The Offer Process: New Listings, Tours, LOI’S and Being Awarded the Deal with Josh Cantwell – EP 219

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Ok, you’ve made up your mind and you’re prepared to jump into multifamily real estate. You want to buy something, but where do you start? What steps need to be taken in order to actually make an offer and secure a deal? 

In this episode of the podcast, I’ll be walking you through what many investors call “The Process.” You’ll learn the framework I use, from gathering all the necessary info from brokers, to underwriting the deal, to creating a letter of intent, and every step in between for being awarded a deal. 

I’ve been through this process dozens of times, and have it dialed in. So, if you’re a new or intermediate investor who has never made an offer on a broker-listed deal, this is a high-level overview, just for you!

Key Takeaways with Josh Cantwell

  • Step 1: Finding brokers and getting access to deals. 
  • Step 2: Evaluating the offering memorandum and financials.
  • Step 3: Underwriting the deal.
  • Step 4: Scheduling a tour of the property and the first call for offers. 
  • Step 5: Follow-up phone calls with the listing broker to gather more information
  • Step 6: Writing your first LOI
  • Step 7: Waiting for a response from the broker.
  • Step 8: Taking the top 5-6 offers
  • Step 9: Second call for offer date for the top offers
  • Step 10: Submitting your second LOI and narrowing down the top 2 buyers
  • Step 11: Third call for offers and then seller picks a buyer and awards the deal 
  • Step 12: LOI is sent to the attorneys and the purchase and sales agreement is completed.

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Josh Cantwell: Hey, guys. Welcome back to Accelerated Real Estate Investor with Josh Cantwell. So excited to be back with you and share some ideas. I am currently in the middle of making and have made two large offers on a 360-unit and a 250-unit, $20 million offer and a $12.5 million offer. And in both of these scenarios, we went through what’s called The Process. A lot of the brokers call this The Process. It’s essentially their process for getting a new listing, making it available to potential buyers, touring the property, receiving letters of intent, and then awarding the deal to a possible buyer. So, if you’re a new investor or an intermediate investor and you’ve never made an offer on a $20 million deal or $5 million deal or whatever, and you are in the process of trying to understand, well, how does actual offering process work, that’s exactly what I’m going to explain in this podcast. I’m going to take you from hopping in on broker websites to downloading the packet, to underwriting the deal, to start to receive the email broadcast, to making the letter of intent, to ultimately being awarded the deal. That’s exactly what you’re going to learn in this episode. I’m so excited to share with you. Here we go with our next podcast solocast on The Process. Here we go. 




Josh Cantwell: So, well, I explained it in the introduction. We’re going through The Process right now. We’ve gone through these dozens of times to try to win and be awarded a deal that’s listed through a broker. Brokers work very hard to meet with motivated sellers, sometimes for months or years and years of building relationships until they ultimately are awarded a listing. And then when the brokers awarded the listing, the broker typically has a discussion with the seller and say, “Hey, how do you want me to run this process? How do you want me to run the listing process? Do you want to keep this off-market and kind of show this to a couple of buyers and bring them in, kind of secretive and just kind of bring them in and show it to a few people who are qualified? Or do you want me to run the process of bringing in every possible buyer and hopefully get them into a bidding war?” And some sellers prefer the bidding war to get the most possible. Other sellers prefer the process of keeping the property off-market. What we’re going to talk about today is the bidding war process, the bidding war. 


Okay. So, here’s really how it goes. If you want to get in the game in this, it really comes down to a few simple steps. Step number one is to opt-in on as many broker websites into their back-office portals as possible. So, you find guys, maybe it’s Cushman & Wakefield, maybe it’s Newmark, maybe it’s Marcus & Millichap, Colliers International, CBRE. They all have websites where you can go see and log in and essentially opt-in to their back-office portal. You don’t even have to talk to anybody to do this, okay? It’s as simple as going online, searching for commercial brokers, finding commercial brokers in your markets that you want to work, finding their websites, finding the place on their website where you can opt-in. You are now on their list and you typically immediately get access to their back-office portal. If they have deals that they’re selling, you can begin to download the packet. You are also now on their email broadcasting list. So, now if they have a deal, you’re going to start to receive the emails. 


Step number two, once you’re in that back-office portal, assuming they have a deal, you can download the packet. The packet is essentially the offering memorandum and the financials that they’re putting up for prospective buyers to download. That typically includes, one, the offering memorandum; two, the T3; three, the T12; four, last year’s financials or the T24; five, the rent roll; and then 6, some sort of investment summary or maybe some sort of term sheet or some sort of like executive summary, usually a one or two-pager. Because the offering memorandum can be 50 pages long, sometimes they have a short summary. So, it’s really those six things that’s considered the packet that you can download when you want to evaluate a deal. 


