How to Beat Other Offers Without Bidding More (Rookie Reply)

0:00Ashley Kehr:If you think the highest offer always wins, think again. Today, we're breaking down the creative strategies rookie investors are using to get their offers accepted without overpaying.

0:11Tony J. Robinson:Plus, we'll walk you through exactly what to do when your tenant stops paying rent and you're staring down your very first eviction.

0:19Ashley Kehr:And if you've ever wondered whether your 9-to-5 job is setting you up for real estate success or maybe it's secretly holding you back, we've got some honest advice you won't want to miss.

0:30Tony J. Robinson:These are three rookie situations we see all the time, and by the end of this episode, you'll know exactly how to handle them just like a pro.

0:42Ashley Kehr:This is the Real Estate Rookie Podcast, and I'm Ashley Kerr.

0:45Tony J. Robinson:And I'm Tony J. Robinson, and with that, let's get into our first question for today. So question number one. The question says, what are the different types of offers you can make on a property beyond just offering at or below asking price? I want to be more creative and competitive with my offers. What strategies do experienced investors use to structure offers creatively? Great question. And I think a lot of rookies should do just kind of focus on price as the only part of their offer. But maybe let's start by breaking down what are all the different elements that go into an offer. And I think for rookies that are curious, like if you ask your agent for a sample purchase and sale agreement, that's like all the different things you have to fill out as you're going through.

1:33Tony J. Robinson:So just off the top of my head and, you know, jump in here as needed. But obviously you have your purchase price. That's one big piece that a lot of folks are going to focus on. The second thing you have is your closing date. to how quickly can you close. Standard purchase and sale agreement is going to default in most places, I think to 30 days. If you're in New York, I don't know, maybe it's like six months because it takes forever for a time to close, but typically 30 days. So you have your time to close. Then you have all of your contingencies. And this is where you can actually make your offer a little bit more competitive.

2:11Tony J. Robinson:So I think purchase price, time to close, those two are a little bit more straightforward. Let's talk about maybe like time to close first. If a seller has an option between getting paid tomorrow or getting paid in 30 days, most sellers are going to want to accept the offer that pays them tomorrow. So if you can increase the speed at which you're closing, then you have the ability to maybe have a slightly stronger offer. I think the challenge though is that for a lot of folks who are using traditional financing is that typically you're going to need about 30 days for the bank to work through all the things they need to work through to get you your lending.

2:46Tony J. Robinson:But if you're using your own cash, if you're using hard money, if you're using private money, you have the ability to close a little bit sooner. I just submitted three offers yesterday for some flips in OKC, and I put a 14-day closing window on all of them and even told my agent I can probably get down to like seven or 10 days if really needed. And that hopefully positions my offers a little bit stronger than the person who's going to close in 30 or 45 days.

3:11Ashley Kehr:Yeah. And I think a big factor of that, like you said, is the type of financing or how you're purchasing the property. Because also too, if you're using a FHA loan or maybe a VA loan, there's more hoops to jump through. So like I've heard a lot of times when someone receives multiple offers, they're most likely like for best case, take the cash. Okay. Cause then there's no bank hoops to jump through. The next would be conventional lending. And then the next would be maybe the FHA or the VA loan because they have those inspection requirements that can scare sellers, you know, thinking, well, you know, my house isn't in perfect condition and I don't want to go under contract.

3:54And then it fall through because it didn't have a handrail or something

3:58Ashley Kehr:and stuff. So that can definitely play a factor as to what your loan is. But sometimes you don't have the control over that. And that can't really be a negotiating tactic because the VA loan is the best product for you and that's what you're going to use. But I would challenge you to find out what other lending options are available to you. So if you could say, I'm going to do a conventional loan, and this is actually what my sister did. She had a full intention of doing an FHA loan and she actually got a conventional loan at 5%. So instead of the 3.5 % down, She did 5 % down, which wasn't a huge difference for the purchase price she was buying at.

4:41Ashley Kehr:And she was able to go in with a conventional loan offer instead of an FHA loan, which was more appealing to the seller of the property.

4:49Tony J. Robinson:Yeah. And I think you said something that's super important. It's like, what's more appealing to the seller? Because timeline, contingencies, all those things are important. But sometimes just asking or trying to ask, at least, because some agents may or may not share this about their seller. but just trying to understand like, Hey, what is their motivation? What's most important to them? Like, why are they looking to sell this property? Why are they looking to get out of it? And knowing that can sometimes help you structure your deal in the best way possible. Like we've given the example before, and we've heard it from multiple investors, like, uh, helping the, the, the current seller move out of their property.

5:23Tony J. Robinson:You know, like if you pay for their moving truck to get to the next place, maybe that that's what they need.

