Lowballing REOs and other MLS listings

I read and heard the strategy to make multiple low ball offers on MLS properties listed below value like REOs, estates, etc.
It also helps if the property has been on the market for a long time. I been at this for a few months and almost had one deal except that my earnest money was not big enough (stupid of me). So basically this what I do:

I get a group of listings from my agent and narrow those down to those listed below value and on the market for a while. By now I have a good idea of the market in my area so I don’t need to run comps from his office , except sometimes I get an estimate from Zillow ( I know not a true value). I then create a spreadsheet with my offers and email to my agent to make offers. I usually use the MAO formula to make my offer (market value x 70% - rehab - wholesale fee). He makes most of these verbal to test the waters and not many agents have the time to write up 20-30 offers with little chance of hitting.

I used to run to the properties before submitting offers to get a rehab estimate but now I just wing it base on the size of house , price, etc. This also was a lot of waste time for my agent and me for that fact.

This is obviously for the sole purpose of wholesaling these properties (I know the tricks by now) . I just want to know if anyone has any experience with a similar strategy and what kind of results do you have? Any advise or tips would be great oon this strategy. I really don’t want to give up on this because of the amount of REOs on the market. Help me out please.

Thank you!

I know that in my market right now if you dont have cash you have no deals, on REOS sucks but its true…

I’ve never posted on here…lack of time. But I do poke my head in some forums from time to time…my way of trying to stay connected.
I couldn’t resist replying to your post because your strategy is very similar to what I do every day. I have about 27 agents looking out for properties with my set criteria. Some of the agents pass me plenty of properties, some don’t…(they forget or more commonly, I don’t use their listings which in turn means I don’t do business with them…no money in it for them). I’ll get between 150 - 180 potential properties from these agents a month. (not each agent, total number). this month alone, I’ve made 43 offers from 120 that was passed to me from the agents (30-50% below FMV). I had 12 counter offers. As we speak, I’ve tied 2 under contract…found a buyer for both of them, will close on 1 next week and the other in about 16 days.
Like you, I initially started by going to each property first, calculate rehab, run the numbers, then make the offer. That’s a good practice, just time consuming. There are pros and cons for both practices (making offers without physically looking and making offers with looking). Here’s the thing…my percentages of getting a house under contract are higher if I speak to the owner (or their agent) and understand their situation. Doing that gives me the chance to give them multiple options. In other words, it gets away from contract assignments because I’ll give them multiple options…example…offer is 45k, or subject to for 2 years plus 5% of profit I make when I sell, or lease options. Point I’m making is I normally give them 3 options instead of one. I’ve done that with 4 deals but find myself drifting away from that and just doing contract assignments…making mass offers because its faster and I have strict goals I want to meet.
At the end of the day its about odds…make mass offers 30-50% below FMV) that fit your criteria…Mr law of averages will take care of the rest. You’ll get some that will accept, trust me. In the 6 months that I’ve been doing this, I’ve done 13 deals (10 contract assignments, 3 "subject to’s) for a total net profit of 52k. No RE background at all…I still don’t know what I’m doing. I feel like a idiot sometimes but I just keep plugging away. Oh, and I do this part time. I have a day job that pays really good…but the way this is moving, I can see a future doing this full time.
Get a 1800 number, do targeting advertising with it ( ex - post ads for “relocating”, or Divorce, or behind on payments, ect). Use your 1800 number with multiple extensions…tie each extension to a specific ad so you can track whats working and whats not. Ext 1 may be for divorce, ext 2 may be for relocating…tracking what works is key here. Also, get a website if you don’t already…this is a must! both will weed out the “tire kickers”…but will also capture those golden ones. with the ads going, agents working, website, and me working to find good deals you’re increasing your odds of finding good deals (remember, law of average). Since I have a full time job, I basically automated my whole process which is also key. Leveraging your time.
hope that helps…I could write more but…gotta get back to work my friend :slight_smile:

