The other day, I flabbergasted a friend of mine.
(I’ve always wanted to use that word in a blog post. Score!)
I explained to him my simple funnel for getting real estate deals:
- I qualify the leads to see if they deserve a deeper look.
- I do a quick analysis of the property (using the BiggerPockets Analysis Calculators) to see if it warrants a site visit.
- If all looks good and it’s a bank foreclosure, I make an offer.
- If the offer gets accepted, I go look at the house and proceed to closing.
As I walked him through this, my friend was befuddled! (Another word I’ve always wanted to use in a blog post!)
“Wait a minute,” he said to me, “you are telling me you make an offer BEFORE ever stepping foot in the house?”
“Of course!” I responded. “At least, if it’s a foreclosure. If it’s a motivated seller, I still make a verbal offer.”
“That’s crazy!” He laughed. “How would you know what to offer? And how do you know the condition?”
As I explained it to him, I thought it would probably interest others as well, hence this blog post!
So before I explain how I do it, let me tell you why I do it this way.
Why I Make Offers Before Looking at the Property
I realize that to newer investors, making offers sight-unseen probably seems crazy.
When I think back to my early days investing in real estate, I used to do exactly what my friend does:
- Walk through the property
- Walk through it again
- Measure everything
- Make a detailed spreadsheet
- Walk through it again
- Get scared and overthink everything
- Then make an offer
- And the offer gets rejected 80-90 percent of the time still.
Today, I make my offers before I step foot into the property.
- I don’t have time to look at every property I want to offer on, knowing 90 percent will be rejected. Life is busy enough! Besides, my real estate agent would go nuts if I made him open up so many properties!
- No one ever accepts the offer up front — they always counter-offer (negotiate with a higher number). This gives me time to see where they are really at price-wise.
- I can estimate the rehab budget reasonably well based on photos and talking with real estate agents who have walked through it.
- I always include an inspection contingency so I can back out or re-negotiate if I find something other than I assumed.
I love the phrase “if you want to get a prince, you are going to have to kiss a lot of frogs!” Of course, this applies perfectly to real estate. If you want to buy a great deal, you are going to have to make a lot of offers and get a lot of rejections. But it’s OK! It’s part of the game.
By offering on properties before touring them, you can save yourself dozens of hours of time every week.
How I Make Offers Sight Unseen: Two Real-Life Examples
So, let’s walk through a couple quick examples that have happened to me in the past week.
1. The Motivated Seller
I talked with a motivated seller yesterday (after church, of all places).
She knew that I did real estate, and thought I might be able to help.
She told me that she is the Power of Attorney for an elderly woman in a nursing, and due to complications with Medicaid, the elderly woman needs to sell her house FAST in order for Medicaid payments to kick in.
The first thing I did was asked some questions, like:
- Where is located?
- What’s the condition?
- How much do you think it would take a contractor to fix it up?
- What’s the roof like?
- Do the floors slope at all?
- What kind of price are you asking?
- If I could pay cash and close in a week or so, what’s the lowest you’d take? (With this question, I know where negotiations are going to START. She told me $140,000 is what the county assesses it at, but that was way higher than she was…