Property offers is an exciting process within the life of an investor. The first 80+ offers on buy-to-let properties never got accepted at the start of our journey and a third of them never got a response.
That may not be surprising for some of you but there was a lot to learn and observe a few trends from that experience.
When we managed to place a little over 500 offers in a couple of years time, there is a lot of learnings to share retrospecting on most of them.
Here are a few things that we learnt about placing considerable volumes of offers on properties.
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Property Offers Acceptance Gets Better With Time
If I take 500 as the number of offers we placed and with about 18 offers accepted to date then it ends up at approximately 27 offers for one successful acceptance.
Not bad at all, isn’t it?
Understand that you are not going to have one offer accepted for every 27 to 30 offers you make.
It usually ends up with no offer accepted for say the first hundred offers placed but you will end up with 5 accepted in the next hundred offers.
Over a period of time, your success rate increases considerably.
This only tells us as investors that we have to remain patient and retrospect continuously on what can be improved within the process.
The 3 Stage Offer Keeps You In Check
The very first issue I had within the offers process was myself not being able to control emotions.
It took some time but I sure did get through the issue calming myself down.
It got simpler when we had agreed between us on 3 stage offer i.e. the lowest offer, an offer where you can take all your money out and the final one where you are ready to leave some money in suitable to you.
Beyond that third offer, we just walk away and leave the decision to the seller.
That 3 stage offer as a system helps us to remain in check and not get carried away giving higher offers leading to loss of hard earned money.
Justifying Your Property Offer Is Not Optional
As investors we are very much used to giving low end offers on a property and many a times all of us try cheeky offers too.
I think the marketplace has got competitive and those cheeky offers don’t work anymore, well atleast not in most of the cases.
That only suggests one should be in a position to justify the offers being given.
Reasons that will pin point on why a seller would not get much more than what we offer.
Having a grasp on the issues that makes a property distressed or derelict.
Being able to justify the amount of work required to get the property to safety standards for tenants to live in with associated costs considered to arrive at a property offer price stands a higher chance to be accepted.
The Conditional Offer
Neither the sellers nor the buyers would like conditions for a property deal to go through.
The simple reason is the negotiation whilst offers are mutually agreed remains open-ended.
Those conditions give points to negotiate on in between the conveyancing process which isn’t ideal.
As investors, we stand a bigger chance to get a deal done if we happen to get the unknowns qualified and mitigated before the conveyancing even starts.
At the beginning of our investment journey, I still remember we used to provide offers with at least 3 to 4 conditions like subject to:
- Survey coming with no major concerns
- Funding is approved for the purchase
- Property being taken off the market once the sale is agreed
Later realised we are only doing more harm to both parties than good introducing doubts on the deal and since have taken off unnecessary conditions which more or less are understood within the deal negotiations.
The only condition we stick to right now is “subject to planning” for the deals we are involved in at the time of offer.
Meeting In The Middle Has Its Up/Down Sides
It may be tempting to close a deal negotiating to meet in the middle of asking prices and offered price.
Meeting in the middle can prove to be a good or a bad deal depending on if a seller has put up the asking price higher than what the property is worth or the buyer has given a very low-end offer.
Needless to say seller benefits in the former case with a higher asking price whilst the buyer benefits in the latter case with a low-end offer.
So never try to offer a meeting in the middle unless you have a complete understanding of what property is worth in its current state as compared to the market price for a done up property.
The other way of looking at it, if you as a buyer have the 3 stage offer defined in your calculations and if the meeting in the middle offer price falls within the 3 stage offer price range, you are in for the deal.
Always Retarget Your Offers
Over 1,047,490 homes were sold last year in 2020 as per official research, of which about 30% roughly have fallen through.
That suggests that one in three properties have come back to the market after an offer price has been accepted for one or the other reason.
If you now see the importance of tracking back on rejected offers from your list, it’s fair to say money is in the chase ups of rejected offers.
From a personal point of view, at Limitless Monks, we have a system where the chase up on rejected offers happens at least for 3 months or until the property is sold, whichever is earlier.
The List Of Negotiation Points
As a quick note, this point is being written solely from an investor or buyers point of view.
Following are some of the negotiation points that one can come across whilst giving offers to play with their offer prices and possible reductions within reason.
- Cash purchase and/or proof of affordability
- Sold comparables if the asking price is higher
- Quicker and/or track record of guaranteed purchases
- Survey report findings down valuing the property
- Property in a chain / Delayed completion
- Length of time property has been on the market
- Amount of work required to get the property back to health and safety standards
- Offers fell through earlier
- Leasehold is sure a thing specifically for flats
- And more…You get the picture….