Making the Offer and Closing the Deal: Get the Edge as a Real Estate Investor

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Once you’ve run the numbers on a potential real estate investors, you know what you want to offer, then it’s time to get down to business – you need to know exactly what to write on your offer and how to write it. I know there’s a lot of real estate investors that swear by investment guru contract forms that they received at a real estate investing seminar. For example, the Carleton Sheets No Money Down program includes a software program called Real Estate Toolkit that gives you an ability to populate an Adobe Acrobat .pdf file with the pertinent information and you can then just print this out and offer this to the seller. For the most part, I recommend against using real estate investing contracts that you’ve taken from investing books or seminars. Instead, I want you to use the standard Realtor contract form from your state. You want to seem professional – not appear like you’re this real estate scammer that’s trying to take advantage of some unknowledgeable sellers. The contract forms found in most real estate investing programs have these almost ridiculous provisions that are almost comical in their slant towards the buyers/investors. Don’t get me wrong, when dealing with a property that seems like it’s been on the market for ages, has a multiple of problems, then some of the provisions found in these real estate investing guru contracts have some use. Generally speaking though, stick to the standard forms for your state.

Keep in mind that if you’re making an offer on a home that is being sold with the help of a real estate agent, the agent will likely require you to present your offer anyway on the standard Realtor form of your state. Real estate agents have been trained in the finer points of the state real estate offer form and know the legalities of the contract inside and out – it also makes it easier for the agent to compare the various offers presented as they are all written on the same form. These state forms have numerous provisions that protect real estate agents and real estate brokers from litigation and protect their right to their commissions. By them accepting your real estate guru contract, they would be exposing themselves to a high level of legal liability – understandably real estate professionals as a whole are extremely wary of accepting any contract offers not presented on the standard state Realtor offer form.

Real estate agents are required, by law, to present every offer given to them to the seller. The reality is that they will likely persuade you to rewrite the contract on the standard offer form. Although they are required to present all contracts, the law says nothing about what they tell the seller as they hand your offer to them. They very well may tell the seller to not even consider your offer if it isn’t written on the standard form. They may tell the seller that something seems fishy about it and has many provisions disadvantageous to the seller. They then show the many other offers presented on the standard form, which obviously have a more professional appearance. Yet another reason to present on the standard form is this: what if it’s a hot property and many offers are coming in? You submit an offer on a real estate guru form, the real estate agent asks you to present a new offer on the standard form, but during this exchange a great offer comes in and the property is sold from out under you. Real estate investing is often a race – you need every edge you can get. Those submitting on standard contracts generally look like professionals that can close; those that submit on investing guru forms may unknowingly come across like seminar graduates that don’t have the experience or ability to close on the deal even if they got it. If you’re submitting your contract offer directly to the seller who is selling by-owner, and you’re using the standard Realtor form in your state, make sure to tell the seller you’re submitting on this form because it’s the standard form for the state and is evenly balanced for all parties involved.

Most loans are able to be turned around in two weeks if you have a top-notch mortgage broker on your team. Obviously you’re going to want to confirm this with your broker, but if it’s possible, then put down on the contract that the closing will be in three weeks – this gives you a little wiggle room. Remember that the homeowner wants this deal done as quick as possible so they can move on with their lives. If you can close quicker than other investors and potential owner-occupants you might just give yourself an edge and eventually, land yourself the deal. When it comes to time before closing, having the closing come quickly is extremely effective to landing the deal when dealing with vacant properties, but only slightly so when the property is currently being occupied, depending on the homeowner’s circumstances. The reason why it may not be in the homeowner’s best interest to have a quick closing date if they currently occupy the property is that some people are wary of having the pressure of having to get all of their items moved out of their home in two weeks. To improve your chances in this situation, tell the seller’s real estate agent that you can close quickly on the deal, but that the seller can have as much extra time as needed in the home to handle their affairs (about two extra weeks) and move out of the home.

To show your professionalism and willingness to move quickly on this deal, include a copy of your bank statement (make sure to black out your account numbers) which shows enough cash in your account to purchase the property, if you’re paying cash in full. If instead you’re getting a loan, then attach a letter from your mortgage broker which states that you’ve been preapproved for an investor loan. If you can pay closing costs with cash, then make sure to state on the contract that you’re paying the closing costs with cash.

As a side-note, I know of an unethical practice where some real estate investors offer to close with all cash and no financing contigency – but all the while they have no cash and were planning to obtain a loan all along. It’s the old bait-and-switch, they tell the seller one thing, then do another thing once they have the seller on the hook. Imagine you’re a seller, you’ve been waiting months to sell your home, a seemingly perfect offer comes along, 100% cash, quick close, what could be better? It’s almost too good to be true – and it is. Most homeowners, especially homes being sold by owner (FSBO) don’t realize they deserve to see proof of these financial claims. They agree to this offer and they become emotionally invested in this deal. They tell all their friends, maybe they throw a party. Then the buyer lays the brutal truth on them. Sadly, some sellers are so tired of the process, and they feel embarassed telling their friends and family that they got suckered, that they begrudingly go along with the deal anyway. Ethical real estate investors take note, although this is an extremely small minority of real estate investors out there that engage in these unscrupulous practices, you need to know what you have to deal with out there.

Submitting offers and closing the deal can be a complicated process – but it doesn’t have to be. By following these simple steps you’ll be getting a leg up on your competition – and in this business, a small edge may be all you need to make thousands of dollars in profit.

Michael Emilio

Real Estate and Small Business Blog