In the course of our daily business, we run into many people who are "want-to-be" investors. There is absolutely everything right with wanting to be. However, for those of you new investors, there are certain rules of conduct that those more seasoned already know but you may not know if you are new to the business. It is critical if you intend to do deals consistently to present yourself in an honest light. What exactly does this mean?
1) When presenting an offer, be real. That means, do not under any circumstances, lead the seller on by telling them that you have the money to close when in fact you do not. Do not waste people's time! This means, get your financing approval and/or cash together beforehand and demonstrate to the seller that you have the money at the time of your offer through a real proof of funds. This means send the offer with your proof of funds. Don't send the offer without proof of funds because if you do, you will be perceived as an amateur and may be in a poor negotiating position immediately because of this perception, whether this is right or wrong. There is no need to show proof of funds before this time, but at the time of offer, you should have everything in order to prove that you have the financial capability to close. Wanting to close and having the capability to close are key, not just the want.
2) It doesn't matter if you low-ball but can justify your offer. You want a great price? Of course, who doesn't? But don't just lowball without being able to explain why. Lowball offers are completely ok if you can justify them. Lowball offers without justification are amateur moves when what you're trying to do is show yourself as a professional.
3) In this real estate market, cash is truly king. Get all your cash together to buy the property you want and you'll be at the front of the line in acceptance. Sellers want cash (your cash), and you want their property, so why not make it easier for yourself and forget about getting financing if you want to close quick on that great deal that just came across your desk. This means, get a partner or partners to put up the cash if you don't have enough or even if you don't have any cash. You need cash, but there is no rule or law to state that it must be YOUR cash. Make deals with private investors whom could simply be friends and family, and get it all cleared before you make your offer. Don't make an offer and think in your head that Uncle Ben has $20 million sitting in his checking account doing nothing and you've got the greatest deal in history waiting for his $20 million to be used. Oh, but you just sent your offer in but haven't even spoken to Uncle Ben about what you're doing, right?...Don't do that! I think you get my point that the money has to be resolved BEFORE THE OFFER. Again, do not waste a seller's time. You want to be seen as a performer, not a non-performer, and the quickest way to become a performer is to do what you say you're going to do in a timely manner and back it up.
4) If you find after an inspection that some minimal issue exists, don't go back to the seller and ask him to knock off $500 or $1,000 because you have a toilet or some light fixtures that need replacing. If it's a major problem like serious electrical wiring faults, a defective septic system, cracked boiler, well then that's a different issue altogether, so perhaps in those types of cases, you can walk away from the deal altogether or ask for a credit at closing from the seller to pay for these repairs. Unless you have an all cash deal happening, ask for a credit at closing for major repairs that came up after inspection, because the repair has to be paid for by someone, either you or the seller. If you just ask for a reduction in purchase price, this won't help you if you are getting a lender to put up some of the money. The credit as closing works much better because you then have the cash to do the repairs right at the time of closing.
These are some simple points for investors who wish to build their reputation with sellers as performers and not as time wasting non-performers. Be a performer starting today and get your deal house in order. Real Estate is all about relationships and don't let anyone tell you otherwise. Being real and honest with your deals will build your credibility, gain you many more great contacts and referral business and put more cash in your pocket. If you wrong people, word spreads quickly so start right from today to build yourself up rather than tear yourself down. Being a performer pays much better.
Until next time........