oh…forgot to mention this…don’t ever give up. Ever. Bulk up your buyers list. Without that, none of this would work. Go to REI clubs and network. Go to the local auction and network. I found 15-20 buyers at the auction. Walked right up to them and said I would love to have them on my list. Google or Yahoo “we buy houses” with your local city name. (eg - search for “we buy houses Dallas”). That one search alone will give you massive search results…go to their website and email them. Ask for their criteria.
One other thing I started this month…I posted a ad in craigs-list for a real estate scout…lol. I’m laughing as I’m writing this but I truly did. Objective being to scout homes for me physically and in the media (penny saver,gazette, newspapers, RE magazines, online, ect…) 11 people responded, 3 of them are now looking for properties for me (basically bird-dogging on steroids). 1000 bucks in their pockets if I close on a deal that they find. People are willing to do this because they are out of work. Get this, one is a agent turned disgruntle with doing RE!
On another note…as soon as I get enough money from contracts, I’ll finally start buying and rehabbing.
Last thing…and my biggest mistake. Dont judge properties. Remember, you are getting properties that fits the investors criteria. I use to look at properties and pass on them because I thought it was just nasty. But you have to remember, if it fits the criteria of your buyers, and they have the money to move on it, they will…it doesnt matter what I think of it!
My family thought I was insane for getting into RE…which was a confirmation to me to get in it!! I knew I was on to something when my wife said it would never work :biggrin

Gilzo, Thanks for posting! I am curious though, when you make the offers through your agent and actually pass it on to an end buyer, does your agent get paid by your or the 3% commission from the sale?

Ikward…by the sale. If I find the deal I still bring in my favorite agent to work it. I pay her 1 - 1.5%…she’ll get more if the house is dirt cheap (under 30k). If she finds the deal, I pay her 3%…sometimes more. Point is, I’ve brought her in on every deal that I find (found 4 personally). She has the experience working with sellers and agents so I try to leverage her as much as possible. Most of the time, we target FSBO’s…I found it’s just easier that way. Since I get theses houses so cheap, paying her doesn’t really affect your bottom line.
Eg…I found a house that was listed for 59,900. It was built in 1952, but was in good condition. It was on the market for exactly 90 days when a agent brought it to my attention. (one of my criteria, 90 days or more on the market) In doing my comps (local assessor website, agent input, ect) I realized this house was already 13-15 % below FMV. and it had sq footage that wasn’t being listed as livable…bingo! Come to find out, it was being listed at 1300 sq feet but the seller built another “playroom” in the attic…it just wasn’t up to code. I called a rehab team and found out it just needed the wiring tied up. The owners were already using the room. The agent missed it when she listed it…tis tis. 400 bucks later to get it in code and I tied the property up. Now I had a 1700 sq ft home. Here’s the beauty of this deal…made the offer 15% below 59,900 because I knew it was already 10% below fmv. So I figured I was getting the house 20-25%% below fmv. (far cry above what I normally offer) but the beautiful thing here is I also had more sq ft. 400 sq ft more! Now the fmv of the house was 89,900. I locked it up for 50,900k, assigned it out to a buyer for 59,900, gave my agent 1800 bucks to handle the deal, paid a RE lawyer 1000 bucks (which chapped my a**) and I walked away from closing with 6k…my biggest profit yet on a deal.
Lesson here I learned was to tell your agent to be on the look out for non livable sq ft…it was a gold mine for me. Also tell her to look for below sq feet averages. One last thing…have your agents look for low property tax…that normally means the homeowner has lived in that house for a long time, hence, big equity in the house. I’m learning more and more about these little tricks but I honestly still feel incompetent sometimes. My skin is tougher too because when you make lots of low offers, you get a lot of rejection. I haven’t entered the reo market yet, just targeting relocation, divorce, job transfer, loss of job, and just general hardship. I literally have this contract assignment stuff down now…well, almost. there’s still plenty I don’t know but getting there.

