Five Laws To Making Offers

Five Laws To Making Real Estate Offers

After buying over 100 houses in my “flipping” houses career I have come to realize the only way to get a seller to say “YES” is to follow the five basic rules of making offers!

In short, here are the five basic rules when making offers:

1)  Never Compromise – You’re only looking for properties that meet your criteria (I have seven to keep it simple) and motivated sellers who will agree to your terms.

2)  Be a shopper not a buyer – It’s better to miss a good deal than be stuck with a bad deal.

3)  Timing matters – You should thrive to be the first offer or the last offer. Otherwise you end up in a bidding war – and that’s no fun, and hard to win.

4)  It’s a numbers game – You will always find quality of deals in the quantity of prospects. That’s why pre-screening matters so much!

5)  Organization & systems – This is the only way to protect your time and money earned now and in the future.

Now let’s take the time to understand these in full . . .

Number 1 – Never Comprise:

Never compromise. I have found the biggest time waster in my flipping career is looking at the wrong properties. Or trying to make a deal with someone who is a “suspect.” What makes them a suspect? Well, quite frankly, they are not flexible enough to hear how you can help them.

If you have watched my 10 videos on how I can give 7-different offers you will understand what I am talking about!

The most important part of this whole thing is to know all about your criteria. See, this is huge. If someone calls you about a six family cash flowing machine and you are a single family house flipper you could get sucked into it and not buy what makes you TONS of income.

I know, I’ve done it. You go off doing your due diligence for the six family because it cash flows something like $2000 per month (or more) and your greed glands swell so off you go trying to figure out if you could put this deal together. There is no real trouble with doing this – except you are all wrapped up in doing your home work you let your main business slide.

Then one day a few weeks (sometimes a month) later you wake up and realize your income has stopped. Or you need some cash to pay bills and you don’t have your pipeline filled up because you were off working on this “big” deal!

So sticking to what you decide to do is knowing your criteria. Doesn’t mean you can’t expand. Just means when you decide to go off in another criteria, make sure it is a parallel activity. Don’t use all of your available resources that make you money on this new project.

Let’s say you have 3 people working for you in your flipping single family business. And they work all week to make sure your business makes the money you make. You don’t want to take one or two of those staff off their regular duties to work on the “new” project. Only because they aren’t going to do the work they need to do to make your quota’s for the monthly income.

The correct thing to do is to make a deal with them to work extra hours, or hire a part time person to just work on the “new” project. See what I mean? This way you have it all covered!

Or another example would be a really motivated seller calls you from outside of your regular area. I am talking about something like having to drive an hour and a half one way. So just to do a 15 minute job at the property it takes you 3-4 hours to do it.

Know your criteria actually gives you time and energy to do what makes you money.

Number 2 – Be a shopper, not a buyer:

Simply put . . . let the deals come to you. I DO NOT chase deals. There are way to many of them for me to do this. I do 80% of my work from my desk. If the seller is not calling me, I don’t wast my time.

If you want to know how I do this, go here!

Basically I work on several deals each week (or month) so if I loss a deal (which will happen often) I don’t fret it. I have several more to work on. I just reallocate my time to where I can close a deal and make some money.

When the seller calls me I ask key questions to ensure we will be a good match. Of course because I am clear on my criteria I know whether or not I should spend time on the deal.

One of the biggest discoveries I have made over the years is there are two major factors to keeping my attention on a deal:

  1. Is the seller motivated and flexible which makes them qualified.
  2. The house qualifies for one of my seven offers I can make, and is not a dysfunctional house. Dysfunctional simply meaning things like bedrooms without closets, or bedrooms that are eight feet by eight feet. Or just as simple as it may be a two bedroom house (and I can’t sell those). And if I can’t add a third bedroom, I’m out.

Pre-qualifying the seller on the phone changed my career. When I figured this out, I went from buying 2-3 houses a year. To 2-3 houses per month. It was huge for me!

I use one sheet of paper with all of the questions I need to ask. Once I have this document completely filled out, I can make a decision on whether or not I should leave my desk. It really isn’t hard. Unless you are not trained. Then it is extremely difficult, I know because I’ve done it both ways!

If you watch my 10 videos how to make offers – the form is in there!

Number 3 – Timing matters:

Okay, I really pay attention to this. Here is why . . .

You may not know, but to buy 3-4 houses per month you have to write contracts on 7-8 per month. Mostly because deals blow up. Life just kicks people around sometimes which will inevitably end up in your lap (because you are the money person in the deal).

Now reality sets in . . . when you first start out you will probably (depending on your personality) will need to make about 15 offers to buy one house. I found as I went along I got it down to about 5-6 offers before I bought a house.

So that means to buy 3-4 houses per month I needed to do 12-15 presentations (or offers) per week. Simple math tells us that at 12 a week for 50 weeks I would do about 600+ offers per year. Now do this for about five years straight – up at a quick glance you can see I have done well over 3000 offers in just a five year period. And I have been at this twice that time.

After doing all of these thousands of offers I notice a very important factor . . .

Either be the first offer, or the last offer. Here is why!

If you end up in the middle it is no different than being in an auction.

