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How Offers Are Chosen

There are typically five phases between taking a listing and receiving offers. Phase one happens when the broker puts together the marketing material, all the due diligence items, etc. Phase two is the exposure phase. That's when the broker puts the listing on all the websites and does email blasts, has phone calls, and meetings with potential buyers. Phase three begins with the inquiries that come in from buyers as a result of the marketing. Phase four is the fun part where offers start coming in. And phase five are the best and final offers. I want to discuss the last three phases, which are inquiries, offers, and best and final offers. Every multifamily broker does things a little bit differently. But, in general, what I’m about to show you is what goes down as inquiries come in. I like to use good old-fashioned excel spreadsheets to keep track of this. In my spreadsheet, I list all of the buyers in the far left column, what they're saying or what they did in the next column, and the offers they made in the third column. I provide a summary of how many signed CAs, how many turned in offers, how many rejected it, etc. I sent this spreadsheet to my sellers every couple of days with updated buyers. It has been extremely valuable to the seller. They can quickly see if there’s a common theme among the feedback. Brokers can prepare the seller for these challenges in advance, but it doesn't have as much weight until the data points come in and confirm what the broker said in the beginning. There are two things to learn from this phase of the deal. #1 - as a seller, this is fantastic raw information about what the actual market is saying about your property, which will help make better decisions, and #2 - for the buyer, it's very important to tell the broker what you like and don't like about the property, sign the CA when you say you're going to sign the CA because the brokers are communicating as much as they can about you to the seller. And as you can imagine when 13 offers come in from different buyers and they range from one to four pages each with different language it could become confusing to the seller. Most brokers will compile all that information into an easy-to-read format so sellers can make the best decisions. On my spreadsheet I have the company name, the actual principal involved, the price offered, price per unit, due diligence period, the closing period after due diligence, did they ask for any closing extensions, what are their total deposits, initial plus the one after due diligence, are there any financing contingencies, was there another broker involved, and the most important column of all, the notes column. The notes column is where most investors survive or die.  This is where I put information about the buyers for example, what other assets do they own, how many do they own, how many units, are they in the same area, how were they to deal with during the offer period, did they take suggestions, did they give off a weird vibe, if we’ve done deals together before. All of that goes into the notes section. Now the seller has all the info they need to make the best decision. I use special characters and color code certain items like if the buyer turned in a bio on themselves and/or their company, did they provide letters of recommendations, etc. This quickly shows the strengths and weaknesses among all the offers. What's really important for buyers to learn about this phase of the process is that it isn't all about the offer terms. Yes, price, due diligence, and closing periods are important, but everything you say during the process, the vibe you put off, is being absorbed by that broker as they communicate with the seller. Even if a buyer turns in the highest offer but they're putting off the wrong vibe it's going to have a negative impact. Once we get to the best and final phase, I use the same concepts above as we narrow down the buyers.  Take a look at the video in the link below to see how I work my actual spreadsheet.

 

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