In Part 1 of this mini-series we discussed not wasting time with leads that couldn’t or wouldn’t sell you a good deal. Today we’re going to make the offer right on the phone to see if it’s worth visiting the house.
There’s no sense driving all over town looking at houses we’re never going to buy, right?
So how can we do that sight unseen?
The trick is to have a formula you follow based on the After Repaired Value (ARV) of the house. From that you subtract out repairs; carrying costs; and profit to arrive at the right price to pay. All of that is a factor of the ARV except repairs. So how can you calculate repairs on a house you’ve never seen?
If you simply ask the seller what repairs are needed they’ll provide a rather skewed answer – either because it is in their best interest or because they really don’t see what’s required. So instead I start with the age of the house and ask questions from there.
If it is an older house, I’ll ask questions about the last time the kitchen and bath were updated; when the last new roof was installed; the type of flooring; and when the inside and outside of the house were last painted. Based on the answers to these questions, I infer the ball park repair estimate.
For newer houses, I assume that systems are fine, but depending on age, I assume paint and carpet; and possible a light kitchen & bath update.
Applying these figures to my formula I calculate my maximum price and start negotiating well below that.
The goal at this point is not gain final acceptance, but rather to determine if we’re close enough to warrant a house visit. If we are worlds apart with no meeting of the minds, the call is done and I move on. If we can come close, then I’ll finalize the deal in person.
Remember when making the offer to talk about how your offer solves their problem as opposed to just the price you are willing to pay. For instance, I’ll say…
If I understand our conversation correctly, what is important to you is to get out from under these houses payments and be able to move on with your life without going into foreclosure.
When I purchase your house I can close as quickly as 30 days or we can extend it as long as you need to make your transition easy. There is nothing you need to do except plan you r move. I’ll handle everything else. You don’t need to worry about a home inspection – I’ve already inspected. There will be no repairs you need to make and I’ll pay all of the closing costs.
Based on what you told me and what I know about your area, I’m probably going to be somewhere in the ball park of $xxxx All I need is your signature on some simple paperwork and you can move on to your new home and never worry about this house and those payments again.
From there it’s just negotiating to get to acceptance.
In the next part of this mini-training we’ll discuss negotiating tactics to get to a “YES”.
Expect abundance
Lou Castillo
P.S. Don’t forget to share your thoughts and ideas below. Everyone would like to hear from you.
