This is the fourth post in our series on how to flip houses. If you missed the previous three posts here are the links.
Part One: Secrets To Flipping Houses
Part Two: The Biggest House Flipping Mistake
Part Three: How To Determine The Real Value Of A Property
With that said, how do I wisely make an offer on a house. Now, every offer you write in real estate or any other business, typically has four things. Now, it’s very intimidating to look at a legal contract, like an offer. In your local area you probably have a four-page or a six-page or a ten-page offer contract. It could be quite intimidating, all the legal jargon, homestead rights, all these things. You’ve got to understand something, the offer paperwork in your market is probably four pages. Let’s just say it’s a four-page contract. Now, in reality, it’s really a one and a half page contract because it’s full of a bunch of fluff. The fluff, the two and a half pages of fluff is mostly protecting realtor commission. Now, if you actually take a basic contract, you cut out all the garbage, there’s about a one and half page contract right there.
I want you to just eliminate some of these fears about making an offer wisely. Four things you need typically, number one is there’s going to be a price. The offer, the house is going to have a price and that price is whatever you determine. Second thing your offer is going to have is a deposit. Now, some of you guys might laugh at this but most homes that I buy I don’t pay ever over a $1,000 deposit. Some homes I’ll even get away with a $1 deposit or a $10 deposit. Some of you guys might say, “Can’t do that here. Can’t do that here.” Guess what? When I started in real estate in Winnipeg people said, “Can’t do that here.” You can do a $1 deposit anywhere, $10, $1,000 deposit. The person who typically is going to kibosh or try to stop you from doing a $1 deposit is again, the realtor because a realtor is trying to protect their commission. If you don’t close, they still want to get paid commission. That’s why people typically want bigger deposits on offers but most motivated sellers will take a $1,000, $1, or $10 deposit.
The next thing you need to have is a close date. This is the date that the offer must be closed. It must be paid for in full. Typically, most offers that I do, I say 30 days or sooner. Thirty days or sooner for me to get this offer approved. After the close date then we’ve got the last thing is conditions. Now, I like to have a due diligence period so I’ll say subject to partners approval. This is a very, very vague clause. When you’re buying you want to be vague. When you’re selling you want it to be very specific. These four things is what every offer I ever write has. I like to use this over and over and over again.
Now, here’s the beauty of using this system. You have a price. We all understand that. You have a deposit. We understand that, typically a low deposit. The close date, 30 days or sooner by mutual agreement, most deals you can probably close in 30 days or move the date closer. The last one is the conditions. Now, the great thing about the condition subject to partners approval, it’s a very non-threatening clause but you can back out for any reason. Sometimes with homes, I might write an offer right away and then before I take my condition off, I might renegotiate. For a lot of real estate deals guys, the negotiation starts as soon as you have a signature on the offer. That is where the negotiation truly starts, not before you buy the property or before you write the offer. At the point of the offer with conditions, that’s where the negotiation really happens.
I hope that you guys have taken some information from here. Understand a little bit more about making an offer on a house wisely. You need to have four major things in any offer and that the real estate contracts you mostly see in your market are inflated to favor Realtors and have nothing to do with you making money. Now, I’m Stefan Aarnio. Guys, if you enjoyed this blog post check out my book, “Self Made” at selfmadeconfessions.com. If you have any other burning real estate investing questions tat you would like answered, leave it as a comment below. As always, like and share and tomorrow I will teach you how you can finally quit your day job.