Home › Forums › General › EHTrust/EHT Topics and Creative Real Estate Financing › What is a "FULL PRICE OFFER"?
December 9, 2006 at 8:19 pm #2792
Although it seems self-explanatory, I’d like to hear how you determine what to offer. I’ve used the old ARV X .70 – repairs = MAO (per R. LeGrand) and it’s great for flips/rehabs/etc.
The EHT opens up opportunities with the ability to offer more and still make money, so…. what do you offer?
The lesser of asking price or appraisal? Something else entirely?
RichardDecember 9, 2006 at 10:37 pm #18344
To me a Full Price Offer is whatever the Seller is asking and maybe more. Each deal will be different. Some you will get lots of built in equity or you can negotiate a little. Others you will just simply offer them what they are asking. And still there will be some, in order to get the deal, give them more than what they are asking.
I kinda have a rule of thumb. I always try to give them more than what they are asking. Is it any wonder why I get so many offers accepted. Unless an offer is made it can’t be accepted, if it isn’t accepted you don’t get the deal. It’s all free money so why not. I’ll take 4 or 5 skinny ones to 1 big one anyday.
BTW, none of my deals are skinny.December 9, 2006 at 10:41 pm #18345
A FPO is a value usually determined by subtracting from the Fair Market Value (appraisal or comps) any amount that you and the seller would agree should be subtracted, I.e.:
- 5% of high-side comps (i.e. appraisal and comps are generally based upon a low to high range and a 6 month sale cycle, from listing to COE…if your are ready to close in a shorter period of time, you should recieve consideration for doing so)
Escrow fees and any commissions paid
Trust set up fee
Amounts to bring loan or other encumbrances current
Anticipcated remarketing expenses
Anticipated repair costs
Anticipated refurbishment costs
Antipated reasonable profit margin
Adjustment for market trend (up or down)
Any over encumbrances
A fair fee for services rendered (i.e., with overencumbered properties)
That do it?
BillDecember 10, 2006 at 5:14 am #18346
That do it?
Yes it does! My thanks to both of you!
Both of your replies would imply that the asking price is at least CLOSE to CMA or appraisal, correct?December 10, 2006 at 2:15 pm #18347
Not necessarily.December 10, 2006 at 4:26 pm #18348
I’m doing a deal right now where the Seller accepted $800,000 and the Appraisal is $1.2m, with an exsisting loan balance of only $600,000. The Seller has agreed to refinance to an IO loan and let us assume the payments via our RB who is ready to move in.
The Seller will take their $200,000 now from the loan and I am splitting the remaining equity with the RB in return for them coming in with $50,000. That means that for the RBs $50,000 contribution they are buying $200,000 of immediate equity and leaving me with the same. There will also be some decent cash flow, as well as sharing in future appreciation.
If they RB buys in within 3 years they share in 30% of the NET, , 4yrs – 40%, 5yrs or more – 50%.December 10, 2006 at 6:42 pm #18349
I should’ve been clearer. I can see how a MAV less than FMV would work, what I was driving at was that their asking price can’t be grossly over what comps/appraisal indicate that it’s worth.
Is that correct?December 10, 2006 at 7:38 pm #18350
I should’ve been clearer. I can see how a MAV less than FMV would work, what I was driving at was that their asking price can’t be grossly over what comps/appraisal indicate that it’s worth. Is that correct?
Asking price is asking price, it is not your “giving” price. They can ask anything they want. And you can give them anything they want if they are willing to wait long enough.
If “giving” someone more than what they are asking or what they are asking is much more than Market Value, will get you the deal, and if you can find someone willing to make the payments, then why not?
You may run into someone that says, “in order to do as you’re asking, I want more”. Now you can choose to walk away or you can give them what they are asking and more. Dave H calls this, “I’ll offer you… What You’re Asking, Plus!” (more)
Remember, Greed is also a “Motivator”. They don’t all have to be “Motivated Sellers” in that they are in a bad situation. Maybe they are just open to it because it may they get more, much more.
I have an offer on the table on a property that is valued at $525,000 but the Seller wants $549,000 cash. What I offered him was $579,000 if he will stay on the loan 5 more years. His loan balance is only $180,000 and he wants $150,000 now. He is willing to refinance to pull his $150,000 out, we will take over his new loan and give him $500 per month for the next 60 months. That’s an additional $30,000 over the next five years.
