You’re at the table. You’re ready for war. Let’s do this. It’s not rocket science. It’s finesse. It’s cunning. It’s knowing when and how to play it.

Making a real estate offer by definition seems to be a simple thing. It’s proving you can pay for a property, on a specified closing date. If repping a buyer, you inform the seller what the buyer wants to pay for the house, and you specify any other terms the buyer wants. If repping a seller, inform the buyer what the seller wants as well as any terms. Easy, right? Wrong. Pay attention.

The moment money appears, things get real and they get real fast. The pressure of the clock is on, down to its final seconds. You have to move; to be quick and precise the nearer you get to the close. Owners begin moving out in their head. Buyers want to get the most for their money, sometimes demanding ever-escalating concessions from the seller. People get weird.

Recently, we almost lost a $14 million sale because the air conditioning units were at life expectancy. The buyer wanted to call the deal off for a $3,500 dollar fix. We ran over there and hired someone to install a new air-conditioning unit with our own money. We handled it. We closed. If you’re not ready, if you don’t know your client, and opponent’s head and heart, then you haven’t paid attention and things will get rough. If you’re armed with your weapons, ready to pull the trigger, then this part will be as fun for you as it is for me.

Settling on the Price

First, because of the laws governing real estate, you must do it by the book. Don’t get sued. Don’t break laws. Don’t lose your license. Don’t get locked up. A trail of paperwork comes in handy if anyone feels discriminated against or cheated later on. No matter whether you are buyer or seller, an offer isn’t an offer until it’s been submitted in writing. Track your paper and follow up. Don’t be negligent. Cover your ass.

Now, in the state of California, real estate offers have a 72-hour expiration date. By law, if you’ve offered or received an offer, you have three days to accept or reject. In an extremely pressurized time frame, a killer real estate agent works hard during that 72 hours.

Prepping for the offer, you size up your opponent, not only the seller, but also the seller’s agent. If you’ve been working the simple formula of open, work, and close in the many micro-deals that got you here, you’re now on the mountain top where the big offers live. You’re primed to attack.

If I’m the agent offering on a property, I cut the time by two-thirds and give the seller 24 hours to respond or I retract the offer. Collapse time to raise your leverage; you’ve now got the other agent moving faster to meet your deadline. I also collapse time because people lose interest quickly. A buyer may say, “I love this house!” on Tuesday and start second-guessing themselves by Wednesday.

Real estate time requires you move because pressures move in from all directions; you’re now managing the seller’s needs along with your buyer’s. He or she now has a day to find the other offers if you’re the first, and we all know the first is usually the best. If this agent is off their game in any way, they have no time to recreate what happened. That’s why you must view everything you say and do, even the first conversation, as part of a close. That blink of an eye between offer and answer is huge opportunity for a really smart seller.

Call the other agent before you offer. Find out if other offers have come in. “Expecting any day now” is often the answer. That doesn’t count. Offers in hand are what matters.

If you’re dealing with young or new-to-LA agents, get them to dinner. During a friendly wine-laced meal, I find out what I need to know. I befriend the other agents to get information and set the tone for a positive exchange because regardless of what happens in this deal, I’ll work with these people again. That’s real estate, where the same 15 people sell 95% of the town. Sometimes, we make a deal to make a deal. We finalize this one and co-list one of mine. We’re always recruiting for good cop/bad selling.

That said, everyone has a personal style. Find yours, play to theirs, and then throw them off. Study them. Learn them. Know them. You’ll strategize more effectively. Know what to expect. Know what you want. Then get in their face and dig for the following:

• Do you have any offers? (They will tell you this.)
• How many? (They might tell you this.)
• How much? (Highly doubtful anyone would ever tell you this.)
• Are you representing any of the offers? (Important: If the agent is repping both seller and buyer, they’ll want to make both commissions. In California, you must disclose if you represent both the buyer and the seller.)
• What matters most to the seller? Cash and financing? Rent back? How motivated is this seller? How can we make a deal?

This is a reconnaissance mission and every detail helps. If the other agent is young and inexperienced, I may have a younger agent make the call because I don’t want anyone on the other end getting intimidated or defensive. I always tell the agent I have a client interested in their house as well as one other.

The “one other” is unknowable to the other agent and I’ve just inserted some leverage in a spot where I didn’t have any a few seconds before. “Two houses” depowers the other agent and lessens the chance he or she will try to hardball me. I mean, come on, it’s not like we run out of houses in LA. The shark knows there are many fish in the sea. I always sow seeds of doubt, hold facts close-to-the-vest, and hint at that I know something that is, in reality, still unknown. It’s all leverage.

