Journal 3. WE GOT THE OFFER ACCEPTED!
I’ll be tagging this series of blogs about my next acquisitions with “first time investor”
We negotiated 650k off the listing price from 3.25 million -> our offer of 2.6 million.
Local Park
Pool in the park
This is post is going to be about how to negotiate.
It's not at all like in the movies, don't come in with BDE and try to strong arm sellers into a price
Always listen to as much information as the seller is willing to give. Chatty agents are my favorite for this reason
The best way to resolve issues is by helping the seller solve their problem. Win -Win
Common problems sellers have and how to solve them
They want the steady income, but don't want to manage people any more. Seller financing is the best way to get them to discount it for you on this. They essentially hold a mortgage over you, but you might be able to get better rates as a result.
They want to just get rid of the property, this is the ideal customer for us. These sellers care the most about how quickly and how likely you are to close. We won over a higher offer because we really focused on our short close time and group's experience in buying and selling
They want a specific magic price number to sell out. Explain to them with the excel sheets and your numbers why they aren't going to be worth that much. This one is a scenario where seller financing could work too, because the accumulation of the interest could add up to their magic number at some point.
What to put in a contract or offer. You'll want some contingencies in order to pull out your earnest money (your deposit)
for smaller homes, often adding a picture and more information about your group can be helpful
financing contingency. This means you can get out of contract if your loan doesn't end up closing. Sellers usually hate this
inspection or due diligence contingency. Personally, I think this should be required, professionals will sometimes skip this because they'd be able to figure it out on their own walkthrough. If you find major issues, you can negotiate to get money back.
appraisal contingency. This means that appraisal from a 3rd party has to come back at a minimum value. Useful for newbies, but sellers in hot markets will just toss these offers.
Now that we've got it under contract, I can talk a little more about the specifics. This is in Chicago's ultra nice Wicker Park area (People who live here know what I'm talking about). We're a stone's throw from downtown, it overlooks a park w/ a pool, has one of the top magnet schools in the city, and we're near a lot of public transit/highway. Property is very run down and vacant, so we aren’t displacing anyone either which is ideal.
We included quite a few contingencies including the financing one, but we figure that since the property was on the market for a while with no buyers (the seller was not a professional, but had inherited from the father who was corrupt former politician), we could come in and negotiate them down to a reasonable offer.
I had a chat with my partners this morning and apparently someone might even be interested in buying it wholesale from us for 2.9 million, which means we'd have made 300k before even doing the construction work.
We've priced the property as a rental, but given how nice the area is, we're also thinking about Airbnb once travel picks up again
Let me know where you think my next post should go, drop questions below