Things to Avoid When Making Offers
Buying multifamily is hyper-competitive. As a multifamily broker, I see a lot of investors shoot themselves in the foot when making offers on multifamily assets. It's easy to do things right once you know what to do. So, let’s discuss the top 10 things you shouldn’t do.
I've had the opportunity to transact with some of the best investors in the world. I've been witness to the techniques these elite investors employ when offering on assets. There is no doubt they made silly mistakes early on but they've honed their craft and win more offers than everyone else. Many of the fails in this video come down to treating others as you would want to be treated, using common sense, and understanding the psychology of the seller and listing broker when making offers. With multiple offers on every multifamily real estate deal, the sellers and listing real estate brokers are looking for the buyer they feel is most likely to show up to closing with the best price and terms.
#1 – Don’t use sales comps that justify a lower price. Even if you’re right, you’re insulting the seller. I have never heard a seller receive that kind of information and not be offended and agree to the lower price.
#2 – Don’t ask for seller financing when you know there are multiple offers. It puts you at a huge disadvantage and it shows you don’t have the cash or ability to get traditional financing, and therefore the probability, of closing.
#3 – Don’t say you’ll need to find a partner in order to get the deal done. Obviously, that’s not going to give the seller much confidence in you
#4 – Don’t turn in a lower offer just because it’s a cash deal. All deals happen quickly now that it’s likely someone else with a higher offer, but needs financing, can still close quickly.
#5 – Don’t ask to tour the property before you’ve reviewed the financials. It takes a lot of coordinating on behalf of the seller to provide that tour. And you’ll look far more attractive to the seller if you’ve fully underwritten the asset.
#6 – Don’t use scare tactics about the market, politics, tax code changes, etc. Sellers and brokers are looking for two things: a buyer that offers the right price and terms and can close. They are not looking for doom and gloom.
#7 – Don’t turn in an offer that has a decreasing price. I understand the theory behind this tactic, but the vast majority of the time it’s going to backfire on you. Human beings are emotional creatures, and if you back them into a corner, they’re going to retaliate by not going to deal with you.
#8 – Don’t submit informal offers. A brief email with a price asking that if the seller agrees to draft a formal letter of intent is just plain lazy and earns you no brownie points.
#9 – Don’t introduce your broker into the deal if you’ve been presented the deal directly from the listing broker. Your broker didn’t procure the deal so they shouldn’t be paid unless you want to pay them yourself for handling negotiations and paperwork.
#10 – Don’t ask to be paid by the seller on the deal if you have a license and are buying the property. It just puts a bad taste in the mouth of the seller and put you at a disadvantage in a multiple offer situation.
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