Know your goals. How badly does the client want the house? Know your terms – the financials, including offer parameters, market value, financing, inspections, and schedule. Your goals are tied to your client’s feelings about the house. Ask your client: Is this a good house or a great one? Do you like it or love it? Is this the one you pray won’t get away, or are there other properties you liked or loved as much or more?

Get a picture of where the client’s emotions are. Take the client from Kahneman’s System 1 thinking (fast and emotional) into System 2 (slow and analytical). Discuss every possible scenario, from acceptance to losing the house. Pad the landing. Often, it takes not getting a property to get a client to pursue another aggressively. Some gotta lose to win.

Remember the golden hammers you picked up during your interactions with the seller, the bits of essential insider knowledge? Google the owner of the property. Is there any worthwhile information there? Do you know the motivations of why the house is changing hands? The seller’s situation should dictate how you offer. Money and its rate of flow to the seller will always be your two biggest hammers when buying a property.

Here’s the thing. Every client who has ever lived is afraid of overpaying. And if they’re whining now, just wait until they see your commission check. That’s why I always do three things: first, I advise and reiterate to clients that it’s their decision; second, I reaffirm my own expertise and interpret what the market is saying; and third, I set up the financial guardrails against paying more than the house is worth. If the client has a lender, that bank or financial institution won’t lend more than the value either. If your clients are rich like mine, they are not as concerned with overpaying for inspections. If the clients are rich, they’ll pay what they feel like paying and have the money to fix what they need to fix.

If the property is an investment, different questions need to be asked. These questions will determine the offer. What are the intentions? Flip or rent? Different laws cover each. What’s the condition of the property? Can you get it up to speed, renovate it to meet the market with the money you have? Is it a good deal or just a buy? Keep in mind investing is much less emotional than a house to make a home in, or at least it should be.

If you want to make money in the rental market, my advice is to buy listings that have been around longer than the average days on sale in your market (DOM). You’ll get a better deal. A quick way to think about it is, can you get 1% of the total cost in rent each month? That means if you pay $100,000 for the property, you get a $1,000 a month income stream, and so on. This will dictate your offer and you can use this model as a map in dealing with the other agent when making that offer.

Another way to parse it is by monthly payment. If you’re in the rental business, you may be paying cash as you add to your empire. If you get a mortgage, figure out your monthly outlay of costs. Take your monthly mortgage payment, plus your property taxes divided by 12, utility costs, and a 5 to 10% contingency for repairs for tenants. Add those figures up. If you can rent the place for hundreds, or even thousands, more, do it. That’s an investing snapshot, an easy formula to remember before you dive into the details in guiding the offer.

Sit down with your client. With their feelings in mind, start talking offers. Base the discussion on real estate facts now; take the emotion out of it. What’s the right offer on this property and how do you get to it?

If there is financing, what’s the client cleared to? If they’re working with a lender, your client will have a firm threshold. If it’s cash, there may be more room. Inform your client that sellers often weigh offers based on how the money is delivered. Cash is fast. Financing has a longer tail and lots and lots of paperwork. You can compensate for financing by sweetening the deal with other terms, but the cash usually wins.

Neighborhood comps are the touchstone of offers. Which houses – with the same numbers of beds, bathrooms, location, and equivalent upgrades – sold in the last six months within a mile radius? Drop the highest and lowest sales price (for the best and worst property), add the remaining “sold” numbers together, divide by the number of houses, and get an average. Next, calculate the DOM, and that includes all the time it spent on the market.

If a house won’t move, there’s usually a change of agents coming and it disappears and reappears on the market. Sometimes, sellers sit out a season if it won’t sell. Be sure to know the full DOM. It’s important to negotiations and can provide an important hammer. If the DOM is higher than the market average, you may get a real deal. If your client is full throttle in love, and the DOM is two days, welcome to the fast lane. If you’re two days in and the other agent is already getting offers, go in strong and build as much sweetness into the deal as you can.

A word of caution: We’ll go through all the ways to make a deal better without overextending, but we’d never want to overpay. If the DOM is on the high side, say 92 days in a 50-day average market, offer on the lower side of your comps. You may get a true bargain and will definitely get a counter.

The offer size should also reflect the market. In a buyer’s market, the excess inventory provides leverage. If you’re the buyer in a sellers’ market, I always advise my clients to offer on more than one house; hedge their bets and always, always have a Plan B (BANTA, best alternative to a negotiated agreement). Understand the market before offering or you’re flying blind. Real estate agents obsess about the status of the market, and with good reason. It informs most every move a real estate buyer or seller makes.

