Best Type Of Real Estate Inventory For Negotiating Deals

My favorite way to negotiate properties is dealing with aged inventory.

This is a much less stressful way of buying properties.  Let's think about this for a moment.  It is kind of like the laid-back Warren Buffet type of investing versus the stressed-out day trader.

If you need your properties to age before you buy them, then there is no hurry to do anything.  Properties come on the market, and you go look at them when you get around to it.  You don't worry about hopping in the car and being the first investor on the scene.

You don't sit up until 2 a.m. hitting refresh on your email to see if any of your Realtors have sent you the new listings for the day.  You just casually go about your life, buying properties on your terms whenever it pleases you.

Best Type of Real Estate Inventory  For Deals

Back on Market Homes

I don't worry about looking at the property listings every day because I know that it is not where I find my best deals.  My favorite property report?  The “back on the market” report.  Specifically, houses that have been under contract with other buyers and not closed.

I would estimate that 75% of the homes I have purchased over the past two years were under contract with someone else before I purchased them.  Doesn't that bring you relief?  You don't have to be the first person to see a home and make an offer.  As a matter of fact, you can let someone else see the house first and make an offer.

All the other people out looking at houses are your allies, not your competitors.  They are helping set you up for success.  Now, I admit, you will lose some houses you want because an owner occupant or another investor pays too much for the house, and they do close.

But you will be surprised when you start looking at the pending houses by how many of them do not close.  You will be even more surprised by how little the sellers will take to get rid of these problem properties that will seemingly never go away.

I can't tell you how many times I have put in an offer on a property that has not been accepted, only to have the property fall out of contract later on, and I end up purchasing it for less than my original offer.

By the way, I always go back with a lesser purchase price on the second go-around!

If there are multiple offers, I will go with my highest and best, but if I am the only one bidding on the property, which is most likely the case since so few people actually pay attention to the pending properties, I go in and try to get it for even less money now that I know everybody anticipated it being sold.  This is the perfect way to purchase properties!

Just think about it!  You get to leisurely look at properties on your own terms, knowing that if your offer doesn’t get accepted now, you can possibly get another chance.  You don't worry if other people are making offers on the same property.

You just do your analysis, put your number on the offer, and submit to the seller.  You don't get up every morning and rush to the computer to check to see which properties were listed that day, hoping to beat all the other investors doing the same thing.

You simply check to see if your target properties that have gone pending are closed once a week or so and when you see one pop back out on the market, you make an offer.  More than likely, you are the only person that noticed this property at all.

Here are a few suggestions when dealing with properties that have been under contract.

• One, the longer the property was under contract, the lower your offer can be.  If the property was only off the market for 7 days, then you are probably not going to be able to steal it for 30% of asking price, but if the property has been under contract for 45 days or more and not closed, then I think you have a good chance of getting it for 60% or so off the asking price with a solid contract and a 14 day cash close.

• This brings me to another point, the best way to make the most profit off these deals is to make solid offers with quick cash closings.  If you try to go at the seller with a 30 day close contingent on financing, a home inspection and on and on, then don't be surprised if you lose out to another investor who offers less money but shorter terms. Typically, a seller in this position is not looking for the most money, but the surer terms.  If he can get his money now, he will take $5k or $10k less rather than having the risk on property for 30 or 45 days.

On the Market Long Homes

In addition to pending properties that do not close, you can also get great deals from aged inventory that has not been under contract before.  If it has just been priced too high or has some other glaring problem that you can fix, make them a low offer as long as you can fix the problem.

These sellers are usually easy to work with on terms also.  If you have a seller who has been trying to sell the property for 180+ days with no offers, a weak offer with conditions and an extended close will be a welcome change.

An offer with conditions and a 60 day close will at least give him hope in getting the property closed.  These can be great targets on your first properties when you need an out if you can't get your financing lined up, or if you need more time to get your investors excited about a specific property.