I am new here so please advice as needed. now for the focus of my conversation, are you aware of companies that do all the leg work for you and give you a very good price for the properties? because that’s who i deal with. don’t have to worry about agents fee’s lawyers or codes they are done for you and move in ready. they sell all over the U.S. i either hold, rent out or sell with a better profit than 6k. again please advise.

Gilzo- Thank you for your insight and congrats on your success. I am actually a bit jealous (but happy for you) of all that you done and doing it PART TIME. I am doing this FULL TIME for almost a year now and only got 1 deal. It wasn’t even my deal, it was another investor who I brought him a buyer to a property he locked up.
I hear you on taking massive action to get results and I done most of what you mentioned, maybe even more since I have more time. I have done 100s of bandit signs, flyers, postcards, letters…etc. The only thing I have not done is the website because I didn’t think I needed it with very few properties under contract. I do use an 800 number to automate my time. It is frustrating to have so little results and know so much real estate investing. I think there ‘s a lot of competition in my town or I have not figured out what’s working.
I can’t believe you had that much success and you don’t even target REOs which is where all the bargains are. How far in your state do you look for properties in the MLS? I thought about expanding but then I don’t know the area or have any buyers ready. I am just tired of not doing any deals locally. I did have about 4 properties under contract through the MLS and they all fell through because my buyers were not interested and not enough earnest money. It seems that every time I get one of these, it is just barely an ok deal and my guys pass on them . Yea I know about having their criteria but that doesn’t work that great sometimes.
I have over 50 buyers on my list but most of these are not “buyers” but really buy 1 or 2 deals a year. There’s about 5 guys who really buy a lot but only want those really hot deals.
I know about most of these tips you mentioned (DOM,low taxes, low sq ft) but even with that I have a hard time catching one. All I can do is just keep working because I made up my mind this is what I wanted to do and the ship has been burned. Sooner or later, I will hit my niche. Thanks for your input once again , Gilzo.

You’ve heard this before but don’t give up my friend. As you know, it’s not easy. I believe it’s all about networking with people and how you deliver your message. I’m completely transparent and honest from the start. I’ll tell the seller exactly what the process is…and go over all the forms. They understand from the “get go” that I will assign the contract to another buyer (business partners, if you feel more comfortable saying). We go over the “outs”…in my case 29 days. In the contract, it states the deal is null and void after the 29th day if I don’t close. As I stated, we go over all the paperwork…investor disclosure statement and the sellers acknowledgment, Investor purchase agreement,/lead paint disclosure notice, property disclosure statement, discharge of agreement to purchase statement, and finally the assignment contract. I hide nothing from them.
You spoke about not having a website, I completely believe in it…might be bias though because my profession is IT. I structure everything to flow into two things, 800 number and website…that’s it. More to the site. Then track it, I use google analytics to track my online ads…as well as squeeze pages to track my online stuff. I use mailbox exts to track my real world ads if calling the 800 number…I have 5 ads going targeting different situations…example (ad in newspaper targeting not able to make payments…call this number…when they call they hear…can’t make your house payments, press one)…track what’s bringing in the most responses and focus/improve on that.

The website explains exactly what we do…exactly. We will assign your contract…or lease option. I even explain how I get my offer numbers and why… explaining the MAO formula in detail. I write on integrity, honor, principals, values…I tell them I live in the same community as they do, that I’m a father and at the end of the day I will never do a deal that compromises my morals as a father or as a Christian…even if it means losing deals! Again, I’m completely honest with them and mean it. When they call or leave their info and we talk, they already know the backbone of my core business practice. The hard part is over before it ever starts…

As far as reo’s, I personally think it’s over rated. Why compete with everyone else? If someone targets reo’s, then why not get the deal before it even becomes a reo? I never understood that. It’s not that hard to find people that’s going in default before the banks grab it. You can find that info at the court house and online! If someone is showing that they’re 2 months in default, why not just go after the deal then. Off the cuff, one analogy is stealing second base while everyone else is waiting on home plate…(waiting on reo’s to be reo’s). Get them before everyone else…just my thoughts on all that. Conversely, I truly believe the “secret” is building and staying engaged with your pipeline. Pipeline being the brokers, the agents, the rehab crew, your builders list, ect. I had 1 deal drop in my lap from the rehab contractor. Get this, when I need a repair estimate, I call him to go to the house with me. He gives me the rehab cost in which I attach it to the package for my buyers list. One day he called me and said he was rehabbing a property for another local investor. As he was speaking to the investor, the investor said he knew of another deal but he couldn’t move on it. The rehab dude told me the address and …the rest is history for that deal. Made 4k off that one. Pipeline!

