He does not trust easy. Cash Buyers have a bad reputation. I know it, you know it, we all know it. But what if you are one of honest intentions? How could a deal look like?
We are glad you asked. The following is a true story and comes from our friends at We Buy Houses In Connecticut. In order to do business a real estate investor needs to have a continuous flow of leads as we all know. One such leads came from a direct mailer. Someone's father passed away and left a small yet cute house to his son and daughter, who we shall call Jack and Jill. Jack is a hardworking and honest person, but is cautious. He does not trust easily. We have always been a very open, transparent and genuine company. We always try give our maximum offers. Doing this has so many benefits. First the sellers will be happy and we have a good chance for referrals. Second, more offers get accepted. Sure less money per deal is made but when you get a higher acceptance rate, it is absolutely worth it. Our deals are structured as follows. We do a walkthrough and try to determine all the repairs needed, if any. And we simply give our maximum allowable offer based on those repairs. Our maximum allowable offer simply means the offer we can make where we will be able to get our minimum allowable profit. That amount keeps us operating and allows us a marketing budget to find our next deal. Then we have an inspection period where we will dig deeper into the condition of the house and more accurately determine whether there are any hidden issues a simple walkthrough did not reveal. If any issues, and they are significant, we will subtract the repairs to that offer, lowering the offer accordingly. The benefit doing it this way is that the seller at all times is offered the maximum allowable offer. Any issues that come up will be presented to the homeowner and contractor bids will be presented to the homeowner so they can see all the numbers are legit. What investors usually do, is they give lowball offers simply assuming everything is wrong with the house. But if it appears that there is not that much repairs needed they do not up their offer to reflect that. That is the difference. We presented the homeowner with an offer. They were very happy with the offer but could not immediately sign the contract because both Jack and Jill needed to sign the contract and Jill was out of state. Jill kept extending the signature till 2 months later. This has a significant impact as the later towards winter we move to, the harder it is to resell the house, get contractors scheduled and even get an inspection in. It didn't seem realistic to have an inspector come in before the contract due date so we just decided to proceed. Weeks went by and dealings with contractors were ongoing. 6 contractors came by and 8 agents gave their versions of the ARV. Then one contractor found a crack in the basement wall. That was the turning point for us. The floors needed to be replaced but we were going to absorb the cost, the mechanicals as well... but the crack. No. We had to lower our offer. Jack was not very happy. He was upset actually, and immediately threatened our integrity and our honesty. No matter what we said and explained how this is simply the way it is and it is not our fault for the crack being there and would he feel happy if we were sorry for discovering it? So what happened? Is this a flaw in our business model? Sadly there is. Having been so upfront and so giving, can backfire. People only hear and remember what they want to hear. It is human nature. All Jack and Jill remembered and acknowledged is the high offer we gave. That was a standard number for them. They already counted on that number. It does not matter how much one emphasizes the contingencies. It only becomes an issue when suddenly they do not get what they want. This business is tricky. Even trickier when you are a very honest entity. But in order to survive the test of time, you have to be honest!
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