Step number three is to underwrite the deal. Underwrite the deal. I’ve done lots of other podcast trainings on underwriting so I’m not going to cover that today but you’re going to underwrite the deal and you’re going to do things like put in the current financials. You’re going to pull the comps and find out what the average rent can be at stabilization. What can you push the income to the other income? What’s the vacancy factor? The expense ratio? Determine your net operating income and then divide by your stabilized cap rate. Okay. Divide by your stabilized cap rate to determine what your future value is going to be. Okay. So, that’s all part of underrating. I know I just covered that in 30 seconds. I’ve done lots of other trainings and podcasts on underwritings, so it’s way longer than I have for today. 


Step number four is now that you’re opted in on the back-office portal, the listing agent, the listing broker is going to send a series of emails. And it’s usually something like this. Number one, they send a “Coming Soon” email. Number two, they’re going to say, “Tours are now available.” Number three, they’re going to send another email that says, “Don’t forget to schedule your tour.” Number four, they send another email that says, “Hey, we’re going to have a call for offers in three weeks. Don’t forget to schedule your tour.” Number five, they’re going to send, “Hey, there’s a call for offer in two weeks.” There’s obviously a deadline, a specific date. And then finally, number six, they’re going to say, “Hey, the call for offers is this week.” Let’s say it’s in three days. Sometimes they send it’s a, “Hey, the call for offers is tomorrow,” or the call for offers is in four days or five days or a week but that’s often email number six is that they say, “Hey, there’s a call for offer coming, the last day to submit your deal.” So, now you’re on the back-office, you’re on their email marketing list. So, that’s number four is the call for offers. 


Number five is that you’re going to have these follow-up phone calls with the listing broker. So, while this is all going on and they’re doing tours, they’re doing showings. Let’s say you do a tour, you have questions. Obviously, number five is there’s the opportunity to go back and forth with the broker, learn more information, request more information, see what the interest level is, those types of things. 


Number six is you’re going to write your LOI. You’re going to email it to the listing broker or you’re going to call the listing broker telling him it’s coming and send him the LOI on or before the call for offer date. 


Number seven, you’re going to sit and wait. You’re going to wait probably two to four days and you’re going to wait for a response from the broker. 


Number eight, the broker is going to say, “Hey, there is X amount of offers.” Let’s say there’s 10 offers. Let’s say there’s 20 offers. And the broker is going to come back and say, “Hey, we’re going to take the top five to six offers and we’re going to have a second call for offer date with only those top five or six.” 


Number nine, they’re going to set this second call for offer date. It’s usually about three to four days after the original call for offer date. Now, they take the top five or six buyers and they say, “Hey, here’s a new call for offer date. If you have any more gas left in the tank, can you submit another offer and can you get any higher? Please submit that.” 


Number 10, you’re going to go ahead and submit a maybe updated, maybe more aggressive, a little bit higher price, maybe a little bit better terms. Your second LOI. 


Number 10, you’re going to wait. You’re going to wait again. You’re going to wait, and then that broker may have a final top two buyers, typically highest price. At this point, if you’re talking about a $10 million deal or $20 million deal, $30 million, $40 million deal, these are all going to be very qualified buyers, very qualified buyers. So, all the buyers are qualified, all the buyers can close. So, typically, it’s all about price at this point. 


So, number 11, the broker may have a third call for offers with these top two buyers and say, “Hey, does anybody have any more gas up in the tank? Can anybody do anything a little bit more aggressive, a little bit higher price, a little bit better terms?” And then you wait again for another two days and the seller then picks a buyer and awards the deal. 


Finally, the final step is that the LOI then gets sent to the buyers’ and the sellers’ attorneys and they work on the purchase and sales agreement. It usually takes two to four weeks to nail down the PSA and then your earnest money is due. So, that very process I’m going through right now, I’ve been through it many times before, but I’m going through it right now in two additional deals. And there’s a JV deal of 446-unit in Houston that we just went through that process and I’m considering a joint venture partnership with my buddy, George. And if we’re going to get involved in that deal with George, he just went through the process very, very, very similar. 


So, those are the steps that you should expect when you were going through and making an offer on a broker-listed deal that the broker is taking out to the public. 




Josh Cantwell: There you have it, guys. I hope you enjoyed that solocast, that training on The Process to work with a broker with an active listing. If you enjoyed it, leave us a five-star rating and review. Literally, please open up your phone right now. Go to wherever you get your podcasts, iTunes, Spotify, whatever. Tap the little button that gives us a five-star rating. Open it up, type in a few words, leave us a little review. Don’t forget to hit the subscribe button as well. I always love doing these solocasts and bringing you guys real-world information on the actual stuff that we go through every single day. I hope you enjoyed it. We’ll see you next time on Accelerated Real Estate Investor.


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