Overcoming First Offer Fears
Making your first offer…why does this step hold so much fear for many new investors? Is it causing you to stall in your progress?
Let’s discuss a few strategies for breaking through your fear in order to complete your first deal. You can even use your fear as a catalyst if needed.
1- What’s the worst that could happen?
We often spend a lot of time doing this, but we don’t use it as a strategy, we use it as an excuse. We think of all of the things that can go wrong and decide it is just too risky. But..you already knew that real estate investment has risks, and you determined that you wanted to do it anyway. You saw that the risks are what provide the rewards.
So now turn this “dooms-daying” and worrying into a tool you can use. Literally write down every bad consequence and worry you have, from financial loss to your brother-in-law calling you an idiot. List them all. And then take each one and come up with your coping strategy and next steps should the “worst” happen. Because it probably won’t, but if it does you’ll already know what to do next. It then becomes a moment of learning and growth, a stepping stone, rather than a reason to give up.
2- Do your homework and be prepared.
Clearly if you’ve gotten to the point of wanting to make an offer to get a property under contract you’ve done some homework. You’ve determined what similar properties are selling for and how much rehab you’re expecting to do in order to get it ready. You have a good idea of how much money it will cost to get the home in salable condition.
Now get someone else to look at all your homework for you. Ask your real estate agent to look through all the aspects of the deal. Obviously if you’ve got a partner they will need to review it as well. Did you find some experienced investors at your local REI club or elsewhere? Take advantage of their expertise as well. You’ll have more confidence if you’ve had at least one other set of eyes on your calculations and estimates.
Making sure that you include all of the right contingencies in the actual contract can also go a long way to giving you the confidence needed to make the offer. Among other things, incorporate wording that allows you to back out if you cannot get a loan on the property.
You’ll also want to be able to back out of the deal if the appraisal comes in for lower that the offer or if during a thorough home inspection any new major defects are discovered. Writing and negotiating this contract is where a great relationship with a good real estate agent and/or attorney becomes invaluable.
3- Change your perception of fear.
We tend to have negative perceptions of fear and the other emotions surrounding it. It can be useful to re-frame the way you look at fear. Fear does not need to be a signal to stop or turn back. Fear tells you to proceed with caution, but not to stop. Excitement can also mimic fear. Think of it as energy, as motivation. As has been said by many “the best things happen outside your comfort zone”
This week’s action: make an offer!