The Law Of Averages

Real estate investing is by far the most rewarding thing I have ever done. I can honestly say that the worst day I have ever had in real estate, is still better than my best day I ever had at my job. One of the most rewarding parts of real estate is buying a piece of property significantly below market value. Not only does that make you feel good, but all of your friends, partners, and definitely your banker, feels good about it also.

Right now is the best time ever to invest in real estate. I love being in the middle of all of this turmoil. The real estate deals that can be found right now, and in the next 12 –18 months, will quite possibly be the best deals of my life. Ten years from now, I will look back and say “wow that was an amazing time in my life, when most people were running scared I was making it happen.”

One of the best success principles I use on a weekly basis is the “Law Of Averages”. Simply put the law of averages states that the more offers a person puts out, the more offers that will get accepted. One of the main problems in the real estate world right now is there is too much inventory on the market, meaning there are too many houses that are not selling. There is one and only one reason a house does not sell—IT IS PRICED TOO HIGH! The most common problem in the market right now too many people owe more than their house is worth. What happens is this; a person or family decides they need to sell their house one day. They call a real estate agent and ask them to stop by their house and give them a “broker’s price opinion” or BPO. The agent does a market analysis and comes up with a price. Unfortunately the family owes more than what the agent tells them they can sell for. The next thing that happens is a cardinal sin of real estate selling, but it happens every day. The real estate agent agrees to list the house for more than what they think it is worth…and then the house sits there, and sits there, with no offers.

The the following week, the same real estate agent gets another call from a homeowner in the same area, with a house very much like the one the agent just listed. The difference is, this family bought the house right and owes much less than the house is worth. This family has a lot of equity and they could sell for much less, but they think they should get the same price as their neighbor. The agent is now between a rock and a hard place. If the agent lists this 2nd house for much less than the first house, just to get it sold the homeowner will be upset and wonder why their house is worth less than the neighbors’ right down the street. So the agent lists the house for the same price and now both houses are just sitting there with no offers. Now a different neighbor down the street decides to sell his house also. Instead of using an agent he decides to sell his house “by owner”.

His house is just like the other two, so he lists his house for the same price. Now all three houses are just sitting there and the inventory just starts to stack up. There are more houses available than there are buyers, because they are not selling fast enough. Here is where the law of averages comes in. You get together with your real estate agent to buy one of these houses because this is one of the areas you would like to invest in. You determine the price you would be willing to pay for one of these houses and it is 30% below their asking price. Now if you were to only put in an offer on the first house it would get rejected because those homeowners don’t have any equity and CAN’T sell their house that cheap. After that you might give up and think “real estate doesn’t work.” But if you were to put in an offer on all three houses there is a good chance the people in the second house will accept your offer because they have the equity and just want to get the house sold - and since you were the only one that put in an offer-THEY TAKE YOUR OFFER. How do I know all of this? Because I use this exact strategy every week, and I buy houses every week. The reason I get one accepted every week is because I put in over 25 offers a week. People that are trying to sell their homes right now are begging for offers. There are many reasons why someone would be willing to take less than the asking price, just like there are many reasons why someone would ask for more than the actual value. Use the Law of Averages to your advantage in this down market. Go out and put in multiple offers. Those who do will be rewarded greatly in the next few years. Eventually, after you are totally set financially, your family will look back and give thanks to you for taking action. Get it done!

Great article!

Rina's picture

Thanks, Matt, for breaking it down to show WHY making multiple offers works!


very cool

David and Kerry's picture

Thanks for the great info. I've been to see two different realtors in my area and been shot down twice. They keep acting like putting in low offers will tarnish their names. Have to admit i was getting discouraged. So thanks for the pick me up, i have another realator scheduled for tonight.

You are so Right!

BrentB's picture

These Realtor's do not want to work! They just want to meet someone on a Monday show you some houses on a Saturday and sell you one by the following Monday. Realtor's are a dime a dozen but once you find a good one, never let him/her go! Send flowers/gifts on their birthday, take them to lunch, send then thank you note's and use him/her as much as possible. It may take the "Law of averages" to find a good Realtor. You may have to work with 25 Realtor's to find one good one....

Great Info

MyDestiny's picture

Thanks so much for the info. This strategy apply also in many different walks in life. Trying until you find the formula that works for you. Continued success.....Lubertha