A week never goes by that someone doesn’t say to me "how did you find this deal". It is very rare that I "find" a deal. You have to look at a lot of properties and make a lot of offers to buy a property.
I always make my first offer over the phone, on the first call. I believe that if your not ashamed of your first offer, its too high. You can always go up but it’s hard to come down after an offer. Having said that, bear in mind that you have to get to know the seller and they must like you and trust you or they will hang up on you if you hit them with an offer half of what they are asking. It is also important to note that it is very rare that your first offer is accepted, especially on the first call. I have worked with some sellers for three or four months before they "give up". The key is to let them hear from you every week so they don’t think of running an ad, calling a realtor or calling someone else. Each phone call you make to the seller also gives you a chance to get to know them more. The more they hear from you the more they get to know you and the more they will like and trust you. Sure, you are trying to get a good deal but I have met some very nice people that I still keep in contact with.
The following is a list of questions I ask on the first call (in a conversational manner)
Whose name is the house in?
Why are you selling?
Who lives in the house now or is it vacant?
What is the value and how did you come up with this number?
What are you asking and how did you come up with this number?
(Note that because I am an investor I assume that their asking price will be less than the value. If not it gives me an opportunity to explain to the seller that as an investor I must buy at wholesale to sell at retail. I use the analogy of a car dealer. If a car dealer has a car on the lot worth $10,000 do you think he paid that for it? No, he probably only paid $5,000- $6,000 for it because he has to make a profit).
How much do you owe and to who?
Are you behind on payments?
What will you do with the money when you sell?
What will you do if you can’t sell?
What condition is the house in?
After I have the answers to these questions I can make an offer before I even look at the property. I explain to the seller that I buy between five to ten houses every month and that I only have so much money to work with. Then I say, "If I could buy your house for all cash and close in five to ten days, what is the least you could take for it"? After they give me a number (say $25,000.00) then I may say, "I only have so much money to work with, and I am looking at several other properties. If I could buy your house for all cash and close in one week, could you take $14,000.00?"
Larry Goins is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.