Avoid These Costly Real Estate Offer Mistakes
2024 brought a wave of bizarre, unrealistic real estate offers—lowball bids, owner financing requests, and wholesale deals that just didn’t make sense. Investors, particularly newer ones, seem to be throwing offers at the wall, hoping something sticks. But in a strong rental market like Memphis, where sellers have cash-flowing properties, these tactics rarely work. Why would an investor sell a property generating $1,400 a month for half its value or agree to finance a deal when they’re looking for liquidity? In this episode, we break down why these offers fail, how wholesalers impact the market, and what it takes to write a competitive, winning deal. If you’re looking to invest in Memphis, understanding market dynamics is key. We discuss why owner financing is almost never an option, how wholesalers operate, and the strategies experienced investors use to secure the best deals. Plus, we dive into creative offer techniques, including escalation clauses, proper earnest money deposits, and negotiation tactics that actually work in competitive markets.
Lowball offers and unrealistic financing terms have become a growing trend, particularly among newer investors who are trying to break into the market with little to no capital. Many assume that sellers are desperate or willing to take on risky financial arrangements, but in Memphis, that’s rarely the case. The reality is that most properties here generate strong rental income, and sellers have no incentive to carry financing when they could just continue to collect rent. Offering $90,000 for a fully rehabbed property worth $140,000 is not a negotiation tactic—it’s a waste of time. The same applies to wholesalers who overinflate property values without truly understanding the market. Many are out-of-state, never stepping foot inside the properties they claim only need minor repairs. In reality, investors arrive to find a home needing $30,000 in work when they were told it needed $10,000. While wholesaling can occasionally produce great deals, investors must be prepared to sift through a lot of bad ones.
Writing a strong offer requires understanding what a seller truly wants—certainty, speed, and fair market value. Investors who offer full price with smart contingencies, shorter closing windows, and a strong earnest money deposit position themselves ahead of the competition. Using escalation clauses, avoiding unnecessary contingencies, and working with experienced local agents can mean the difference between getting the deal or wasting time on another rejection. With Memphis set to become even more competitive in 2025, investors must adapt to proven offer strategies that actually get accepted.
In this Avoid These Costly Real Estate Offer Mistakes episode:
- Lowball Offers Don’t Work in Memphis – Sellers in Memphis aren’t desperate, and properties generate consistent rental income. Offering 50–60% of the asking price with owner financing terms is a losing strategy. Instead, investors should focus on fair market deals, making competitive offers backed by real numbers.
- Why Most Wholesaler Deals Aren’t Worth It – Out-of-state wholesalers flood the market with misleading deals, inflating values and underestimating repair costs. While there are occasional gems, investors must learn to separate good opportunities from overpriced, misrepresented properties.
- How to Write a Winning Offer – Full-price offers with smart contingencies have a much higher success rate. Strategies like escalation clauses, waiving unnecessary inspections, and offering competitive earnest money deposits make your offer stand out in a crowded market.
- The Importance of Earnest Money Deposits – A strong earnest money deposit shows commitment. Offering only $500 on a $150,000 deal signals uncertainty. A serious investor should put down at least 1% of the purchase price.
- Why Memphis Market Conditions Favor Sellers – With strong rental demand and rising property values, Memphis remains an attractive market for investors. However, smart investors understand that seller financing and extreme discounts are unlikely in a city where cash flow drives transactions.
In a market as competitive as Memphis, understanding what makes a strong offer is crucial. Investors who rely on outdated tactics like lowballing, seller financing, or wholesale markups will continue to struggle. Sellers here don’t need to accept bad deals—they have income-producing properties and plenty of buyers willing to pay market value. Instead of throwing out unrealistic numbers and hoping for the best, smart investors take the time to craft offers that stand out. Using escalation clauses, ensuring a solid earnest money deposit, and making strategic inspection contingencies are key ways to gain a competitive edge. Wholesalers remain a mixed bag—some provide legitimate deals, while others misrepresent properties, leaving investors with unexpected repair costs. By working with local experts, understanding seller motivations, and avoiding common offer pitfalls, investors can secure high-quality deals in Memphis without wasting time on strategies that don’t work. Want to invest wisely? Call 901-692-7401, and let’s build a strong real estate portfolio together.
