Hi All,
Great forum and good educational test case.
Steve, you mentioned previously that a quick sale is one of the key requirements of the seller.
Regardless of whether the agent likes the offer or not, he is obliged to advise the owner of the offer, and will probably do so if the offer is accompanied by a cheque to indicate preparedness to close the deal quickly.
The agent may also be willing to change his mind if he could be made to realise that it wouldn’t be too hard to leave him out of the loop. Anyway, I would stick with the offer until the owner is advised and the owner, not the agent, makes a counter offer.
Regards
GuyHi all,
Great new site Steve!
How about looking at the vendor’s motivation to sell? If they have already committed to something else you may be able to solve their problem and get a win-win outcome. ie. Placing a cheque on the offer for instant cash and getting the house at 40 something thousand.
Li-Sa
OK,
The tenant is not interested in buying the property under a wrap.
Using the building report as leverage
Earlier I mentioned that the vendor wanted a price with a ‘5’ at the front. This kind of comment is usually out of a preconceived opinion of what the property is worth and mostly based on the agent’s original guess as to what the house owuld sell for.
But now we have new information that detracts from the perceived value since there is an issue with the roof. By paying for a building report and finding a few issues we have introduced an element of doubt and it may be that if the vendor is in any way motivated to sell, then a bit of worrying news may accelerate the urgency to sell and move on.
More often than not I will use a building report as leverage to strike a better bargain and drive the price down, either directly or indirectly.
For example, in this case with the roof it is expected that it will cost $2,000 to fix.
Now I have gone back and said to the agent that I am happy to pay $50,000 BUT the roof must be fixed first AND I want a six month settlement AND the max. deposit I’ll contribute is $1,000.
The extended settlement should give me enough time to find a lead (if I wrap it) and I can always bring it forward without penalty but it is harder to negotiate and extension.
Accordingly, my extended offer is:
Purchase Price: $50,000 (really $48k after roof fixed)
Deposit: $1,000
Settlement: 180 daysWhat do you think?
Regards,
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Steve,
I wouldn’t go for this deal as you have structured here for several reasons:
1) Offer of 50k – this is significantly higher than your original offer of 40k – nearly 25% higher!! If you originally thought it worth 40k with room for some negotiation why would you then be prepared to go so much higher.
2) You have a desperate seller here – 180 days to settlement is not much use to a desperate seller.
3) Agent is legally obliged to put offer to seller – so let him do that. If he doesn’t, do it yourself.
4) Agents always say there are other interested parties!!
a) If so, where are they?
b) Why isn’t it sold then?
c) Agent will look bad to seller having over priced property in the first place so he will do all he can to get as a close a price to his initial guess as possible.Tell the agent your final offer – say 45k max and say you will reduce this by 500 each week you are kept waiting. Call in two weeks and see whether they have a definite buyer who has instructed a solicitor. Chances are not.
I feel like I’m preaching to the converted here but if it was me I’d make my offer and then go look for more properties – they’re like buses – there will be another along in a minute.
Lisa.
Hi,
When I worte this post I did so as a case study.
Prior to starting the post I had signed a contract to buy it for $50,000 on a six month settlement, subject to (a) finance and (b) a builder’s report to my satisfaction.
Well, finance wasn’t a problem, however as the case study mentioned the building report came back with a problem with the roof. Some of the older sections were rusting and it owuld cost about $2,000 to fix. There were also some other general maintenance issues which would need repair in the medium to long-term.
I went back to the agent and said that I would be happy to buy, but only if the owner:
(a) repaired the roof OR
(b) dropped the sales price for the roof AND also some of the other issues (drop of $4,000)The agent took a few days to come back to me and then said the vendor wasn’t happy to do either.
So I canned the deal and moved on.
This underpins the lesson that you don’t need to buy every property that you come across and that not all deals are equal.
My business partner David has a good saying… “It’s our investing game, we make the rules and we always win”.
If someone doesn’t want to play our game then we move onwards and upwards and find vendors and agents who will.
Bye,
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Steve
Looking back through some old posts I came across this one.Question? What happened? Did you buy? If so what for? Do you still have it?
Must read some more old posts. They make some interesting reading.
Also alot of those of you who answered in those old posts seem to be missing now.Regards
Hi Muppet,
Thanks for resurrecting this post from the archives!!
It is definately interesting reading.
Wonder who will still be around 12 months from now? Hopefully me
]Regards,
Del [
]Hi Guys
Guess what (egg on face) I didn’t read all last posting before mine. I see that Steve didn’t continue with the deal, therefore all my questions are null and void.Moral: Read all the fine print before committing yourself to signing a deal or to a posting.
Regards
I got here too late!
yep i would have done the same, except maybe bought it- and negotiated harder at the front end in expectation that the builder’s report was going to be bad (they always are at that end of the market, aren’t they??? especially if they have been rental properties???).
As a buy and hold kind of person myself I’ve always sorted the finance ahead of time so I have always been able to make a ‘cash offer’ – and i strongly believe cash buyers can get better deals to the tune of thousands.
I heard that most deals fall over due to finance not coming through. I know Steve wouldn’t have that problem of course.
I would have offered the vendor a short ‘instant’ settlement thus further (hopefully) making the vendor start drooling like mad not to mention the RE agent!. This would hopefully add to the pressure the agent would put on the vendor to accept my offer….hehe
Which might have ended up somewhere around the 44 k mark after a bit of back and forthing.
Also B+H’s, we want the rent coming in as soon as possible.cheers-
Mini
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