Making a "Blind Offer" (part 1)
So you're driving through various
neighborhoods and you happen to come across a property that, from its overgrown
landscape seems to be unoccupied and abandoned. It looks like the type of
property you’re looking for; So what next...? This is the point where a
decision to go at it alone or work with a professional really comes into play. For starters, as an investor you should
already have funding in place and some idea about the value of the properties in
the neighborhoods you’re searching & wish to purchase. You would also want
to know what the market has been doing in that area. Public websites like
city-data, Zillow and the County Appraisal district can offer helpful
information. However, in this blog… what I wanted to discuss was the “blind
offer” that one would make in an effort to purchase the property.
The “blind offer”
is the price you would offer to pay for the property …site unseen. Basically
you’ve not had an opportunity to enter the property and view the condition from
inside. So aside from what is available through public websites and driving by
the property, it’s all the information you have… much like buying at an auction.
The silver lining is that the property is not on a public portal for everyone
to see, so you have the upper hand over any completion. Determining if the
property has an absentee owner, if it’s in foreclosure or bankruptcy, if it’s a
short sale or in probate is part of your “due-diligence”. The value of the
property is derived differently… This would depend on your plans to “flip the
property” or “hold for cash-flow”. So whatever formula you use to determine
value, this is the information you want to approach the owner with. Some
investors have a very aggressive formula and can seem offensive to the property
owner. You will need to justify your “offer” based on the data & values you
collect, without actually seeing the property first hand. Properties like these
are bought "AS-IS" at a discounted price. BUYER BEWARE!
Depending on the property condition, a “conditional
clause” is sometimes included in the offer. Now, if the property happens to be
attracting lots of attention from other investors… you may have to alter your “offer”.
For example, if the owner receives a similar offer or All-Cash offer by another
buyer without a condition clause... Sometimes the buyer doesn’t want or need an
inspection or appraisal… then you have to determine if you wish to compete or
loose the opportunity to the other buyer altogether. This is also why we often
see a property sell for more than originally asking. This is also why many seasoned
investors would rather purchase property not listed in the MLS. For this reason
it's important to have an idea of the condition of the property in its current
condition. A buyer has to “strike while the iron is hot”. This means having
secure financing in place (cash or hard-money) and what you’re willing to pay.
If you say you can close in 30 days, close in 30 days.
In (part 2) of this blog we’ll get into the “option period” and what it entails as well as what you should do if one is not offered. If you have a question about this blog, shoot me a line by filling out the short form below.