Avoid These Costly Real Estate Offer Mistakes Transcript
Brett
0:01:28 – I’m going to say 2024, this last year, probably the first time in a long time that I got bizarre, strange, weird offers that normally I wouldn’t get. And normally would I even encourage someone to write. And I will say they both, a lot of them came from young guys, you know, who called me up saying I’m a real estate investor and I buy and I do this and I do that. All right, well, so what do you want to do? Well, I’m going to send you an offer on this house. Okay. House is listed for $140,000. They sent me an offer. Seventy thousand. Ninety thousand dollars with five thousand down and a 30-year owner finance mortgage for the balance. I’m always nice and I just say, look, this house is completely rehabbed. Just go with it, go with it, Nick, go with it. I’m nice and say, listen, the house is completely rehabbed with a tenant paying $1,400 a month. The seller is not going to sell this house for $90,000. Number two, he’s not going to carry the note for you. He’s selling it for a reason. He’s already making money on it every month, so why would he carry a note and make less money because you’re making more money on it. Number two, he’s obviously selling it to move the money somewhere else, so he needs the cash. I try to be diplomatic about it. Those are the kind of idiotic offers I got this year. I apologize to any of you that are listening that maybe I sent me an offer. I’m not calling you an idiot, but come on. I mean, you got to… We’re going to talk about why that is a dumb way to approach a sale, especially in the Memphis market. Well, I think a lot of that is just people simply throwing enough stuff on the wall hoping that something’s going to stick. I got a handful of those too that were 50% of the list price, trying to get the owner to carry the note, and I had a lot of those same conversations. Probably a little more diplomatic than you did, but nonetheless, I got a bunch of that as well. Well, what are you investing? Nothing. You’re asking everyone else to carry the note for you so you can make the money and I don’t understand why that is. Jeff, what about you?
Jeff
0:03:19 – I’m on the opposite side of things. I’ll go look at a house for $90,000 that needs $50,000 worth of work and they want $100,000 for it. So I’m the lowball offer guy. It needs $50,000 worth of work, they want $100,000 for it, I’ll offer them $50,000 for it. And they look at me like I’m an idiot. Now, I realize your low ball offers are getting made on rehab properties that are turnkey, but these properties I’m looking at…
Brett
0:03:48 – Rehab properties are a different ball game. That’s open to whatever you want to throw at it, you throw at it. I agree with that because everybody’s got their different rehab numbers and they have their different number they can pay for it. What affects that though is buying hold or buying flip. If you’re buying a flip, you got to buy it for low, less. If you’re buying a hold, you can pay a little more for it because as long as you’re all in at that 1% mark.
Jeff
0:04:09 – But you still can’t pay retail for it. When you explain to the old man, look, this house is worth $120,000 top end. That’s all you’re ever going to get for it. You got two choices. You can pull $70,000 cash out of your bank and you can go through the headache of flipping it, but you’re still only gonna net 70,000.
Brett
0:04:29 – Right.
Jeff
0:04:29 – Or let me do it for you, just sell it to me for 70 and we’re done.
Brett
0:04:33 – Exactly.
Nick
0:04:33 – Well, and another thing that I get a lot of is wholesalers with throwing me numbers and spec sheets of houses with, oh, this house needs $10,000 worth of work, and then when I go look at it, well, it needs 35 to 40,000. So you get a lot of these wholesalers that are not in the Memphis area, and they have no idea, they’ve never walked the property personally. Oh yeah, but to Brett’s point, I get those wholesaler calls, texts, emails every day now.
Jeff
0:04:59 – I don’t know how to get rid of them.
Brett
0:05:00 – Well, don’t get rid of them because I promise you, wholesalers, it’s kind of like diamond mining.
Jeff
0:05:06 – Oh yeah.
Brett
0:05:06 – You go through a ton of them and all of a sudden out of nowhere, this little precious thing just pops up and it works.
Jeff
0:05:11 – And I do, and I give them all the same opportunity. I explain to them how we operate. I explain to them, no, I’m not going to sell you this 4-2 for $165,000 that I can put a tenant in for $1,800 a month for $95,000. Well, what if I bought 10 of them? I’ll sell you 10 of them for $167,500 a piece. I mean, you just offered for me to lose money on one house. Why would I want to lose money on ten houses? Well, you’re making up for it in volume. No, that’s not how this works.
Brett
0:05:45 – That’s not how the game works. Yeah, and look, we’ve dealt, this year was easier. Marissa and I have a mutual client that Loballs offers, and we get, I mean, out of what, probably 40 or 50 we wrote. You got a couple, I got a couple, so we got four or five out of it.
Marissa
0:06:00 – In every blue moon, I will say for those that do want to lowball, you know, on the buyer side, every blue moon, you will be surprised. Something will stick.
Brett
0:06:10 – Yeah. It’s so much work.
Marissa
0:06:11 – But it’s a dime and a dozen. It’s so much work. It’s a dime and a dozen.
Brett
0:06:14 – Well, if you want to do that, what you’re going to end up with is pretty much an inexperienced agent who’s learning to do this, someone who’s willing to sit down and write 100 offers a month for you. I’m not, so.
Jeff
0:06:24 – I still don’t fully understand the motivation behind a wholesaler. I mean, I envision them sitting behind a desk somewhere just calling thousands of people a minute.