So my offer reads that we will give him $579,000 instead of $549,000. The area is very hot with appreciation rates over 24% because of new residential and a huge Mall, Theatres, Stores, Schools etc. going in only one block away. We also can divide the lot into three other building lots if we want.
I also did a deal that the property was paid off. The seller was asking $154,000 cash so I offered him $190,000. I’ll give him $1000 per month for 36 months and $154,000 when the RB refinances.
Do you see how I give More than what Sellers are asking even if it really isn’t?
My niche is always giving Sellers and Potential RBs, more than what they expect. After all, it’s all free money to me. I can do four or five of those before other investors even get an offer accepted.
Give’em more and let time and the RB take care of the rest.December 10, 2006 at 7:47 pm #18351
Thanks, Scott. I can certainly see how offers significantly larger than asking price (like those in your examples) could motivate otherwise “unmotivated” sellers. If I can perfect this system, I could put myself in a truly unique position in my area.
I had a call from a seller in a similar position as one of your examples (free and clear house). They just wanted out of the Katrina Zone, though and future earnings weren’t important to them.
With all of the information available (balance owed, monthly payment, viable rent price, sellers needs) in place, as long as the numbers work a higher offer is workable. Thanks again.
This is exciting stuff!December 11, 2006 at 7:55 pm #18352
I say, “I’ll give you what you’re asking PLUS“, because I want the seller to ask me “PLUS WHAT?” Then I can say,
“I’d be willing to give you more than what your asking – - if your willing to take payments for a couple years.”
How much more? “What do you think would be Fair to stay on the mortgage?“
By the way, “I’ll be 100% responsible for all mortgage payments, taxes, insurance, maintenance, up keep, improvements, damage, landlord problems, etc.”
Review the agreement you’ve discussed, and then ask . . .
Where can I send the OFFER?
Do you have E-mail?
The offer is our standard NEO (found in the doc manual).
I also send letters to listed properties to find prospects.
Letter basically says:
Don’t Sell Your Home . . . for Less than Full Price!
Get Full Price OR MORE without “Selling”
NO Commissions, Closing Costs or Fees!
NO Maintenance, Up Keep or Landlord problems, etc.
Turn Your Home into a How, Now, “Cash Cow”
Can You say . . . Moo Lah?
We’ll Make You an OFFER TODAY! — and my E-mail address.
I don’t give them any phone numbers or addresses (because I don’t want to get into a pissing contest with the listing real estate agent).
I mail 250 a week to listed properties. Some letters come back marked “undeliverable – Vacant”. Great, if the property is vacant my odds just improved that this is a motivated seller. I call these FIRST!
Try it! You just might find some Free Houses.December 11, 2006 at 10:05 pm #18353
Thanks for the tips but I have a question. While technically (as I understand it from studying the archives of this board) you aren’t doing anthing illegal by contacting the owners of listed properties, doesn’t this alienate you from the Agents/Brokers in your area? Surely some of the sellers tell their agent about your letter, Yes?
Glad you’re getting results this way, and I might try it, just wondering if you’d get more deals working WITH the Realtors than working AROUND them.
Not saying one way or the other is right or better, just curious.
RichardDecember 12, 2006 at 12:12 am #18354
Dave, you’re giving away our secret marketing program.December 12, 2006 at 1:16 am #18355
Why not spread the wealth?
DavidDecember 12, 2006 at 1:26 am #18356
I have no bone to pick with real estate agents, its just that most of them think they are better than us lowly investors. If they are decent I’m willing to work out a commission deal with them, however, most have minds like cement (all mixed up and set firm). The NEHT is so flexable I can negotiate just about anything (I’m easy if you’re decent and don’t act like you’re the only one that knows anything about real estate deals). Sorry RE guys, anything you can do I can do better! (Now who thinks he knows everything? The proof is in the pudding.)
There is plenty for everybody doing NARS deals. For those not doing NARS NEHTrusts I have only this to say, good luck trying what’s in my letter without the NEHT!
8)December 12, 2006 at 2:02 am #18357
Scott, Why not spread the wealth?David
That’s what a Socialist would say. Howbout this, “spead the knowledge and experience”. What they do with it from there is up to them. Spreading the wealth is like a handout. Teach’em and let’em fish on their own.
Anyone that I’ve helped on this board will tell you that I am not stingy and spead plenty of knowledge and experience with all who ask. Just wanted to clairify that a little.
Merry Christmas, Happy New Year and God Bless Everyone of You as He has Blessed me and my Family.
You must be logged in to reply to this topic.