Reconfirm the neighborhood and exact location of the house by making sure your information on them is up to date. Don’t take anything online as gospel. All of the big online MLS services use the plans filed under the first building permit, even though they are rarely updated while houses are constantly being renovated and changing. Does the house border a green zone or an alleyway beside a mall parking lot? Is this location really good for the buyer who must commute? School needs? Lifestyle? Property taxes? Utilities? Use this in calculating your offer and be prepared to use this in negotiations.

Also, revisit the specific issues of the house. How old are the appliances? Are there any necessary renovations? How are systems, such as plumbing and air? These are the fixes that must be done now. List your client’s immediate needs, estimate the costs, and take it off the offer. Inspections during contingency may bring more. The math tells you the facts of the offer. It’s the rational process you use to get to the final number.

Your last act is that heart-to-heart with the buyer: How hard do you want me to fight for it?

I’m working with a young couple on their first house right now. Their parents are giving them the money to buy a house – all cash, $1.5 million, a pretty cool wedding gift if you ask me. We saw a two-bedroom house in Silver Lake on Wednesday, went back twice the same day, and they fell in love. I spoke with the seller and immediately began working the System 2 thinking. He wasn’t going to entertain any offers until the upcoming Monday. A Google search of the owner told me he is an attorney, married, and they live off premises.

I initiated a strategy with my clients and decided to go in at full ask on Thursday, putting a 24-hour time cap on the offer. I never wait! I mean, why? Going in early doesn’t have any meaning legally, but I’ve planted a flag to let them know my clients are as serious as hell. Besides, the seller has to respond immediately, and in the age of technology, that means immediately no matter where on earth they might be. As I said, this is a 24/7 job. It’s my way of life.

My buyers then wrote a letter to appeal to the seller’s heart. All of this is a risk but my clients don’t have another half million in cash lying about. What we have is speed, cash, and full-ask. We came in early as testament to our intention. If these sellers want cash right now and someone who loves the house, our offer has a chance. If they call soliciting a counteroffer, we’ll see what is possible. Remember, every counteroffer restarts the process and you’re back in the game.

My newlyweds didn’t get the house in Silver Lake. The seller wanted to wait and ended up with multiple offers over asking. Since then, these buyers have put in offers on two more houses. They have taken my advice to go in aggressively on multiple properties and it’s just a matter of time until the planets align and they get a great house. Intelligent responsive clients really up the level of pursuit. They didn’t throw a fit or get discouraged when they didn’t get the first house; they rolled up their sleeves and went to work. Those are some great clients.

I tell my clients all the time, make an offer. Put the contingencies on and order the inspections. If you change your mind in the next 10 days or whatever the agreed upon time frame, or if the house doesn’t pass its tests, withdraw the offer. You won’t lose any money except for the cost of inspection, which is a few grand, nominal in the scheme of property purchase. As I like to say, “It’s just the cost of doing business.” If you’re competing hard for houses in a seller’s market, offer and don’t stop looking.

Inspections and Contingencies

In broad terms, the inspection covers heating and cooling systems, electrical, plumbing, termite, mold, foundation, roofing, drainage, structural, and more. The report sometimes will not cover issues such as lead, rodents, or chemicals and gasses. You must ask and no doubt, the cost of the inspection will rise. It’s worth it though; anything is worth not buying a defective house.

Good home inspectors alert you to problems and assist in pricing out solutions. Say there are termites in the deck. If they’re good at their job, they’ll connect you with a good exterminator; you get the estimate and negotiate it off the final offer – that is if the problem is surmountable and your client still wants the house.

Now, with any offer, an earnest money deposit (EMD) is required as a declaration of intention. You have to put in some skin up front in real estate. Without this deposit, one buyer could run all over town, squeezing off written offers and taking great houses off the market, holding the market hostage. The EMD, like almost all things in real estate, can be negotiated.

In most markets, including California, it’s typically 3% of the purchase price and it’s held as a credit against closing costs and the down payment. If you’re offering in a tough seller’s market, the EMD may shoot as high as 10%; it’s another way to create leverage when trying to win a house. If your client loves a house, however, the bigger the EMD, the better the chance for the offer. Nothing says “I love you” to a seller like money.

Also, you can build in an escalator clause into the offer. Hot markets require you stay out in front of your offers. That means, if you really want a house, you offer and have a strategy to win it over the other offers. Online auction sites such as eBay use the same escalator method, which means you meet the highest price automatically and raise it X amount whenever a higher offer is received. This continues until you reach an agreed upon threshold.