Marissa
0:06:37 – Very time consuming, I’m sure.
Jeff
0:06:38 – I mean, it must work. It must be. I mean, there’s a lot of successful wholesalers out there.
Marissa
0:06:42 – Well, if they’re calling thousands of people back to back to back, well, I mean, you’re
Jeff
0:06:46 – They’re getting deals.
Marissa
0:06:47 – odds maybe 10, you know, maybe 10 of them.
Jeff
0:06:49 – They’re getting deals and they’re making a living. I mean, it must work. I don’t have the patience to make…
Brett
0:06:54 – Giving a deal is like being a real estate agent. You don’t make crap until it closes, right? I know lots of wholesalers that have had a thousand houses in their inventory and they’ve probably lost 700 of them because they couldn’t close on time. Because they have a contract to close by a certain deadline. If you don’t close, then you lose the contract. And that’s why they’re pushing you and trying to make that money in the middle. The problem with a lot of wholesalers is they don’t understand the market, they don’t understand the property condition, and they want too much for the house. Well, and that’s the problem, too, because I’ve had some wholesalers that’ll call me back two weeks after they sent me one and say, okay, hey, I’ve now dropped the price $15,000.
Nick
0:07:29 – So either they renegotiated or they were trying to make a $25,000 spread.
Brett
0:07:32 – They were. A lot of them were trying to make $25,000, $30,000, and then all of a sudden they realize my contract is sparing a week. I’ll make five on it and just be done with it. So losing it.
Jeff
0:07:39 – Nick, my favorite one is when I get a call from a wholesaler in Montana that says, Jeff, you have got to go check this property out. And I fell for it hook, line, and sinker. I went and checked the property out. I got there, there was no house on the property. I called the wholesaler back and I said, dude, where’s the house? He says, it was sitting right there. The homeowner sent me a picture of it four months ago. I’m like, well, it’s not there anymore, brother. You’ve got a vacant lot that’s for sale for $75,000. I’ll give you three grand for it. Wholesale’s a good business for us, a good tool for us. It’s just a lot of extra work because you’ve got to go through a lot of garbage to find the right property for your client. And keep in mind, at the end of the day, I don’t represent the wholesaler, I represent my client. So when I look at a property, I’m negotiating on behalf of my buyer, not the wholesaler. And they tend to get away from that concept thinking, oh, I know Brett, I’ll work the deal out. No, at the end of the day, I’m obligated to my buyer. And I’m not going to let him pay 50 grand for a house that he’s got to put 50 grand in that’s worth $100,000. It just ain’t going to work.
Jeff
0:08:40 – But to your point earlier, you’re right. You can find a diamond in the rough. You can…
Brett
0:08:45 – I have. Ameisha’s has bought two of them.
Jeff
0:08:46 – Well, yeah. You can take a wholesaler and we can train that wholesaler. This is what we’re looking for.
Brett
0:08:52 – If you think that’s doable, I don’t know if that’s doable, because a lot of these guys have their own mindset and they’ve gone to seminars.
Jeff
0:08:58 – Have you done anything else with that David Goff guy?
Brett
0:09:00 – Yeah, we talked yesterday actually.
Jeff
0:09:02 – You know, he hit me up for Snowden, that was a pretty good deal. He’s manageable, he’s easy to work with.
Brett
0:09:08 – David’s different.
Jeff
0:09:09 – We’ve kind of trained him a little bit.
Brett
0:09:10 – David has integrity, if I can say that. So he doesn’t go just take on a property unless he knows there’s room in it for him and he can physically. I taught, I taught David how to understand the 1% rule in the investment game. Once he understood that it limited and changed how he went after properties. So he can evaluate in advance, say, well, there’s not enough room for me to flip and make this. And sometimes he’ll just send them to me directly. Say here, the buyer wants this for it. If you’ve got a buyer, let me know. And he doesn’t make anything on it, but he understands the investment game enough to know how to price these properly so that I can make money and my investor can get a good deal and everybody walks away happy.
Jeff
0:09:46 – But I think the reason why he understands it is because you kind of educated him on what we do.
