Once you have the leads, the next step is to research and create the offers. You most likely won’t make an offer on every property you find. However you never really know what a seller will do until you ask them. To get an honest answer you.

need to make a written offer. As you create your offers, make sure they are consistent with your overall goals and strategy. When you find a likely property, do your research. As you prepare to make an offer, you should have answers to the following questions:

 
1. Does the property fit into your investment strategy and further your goals?

2. What is the current appraised value?

3. What are the current market conditions?

4. Are there any outstanding liens against the property, is the title clear?

5. Are there any easements on the property?

6. Does the property pass your home inspection criteria?

7. Will it sell (if you plan to sell it)?

8. Will it rent (if you plan to hold it)?

 This list is just a starting point. You will have other questions or required information specific to your situation. Whatever your needs, don't skip the
research. However, most of the time you won’t want to be real thorough on the research until you know you can buy the property (it saves time). So, make your offers “Subject to” sufficient time to conduct your due diligence on the property.

 The last thing you want is to buy a property and then realize that you won't make a profit without extensive remodeling (unless that is your plan). Unexpected liens and easements can also effect your desired outcome, so take the time to know the answers before you close the deal. This is where aligning yourself with a good team of trusted professionals really counts. You can have a contractor give you a quick heads up inspection, your title officer can check the title, and an appraiser or comp service can give you a value range. You get the picture. Take the time to get to know your sources. Develop a good relationship with theoffice staff. Be courteous, patient, and cheerful and it is amazing what they will do for you. They are the experts, so don't be afraid to ask them questions.

Other information will be obtained when you visit and inspect the property. Customize the property inspection checklist to make sure you don't over-look anything. If you have contractor friends, it doesn't hurt to take them along too for an objective opinion. Even though you need to move fast on many offers, don't skip the research. Most sellers won’t balk at a short inspection period. But, don’t ask for three weeks if you can do it in three days. More of your offers will get accepted.

 As you create the offer, you need to know your market. The general rule is to buy an investment property for 25-40 percent below 'good condition retail' value (less rehabilitation costs). These numbers vary from market to market, depending on

whether it is a buyer's or seller's market. If you keep your offers and purchases within that range, you are usually covered against unforeseen costs and/or repairs. Don't forget to account for closing, investigation, and marketing costs in your offer analysis. Wholesaling and Retailing. Another, often overlooked aspect to the offer is understanding the seller's motivation. It is easy to get caught up in the numbers of the property and ignore the seller as a person. However, most sellers are not sophisticated real estate investors. They are average people who often have emotional commitments to their property. The property may have belonged to their deceased parents. They are selling because the parents are gone and no one in the family needs or can afford to keep the property. The property may have been the owner's first home. They may be selling because they are moving up to a bigger family home. They may be selling because they have financial problems and can no longer afford to make their house payments. They may be moving because of a job change or transfer.

 All these factors determine the motivation to sell. In some cases, the need to sell is urgent and you can press for better terms or a lower price in order to solve the immediate problem. In other cases, the sellers may have a hard time letting go of the home. They aren't in a hurry to sell financially, so they may be interested in owner financing. Whatever the situation, be sensitive to the seller's needs and their varying attachments to their properties. It can make the difference between making the deal or missing out on a lucrative opportunity. To help you understand the seller's motivation, try to gather the following information:

    * How long has the seller owned the property?
    * Does the seller own other income property (is this an analytical or emotional sale)?
    * What are the seller's plans for the profits of the sale?
    * Has anyone else made an offer?
    * If so, what were the terms and what happened?
    * How flexible is the price?
    * Will the seller consider carrying any financing?
    * Is the seller easily offended?
    * Is the seller willing to negotiate on price and terms?

If you can answer these and other questions you might think of, you stand a better chance of meeting your goal and purchasing the property at a more profitable price or in a more profitable manner (with creative financing techniques).

Once your basic research is complete, it is time to structure your offer. A basic offer generally consists of the following components:

    * Property owner name and address
    * Property address and description
    * Purchase price
    * Down payment
    * Financing terms and contingencies
    * Closing date
    * Deposit enclosed
    * Your contact information
    * Contingencies/inspections
    * Signature

Note: Before you get started, you should have the form reviewed by a competent real estate attorney to make sure it is correct for your state and region.