Remember, in a highly competitive situation, if you set a threshold above the value of the house just to get the house, you may have to pay the difference to the seller because the bank won’t. If this doesn’t get your offer accepted and your client is still in love with the house, you’re going into sudden death, the final shoot out. Or are you?

In a seller’s market, don’t freak out and slap on an escalator just because, and then skip the appraisal to sweeten the pot, or you may end up with a property worth less than you paid for it. That’s a real estate fumble on your own goal line. Use an escalator when the client is in love with a house and there are other offers besides yours. If you’re using a lender’s money, they flat out won’t let you drop the appraisal contingencies. They don’t want to be stuck with too much house either. If the house appraises lower than market, the seller must drop the price or you walk. Others may be all cash and stay in, but you walk.

Sometimes you need to stand strong. You make a “best and final” offer. Best and finals are standard tools for the buyer. You put together an offer based on your calculations on the value of the house as well as any terms you think will make the offer most desirable to the seller. You can put “best and final” on anything and then submit again after a rejection by the seller, so the term doesn’t mean much, unless you want it to. I’ve submitted best and finals to be rejected and, if the client is in aggressive pursuit, I counter anyway. In a hot seller’s market, standard protocols do not matter.

Now, never offer more than the house is worth in a best and final. It’s a mistake unless you know you will long for this house forever if you don’t get it. Don’t get shook by using a best and final. Stick to the price you know is right. If you want to go over, go over. It’s like the question “how much is this house worth” turning to “how much is this house worth to me?” Both questions are important. Only the buyer can decide – or a real estate agent with a heart of gold.

Enter Matt. We had a client, a dot-com billionaire, dreaming of a particular house in Pacific Palisades. He was relocating to Los Angeles to start a new business and would be relocating his entire staff. He was overpaying for the house he wanted by $2 million, which was a drop in the bucket for him. It was keeping my brother up at night.

I told Matt to drop it. That it was the client’s dream home and the money didn’t matter to him. Even after telling the client multiple times that he was overpaying by $2 million, Matt still couldn’t let it go. He searched nonstop for a week and found the client a house he loved even more, even though it was $6 million less than the other house. The client bought it. It’s not always about commission; it’s about relationships. Now Matt is sleeping again and since then, two of the dozens of CEOs involved in his new endeavor have contacted Matt because they need houses. I suspect many more will call.

So, you never want to overpay, but how do you sweeten terms without overpaying? What motivates the seller? Is it just money or is time a factor? Are they selling because of divorce? Is this a move to start a new job? Is the calendar a part of the equation? Is this part of an estate that survivors long to settle? If they would like to stay in the house offer a rent-back deal. Let them stay rent-free for an additional two months after closing. The point is, negotiate. Make a deal. You don’t know what is possible until you ask.

Real estate offers share a recurring theme. Most sellers are always going to hint at a world of offers about to flow in. Make sure you have proof or you’re just going to bid against yourself. Don’t do that. Ever. To concede small meaningless issues during negotiations is one thing – hell, let them feel like they are winning so the agent can look like a star to their seller – but don’t offer more money. If you feel you’re being played, retract the offer. There are just too many great houses to buy. When you find one, offer cash – if not for the whole deal, for as much of it as possible.

When in seller’s markets, I suggest you go in with the cleanest of offers. Get cash, or get as much of the offer in cash as possible. Don’t hang a bunch of contingencies on the offer and collapse the schedule of due diligence. A 14-day inspection period works, but 10 days is even better.

If you’re wealthy and your attitude is that you’ll fix what is broken because it’s only money, skip some of the due diligence. A lot of my clients do. Outside financing slows a deal, but it’s still the way of majority of real estate transactions in the United States are handled. Lenders slow the process because they are professionals who double check and move paperwork on all aspects of the deal.

More Deal Sweetener Details

Again, negotiate and close any kind of real estate deal that you and the seller both agree on that doesn’t break any laws. This is a creative business; find ways to the seller’s head and heart. I’ve already described how cash payments, EMDs, escalators, and rent-backs can help sweeten the deal. Here are some additional points to consider:

As for Curve Balls: Play by Your Rules and Get the House

If your client truly wants the house – will die without the house – and the other agent comes back to you after “best and final” to reject your offer, bid again! Sure you’re back in when you said that was your last offer, but who cares. Money talks. If you want the house, keep going back and get it. The seller can decline the other highest bid and accept your counteroffer. It happens all the time. Like I said, there’s no loyalty in real estate, so don’t expect it. Don’t wait to make offers. Go back until you’re heard.

As a real-deal “Hollywood” agent, it’s also important for you to be aware of a few curve balls out of the playbook. Be ready to deal with one or more of the following scenarios.