Brett
0:09:50 – Yeah, we went through a lot. I worked with him on it. Well, let’s get into writing a good offer because listen, I believe this year we’re going to get back into a more competitive situation where we’re going to have more buyers than inventory. And you guys weren’t in the game in 2022, but it was absolutely ridiculous. I went back and looked at my transaction desk and I wrote over 700 offers that year. That’s how crazy it was. And when I go back and look at some of the ones, they were all at asking. And I was getting beat out left and right because people were paying over asking. Hedge fund groups are coming in throwing a thousand contracts out on day one and just scooping up everything and they’re all paying over asking, no inspection, cash. It was just insane. So during that process, Glenn and I started getting creative with our offers to be competitive with some of these bigger groups that are coming in. So let’s talk about some of the issues sellers have. And I want to say this to those listening who are considering investing in Memphis. I’m going to tell you why owner financing is never going to work here. Why selling a house 60 cents on the dollar is not going to work in Memphis. And there’s one simple reason. That owner and that seller has a property that is currently positively cash flowing. Why would he give it away? Why would he carry a note for you if it’s cash flowing? It makes no sense. I know in California and some of these other screwed up states, this idea that they’re using, owner finance and all that, probably works. Because you’ve got property values have gone from a million dollars to 600,000 and people are trying to sell their house, they owe more than they can pay off, so owner finance becomes an option, right? It’s a way for me to get out of the house. But at the same time, if that guy bails on you, you’re still stuck with that house and the debt and the condition it’s in. So owner financing is never gonna work in Memphis, period. If I’m wrong, I gave you my number, call me, I’d love to hear one scenario where you made it work here in Memphis. Because as a reasonable investor with a half a brain in my head, if I’m making $1,500 a month, putting $400 a month in my pocket on a house that’s appreciating, and I decide I want to sell it because it’s doing well, it’s a good asset to sell, and I’m going to move it, why would I carry a note for you for the next 30 years?
Marissa
0:11:59 – So to piggyback off of that, I had a buyer investor from another state so like you said they don’t really know the Memphis market and I’ve noticed looking through the MLS a lot of the remarks will say no creative financing like they’ll tell you up front my buyer was wanting to do the owner finance hey I’ll put this big lump sum down and I’ll just pay the owner every month and my thought process was like yours because I’m like well why would the owner want to still pay the note? That’s the point of them trying to sell it. If that’s the case, they might as well just put a tenant in there and have the tenant pay the note versus having another.
Brett
0:12:38 – Well they use a cashflow concept.
Marissa
0:12:39 – I don’t know.
Brett
0:12:40 – I don’t get cash every month from me, but then they got to pay the bank.
Marissa
0:12:43 – Like they still have to do that step.
Brett
0:12:44 – And you’re offering him less payment. You’re getting all the rent and you’re going to give him less money than he’s currently collecting and he’s still going to turn around and pay the note. I’m like, explain to me why that makes sense to anybody.
Jeff
0:12:56 – I’m with Marissa. If I’ve got a 3,200 square foot house with an $1,100 mortgage payment and I can rent it out for $2,200 a month, I’m going to put a tenant in it. Make a thousand bucks a month.
Marissa
0:13:07 – Right. Now, of course, every seller has different circumstances. You know, some are desperate to sell. Some may be moving or family issues or whatever the case is they don’t want to you know keep carrying the note pay it like just stick a tenant in there let the tenant pay it versus someone trying to buy it and you’re just paying the owner I mean because the owner’s not really getting nothing out of it at that point.
Richard
0:13:32 – One thing you did mention that you maybe should expand on Memphis is an entirely different market for people who don’t know what is Memphis and why is it different?
Brett
0:13:41 – That is a great question Dick. I appreciate that. I’m sorry, I’m just having fun today. Alright, let’s do, I agree, I appreciate that Richard, seriously. The reason why Memphis is not a market for this is because we have 760,000 of them over 300,000 of them rent. So what does that tell you? Well that’s a great place to buy rental property because there’s always a ton of renters there. Number two, you can still buy a rental property for a hundred grand. They rent for $1,300 a month so the cash flow is great, the appreciation is good. Because we have a hot rental market, values continue to grow every single year. So when you’re in a market like that, why would you even consider putting yourself in a position where you have a kid out of California who’s 26 years old who’s now responsible for paying a note to you for a balance of a hundred and ten thousand dollars at whatever Senate interest rate but you still got to pay your mortgage he takes over the property he lives in California tenant doesn’t pay for three months what is he gonna do he’s not paying you now what you got a foreclose on because you’re doing it you did a finance mortgage with him now you’re in a position where you’ve got a house that the tenant’s not paying, possibly the house is getting damaged, someone else who’s responsible to you in California with a mortgage who you now have to foreclose on which could take God knows how long. That’s not to mention if they don’t go and file in Shelby County with those documents, if they file those documents, then they would force a foreclosure. You couldn’t just kill the contract. I’m sure there’s some desperate investors, maybe some people get in some financial trouble. I had a couple of investors just who got in some trouble and I was able to bail them out through liquidating some of their assets for them. But owner finance was never on the table for them because they realized the dangers of that. Now I’m not saying if you’re coming into this market and you’re a new investor and you want to learn how to be in this game and become an investor, I’m not saying don’t throw stuff at the wall and see what sticks go after everything that comes your way I encourage you to do that But just understand when you do it why people have the attitude they do because the Memphis Market those seller doesn’t need donor finance and that’s just plain and simple I would encourage you to call nine on one six nine two seven four zero one Let me put you with one of our team members and actually help you build a portfolio Without you having to beg borrow and steal from people that currently own properties, current investors that own property. Does that answer your question, Richard?
