if you plan to resell, or cash flow it every month if you plan to hold it and rent it out.

So you go to the seller armed with your research. There are a number of things you need to take with you.

1) business card so they know who you are and that you’re a professional. You want to leave this so they have all your contact information when you’re gone.

2) testimonials from people you’ve done business with in the past. You want testimonials on your website and all your marketing materials but be sure to print some out to, again, leave with the seller to look over later.

3) comps from the area showing the market value of their home. Many online sites offer this information and you’ll need it to help you and the seller come to an agreement about what their home is worth.

4) documentation showing how you came up with your offer. This is the most important piece of information you will carry and share with the seller. It is also the most important piece you will work on for yourself.

To begin, you must know the approximate market value of the home and you and the seller need to agree on this number. You will start subtracting selling costs from that number.

Start by explaining to the seller that people, especially in this economic market, expect a discount from the asking price. A 3%-5% discount is normal.

Next, subtract real estate commission. Even if they sell to you and don’t use a realtor, this could be a very real cost for you if you end up selling the home later with a realtor. Subtract out commission as you may have to pay this at some point so this is a real cost for you. Again, we’re showing what you can pay for the home and why.

Subtract out closing costs. Today, sellers are paying most of the closing costs to make the purchase of their home attractive to buyers. It is a buyers market so sellers are taking larger discounts and picking up more of the back end costs than in past years.

Go on to subtract any other costs that will occur with the sale: home inspection, pest inspection, vacancy insurance, transfer tax, repairs, utilities, yard maintenance, mortgage payments while it’s vacant, etc.

Do you know what the repairs will cost? You should have a pretty good idea if you’re making an offer.

These numbers will subtract out to your bottom line, your offer. These are numbers you discuss with the seller to show that you didn’t randomly pick the number you’re offering, but that it is a true and fair number. When you take the time to go over this worksheet with the seller, you have educated them on the true costs they will run into when selling their home and, even if they don’t like the final number, they understand it and see that it is real.

This worksheet and the time spent with the seller is vital. The best transactions are a win for everyone and, even when your offer is lower than what the seller was hoping for, once you’ve shown them why, they can agree to it and accept your price knowing that you took the time to help them out and allow them to move on with their life.

How do you present your offers? Is this information helpful?