Caution: When you submit a purchase contract, the terms are legally binding. Make sure you are able to live with whatever you submit. And, allow for at least one contingency clause subject to an inspection.

 For unsophisticated sellers, official purchase contracts can be intimidating as a first communication. For this reason, you may want to try a less formal approach, known as a letter of intent. A letter of intent is a simple expression of the buyer's desire to purchase the property. The letter outlines how much you are willing to pay and the terms you are looking for. By keeping it simple, you can often work more quickly with the seller to find mutually agreeable terms. A downfall of letters of intent is that more sophisticated sellers may not take them seriously. If you plan to use them, be sure to talk about it with the listing agent or seller. As with purchase contracts, you can still have a standard form, it is just shorter and simpler, leaving out all the legal gibberish. Letters of intent can be legally binding but, once you have initially agreed on the price and terms, you should still submit an official purchase contract. I only use them when I buy because a letter of intent is loosely written. Remember when you “Buy” keep the agreement “loose”, and when you “Sell” make it “tight” ,cross every “T” and dot every “I”.

 Once you have a signed contract, if you are skittish at all about the seller and have huge profit potential, it is a good idea to file your contract at the recorders office to protect your claim. Most people are honest and will honor a signed contract. However, there are always a few in the mix who may disregard your offer and try to take a better one that came later. To protect yourself, go to your county recording office and file a letter or affidavit stating that you have a contract with the seller to purchase the property. In the affidavit, specify the property address, the seller's name(s), your name, and the purchase price and terms of the offer. You may also need to submit a copy of the contract and pay a transfer fee or tax for doing so. But the small cost and minimal time could be worth it in the end if the seller tries to sell the property out from under you.

source (unless you are independently wealthy). A good mortgage broker is worth their weight in gold! It is also helpful to have a reliable real estate agent on your team. You don't have to use them on every transaction, but it really pays to have them in your corner. They have resources you don't and can pro-vide
many services for little or no cost. Just don't take advantage of their information without ever involving them. Remember, real estate agents work on commission. Respect their time and expertise and be willing to compensate them if they aren't
part of the final transaction. You also need an escrow and/or title company. They are the closing experts and a good relation-ship with an escrow or title agent can be invaluable. Just remember, since no one works for free, you need to make sure you account for all the purchase expenses when you evaluate the property.
One of the important concepts to keep in mind here as stated earlier is that you make your profit from real estate when you buy the property. You realize that profit when you sell. If you don't buy right, you won't make much, if anything on the other end. That's why you want to check all your figures before you buy.


Financing options to consider in your offer: There are many ways to finance a property purchase, from owner financing to standard bank terms, to investment funding sources. Each person will establish a network of financing that works
best for them. Just remember that you have to be able to meet the terms of the financing until the property is sold. It doesn't pay to purchase a property and then lose it to foreclosure 4 months later because you can’t afford payments. Financing is often one of the most intimidating steps of real estate investing. There is always a risk, but if you have done your homework, the risk
can be managed. Some of the basic financing options, for both the buyer and the lender, are:

·    Traditional bank mortgage (cash to new loan)
·    Split-funded
·    Seller financing
·    Private investors (all cash)


Cash to New Loan Offer:
 This is by far the most common buying strategy. The buyer puts down cash in the form of earnest money and a down payment. Down payments are typically 3-20 percent of the purchase price (amount varies based on buyers credit score). Then, the buyer gets a loan from a bank or mortgage company for the balance. There are thousands of these types of loan programs on the market today with different underwriting requirements. If you are buying this way, try to stay under 80 per-cent loan to value. If you exceed 80 percent, private mortgage insurance or PMI may be required on your loan. This would tack on to your monthly payment, increasing holding costs. Amounts vary so check with your lender if you are going above an 80% loan. There are also varying points and origination fees charged to the buyer. Sometimes you can make the seller pay the majority of them, if you ask.Having the Seller pay the majority of these fees can greatly reduce the buyer's cash requirements, making the sale easier. When I sell property I often pay the buyers fees. I insert a clause like: “Seller agrees to pay all of the buyers non-recurring closing costs and lender fees allowed by lender.” The lender typically has an amount they allow the seller to pay. A creative escrow officer can sometimes move fees around thus reducing your buyers down payment requirement.  You can also have the lender bury many of their fees in the loan itself. This has pros and cons. You end up paying less out of pocket at the closing table, but you may pay far more in the long run with an increased interest rate and increased monthly payments. You need to look at it case by case, and run a comparative amortization schedule to deter-mine your break-even point. If you don't plan to keep the property long-term, this isn't as critical, but be sure to include the higher costs in your holding calculations.