Richard
0:16:07 – Yeah, I guess.
Brett
0:16:08 – Okay. So, let’s talk about how to write a good… So, we’ve all got an owner finance contract, low ball offers. I’ve had all kind of weird stuff. I’ve had someone wanting to do a reverse mortgage with a current property owner, which is basically the same thing as financing it. I’ll go ahead and buy the house, but I’m going to pay you over time, but I’m going to do a reverse mortgage based on what you owe and the equity you have. So I’m going to take over your note and then pay you so much a month for the 30 grand equity you have in the property. I’ve gotten all that weird stuff. None of it worked. I mean, I wouldn’t even bring it to my client. I would send it to them and we’d have a good laugh about it and that’d be the end of it. So let’s talk about how to write a good offer because we’re going to get in a competitive business. This year is going to be very competitive. And I want to make sure everybody’s aware of one part of the contract that we’re going to discuss and it’s line 329 on the purchase sale agreement. Everybody know what that is? This is very important for you all to understand this. When you write an offer and you don’t have an agent that understands how to write a competitive offer, you’re going to do exactly what a lot of people do. You’re going to spin your wheels, throw crap at the wall and see what sticks. So I’ve come up with kind of a guideline for how to write an offer that has a shot to get accepted. A seller wants to sell a property. What’s that seller worried most about? They’re worried about the uncertainty that a deal will close once they get a contract. They’re worried about repairs. Are they going to come back and want repairs? How long is it going to take to close this? Am I waiting two months to get paid? Am I going to have to keep paying my payment, my insurance, until it does close? Is this buyer even qualified? Cost of selling to me as a seller. What’s my cost? How much money is it going to cost me to sell this house? And getting the price they want, which is that’s usually the biggest one, is I’m listing it for $150,000, am I gonna get 150,000? So those are things that give sellers pause when they get involved. Now if you get a good real estate agent to help you sell or buy, you shouldn’t have these worries because that agent is smart enough and has enough experience to guide you and be honest with you up front. I give my clients average net numbers on every deal we did based on all the calls miss that the other here’s what your net should be when we close this is what you should have wired to your bank account give or take a couple thousand dollars i do that but the remind it is so when making an offer my opinion and when i did this a lot is how many offers do you think you are for twenty grand asking her fifteen grander asking her any accepted even if you know it needs 15 grand worth of work, how many are going to get accepted? In a competitive market, when the guy is just getting offer after offer, zero.
Marissa
0:18:32 – In a competitive market, none.
Brett
0:18:34 – So trick number one is you write it for a full price offer. And when your investor says, well, wait a minute, I know it needs at least 10 grand worth, well, fine. But we don’t know that for sure. It may need 20 grand worth of work. So what difference does it make? Write it for full price, get the offer accepted, go do your inspection, get Nick to do a bid on the work, and he’s 12 grand worth of work, great. Go back to the seller and say, here’s the deal. He’s 12 grand worth of work. I got to be all in at 100 grand because it rents for 1,000 a month, I got to hit 1%. Now why does that work versus just throwing him an offer for 89,000?
Nick
0:19:08 – You have some hard evidence there.
Brett
0:19:10 – He’s got a bird in hand, right? Because then he’s now going to realize, he’s going to see the bid, see the inspection report and realize, well, if I tell this guy to go up a rope, I could go back to market, get another buyer or go to one of my other fallback contracts. And now wait again for them to do their inspection and probably come up with the same solution and ask me for the same thing. So I might as well go ahead and make this one work. And your chances of moving that forward is much greater than just throwing this guy in $87,000.
Jeff
0:19:37 – I’d say your chances increase by about 90%. Because that guy’s probably already had four of those lowball offers before you presented your offer to him.
Brett
0:19:47 – That’s right. So, I encourage people to make a full price offer, even if you know it needs work. Or, you know, if you know it needs 10 grand worth of work, instead of the 100, offer him 97.
Jeff
0:19:58 – Yeah, but you gotta…
Brett
0:19:59 – Give him something reasonable to accept your offer.
Jeff
0:20:01 – You got to explain to these new young guys though that you’re not paying full price for the house. This is just an offer, continuing upon an inspection.
