Just made an offer to buy another property...this is what happened

What's up you guys, it's Graham here. So, two things with this video. The first one is that usually I have a video planned out. This is not the case; I'm just gonna be freestyling it to a camera. The second thing, I'm not everyone says this—I don't know if I'm going to be actually posting this. I'm probably, I mean obviously if you're seeing this now, I've posted it. So it's kind of stupid of me to say, but I'm really filming this video with the expectation that I'm gonna decide later if I'm gonna actually post this or not just because of how kind of sensitive the issue is. Now that I have a lot of people watching me, there's a small chance the seller of a property might see this video, and then that might influence their decision one way or another, or it might create competition for myself if I give away too much information before I actually get something signed.

So with this video, I'm gonna really—I have to be as generic as possible until I actually can get something signed. And if it doesn't work out, then later on I can go and give some more details. So because of that, I'm gonna be a little bit vague in this video while still giving the full aspect of what it's like to invest in real estate.

So anyway, just some backstory here. About five months ago, I was really debating whether or not I should go and buy another property this year or buy the car I've always wanted, which was a Lamborghini Gallardo Superleggera or Performante. I was also looking at the Mercedes SLS AMG, which is an amazing car. Doing one of those or buying another property.

After some careful consideration, I really decided that the car can wait. I don't really need one right now, and that the property would be a better choice long-term. I could get the car anytime; it doesn't really matter. So I chose the property, and I started looking right after that.

Now, one of the things I always do when I start looking at real estate is I get pre-approved. So I gave in all my information to the lender; I found out exactly what I can qualify for, exactly what the loan is, all the details. So I know when I go and look at something that I can actually buy it, and then I won't come into any problems during escrow about me not qualifying. There's like something come up.

So anyway, I got qualified with my lender, and they gave me a rate of four point three seven five percent fixed for the next 30 years. And to me, that's a pretty decent rate. I really believe that like ten years from now, that's practically gonna be like free money. So I think, you know what, that's great! Let me start looking.

I believe it was about a month ago I posted a video that real estate investing just got a lot more difficult. My thumbnail was like me like this, all dramatic and stuff like that. But the reality was that real estate investing did get a lot more difficult because interest rates were going up, inventory was shrinking, competition was fiercer than ever, and I just couldn't find the right property. You know, I had been looking for three months at this point, and I had taken a look at a few that I thought had potential.

But when I went and saw them, it just didn't do it for me. There was one property—and I'm cool giving out this information just because I don't want it—six hundred and seventy-seven thousand dollars for two properties on one lot in Jefferson Park. So for all of you in Los Angeles, I'm sure you can find out which property this is.

I went and saw the property; I thought it was perfect from the stats. And then I saw it in person, I realized like this property needs one hundred twenty thousand dollars worth of work, and when I'm done with it, I'm gonna be all in about eight hundred thousand, and it might be worth like eight fifteen. There's just—there's not enough equity in that deal. I'm not gonna make money on it. There's just no advantage of me doing this, and I was gonna wait.

So I kept waiting, and then a property came up. This is the one I'm gonna be pretty vague on here. I was kind of thinking, yeah, this isn't ideally where I wanted to be, but like it looks pretty cool, so let me go and take a look at it just for fun. I had a free morning and I went for fun basically to take a look at this home.

And I saw it. As soon as I walked in, I'm like, wow, this place is awesome! This is so cool. It had—basically, it was done. The owners had pretty much remodeled this home for themselves, and they're not flippers or anything like that. So it was some really quality work that was done for the long term—not just enough to make it look good for like a few years and then all of a sudden starts falling apart. Like this was some pretty quality work.

So I knew that this place was going to be going, you know, over asking. They priced it pretty aggressively, so I just submitted an offer. A few days later, they came back and they're like, "Hey, listen now, we have seven offers on the table; you gotta come back with your best and final offer."

Now, this is a very common stress right now for sellers, is that they come on the market at a very reasonable, somewhat aggressive price, and then they get a whole bunch of offers. Then people get very excited; they get very emotional. They fear losing out on the property, so therefore they end up paying more than what the property is actually worth. Which then benefits the seller because they get a higher price than if they just priced it where it should have been from the very beginning.

And this was their strategy. I knew this but at the very least, I wanted to put my hat in the ring and just see what happens. So sure enough, they counter us all back, best and final offers are due.

So after getting that counter-offer, I was really determined to figure out what was my top-end range to the point where if I offered this price and someone pays more for it, I'm not gonna feel like, “Oh no, I lost out on the property.” Because if someone paid five grand more, so I really wanted to make sure that whatever offer I offered, this was it. This was the top end that I was willing to go, just knowing that if someone paid more than that, it was gonna be no big deal. They deserved it more, and I just felt like if they're willing to overpay for it, they're willing to overpay for it.