5:27Ashley Kehr:One other thing too, with that piece of it is making the offer and whatever you decide on the financing is, is there wiggle room in your purchase price? So I can't stand this, but escalation clauses. And sometimes agents will put right in the listing, no escalation clauses. But this is when you make an offer and say, my offer is$200 ,000, but I will go up to$250 ,000, but no more than$5 ,000 over the highest offer. So what that does is you're offering$200 ,000, but if they get another offer at, say,$220 ,000, your new offer automatically goes to$225 ,000. But if the other person offered$250 ,000, that was your max and the other person's going to get it.

6:18Ashley Kehr:So I don't like escalation clauses, but that has been a negotiation tactic for people by putting in those escalation clauses where they're not putting in that full offer of$250, hoping they get it for a better deal closer to the$200. The next thing that I heard of, which is this was completely new to me. So this was my sister again. She put in an offer on a house and there was another offer. She ended up getting the house, but she found out later on what the other offers were from the seller of the property. And one of them was that they were willing to pay like 10 % above the appraised value.

7:01Ashley Kehr:So no matter what the house appraised for, they were going to pay 10 % over the appraised value or their offer. Like let's say they offered$400 ,000 or 10 % of the appraised value. So if the property appraised for over$400 ,000, they would pay 10 % more. But if it appraised for the$400 ,000 or less, they would just stick with their regular purchase price. So I thought that was like super interesting too. So like if you think your house is going to appraise for more, then yeah, you might want to take that offer. But if in this case, like the offers were already like$75 ,000 over asking and stuff.

7:44Ashley Kehr:So like the seller was already like surprised at how the offers were. They didn't think that it would appraise for much more, I guess. I don't know, but they didn't take that offer. But I thought that was really curious. That was the first time I'd ever heard of anyone doing that method of negotiating.

8:00Tony J. Robinson:You touched on contingencies, which I guess is like the last kind of lever that you have to pull as a potential buyer. But contingencies are basically parts of the contract that say, I have the right to back out as a buyer if X happens or if X doesn't happen. It's your way of backing out of the deal. And some common contingencies that we see are financing contingencies. Vast majority of home purchases in the United States are done with some sort of financing. And buyers typically want to make sure that if for whatever reason they can't actually get their lending, if they can't actually get final approval on their loan, they have the ability to back out of that purchase.

8:39Tony J. Robinson:So financing contingency is one of them. If you're coming with private money or cash or hard money, the risk of financing contingency is actually being an issue kind of goes away. And for me, typically, when I'm buying a deal, I don't put a financing contingency because I'm usually working with private money and I've got a high degree of confidence. We're going to be able to sort that out. So financing contingency is one. Ashley, she just talked about the appraisal contingency. So you might be able to get approved for your financing, but if the bank appraises it at$50 ,000 less than your purchase price, well, that means you now as the buyer have to come out of pocket$50 ,000.

9:18Tony J. Robinson:And if you're willing to do that, great. If you're not, then you put in some sort of appraisal contingency that says, I'm only willing to go up to the appraised value. So that's another one that you can either add or remove. Um, another common one is the inspection contingency. And I think that's one that for, for most rookies, you probably want to keep in. Um, because if, you know, say you do your inspection and you find out that there's something wrong with the, you know, the, the main line going out to the, like the city sewer, it's a big issue, you know, and like, you don't want to be on the hook for, for maybe fixing that.

9:49Tony J. Robinson:So the ability to say like, Hey, if something comes up during my inspection period, during my, my due diligence period, um, I have the right to back out as well, or at least to renegotiate. And then maybe some other ones that aren't as common, and Ashley, I'm not sure if you have any to add on to that, but it could be like home insurance. I'm thinking about where I'm at in California. You're trying to get homeowners insurance with fires. It's a little bit tough. Places like Louisiana or Florida, other types of insurance could be tough. So making sure you can actually insure the property could be one.

10:24Tony J. Robinson:And then this probably doesn't happen as much like in real estate transactions, but say that you're trying to buy a property, but it's contingent on you selling your existing house. You know, like, this house needs to close in order for me to get the down payment to buy this house hack. That could be another one. So those are all the different contingencies I think we typically see.

10:40Ashley Kehr:Another one that I would add is like the interest rate too, is like the interest rate cannot exceed 7 % too. That one I see is like very common in a lot of deals that I've done is that the interest straight of whatever the person's pre-approval is at, it cannot exceed a certain amount because or else they may not qualify for that loan anymore because their payment has gone up and it's not going to meet their debt to income anymore, whatever that may be. So that's also a part of like the financing contingency. So I think like my favorite actual negotiating technique is to give multiple offers. So design two, three different offers where maybe one does have a contingency, but you're paying a little bit more.