Brett
0:20:09 – That’s right. And that contingency is so important. So number one, full price offer. Number two, don’t do 10, 14 day inspection contingencies because that stresses the seller out. They’re like, oh crap, they’re going to tie my house up for a half a month before they let me know if they’re going to move forward or not. Here’s what I encourage you to do. Line 329 on a contract. Now I’m going to read it for you. And I use this nine times out of 10. It says, buyer waives the option to request items to be repaired and or replaced under D3 above, and there shall be no resolution period. But buyer retains the right to perform inspections in a timely fashion, furnish seller with a list of written objections, and immediately either terminate the agreement or accept the property as is. If you go in with a full price offer you don’t want to do that or you can it doesn’t matter. You go in there and say it needs 10 grand worth of work you go back to sell and say look I can only give you 90 now it needs 10 grand worth of work I didn’t know that. So the seller’s not going to walk away simply because you didn’t have a contingency in there for inspection but what that does is it protects the earnest money gives you the right to inspect, and then walk away. But why does anybody walk away? As soon as you say I’m out, the seller’s gonna be like, well, what do you want? Well, I need 10 grand less. Oh, okay, well, let’s work it out.
Marissa
0:21:24 – And most times the seller doesn’t wanna start the process drag over, especially if they’re already like two weeks in, because they’re wanting to hurry up and get their money.
Brett
0:21:31 – Right. So put zero in your inspection contingency and then check that box, which says I’m taking the property as is, but I’m still going to do an inspection. And when I do my inspection, I’m still going to notify you whether I’m proceeding forward or not, period. And as soon as you say, I’m out because this needs to tinker around with the work, the salesman will be like, okay, well, let’s work this out. What do you need?
Marissa
0:21:52 – I want to know the price.
Brett
0:21:53 – Great, let’s do it.
Marissa
0:21:54 – I feel like keeping the inspection period is very important because like you said, you can either back out, you know, legally, or that’ll give you the room to at least open the door for negotiation. Absolutely. As long as you can open the door for negotiations, you still got one foot in.
Brett
0:22:10 – In investment, in the investment game, inspections are for negotiation purposes, nothing more. You know, when somebody puts an offer on a house, they know what they’re buying, right? They know they’re buying a rental property, they know there’s going to be some problems with it. It’s a negotiation tool. So if you just mark that point and put no contingency for inspection, but this gives you the right to inspect and object and walk away, which protects their earnest money, you’ve just sweetened that because they’re looking at, oh, wow, so there’s really no inspection contingency. Well, there is really, but to them, there’s not. So you’ve taken that out. So not only have you given them asking, now you’ve made the inspection process way smoother in their head. There’s another trick that Gwen and I use a lot of. It’s called an escalation clause. Everybody’s used those? OK. So an escalation clause is pretty simple. Let’s say you’ve got a house in Midtown that you know is going to go fast, or a house that is priced $80,000 that’s worth $125,000 and needs 15, 20 grand worth of work. You know that’s going to go fast. So what do you do? The guy’s asking $80,000. You say, we’ll give you $80,000. And then your special steps, you say, here’s an escalation clause we’ll go up to ninety thousand we’ll go up to a thousand dollars over the highest bid you receive up to ninety thousand dollars which tells that buyer okay well I got one for 87 so this guy’s gonna give me 88 oh I just got one for a breast gonna give me 89 all if 90,000 because I’ve done my work and realize this month this house has got plenty of room in it regardless so I’ll put an escalation clause in there to allow my offer to continuously go up to beat the last offer that just came in up to 90,000. So use that. It’s very important. Have you used one of those before?
Nick
0:23:45 – Personal stuff I have, yes.
Brett
0:23:46 – Yeah, it’s a great tool to use. All right, closing date. If you get an offer from somebody and the closing date is 45 days out, what’s your first response?
Jeff
0:23:54 – No.
Brett
0:23:55 – We’ve got to shorten that up to at least 30.
Nick
0:23:58 – 45 days for things to go wrong. And to delay this process.
Brett
0:24:02 – The longer your closing date sets out, the more stress that seller’s about this deal falling apart. So the faster you can close, the better. So you tell your client when you’re buying and you’re writing an offer, get pre-approved in advance. And you ask your lender, if I get you a contract today and you’ve got all my documents today, how soon can you close? Three weeks, great. And you make that closing date as short as possible. Because here’s why. If we come up on a closing date, and bank’s not ready to close, then you know the week, and I call the agent on the seller’s side and say, look, I need another week, the bank’s not ready. What are they gonna do? Okay, sign an extension.
Marissa
0:24:38 – How many times are they gonna sign an extension?
Brett
0:24:41 – Well, a mutual client we got, four.
Marissa
0:24:44 – You’ll be surprised.
Brett
0:24:45 – Four extensions over a month and a half. So, my point is, if you put it three weeks out, that’s a sweet spot. If you go 30 days, it gets a little shaky. You go beyond 30, your offer becomes the bottom of the pile. Well, that seller is already thinking, well, this person’s not that serious. If they already have their ducks in a row, there’s going to be a lot of room for error. Or I’m going to make another payment in 30 days. This other guy offered me two grand less than what Brett offered me, so I might as well take this one. He can close in two weeks. I’m going to pay a thousand dollar note anyways one half dozen the other.
