Attention Rehabber’s: Is The Highest Offer Really The Best Offer?

Unless you have been living under a rock for the past couple of months, you would have noticed that real estate inventory is extremely low all across the country…..and in some places lower than its ever been! So what does this mean to those of us in the Real Estate Investing business? Well first and foremost it means getting your hands on sweet deals is going to get a little tougher, so you better start to work on your acquisition strategies. Secondly however is that if you are rehabbing in your business, selling your finished products to a retail buyer just got A LOT easier than it has been for the past few years! Now this is a good thing for sure, but since inventory is so low some of the retail buyers that are out there right now seem to be causing a lot of unneeded grief for investors. Because of the LOW inventory agents have to be quick to the trigger in order to make sure their clients have a chance to get a property that they like, and this “quick trigger” has caused a lot of buyers to write offers first and think about everything else last……instead of the other way around like it should be. In my own business we have dealt with this a lot lately and its nothing short of ANNOYING! Basically buyers are writing offers out of fear that they may loose the house if they don’t, instead of writing offers because they absolutely want the house and have got to a point where they are truly ready to buy a home. In addition we have seen buyers and their agents writing offers before they are actually “pre-approved” with their lender if they happen to be looking at houses over the weekend.

So what does all of this mean to you the seller of a rehab project that you have just finished putting your blood, sweat and tears into? It means that now more than ever you need to make sure that you really check out your buyers thoroughly before signing on the dotted line and accepting their offer. It has been our experience as of late that the buyers who write the strongest offers (full price asking for no closing costs to be paid by the seller and/or an escalator clause) are not necessarily the best choice for a seller to accept. It seems that in some cases those buyers who are trying to “win the bid” are really just trying to tie up the house while they decide if they really want it or not. Now don’t get me wrong, inspection periods are meant for a buyer to complete their due diligence on the property…..but not for them to decide if this is really the house that they want to buy or the price they want to pay for other reasons……that type of due diligence should be done before the offer is written. Its my opinion that if you are writing a VERY strong offer, then that should mean you absolutely want the house (given there are no issues with inspections and what not). Unfortunately some agents and their buyers don’t seem to have this same outlook and have no problem doing business in a very poor manner. Its always funny to me that most RE Agents harp on the “ethical responsibilities” that they adhere to, but when it comes to wasting a sellers time and doing bad business they don’t even think twice about it, or do it in the name of “protecting their clients best interest”…..which basically means backing out because their clients changed their minds for no good reason….AKA they weren’t ready to purchase a home yet and wrote an offer too soon.

Now I am not trying to come off as overly negative, but what I am trying to impress upon you is that you need to check out your buyers very thoroughly before accepting their offer (no matter how strong the offer is). What we do is grill the buyers agent with a series of questions that will allow us to learn who our buyer (and their agent) really is without ever having to meet them. That way you can start to figure out if accepting their offer is going to be the best business decision at the end of the day. We also call the buyers lender and grill them with a different set of questions, so that we know if they are “really” pre-approved and if the loan officer has done their job properly. The bottom line is that sale fails can really cause major issues for your investing business, so by putting in some effort to complete proper due diligence on your potential buyer ahead of time….it can save you from a lot of headaches & issues farther along in the transaction. Make this process part of sales system and I can guarantee you that things will run much smoother for your business!

Lastly things have been crazy lately which is why we have yet to release the 1st episode of our “Real Dealz” Podcast, but I can assure you it is coming! We have been wholesaling, rehabbing and building more houses than ever, along with working closely with TV Producers who may be putting us on a TV near you soon…..so juggling those things has left very little time for the podcast. Anyway that will be changing, so keep your eye out for the 1st episode or sign up on our home page to be notified!

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