I’m working on a lease option as we speak so I hope it goes well. I feel like a fish out of water on this one but it’s all good. I’m finding it hard to do all this with my full time job (oh, and I’m a recently single dad with full custody of my 2 girls). I’m constantly tired but I press on. I had a friend of mine tell me years ago…“it doesn’t matter how tired you are, it doesn’t matter how exhausted you are, get your a** moving and do something! I’m literally doing that but I’m TIRED!. I won’t quit my job because I make good money and I enjoy what I do. Way more money than real estate right now although I can see there’s potential. I put the girls down at nine and literally stay up until 2 or 3am to work on my 'part time” gig. All my buddies still smirk at me when I tell them I’m doing ok in the RE game. NO VISION! Conservative!..still love my boyz though. I proclaimed starting my re career after my 10th deal!!!

How far do I look in my state? I just look in my local area. I’ve never hung one bandit sign or flyers…but do believe they work. Like I mentioned above, I need to target people before they hit the mls. I’m working on a plan to do just that. I truly believe anyone who does that is the most successful…I’m thinking about targeting absentee land owners then contact them with my pitch. Check this out…and one I believe that’s flying completely under the radar from local investors…There’s a property in my own neighborhood…it’s the worse house in the neighborhood…and I live in a very nice neighborhood. It looks like it was built in the 80"s but it was built in 92. It looks nothing like the new houses in my neighborhood. I think the owner didn’t sell out to the developers when my hood was built because it doesn’t look like it belongs at all. The house is in the very back of my hood, on a very secluded cul de sac (which is why I think its flying under the radar). Next door is a 500k house, the house across the street is well over a mil. It needs work inside and the backyard has a big shed full of metal/wood…its a very odd looking home. 2/1.5/2. The owner is asking 168 for it and he’s out of state…no one lives in it. I’m struggling figuring out how to tackle this one. I want to offer him 70-80k but I don’t know what a investor would be able to do with this house. Even if you clear the house and land, then what…I don’t think the land is worth 70-80k. If you rehab, the house would still look completely out of place compared to the others…I’ll give you the link to see it for yourself if you want…I think it’s a gold mine if I can figure out what to do with it. Anyway…I’m thinking about finding those out of state absentee land/home owners and hitting them up.

Again, the delivery of your message is crucial. How you come across to the seller, your buyer, your agent, ect. I give my buyers the best package I possibly can. I want them to view it and say “wow, this guy went above and beyond”. In fact, when I attach the repair quote from a reputable contract crew, it’s dead on balls accurate. Because of this, I believe he doesn’t even do his due diligence anymore because my quote has always been right! My ARV is always accurate, my comps are always accurate…I have buyers tell me my package is the best they’ve seen. That’s my mentality…Be the best! Some of the new people I see are all the same…turning their wheels and following everyone else. I literally practiced with a friend of mine for 10 hours on a Saturday…role playing on what I need to say and do when I meet the seller! I kid you not…10 hours straight. By the time I did my first deal and sat in the living room of the seller, I felt like an old nfl vet. I went over those forms 100 times with my friend that day…went over 100 questions they might ask…I was over prepared when I did my first deal.
But that’s just me, everyone has their own style and personality. I look at it as a war! Be brutal with your efforts, do it better than your competition. Die doing it! If you were swimming 10 laps against the next guy, go full out the first lap…don’t save your energy! You’ll win at the end because you have the mind set before hand that you will die today so why not go all out from the start. I f you haven’t read Lance Armstrong’s book, I would recommend it. He states the reason he beats everyone else in the mountains is he saves nothing for later, he pushes harder when everyone else is tired and in pain. When he’s in pain, he pushes harder up that mountain. He would rather die than to let anyone else win while climbing those mountains. Have that mentality my friend and nothing will stop you. Not one year, not 10 dead deals.