Let me tell you a story to explain . . .

One of my coaching students calls me and said he had a HOT deal in Meriden Connecticut. House is worth $130K to maybe $140K. So knowing my criteria (I  don’t usually buy off the MLS – I buy from the sellers direct) I was a little hesitant to get involved. But because of my dedication to my student I went against my criteria.

The house was listed on the MLS for $35K. We went to look at it to see why $35K. Well it needed a bunch of work (which I love). So while we are in the house the selling Realtor is there showing people around. And when I say people, I mean dozens of potential buyers. And many not professional buyers like me. Most were there to buy a home for themselves. Very tough competition in my opinion. Only because theses buyers don’t calculate profit; the buying factor they use is “how it feels,” or “does it suit their needs.” It a big differences.

The selling agent (in the house) proceeds to tell us if we wanted to submit an offer that it would need to exceed $51K; and the owner was going to except one final offer within three days, so please don’t wait.

We were there on a Saturday morning. I rushed around and got my proof of funds letter (to show the seller I was serious), did my comps (comparable sales to see what the house was worth fixed up), and made an offer of $59K. Now I have very strict formulas on how I make offers (watch my videos to see them).

And I was stretching my math real hard to make this offer. Two hours after I made the offer, the Realtor called me and said for me to be considered by the seller I would need to submit more of a deposit (I was at $1000), and my offer had to exceed $65K.

See, “in the middle!”

It sucks! I made a damn good offer and I have a clever agent using the MLS to create a bidding war on a lower than average piece of property. It is a great strategy for the seller. However, once you have bought as many houses as I have, this is not the way to buy houses. My way is SOOOOOOOOO much easier.

Remember what I said earlier, I want the sellers calling me. I don’t want to chase them. And the only way to do this is to find deals that no one else knows exist. It’s pure magic.

If you want to know how I do this, go here!

Bottom line, the best position to be in is someone who has just started to sell. Or a seller who has been with a Realtor for 6-12 months and for some reason could not sell. I flourish with ether scenario.

So the rule I try to adhere to is be one of the first offers, or one of the last offers. This alone will increase the amount of offers you will get accepted when presenting them to sellers.

Number 4 – It’s a numbers game:

The quality of your deals will always be found in the quantity of leads. Old marketing strategy. So let me explain.

IF YOU DO NOT PRE-SCREEN leads . . . you will FAIL in this business!!!!!!!!!!!!!

WOW, strong isn’t it?

Well, after receiving thousands of leads, I know if you speak to too many “SUSPECTS” you will get burned out and eventually give in to telling  those dream killers (the people in your life that tell you this is a get quick rich thing) they were right. It doesn’t work!

See, for quit a while I was spending $7000 to $9000 per month in marketing (since then I have found much, much, much cheaper ways to do this) advertising for leads. So I have had tens of thousands of leads. Which I feel makes me way qualified to talk about this!

About 95% to 97% of your sellers who call will want all of his/her money at the closing and is not be willing to give you 10%, 20%, 30%, or more in equity. In other words: They will not be flexible.

So what makes a seller flexible? A situation. A problem. Some sort of a barrier they can’t get through. Let me give you some examples of what I have found:

  • Divorce (where both sides can’t agree)
  • Liens of some sort (IRS, property taxes, etc)
  • Burned out landlord (bad tenants)
  • Needs repair and can’t afford them, or just won’t do them
  • Expired listing (couldn’t sell with Realtor)
  • Making two house payments
  • Probate or inherited a house not wanted (in most cases the house needs repairs to sell)
  • Moving out of state (mostly because of a job)
  • Downsizing or retiring
  • Up-sizing (too many family members for size of house)

These are just the most common situations I have run into. The point – if you help folks solve their situation you will buy houses every time! Bar none! See, I call myself a “Professional Home Buyer” or a “Dealologist” for a reason. I study the deal very carefully so I can make sure my offer satisfies the seller and the buyer.

One thing I learned long ago, is the best way to make a deal happen is to structure it so each person coming to the closing table is getting something so exciting to them that they wouldn’t miss this event for anything else. Or put another way . . . they feel this closing is the only place they can get what they really desire, so they will move mountains to be there!

This exact reason is why I’ve inherited the name “Bill The Deal Maker.” I pay more attention to the sellers needs than my own most of the time. Only because I always know what I want. After all I am the only person who can see those mental image pictures (until I communicate about them), right?

Alright, this brings me back to pre-screening and knowing my criteria. I am certain of my abilities to help sellers get what they want. So these have become my criteria.

When I am on the phone for the first time with a seller I ask the correct questions to make sure there is a situation that motivates the seller enough to want to  give me 20% to 60% in equity (as pay) to solve their problem. And, of course, I have the skill and confidence to proceed to help the situation get resolved (and so can you if you hang around our group).

Once you take my advice on this strategy, your abilities will increase along with your profits. Simply because you are helping people in life. And there isn’t anything better than having helped someone with a problem.

It works, and it is a great business model. So in this “law” you have to know most of the sellers who call you are not for you. You are just weeding though the chaff to find the caller who deserve your help! And if you do it the way I have vetted out for you, you will be very successful, I promise!

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