Split Funded Offers:
 This is where you offer all cash, except you stagger the payments. If the purchase price on a property is 100,000. You could offer 50,000 cash now (secured by a private loan or cash) with the balance in 30-60-90 or 180 days. If the property is a major fixer upper the seller realizes, (with your help) this is the best way for them to get their asking price. It is always risky to put cash into a deal unless you close on the property on the 1st advance of funds. You want the property in your name and with a title policy. A lot can go wrong if you structure a split funded offer and take possession, but wait to close at the end of the term. A seller could cloud a title or even die and you would be left with a mess to clean up. However, these offers are easy to do. If you have done your homework, you will know a sellers hot buttons. Often they just need enough money to move or pay a few bills. Sure they want all cash, but ask them, “ if you could get $50,000 now, and the other $50,000 when I get this place fixed up and sold, would that work for you? After all, I will be putting my cash into fixing this place up and I don’t get paid until I get it sold. Are you beginning to see how powerful this is? This also makes it easy to get private money because they are only sitting at a 50-60% loan to value ratio. If the seller likes you and trusts you and it works for them, many times they are willing to wait. Sometimes they like the idea of getting a monthly payment and I will ask them to subordinate to my buyers new loan. This type of offer is awesome because there are no banks to deal with. You would be surprised how many people have excess equity trapped in a property. Most sellers want a good down payment. The amount, of course, varies by market and price range, and then they will carry the financing. Another term for this arrangement is carrying a contract. If structured correctly the seller can easily convert to cash by selling all or a portion of the note at closing. Since this is creative real estate, anything of value could be bartered for the down payment so get creative here. With bank savings rates in the toilet (1-2%) it makes a nice argument for the seller to get a higher rate of return secured with an asset they are comfortable with. This topic is a course in itself and we discuss it in more detail in

All Cash Offers:
When I am buying bread and butter bank REOs for buy/sell transactions, I like to offer ALL CASH with a short closing period, 1-3 weeks. Banks prefer this type of offer, as do distressed sellers (HUD homes take longer). You can use your own money, but in the case of most beginning investors you would need to use private money In submitting the offer include a cashiers check for $1,000 or more. You don’t want to look like a seminar investor. If you are buying at a deep enough discount, private money may not be a problem. You will want a letter from the lender indicating funds are available or better yet have the funds on deposit at the title company. Cash offers are strong offers. Throughout your investing career, you will probably use all of these, and more, to help you purchase properties and close deals. It’s funny but if you are successful and have 12 loans on your credit report it is sometimes harder to get financing then a first time buyer. When buying and selling, traditional mortgage financing is the most demanding and takes the longest to arrange.

Seller financing can be arranged much faster, and often at less cost, and the terms can be anything both parties agree to. With Savings rates currently hovering at 1-2%, showing a seller how they can get 6-8-10% on their money is a good way to go. Private investors can be the most flexible (and most expensive), they are often straight equity lenders, but it can take time to make the contacts and gain their trust. Once you do, they are priceless. Be sure to always follow through and do whatever you can to maintain the terms of the agreement(s). Private investors or private money sources will probably not be available to you when you first start investing. But once you have proven yourself and you start to close some consistent deals, you will begin to attract some of this money. The money usually comes through your contact network, and you never know from which direction. So be friendly to your bankers, your title company, and your Realtors. Work hard at your networking and ask, “Who do you know that wants to earn a safe return as a lender on real estate?”