Jeff
0:25:19 – Are you saying strategically shorten the closing date knowing that you’re probably going to ask for an extension?
Brett
0:25:24 – Yep. And when a bank sees that closing date some lenders actually most of them don’t but some lenders actually pay attention to that like oh crap we got a week we got to get this in close and they get on the ball and you may not close in three weeks it may be three weeks and two days but it’s always under 30.
Marissa
0:25:35 – So if everything is good on the buyer and the seller side is it really up to the lender on how fast they can move to get it closed like that’s who you need to ask hey what’s your timeline?
Brett
0:25:48 – It’s Up to us as agents as brokers to tell our clients when we’re looking and we’re gonna put an offer in I need a pre-approval letter tomorrow. I need your lender to have their time frame in place and I need you to already have all the stuff they want from you to get your loan rolling in there tomorrow. Because we got to move this quickly. And you explain to them why you’re doing this. Look, we’re in a competitive market. There are 10 people offering on this house. If you want a shot at doing this, these are the things we need to do in our contract to make it work.
Marissa
0:26:16 – And it’s also great to come with your pre-approval or get with your agent and have them refer you to a lender because when I write offers, I like to send the pre-approval over with it. So we’re not doing that on the back end.
Brett
0:26:29 – Right. No, exactly.
Jeff
0:26:30 – Absolutely.
Brett
0:26:31 – Another place you can, uh, you can-
Jeff
0:26:33 – I wouldn’t accept an offer without a proof of funds letter.
Marissa
0:26:35 – And the ones that I, on the front end, when I wasn’t aware of that, and I would send offers, they would always come back and ask anyway, hey, do you have the pre-approval?
Jeff
0:26:43 – Yeah, I won’t even- So you might as well get it all up front. I won’t even present an offer to one of my people without a proof of fund that’s attached to it.
Brett
0:26:53 – Another couple things you can do, and I’ve actually had, Amisha’s done this twice. Number one, don’t ever ask for closing cost assistance. You’re an investor, right? That’s like asking somebody to own or finance for you. You’re an investor, don’t ask another investor to help pay your closing costs. If you can’t pay your own closing costs, they’re not gonna look at you as a serious candidate. So don’t ask for closing costs.
Jeff
0:27:11 – Well, what if, you know, we had the one lady from out west that did that. She went 187.5 on a $185,000 purchase and took that seller’s money towards her down payment.
Brett
0:27:28 – She built it into the deal. She didn’t short the seller. She added to the deal and then took it back. So she could roll. It’s still a net. It’s a net the same to the seller, but what she did is rolled that $2,500 or $3,000 into her loan instead of coming out of pocket, which is smart. A lot of investors do that. They buy and Jeff Sloan bought nine brand new construction homes. He took $5,000 builder credit from every one of Terry’s homes, which is however much money that is. He got that back so he didn’t have to come out of pocket with that money. So it helped pay that much of his closing costs. So it’s a smart move. But don’t ask for just straight up closing cost unless you’re going to do something like what our client did, your client, and what Terry did, and you build it into the price and then just take it back to where the net to the seller is the same. That’s really the end result is you want the net to be the same.
Marissa
0:28:15 – So instead of trying to offer a lower purchase price or ask for closing costs or anything that’s going to be a detriment to the seller, you can add the price into the loan and slowly pay that off.
Brett
0:28:25 – If you don’t want to come out of pocket for five grand and they want a hundred grand for the house, offer them 105 with a $5,000 seller credit back to buyer. People do it all day long. Now, the only downside to that, the house only appraises for 103,000. Well, now you got a choice. You lower your credit you want to 3,000 or the seller is only getting 98,000 now, right? So there is a little bit of risk to that, but that’s, it’s our job as agents to run the numbers for our clients to make sure they’re comfortable with the fact that this will work. You know, you can’t just throw it out there arbitrarily. You’ve got to run a CMA and make sure you understand the value of the property. Oh, and Amish has done this in several cases where he paid half the seller’s closing cost. All right. We were in a very competitive situation with four other buyers and they were all right there within a few dollars of each other and he’s sweetened the pot by offering to pay $1,000 of the seller’s closing cost, which was only going to be 1500 total. So what do we do there? With a caveat, as long as you close title assurance and escrow, then we got title assurance and escrow to do it for 600, done. But in his mind, his offer is better than his other ones because he’s paying part of my closing costs. How we got that done didn’t matter to him as long as he wasn’t paying it. So that is another. The last but not least is earnest money. 1% is what your earnest money should be.
