Writing an offer on an investment rental property? Which form should you use?

by | May 7, 2014

Forms to Use

My Investment Services

Always use Association of Realtors Forms when making offers. There are plenty of late night gurus out there who preach you should use 1-page “intent to buy” or some other short form for extending what may or may not be an offer. Don’t do this. You are wasting everybody’s time including yours. Aside from the obvious problem of its validity, especially in a court case should that happen, using anything other than pre-approved Association of Realtors sales agreements puts you at a competitive disadvantage. That is not acceptable; you want every competitive advantage possible.

Just for a moment step out of your buyer shoes and step into the seller’s shoes. Now imagine you as the seller receive multiple offers on your property, which often happens when buying investment real estate. One of the offers is this little one-page “intent to offer” with no hand money check but rather a promise of a hand money check should you accept the short and incomplete terms. The other offer is on the Association of Realtors Sales Agreement form, completely filled out, all terms identified and there is a hand money check as well. This is a legally binding agreement. Which offer are you going to take more seriously? Exactly, you will go much further negotiating with a substantial and official looking sales agreement than you will with one that looks like maybe you don’t care much about the deal. Not only are you in a better negotiating position, you are in a better legal position should trouble arise. With a real agreement of sale there is far less ambiguity. Also, you can still put in your contingencies for financing, should you choose to do so, inspections, appraisals, verification of income and expense data for the property, whatever you want to have in your favor.

Always remember that when you are making an offer on a rental property to always make the offer contingent on seeing the current owner’s financials on the property including all income and expense data for the last three years. No exceptions! The only time you can’t do this is when you are buying a foreclosure property (I know, it’s an exception). You also want to see current leases, any contracts the current owner has for services like pest control, property management, laundry, etc. You also want a contingency on seeing every single unit in the building you are buying. This is especially important in case you didn’t get to see all the units before you made the offer.

When you are making your offer and there are multiple offers or there is a “highest and best” scenario, you can use one of my favorite tricks. Let’s say there is a “highest and best” scenario and your intuition tells you to go full price on the property and the full list price is $99,900.00. You may be tempted to offer the list price or even $100,000.00 even. Go ahead and do that but add an additional amount of say $159.00. In other words your offer will be $100,159.00. This way if you are bidding against others and there happens to be another educated investor who sees the merit in offering full price, you will get the property for $159.00 or less because you outsmarted the competition for only $159.00.

On the first round of negotiating (with you as the only offerer), let them respond to your initial offer. Don’t respond right away. Instead, wait until the last minute to make them sweat a little. Then come back with a counter-offer that moves up only a little. You want to create the impression that you want the property but are already at or very close to your magic number. You leave the door open a little but not much. You don’t want to lose a good deal over pennies. Also, in your counter-offer make it an unusual number. For example, instead of coming back with $120,000.00, come back with $118.743.67. They may think you’re weird but your real estate agent will explain that you have done your homework down to the penny; you know your business, and what the property is worth. If it goes another round then you can waive one of your less important items, like the lawnmower you asked for. I always look for a few odds and ends to throw in my offers that I can then use later as throw away to get the deal done at a price acceptable to me. There are many more negotiating strategies I can share with you. You can read Rental Profits Without The Pain or better yet take the course “Rental Profits Without The Pain”.

For more information on writing offers and negotiating tactics please visit www.MyInvestmentServices.com. You can also call the My Investment Services at office at 1-800-931-2605, or email Gary@WinRealtyAdvisors.com

Choose the right form when writing offers

Choose the right form when writing offers

Written by Gary Patrick Wilson. May 7, 2014.

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