Making an offer can be a scary thing. What if you offer too much or too little? How do you know what number to offer a seller?
Hey Moguls, Steph Davis here…
Fear of making an offer is VERY real for many new real estate investors – and the butterflies might still show up every now and then even for experienced investors!
But when you’re spending your own money on marketing and you’ve got a motivated seller on the line, it’s time to face that fear.
How?
Well, to start, if you missed my previous lesson about just how to conquer that fear and pick up the phone, check it out here.
So if we’re getting past our fear, today I want to talk about how to make the right offer…
The key to making offers with confidence is to do your due diligence. When you’ve done your research, you can keep calm and call that seller back with a number that’s just right.
Check the Comps
First, you want to check recent comparable sales in the same neighborhood as your subject property. Comps are especially important if you’re working in an area you’re not familiar with.
If you’re working in a neighborhood you know, you will probably already have a ballpark number in mind.
When you look at comps, consider both recent retail sales of similar homes and also investor sales. Investor comps are going to be the low values in a neighborhood, so they are especially important.
Investor comps are the easiest way to see what investors are paying for similar properties in the neighborhood.
Do a Drive-By
When you’re just getting started, pulling up comps on the MLS or Zillow can be confusing. The numbers might be all over the board, and just looking at a computer screen you might not be able to figure out why one property sold for so much less than another property.
When that happens, I get in my car and drive around the neighborhood. I drive by the subject property and also the recent retail and investor comps I saw online. When I do this, the numbers make a lot more sense.
Values can vary tremendously just from block to block, and it’s hard to tell why just looking at comps on your computer, so go for a drive to understand why certain properties are selling for more or less than others.
Sometimes you’ll see a comp that sold for $150,000 and then another one only a block over that sold for $300,000. When you drive by those houses, it might make a lot more sense. Probably the house that sold for twice as much is on a nicer block.
A Little Help from My Friends
Sometimes this drive-by investigating isn’t quite enough to get you to a final number. If you’ve done the research and gone to the neighborhood but you’re still confused, ask for advice.
If you have a mentor, you can probably send them your research and they can help you figure out what you should offer.
If you don’t have a mentor, rely on your network of wholesalers and buyers…
As a new investor, I was always working on building my buyers list. If I was unsure about an offer, I would call my buyers. I wouldn’t give them the exact property address, but I would tell them I was negotiating a deal on a certain street and give them details about the house. Then I would ask them to give me a ballpark of what number they would consider to buy the property.
I still do that if I get leads from outside of my area. I’ll find some recent investor sales and hunt those investors down. Then I give those investors a call and run the deal by them (again, not using specific addresses unless I have the deal under contract).
Make the Call
Once you’ve done all of that and have a handle on what the values are in that neighborhood and where your offer should be, it’s time to call the seller back. If it looks to be a promising lead, set up an appointment with the seller to go out and look at the property.
Remember, the best strategy to deal with offer anxiety is practice. It does get easier with each seller you talk to.
Your Take
How do you figure out what to offer the seller? Let me know what works for you below!
1. Compare the comps in the neighborhood
2. Drive by the subject property and the comps
3. Ask for advice from your mentor or local wholesalers or buyers
4. Call the seller—don’t put it off or let your fear get in the way of the deal
Steph Davis
started wholesaling in October of 2006. At the time, she had been stuck at a job bartending for the past 10+ years. She was broke and miserable, and desperately wanted out of the bar scene, which I had been stuck in for the last 10+ years.
She ended up closing four wholesale deals by the end of 2006.
Since then, she's closed more deals than she can count, has written two best selling wholesaling courses (Flip This REO and The Cash Buyer Ninja) and continues to teach others how to wholesale with videos, interviews, and as much useful information as she possibly can, because she knows what it’s like to be a broke beginner, struggling to get that first deal.