An investor asked us about a property that they were bidding on that had been on the market for several months. They made their offer only to be told by the listing agent that there were now multiple offers on the property and they wanted everyone’s highest and best offer by a certain date. The investor questioned whether there truly were multiple offers or not and what course of action they should take.
This investor is in Florida and in Florida, as in most states, it is a breach of ethics for a listing agent to tell a falsehood regarding a listing. That being said, we see it happen all the time. Regardless of whether or not there are indeed multiple offers, it is always important for an investor to not allow emotion to enter into the equation. If you are following what the Institute preaches, you have carefully built a model that will tell you what you should pay for the property (if you haven’t yet built a model, see our member’s section for a spreadsheet to get you started). Once you’ve carefully studied the neighborhood and determined your As-Repaired Value, you’ve determined what your rehab costs will be, you’ve determined what your closing costs will be, and you’ve come up with an idea of how long your hold time will be, you should be come up with your “strike price”, or the highest price that you should pay to hit your return goals. Once you’ve done that, you should remain confident that you have offered a reasonable price for the property. When investors increase their offer price beyond the strike price that they have calculated, that is when they get themselves in trouble.
Trust your model and the homework that you have done. Don’t allow yourself to succumb to emotion. It has been our experience that, although they are legally obligated to be honest with all parties, some agents do embellish in order to induce a potential buyer to up their offer. Stick to your guns and, if you lose the deal, it was never meant to be. It’s better to live to fight another day.