Make an Offer Anyway
If you go to see the house, make an offer. No matter what. (If they did not have enough equity, you shouldn't have gone to see it in the first place.)
First, have you joined our private FlippingJunkie facebook group? Come network with us!
My mentor always insisted that I make offers on properties even if I have no desire whatsoever to own them. And believe me, this happens often. We see properties that have horrible layouts, extensive damage, trashy neighbors, toxic smells, strange owners, ferocious tenants, funky add-ons, non-existent roofs, junk piled so high that a hoarder would be disgusted, animal damage that seems impossible, and...well you get the idea.
No matter how disgusted I am with a house, I always make an offer. The offer is usually quite ridiculous even for my standards. :) Sometimes, my fingers are even crossed behind my back hoping that they won't take it even when I am offering $1,000 for a house. That's exactly what was offered for a house I saw about 5 years ago. The owner's father had decided one day that he was going to improve his home. The idea was one that I'd never seen or thought of, and for good reason! This one defies all logic. What was going to be done was a foundation conversion. The house was on pier and beam (house was sitting on cedar posts). Obviously, slab foundations are more desirable, so our homeowner figured that he would simply turn his into one...
Now you might wonder, how could he do that. Did he slide steel I-beams under the house and lift it so that a slab could be poured? Did he pour a slab next to it and then move the house onto it? No, no, no. That would have been too difficult. Instead, the idea was very creative. He cut holes in the floor and poured concrete directly under the house!!! No rebar, no preparations, nothing. I'm not sure if the house was leaning before or after the new 'slab' was poured.
Once the concrete cured, the flooring was removed because it wasn't necessary anymore. I'm not sure how this was done. The new 'slab' was probably over 10 years old by the time I was asked to make an offer on the house and there were 3 inch wide open cracks running through it. This place was horrible. My offer was based on what I could sell the land for after demolishing the house.
Even though I ran the risk of seriously offending the owner, I still made the offer. If I'd taken the time to go over and take a look at the house, I was at least going to make an offer on it. You just never know. They may be happy to take it. Most of the time they are not offended, as the state of the house is very obvious to everyone.
They didn't take the offer and I was actually glad that they didn't. If they'd taken it, I would have simply wholesaled the house which is the idea behind this blog post. If you don't like a property, you can make a super low offer that will allow you to easily wholesale it and make a profit without ever having to take ownership.
This is exactly how it worked out for a guy who was going to jail soon and needed to get rid of a house. The house looked to be an old storefront in the middle of a bad neighborhood. The interior was set up as a house. There were large cracks through the foundation on this one as well. The difference was that this one at least appeared to be relatively structurally sound.
The owner was going to jail soon (didn't ask what for) and was covered in tattoos. He actually appeared to be under some sort of influence. I was being cautious. It turned out that the city wanted to tear the place down and that there would be a hearing to decide it's fate soon.
I didn't like the cracks in the slab. I didn't like the seller (which didn't really matter). I didn't like the fact that the city had its sights on the place and wanted to demolish it. There just wasn't much to like....except the price. The guy had told me he would be willing to sell for $7k over the phone. Who would pass up looking at that one?
My problem was that, even given the low asking price, I was too busy thinking about all of the negative aspects of the place and the transaction involved. It took a call to my dad to clear my thoughts and to hear him tell me to just offer even lower to where it was a price that another investor would not be able to refuse. Wow, how come I didn't consider that? I guess I was just too busy thinking about how bad the place was. You truly live and learn.
So, what to offer? I ended up offering $1,500 and he actually countered at $3,500! We agreed on splitting the difference at $2,500. :) Now it was time to draw up the purchase and sale agreement. Only, he stopped me from going to my car to get it because he had decided to wait until this very moment to tell me that the house was not in his name.
IT WAS STILL IN HIS FATHER'S NAME!
He casually informed me that I would have to go to his father's house and tell him how much we had agreed upon. Talk about getting out of my comfort zone! AND HE WASN'T GOING TO COME WITH ME. HE WOULD NOT BE THERE.
I had to summon a lot of courage to head over to his father's house (across town nonetheless). With my hands sweating like crazy and my nerves near being shot, I laid out the terms that we had agreed upon. The father never said a single word and just calmly signed the contract.
The reward quickly came when I assigned the contract for a $5,000 profit to the first investor I told about it. Pretty good for selling a contract.
The take away is this: No matter how much your brain and heart tells you that you do not want to even make an offer on a property, you must always summon the courage to go ahead and make an offer that will allow you to, in turn, sell it at a price that another investor would be hard pressed to refuse. Chances are that your competition is not very likely to even make an offer. You already don't care whether you buy it or not. So go ahead, make the offer.