So I did some comps on it. And by comps, I mean I looked at every single home that sold in that area over the last five years. I looked at everything; I went property by property by property checking out everything that has sold, everything else that's on the market. Then I even drove around the areas checking out all of these on the outside in person to figure out, okay like this is not a comp because it's next to an alley, and this next to a busy street. This could be a comp but it maybe has a bit of a view here, so maybe it's right a little bit more.

So anyway, I did substantial research, and I determined a specific price that I felt this property was worth. Now, the hard part about this property is that it's a weird place to value because already right off the bat, it is the most expensive place that's being sold per square foot. Already right off the bat is the most expensive sale for this type of property in this type of area. Just from the price that I initially offered, I was already just like I was beating records in this area to get that specific property that I wanted.

But I still saw the value in it. You know, some people they look at comps and they see like, okay, I'm buying the most expensive home on this entire block that's ever sold. But I see a lot of opportunity in that, and regardless of what people think of just like you shouldn't buy the most expensive place. You know, I disagree in certain situations, and this was one of those situations. I just believed like this is a good place.

So anyway, I did my research on it, and with that I came up with a value that I felt I'm not willing to pay any more than this. This is it, and this is what I feel is a fair price to pay for this property given that, you know, I'm an agent, I'm an investor, I know real estate. I'm planning to keep this for a very long time, and this is what I'm willing to pay.

So I submitted the offer, lo and behold—and it wasn't totally surprised at this—they got offers that were much higher than mine. And honestly, I wasn't like—I was disappointed obviously, but I wasn't that disappointed because if someone's willing to pay that much over what I am willing to pay, I figured, you know what, they're just grossly overpaying for that property. I can't help someone do that; good for the sellers; they got someone who's paying way more than the home is worth—great, happy for them. You know, I'm just gonna continue looking until I can find something else that works for me.

So anyway, about two and a half, three weeks went by, and all of a sudden I get an email from the listing agents saying the highest offer that we had fell through; the second highest offer happened to fall through. "Are you still interested?"

And the reason it fell through, I believe, was just the buyers weren't savvy. I mean, every now and then you get a buyer who's just like every little thing worries them. They're not accustomed to the process, and by doing so, they just freak out over anything, and they just cancel. Or maybe they feel like, you know, they have buyer's remorse, which is very common, especially when they're overpaying by that much money.

And I know what price they were in escrow at, and I could say they were grossly overpaying for this place. And it's not uncommon for a buyer just to get all emotional in the counters offer a really absurdly high price to get it accepted and then they think about it in escrow, at which point they usually are like, “Oh man, maybe I overpaid, and I can't believe they accepted my offer! Let’s just cancel.” Very common. I believe that happened with the first two people. The second person I think was just a little more aggressive in their approach, but given this, I kind of felt like—and I told you so moment.

Because I wrote a letter with my offer to the seller, and I said, "Here’s my offer. I understand this is probably going to be less than what someone else is willing to overpay on this property for. I understand that, but the benefit of my offer is that I am NOT here to renegotiate the deal.”

What's very common is that buyers will go and offer an aggressive price just to get the deal, and then they slam you after they do all inspections. They do their inspections, and then they come back and say, “I want a seventy-five thousand dollar credit for all of these imaginary issues, and if you don't give those to me, I will cancel.” And they hope that the seller at this point is desperate enough to say, “Okay, you know what, fine. Let’s just give you the credit. I just—I need to sell this place now.”

And sometimes this works; it's a very viable tactic that a lot of buyers use. But I figured, you know what, I'm gonna be a nice guy here; I'm not gonna do any of that. Sure enough, they go with someone else who does exactly what I mentioned most buyers do in my letter, and that fell out.

So anyway, it comes back available, and the agent says, "Are you still interested?" I said, "Yes!" So I resubmitted an offer that I felt was good based on the fact that I'm not going to be asking for any further credits. And sure enough, the sellers came back again and they said no.

So I figured, you know like, why would they say no to this? Like I really believe that my offer on this property was amazing. Like it was the cleanest purpose; all they had to do basically is just sign the paper and that's it. That's pretty much all they have to do; I don't even need to go back to the property more. It's just like they sign, there we go.

So I slept on it, and then I figured, you know what, the next day I'm gonna come up in price a little bit. I'm gonna give them one last offer, and at this point, I kind of felt like I was paying a little bit more than I should just for the convenience of getting an answer really, really, really quickly.

Sure enough, they came back and they said no again. And the problem that I believe—and I'm really hoping the sellers aren't watching this—is this is part of the reason why I potentially not gonna post this video. Because I would say there's a 1 in 200 chances that they were watching this and like seeing the inside of how my mind works when it comes to writing offers.