I’ve made many mistakes…lost two deals. One deal lost because I wouldn’t compromise my Integrity! I would of made some nice bank on that one too!

Thomas Edison’s teachers said he was “too stupid to learn anything.” He was fired from his first two jobs for being “non-productive.” As an inventor, Edison made 1,000 unsuccessful attempts at inventing the light bulb. When a reporter asked, “How did it feel to fail 1,000 times?” Edison replied, “I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.”

Winston Churchill failed sixth grade. He was subsequently defeated in every election for public office until he became Prime Minister at the age of 62. He later wrote, “Never give in, never give in, never, never, never, never - in nothing, great or small, large or petty - never give in except to convictions of honor and good sense. Never, Never, Never, Never give up.”

Albert Einstein did not speak until he was 4-years-old and did not read until he was 7. His parents thought he was “sub-normal,” and one of his teachers described him as “mentally slow, unsociable, and adrift forever in foolish dreams.” He was expelled from school and was refused admittance to the Zurich Polytechnic School. He did eventually learn to speak and read. Even to do a little math.

An expert said of Vince Lombardi: “He possesses minimal football knowledge and lacks motivation.” Lombardi would later write, “It’s not whether you get knocked down; it’s whether you get back up.”

Tom Landry, Chuck Noll, Bill Walsh, and Jimmy Johnson accounted for 11 of the 19 Super Bowl victories from 1974 to 1993. They also share the distinction of having the worst records of first-season head coaches in NFL history - they didn’t win a single game… THIS IS YOUR FIRST SEASON Great Martini, your Super Bowl is near!