Marissa
0:29:43 – I typically do that as a rule of thumb, but you have some that like to low ball on the earnest money too.
Brett
0:29:49 – It’s flat 500 bucks no matter what. And that’s to me, it’s an unserious offer.
Jeff
0:29:53 – It is.
Brett
0:29:54 – If you’re so sure you’re gonna close this property, you should be willing to put up four grand. But if you’re not sure if you’re gonna close it, you’re not sure if it’s going to work. You’re not sure if you’re committed to this property yet. Then you throw out lowball earnest money and require that your attorney holds it, not the seller’s attorney, which tells me as a seller that you’re not serious about this.
Jeff
0:30:25 – My $325,000 offer but they offer $500 earnest money. I’m like, really?
Brett
0:30:26 – Well, that’s a little different. Now, OwnerOc is different because some of these people just don’t have a lot of cash. They’re getting down payment assistance. They’re getting FHA loans. So in some cases, they don’t have enough cash. In the investment world, though, that is uncalled for. Because if I get an offer and you’re offering three grand under asking, $500 earnest money, but yet your attorney holds it, you know what I’m going to say? Your buyer’s not serious about closing it. So he was. He let my attorney hold the earnest money. The fact that you may back out at any time leads me to believe you want it with your attorney so you force me to fight for it instead of my attorney forcing you to fight for it. And it’s just a trick that they use. So don’t ever, put some serious earnest money out there. If you’re serious about buying this property, put some earnest money out. Show them you’re serious about closing this deal. And for God’s sake, I will throw title assurance holding earnest money for my clients as buyers all the time. And if the agent doesn’t bring it up, I just let it go and we put it in title assurance. Fine, it helps make my job easier. But if they kick it back and say, nope, our attorney closes, which every agent should, any good agent should want their attorney to hold it if you’re representing a seller, then we’ll just move it over then. That’s fine. Make sure your earnest money is something serious, something worth, at least 1%. A $100,000 house, at least put $1,000 up.
Marissa
0:31:40 – And another thing I think with these investors since they do come from all over the place, it’s different in different states. I don’t think some states do the whole earnest money thing. So coming here, it’s like, well, they don’t do what you all do. So now they got to get into the mind frame of, now I got to put this money up just to show them that I’m serious.
Brett
0:32:00 – Well, if somebody tells them, well, they don’t do that in Arizona, I’m like, well, then why are you buying in Memphis? Go buy in Arizona then. If that’s important to you, then go.
Jeff
0:32:07 – You’re going to get the money back if the offer doesn’t work out.
Brett
0:32:11 – Earnest money is just a show of good faith to put the seller’s mind at ease, especially in a hot real estate market. And let’s go ahead and throw this out there. As this market heats up this year, every con artist is going to start crawling out of their corners and their dark holes and start trying to get deals done and do this and do that. So there’s going to have to be some mechanisms put in place as agents for our clients to protect them. And these are ways you can do that. You can make your offer strong, you can also protect your client by just making sure you do the right thing. I wrote down some stuff that, and some of this came from this summer, some of the stuff that we saw. 30 plus day closing, no. 10, 14 day inspection, no. Offer below asking, low ball, no. $500 earnest money on a $150,000 house, no. Sell or play closing costs on behalf of the buyer without adjusting the price, no. Ask for creative financing, hell no. Contract is assignable, absolutely no effing way, hell no. Those are the don’ts you do in a contract. If you want your contract to become a piece of toilet paper or a beer coaster do all these things I just read off at the end because it that’s exactly what it would be if you want to be competitive Take that list of what we did and really get creative with your offers and think outside the box Glenn I made a ton of money in a hot market Outbidding people because we got creative with our with our offers very creative and that one box 329 Glenn showed me that because I was freaking out about well, I mean, I’ve got to have a special contingency I gotta be able to expect probably his breath. Let read this. I read it. He goes check that Well, what does that mean? He goes you get to inspect the house and you get to walk away Okay. Well, that’s cool. I’ll give my earnest money back. Sure But what if I want to negotiate I can’t negotiate here’s you think the cell is gonna let you walk away if you give him Proof that that needs $8,000 to work No no. Send them the report, send them a bid, and I guarantee you it just started working for me and I sold a lot of property that way. So I just want y’all to be prepared for this year because I hopefully, I believe this, that we’re gonna have a banner year, we’re gonna get busy, we’re gonna have a lot of business coming in, and I want us to be prepared to be competitive against some of these guys in town that already know how to do this and know how to do it well. Alright, well thanks for listening. Make sure you give us a call at 901-692-7401 and MyMemphisInvestmentProperties.com where all of our listed and off-market properties are. You can go check them out, all the details, pictures, everything you want to see. Thanks for listening.