My wife and I are just getting into REI. After a few years of owning an appraisal business, I am ready to use my knowledge and experience for bigger and better things (I’m definitely not quitting my job, however!).
We are getting very aggressive… our goal is to put out 20 offers per month. Right now we’re already up to 4 and we just started making offers at the first of the year. We are mainly putting out offers on REO’s (there are over 4,000 new ones / month in our market!). We were told duing an investment course @ a local college that about 20 lowball offers should yield a deal.
So that is my question to you all… about how many (and I know experiences are going to be very different) offers do you count on putting out before you get one to stick?
Just a little background on our strategy - we are typically offering about 70% of the ARV less renovation/rehab costs. So these offers really seem ridiculous to us… but we hope we get one soon.
The good news is being an appraiser, I have full confidence in our ARV numbers. The renovation costs are more of a wild card for us but we build in 7 days for due diligence (inspections, etc) into our offers for a safe out if need be.
Thanks in advance for any feedback on the question.
i’d say that the 20 to 1 ratio depends on where you’re making the offers…
you mentioned reo’s…
is this what you’re referring to? you’re doing 20 bids on reo’s?
(are any of the reo’s HUD properties? if so - i’m sure you know the drill with the waiting period for investors)
anyhoot, it depends, if you’re just arbitrarily putting out offers to 20 properties based solely on numbers with NO seller, property information, etc…i think your figure will be more like 50 to 1. because that’s just a blind/throw it on the wall see if it sticks approach.
curious - how are you making your offers? through realtor?
I am not a big proponent of the “make a bunch of offers” philosophy. Instead of wasting your time and that of your realtor, I suggest trying to find an owner that it truly desperate (or at least motivated in the case of banks) and then make an offer. I probably average 3 or 4 offers per deal. If you’re dealing with REOs, then ask your realtor which banks are motivated to sell.
I agree with TMCG, if you’re just throwing out random offers, your ratio of offers to deals could easily be 50 to 1, or even 100 to 1.
Yes, we are mainly putting offers on bank-owned properties (REO’s) because we are not afraid of “insulting” the bank. We are targeted in our approach with respect to neighborhoods, types of homes, etc (mainly those that are in areas that attract renters).
We do visit these properties, go inside them, and drive the neighborhood before we make an offer. And we have no agent representing us so we’re not wasting anyone’s time. We have the forms and write up our own offers. We know what to put in the offers to make them complete and more importantly, what boxes to check to protect ourselves.
We are not limiting ourselves to REO’s. We also are putting some on fixer uppers, expired listings, and FSBO’s that are owned by regular Joe’s. We believe that the only way to find out if a seller is motivated (other than to know by being an insider) is to make an offer and see. Offers are the doors to communication and you never know the urgency of the seller until you make one, so we are taking that approach. Just curious… how do you find a motivated seller if you do NOT make an offer (assuming it doesn’t say that in MLS)?? I would love to know.
I can live with 50:1 or even 100:1. Once we find the houses we want to put offers on it only takes about 5 minutes to fill out the forms (most of the info stays the same), write the earnest money check, and fax it in with our pre-qual letter… not a big chunk out of my day. Figuring out which properties we want and what to offer is more time consuming but we believe that if we keep trying it will pay off.
Good timing this post. We were just talking about this last night. The number of REO’s here are growing daily. We specialize in fixers and I’ve identified two that are REO and medium fixers.
The problem is that the bank has pretty much priced them at the ARV.
I’ve been advised to include bullet point reasoning for the price that we’ve come up with and include it with the offer. Basically, outlining why keeping the house will end up costing them more money. I’ve also been told to keep submitting that offer once a month. I don’t know if this works, but I think it’s worth a try. The possible returns are certainly worth the effort.
I’d be interested in hearing how this works out for you.
If you are not an “insider”, I don’t know who is. If you’ve been successfully running an appraisal business, then you certainly know the players in your area. Have you told them that you are in the market to buy properties and what your criteria are?
Just curious... how do you find a motivated seller if you do NOT make an offer (assuming it doesn't say that in MLS)?? I would love to know.
I have a realtor that I use exclusively. She knows my purchase criteria. When she finds a deal that will meet this criteria, she calls me. Realtors talk among themselves. A good realtor knows when a bank is wanting to unload a property. To get this call, you must be a serious buyer who will immediately make an offer without a bunch of (or any) contingencies. Banks usually have no tolerance for contingencies and I never put them in my contract for REOs.
I also belong to my local REIA. When you know the other successful investors, you’d be amazed at the deals that will come your way. As I’ve said before, the vast majority of people at your REIA will be newbies. These faces will change each month and networking with them is a waste of time. You must meet and become friends with those that are successful.
I could go on and on, but suffice it to say that I only make offers when I have good reason to believe that the seller is desperate to sell.
Bobbi,
In my experience, banks don’t care what you send them. They’ve already gotten pictures of the property and at least a BPO. All that really matters is whether they NEED to sell (because of too many bad loans, extended time on market, etc) and that you submit a clean offer with a quick close.
What does being an appraiser have to do with knowing inside information about a deal – particularly if a seller is motivated or not?
Sure, being an expert in real estate markets and property values puts me at an advantage, but that is completely seperate from being on the inside of a good deal that comes along. I know how to spot one but they aren’t exactly being handed to me, just because I’m in the industry.
An example of someone on the “inside” would be an agent who works with banks on REO’s. They are likely to know when the bank is motivated to dump properties. Being an appraiser does not help one bit with that.
Don’t you know the agents who works with banks on REOs? Don’t you know who the serious investors are? Don’t you know the bank officers? Local politicians? That’s as “inside” as you can get! Get out there and talk to some of your connections.
As an appraiser, RE agents are a royal pain in the neck. All they do is bother us with “hit the number or you’ll kill my deal! Hit the bloody number!” So as an appraiser, I can comfortably say that we try to avoid contact with agents, or anyone else trying to influence our opinion.
As an investor, however, I am just sending out my first few offers, so there hasn’t been enough time to really develop any relationships with REO agents. That will come in time.
Bankers? No. Politicians? No. Serious investors- I know a couple.
Seeing as how we haven’t purchased our first investment property, networking on the investment front is in the infancy stage. Actually, let me amend that statement. My only leg up is I get to start out at “toddler” instead of “infant” simply because I know a couple more Real Estate folks than the average Joe. But I wouldn’t go as far as to say it’s “insider”.
In any case, I appreciate your feedback but am afraid we’re getting off track and hung up on a trivial point.
I just wanted to poll the forum to see about how many lowball REO offers we could expect to put out before hitting one (lowball being ARV minus renovation costs times 70%).
Thanks for the words of inspiration. I called the few REO agents that we have submitted offers to thus far and told them our ideal property parameters and to keep us in the loop if they have deals coming along.
I just generated a great lead off of one of those phone calls - so thanks for the inspiration. This business really is all about the network. You can have all the knowledge in the world but you have to have the other piece – the human connection, in order to have good leads coming in.