11:25Ashley Kehr:Maybe one is an all cash offer, but you're paying less. Maybe one is seller financing and you get really creative with a down payment. And then maybe it's just seller financed over one year with a balloon payment. That gives you time to fix up the property, go and refinance and get a loan from the bank. So that is what I really like to use is of multiple offers with different types of contingencies, different ways of paying for the property. And then that lets the seller actually decide, okay, which one of these will work for me? All right.

12:00Tony J. Robinson:We have to take a very short break, but when we come back, we're going to go over an eviction that's going on right in Ashley's backyard. Summer bookings sound great until someone slips by the pool, gets hurt on your dock, or damages your property during a long holiday weekend. A lot of short-term rental investors don't realize their standard policy may leave gaps when it comes to short-term rental activity. That's why investors use Steadily. They offer landlord insurance built for real estate investors, including short-term rentals. And if you're a BiggerPockets Pro member, you'll also get 5 % off your landlord insurance premiums.

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14:33Tony J. Robinson:The AI Weekly Recap points out spending spikes and upcoming expenses before they become a problem. So it feels like having a financial advisor right in my pocket. Write your own money story with Monarch. Use code ROOKIE at Monarch.com to get your first year of Monarch core half off at just $50. That's 50 % off of your first year at Monarch.com with code ROOKIE. All right, guys, we are back from our short break and we've got a question. from Matthew, a fellow investor in Ashley's Buffalo, New York. And Matt's question is, I'm going through my first eviction in Buffalo, New York. I've sent the five-day late notice and the 14-day demand letter.

15:11Tony J. Robinson:If rent is still unpaid after the 14 days, is my next step filing the notice of petition with the court? I prefer not to use a lawyer because I want to learn the process myself, Matthew. And Ashley, this reminds me of your very first eviction where you also wanted to learn the process yourself. And for maybe the rookies who haven't heard that story yet, how successful was Ashley, attorney at law in her first eviction process?

15:37Ashley Kehr:Well, I know that the part you're referencing is the part where I cried about this. And I actually, this was a question I found on Facebook and I actually responded to it. And I did leave out the part where I actually cried. I did say that the eviction got thrown out, but I I didn't humiliate myself on Facebook. I chose to leave that part out. But I did have tears welling in my eyes as the judge is telling me, you did this completely wrong. And so I actually had my first two evictions at the same time. And I was working for another investor. And he, to be fair, he was the one that told me, ah, you could do this.

16:16Ashley Kehr:You can do this on your own. You'll figure it out. It shouldn't be that hard and stuff. And after that time, we never, ever had me do it again on my own. And it was always with an attorney. And the process is so much easier. But for this example, I recommended using an attorney because they will do the whole process for you. And it's not as expensive as you think. On average, I spend$1 ,100 on attorney fees for an eviction. And that's if the eviction goes the full route. Like we have to have the marshals come and everything like that. So to me, that is worth it because that is oftentimes one month's rent.

16:55Ashley Kehr:If you go through this process and you make a mistake, you are having them stay for another three months while you start this process all over again to evict them. So I think that as an investor, you need to be prepared with reserves and having money to spend for things like this that happen. and you will end up hopefully saving money in the long run because you hired the attorney to do it right the first time. And in his question, he said, because he wants to learn the ins and outs of being a real estate investor. So Tony, that's like you saying that you want to learn how to change the toilet to be a real estate investor.

17:41Ashley Kehr:You are a very successful real estate investor and you haven't gone and learned how to install a toilet, right? No, no, I have not. So it's like you don't need to learn everything to be a real estate investor. And you can still know the process by seeing what the attorney is doing following it. I mean, they document it for you. You get copies of everything. You can go to eviction court. But in New York State, it is like a long process. Like you have to send a couple of different notices. You have to make sure everything is like in a certain timeline. They have to be served by somebody. You have to have an affidavit sign that this person served them.

18:23Ashley Kehr:And like, that's what I like about the attorney is that that's all part of the package for you. They, they handle all of that for you. And I think it is well worth getting an attorney to do the eviction for you than spending your time. Your time can be better spent. Okay. What do I need to do? Once this person's moved out, I need to get this. property rent ready right away so that I'm not losing more money? Do you need to get a contractor lined up? Do you already know it's destroyed? Do you need to start getting your listing ready? Things like that. So I think there's a more valuable use of your time than running around, sending certified mail, finding a process server to serve them, things like that.

19:05Tony J. Robinson:Yeah. You make a super valid point, Ashley, that being an investor means investing, right? It It doesn't mean turning yourself into an attorney or a trades person. It's, hey, can I find the right person to execute on these different pieces? So couldn't agree more.

19:22Ashley Kehr:Tony, have you ever evicted someone?

19:24Tony J. Robinson:No, no, I never have. The only long-term rentals we ever had, I had property managers in place. And luckily, we had mostly decent tenants and no issues at all. I have, though, had to call the sheriff's on a few short-term rental guests to get them out because they wouldn't leave.