Anyone who owns rental property can probably relate to this: unsolicited snail mail, voicemails, and text messages from investors who want to take your moneymaking rental property off your hands -- for a "fair" price, or so they say.
If I sound a bit jaded, it's because I'm constantly bombarded with these messages, and I just want them to stop. But that's because I'm running a successful rental business. Not everyone wants to hang on to their rental property or second home. Maybe it's no longer a moneymaker for you, or maybe you never wanted the property to begin with. And that's the market that prompts unsolicited offers.
Here are some things to know about unsolicited offers to purchase property, such as whether you should entertain the offer, as well as how to get in the unsolicited offer investment game yourself. After all, this investing method pays off for some people, and if you can't beat them, you might as well join them.
What is an unsolicited offer on a property?
When you list a property for sale, you expect to get offers from people who want to buy it. But you can also receive offers to buy your property even if it isn't for sale. Those offers are called unsolicited offers.
These unsolicited offers can come from a person who wants to buy your home for their primary residence, a real estate wholesaler who plans to sell the house immediately to an investor, or a real estate investor or company that plans to either fix and flip the property or hold and rent it.
What to do if you receive an unsolicited offer to buy your property
If you receive an offer to buy your property and you're uninterested in selling it, you can just ignore the offer. But you might want to consider your options. Even if you weren't thinking of selling, you might want to find out more. Before you answer the person or company making the offer, you should first understand the way unsolicited offers generally work.
Expect the offer to be low
The unsolicited offer will almost always be less than what you could probably get if you listed your property for sale yourself. Of course, this can depend on whether it's a buyer's or a seller's market and the condition of your home, but generally, people who make an unsolicited offer are going to lowball you. They typically prepare you for the low offer by giving you a sales spiel that sounds something like this:
- You won't need to pay a commission to a real estate agent.
- You won't need to pay closing costs; we will.
- You don't need to repair or prepare your house for sale; we'll buy it "as is."
- You don't need to disrupt your life by having showings.
- You won't need to worry about the sale falling through.
These points are to justify the low offer you're about to get. And just how low the offer will be depends on who's making the offer, what the market's like, and the condition of your home.
The exception is if the unsolicited offer is from a person who wants the home for their primary residence. Maybe this person loves your home and neighborhood and keeps losing out on deals because of a competitive housing market. This person might offer you fair market value or more for your home, especially if your home is in tip-top shape and the market is a seller's one. Note that this type of unsolicited offer isn't as common as ones from wholesalers and investors.
How to evaluate a deal
Expect a wholesaler to offer between 50% and 65% of the home's fair market value, but some wholesalers will offer only 10% or 20% of market value. You'd need to be a highly motivated seller to agree to take that much less. But that might be the case if you, for example, inherited a property that needs a lot of work and you're stuck paying taxes and insurance on this run-down property you don't even want.
Investors typically offer more than wholesalers do, typically in the 70% or 80% range of fair market value. In this case, if you want to sell, you'd need to evaluate whether you want the easy, fast cash offer or whether you want to sell the traditional way using a real estate agent who can probably get you much closer to fair market value -- assuming your house is in comparable shape to other neighboring homes; if not, you might want to take what the investor is offering.
If you've received an unsolicited offer and you want to sell, you can always hire a real estate agent to represent you and help guide you through the process. But since you'll need to pay the agent a commission to represent you as a seller, if you hire an agent, you might want to list the home instead of taking the unsolicited offer. Your agent can help guide you.
How to get in the game by making your own unsolicited offers
If you think you have what it takes to start buying properties for well below fair market value to use as investment property, make sure you take these four steps.
1. Evaluate the neighborhood
Focus on areas where you can make a profit. You want to choose a neighborhood with promise -- one that isn't overpriced and has good schools, high employment, and rising home prices.
2. Pick your strategy
You can use a strategy called "driving for dollars," which literally involves you driving through neighborhoods looking for distressed properties. When you find such a property, you can make your unsolicited offer.
You can also buy or compile your own mailing lists. I'm apparently on a list that consists of people who don't live in the property they own (like a landlord). It's easy to determine this because the property tax bills are sent to my primary residence, making landlords like me a targeted group for many investors in the unsolicited offer game. Other mailing lists might consist of recently divorced people, seniors who have lived in the home for more than 15 years, or financially unstable homeowners.
Use an investor-friendly real estate agent. They can help you find properties that would likely make a good investment property for you and guide you regarding what to offer.
3. Have your financing arranged
If you're paying cash, you have your financing arranged. But if you need to finance the deal, make sure you have access to cash before you make an offer because you'll need to act quickly if someone accepts your offer, and you'll need to make good on your promise to close.
4. Start making offers
You can choose from a variety of methods to get the word out you're looking to buy, as explained above. You can snail mail letters outlining the benefits homeowners will receive from selling their home to you. You can call and speak to homeowners or leave a detailed voicemail, or you can send a short text message to alert your target audience you're interested in buying their house. Make as many offers as possible, as this is a numbers game. You'll be told "no" or ignored far more often than you'll score a deal.
The Millionacres bottom line
There's a market for real estate investors and companies to buy homes for below market value and use them as moneymaking investment properties. The homes are usually in bad shape and wouldn't sell for top dollar if listed on the open market. Being on the receiving end of an unsolicited offer when you don't want to sell can be annoying, but for people who do want to sell for fast cash and for investors who want to buy, this can be a lucrative business.