But you know what, if it's meant to be, it's meant to be. What happens if the sellers, if you guys are watching this, this is my perspective of it as well. And for all of you watching, this is what's a very common practice for sellers, and this is what happened. I mean I've had it happen before with my own clients.

What ends up happening is you put the property on the market, and you get maybe one or two people that right off the bat submit a really high offer, and all of a sudden your expectation is set at that very high offer. You believe that because you got all that initial traction from the very beginning, that's what the property is really worth, when in actuality that was a hyper-inflated amount based off hype and not the actual fundamentals of the property.

Same thing like we could say with cryptocurrency is that a lot of those prices were based off of hype and speculation and just the emotion of fear of losing out—that it wasn't the actual fundamentals of what it was actually worth. And that's a very common thing with properties. I had another listing recently; I think we were priced at one five nine five, first day on the market we got a full-price offer, one five nine five.

Sure enough, that buyer was just nutty; they submitted the offer just to basically tie it up while they thought about it. And they thought about it and they realized, you know, I know we don’t actually want this property. But what ends up happening is that you then get a realistic offer, a decent offer for what the property is actually worth, but in the seller's mind they think, "But we got a full-price offer; that's what it's worth.”

Because we had that—reality—you never really had that. I mean that was just some delusional buyer who ended up writing that because they didn't know what they were doing. So that's what I think ended up happening in this situation, is that the seller's expectation was set way too high from the very beginning from an artificially inflated price that makes my offer look significantly less when you factor in that that was the fundamental value of the property of what I really felt it was worth.

So anyway, that's what I was kind of dealing with here. But the moral of this story, if there's an entire point of this video—because I'd like to think that all of my videos at least have some sort of lesson that you can take away from. At least that when you finish this video, you know that like, okay, so I can follow these and I'm not gonna make the same mistakes.

The first thing is really just to stick with your guns on this and not get emotional about it. How do I really wanted this property, and how they really felt like I have to get it, I would submit some price that was over what it was worth. And I knew kind of what I felt I would need to write in order to get it, but that just—that price didn't make sense. I knew that was not going to be a good price to go on at. So I really stuck with my guns; it's so important that anytime you're in buying any sort of real estate that you know the fundamentals of the property, and you really know what it's worth and you stick with that.

That you don't come up in price just to give in because you're just like so tired and worn down and that you really want the deal more than anything else. And once you get emotional about it, that's the point where you begin to lose.

Anytime you're looking at a property or anything from a financial perspective, you really have to look at it from a very logical perspective—that these are just numbers, that these are just comps, that these are just properties, and that there's nothing in it that will tie you to it emotionally. It's so important to have that mentality, to stick with what you feel is right.

And throughout this entire process, I'm really stuck to what I felt is a fair price to offer, to what it makes sense for me to buy it. And I know I'm a great buyer, and I know my advantages as a buyer, and I'm like the easiest person ever to deal with. I factor all of that in the price I offered knowing what I have to give to the seller.

So basically, with this, I just stood my ground, and you know that is what it is. And whether I get it, great! And if I don't get it, then at least I know that I didn't offer a price that I wasn't comfortable paying. And that any time in the future when I look at real estate, I look at it very objectively, and I figure what is it worth? What am I willing to pay? I offer that price; if they say no to it, that's fine. If someone's willing to pay more than that, that's fine. If someone's willing to pay less for it, well, then they should have taken mine.

But that's it! I mean it's really just a numbers game. And you know, it's a bit disappointing to—I mean, anytime you submit an offer, there's a rush of excitement that comes along with this. Plus, it would make some great content for you guys to be able to see the process. But at the very least, this is what's going on behind the scenes.

This is probably as close to like a vlog style as you'll realistically get for me, like looking at properties and stuff, just because it all happens pretty quickly. So anyway, that's that. If for whatever reason the sellers are watching this, if you guys want to comment down below and tell them how much they should accept my offer, I think you guys should do that. Just say, "Graham's a great buyer; Graham’s an easy buyer; should take Graham's offer because it was pretty good."

But again, I don't want to get too specific on this because they know I'm sure there were like twenty of you guys out there who were looking at the same things that I am. I don't want to give anything away about what I'm offering on, and that's part of my fear of uploading this video. But I guess if you see it, too late anyway.

So cool! As always, guys, thank you so much for watching. I'll make this one outro quick: like the video, subscribe to the video if you haven't already. Private Facebook group in the description for anyone interested in real estate. For anyone who's interested as a real estate agent, I have my program, the Real Estate Agent Academy, link in the description for any of you wanting to get into that. Cool! Thank you for watching. I hope this video was not too rambly, and until next time.