A few months ago, I got an email from a reader who asked me an interesting question.
This person had been hanging out in some real estate forums for a while and they came across a conversation about the strategy of making low ball offers (something my business is fundamentally based on).
Someone in the forum posted this classic line:
“If you aren't embarrassed about your offer, you asked too much.”
Then another person replied with this tirade:
“That saying is pretty much from hustlers, not real RE investors… there was some guru book in the late 80s about firing out low ball offers just to see if something sticks. These types get blackballed by agents. Offers are presented on the phone with an owner with a few choice words and turned down, if presented at all.
Realtors are wise to this activity too. All they do is ask the owner the lowest price they will consider and make a note to reject any offer below that amount. That way Realtors don't have to fool around with low ballers.
Realtors are to present all bona fide offers, not some ridiculous offer from a bonafide hustler. Not only do they not have to be presented, they don't have to be answered. They can go straight to the trash.
While these guys may think they are being clever or smart investor types, they are really making things harder on themselves. Names circulate quickly among Realtors, when your name gets around……well, you'll basically be ignored.”
This person (the reader who emailed me) seemed rather distraught after seeing this comment as if there might be some truth in this statement. Perhaps the idea of sending out offers for 10% – 30% of market value is a little too ridiculous (maybe even unethical) to actually work?
I can understand why a new investor might be alarmed by this kind of unsolicited opinion from an anonymous person on the internet. It's no secret that some folks have a negative perception of real estate investors because it's true, we do make some ridiculously low offers.
Have you ever listed your personal residence for sale (the one you dumped your life savings into) and gotten an offer for 50% or less of your asking price? I have – and it can be pretty infuriating. To most non-investor types (and even those of us who do understand the business), it's understandable how one might get offended by the mere suggestion their property isn't worth every penny they think it is.
This is exactly why smart investors don't go after these types of sellers.
For the same reasons a real estate investor MUST make low offers, it's just as important for them to pursue the right clientele (that small demographic of people who are highly motivated to sell).
When I'm looking for new deals, I almost never deal with realtors. In fact, when I see a realtor's name on anything, I usually just walk away.
Think about it – when someone has gone through the trouble of contacting a realtor to list their property the conventional way, it's a clear indication that this person cares. These sellers are NOT apathetic and generally speaking, they're expecting a “reasonable offer” (i.e. – at least 80% of their property's value) and who can blame them?? If I were selling my house, I would expect the same thing!
If you make a habit of sending out hundreds of laughably low offers to the realtors in your town, then yeah, you probably will get “blackballed by agents”. That's because these are precisely the wrong people for you to be targeting in the first place.
We're looking for that small segment of society that just doesn't care.
I know it might sound crazy, but when you're working with a seller who is truly apathetic and/or in a situation where they perceive their property as a CURSE, a 10% offer is completely legitimate… and you aren't taking advantage of these people, you're doing them a favor!
As I explain in this blog post, “Value” is a subjective word – and it comes in many different forms, shapes, and sizes. The word means different things to different people.
To some, value means money.
Others find great value in the alleviation of pain.
Some people place a high value on the elimination of a problem.
A lot of people find extraordinary value in things that are easy.
I've worked with many sellers who didn't care AT ALL about the monetary value I was offering them. Why? Because they didn't need the money, period! Instead, they valued the fact that I was able to eliminate their problem AND make the process very easy for them. Their property had become a major nuisance and by offering to remove that nuisance, I was giving them all the value they wanted! Even though the money mattered a great deal to ME, these people had a completely different perspective than I did (which is often the case) and my laughably low offer price was irrelevant to them. They didn't care about the money – all they wanted was an “easy button” and I was there to give it to them.
If you've already gone through the process of finding motivated sellers, none of this is news to you – you already know these people are out there. Granted, they may be few and far between when lumped in with the whole of society, but if you know where to find them and how to reach them, there's no reason you can't have dozens of these motivated sellers calling YOU in the next couple of weeks.
A smart real estate investor doesn't waste people's time (their time, or the time of a realtor and their rationally thinking seller). They make intelligent offers to people who think differently about their property and the “value” associated with it.
The people who gladly accept these kinds of offers are NOT thinking with the same rationale as someone who has their property listed with a realtor. These are two completely different types of sellers… they aren't just on a different page, they're in a different book altogether.