Gilzo- Man I don’t even know where to start, you were deep and inspirational. I will answer each of your topics as you wrote them.
Are you talking about being “open” with sellers who have agents or just regular fiz bows? I can’t imagine how you can get the agent to work with all that paperwork, although that might be why you are making much more money. I am upront with the fiz bows about what I am trying to do, most of the time I don’t get that chance. I am now starting to do a better job at tracking my marketing and just recently added Google voice to my arsenal. I should get a website but I am going to need a buddy to do that for me.
One of the reasons that I don’t have a website it has to do with a mentor I have here locally. He actually wholesales lease options through an option contract. Not sure how familiar you are with that but that is something very few people know about doing, wholesaling lease options. He is an old school cat and believes in keeping things on the “hush” to avoid trouble. He said if I created a site, Realtors and other competitors would create problems. As far as I know there’s nothing illegal about his strategy just doesn’t want the attention. I do believe that a website would serve well with wholesaling fixer uppers to investors instead of having to do a bulk email when you have a property and will add credibility.
That was a nice deal you got from your contractor. You are probably beating me on the networking by a good mile. I completely agree that networking is key because after all, that’s how my first deal happened. My problem is that I always been a bit shy and grew up having an inferioty complex. When I first started this, I would almost pea in my pants talking to other professionals. Now I got more comfortable talking and looking to network more, specially because the warmer days are here now. I actually only have 2 agents working with me with wholesaling but I would like to add more. The problem is that there are very that understand or believe in what we are doing.
Your lease option is probably something that I know more about but I am sure you are fine there. Is this a sandwich option? That was the only no money down technique I knew regarding lease options until my mentor said that he doesn’t even get caught up in the middle , just works the contract between buyer and seller. I admire your work ethic and I know kids are tough , I have a 2 year old boy. I have a hard time juggling this biz, being a husband and a father. You have almost all that plus a full time job , red bull probably thanks you . There’s times where I feel like I can’t do it no more but I am going to say if Gilzo can do it , so can I.
So we both stay locally with looking for deals, much easier that way. I think you should make offer on that house in your hood if the next door house is worth 500K. I am guessing that the house can’t be rehabbed and must be demolished when you talk about the value of the land. Even then , you could assign the ugly house sitting on a nice piece of land, worth a shot. I have not done much with absentee landlords because I don’t think there’s as many as there’s foreclosures, probates, etc. Although I don’t think it’s a bad idea and might go there soon.
Once again I am impressed by your work ethic with the role play in regards to your seller presentation. That’s something that I should’ve done in the beginning but by now I have had real life experience. I did role play with the wife a few times but not near the amount of hours that you did in one session. As far as your reputation with your buyers, I agree that’s important. I try to provide the best service possible to them. I might’ve got off to a rough start because I had some properties that were not so great deals. I didn’t know what I was doing and that’s all I had all the time. Since then my deals gotten better although apparently, not good enough.
I actually got one right now and I will use as an example. This is an REO that I got under contract for 34K and the ARV was around 65-70K. The rehab on this is 5K for a rental and 10K for a cheap flip. I shopped it for 39K just a few days ago to my buyers before the bank had signed off because they had already accepted my agent’s verbal offer. I got very little feedback and only had 2 guys that looked at it. One guy was not very fond of it but the other guy would only offer 35K. I was bound to take that but then my agent responds that the bank rejected the contract because of my “and/or assigns”. I already know banks don’t like this but we figure we try because a few banks around here do look past it and I wanted to avoid a double closing. The point that I am trying to make here is that you have to get lucky just to get a deal and then when you finally do, you got some hoops to jump through, specially REOs.
I know all about motivation because I would probably quit if I didn’t get into it. I know all about Napoleon Hill, Tony Robbins, Norman Vince Peale. Every day before I start , I need something inspirational in order to have the strength to get through. My wall has inspiration quotes that range from the Bible to Dr. Hill. I have that man’s Think and Grow Rich audio cd’s in my car and listed to it a few times already. I never cared for that stuff when I was young and stupid but now I know that stuff works. You are what you think and say you are and so everyday I try to plant as much positive thoughts in my mind as I can. This morning I had a hard time gtting started so I went to The Power of Positive Thinking and yelled one of my favorite verses a few times, it says, “I do not believe in defeat”.
I am all for that stuff and it almost feels it is just as important as knowing this biz. I had a lot of struggles growing up and was not raised in a very good environment. I let my surroundings and people control my thoughts almost to a point where I was defeated. This is why I need that motivational stuff because most of my life my mind was planted with negative thinking. I realize now that you can change your life with the renewing of your mind but it takes some time. I was out at 4 AM last week putting out bandit signs because of my dedication to all this. I was freezing my behind in the winter time putting out 250 signs that have almost all disappeared and got no deal to show for it. If I didn’t get into those books/audios, I would’ve quit after so many failures. BUT I WILL NEVER QUIT AND FAILURE IS NOT AN OPTION.
Sorry about the long rant but yours was a good post that I had to put a good effort as well. I am sorry if I got a bit emotional and I am sure most people don’t care about another’s sad story. Sometimes you just got to let that stuff out.
On a lighter note and closing remarks. I am an Eagles fan and I hope I do better than they done with Super bowls, when it comes to this biz. Go birds! You’re a great guy Gilzo, wish I knew what your name meant . Seriously bro, thanks for the encouragement and good luck in everything. God bless.

Sorry for not getting back to you earlier…had to go to Fort Worth (for work) and I just got back to the house. (which by the way was a miracle in itself that I was able to get someone to watch the girls…but I pulled it off). By the way, are you in Philly? If so, that may explain our differences in getting deals. I’m in Oklahoma City where our cost of living is much cheaper. The local economy here didn’t get hit as hard by the recession because of large presence of the oil and gas industry here. In fact, forbes called OKC the most recession proof city in the US…just thinking out loud as a possibility. I’ll write back as soon as I get the kids down.