Make Offer
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How do I make submit a lump sum offer to the IRS to settle my back taxes?
Want to make offer to settle as easily as possible in a fair manner from taxes that were not paid during a period I became ill. The IRS has no mercy.
An Offer in Compromise is a settlement with IRS where you pay less than 100 cents for every dollar you owe and IRS forgives the rest. It will do this if it determines you are offering as much or more as it could collect from you through monthly payments or seizing your property. In most cases mercy is not a consideration, just your ability to pay.
The amount you have to pay is, to use the IRS jargon, is "an amount that represents the reasonable collection potential of the account." This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.
For example, if you had a car worth $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer a lump sum of 80% of the $10,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed. Your own affairs are likely to be more complicated.
I am an enrolled agent, licensed by the US Treasury Department who specializes in taxpayers who have large unpaid tax bills and prepare these for clients. You do not have to have a representative but the process can be pretty intimidating if you haven't had any experience. You would pay professional fees to a representative to provide this. That decision is up to you.
I got an offer for a client who owed a quarter million dollar liability accepted at 1 cent on the dollar. Many other clients have not qualified. The average nationwide for accepted offers is closer to about 17 cents on the dollar. On a case by case basis, this figure is meaningless. Your case might also dictate an entirely different approach including getting the whole account put on ice for a few years or filing for bankruptcy or actually paying it in full over several years.
If you want to hire a professional representative--enrolled agent, CPA or attorney--stay away from the ones that advertise on cable TV. Their fees can be heart stopping. Mine are less than half of what the "As Seen on TV" firms charge. The best representative in these cases is an enrolled agent with a collection background. If you want additional information outside this forum, you can email me through my profile.
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Low Ball Home Offers
The bad news is that your low ball home offers are not likely to be accepted. The good news is that they work anyhow. Let's look at why that is.
Most real estate sells for a bit less than the asking price, but a "low ball" offer on a home is one that's lower than the usual discount. For example, if most of the homes in your area sell for two or three percent less than the asking price, and you try to get a house for 15% less, that will be considered a low ball offer. It will generally be frowned on by the real estate agent, which is irrelevant. If you have a good reason to do so, just make your offer.
What's a good reason to make a low offer? It might be necessary. You may only be able to borrow a certain amount, and so you need a lower price for a given home. You might need to keep payments lower so you can get cash flow from a rental house. You might just want to buy low and sell for a profit. Whatever your personal or investment reasons, the idea is that you only get a deal if you ask. But will it work? Will the seller accept that low price? Very rarely, but that's okay as long as you understand the process.
If you need a home right now, don't go around offering 20% less than the asking prices. You probably don't have time to waste trying to find that one-in-a-hundred sellers who will say yes. On the other hand, If you are an investor and it takes two months and a hundred offers to get a deal you can make $20,000 profit on, why not do it? Refine your technique and you might get one-in-thirty to say yes. That may sound like bad odds, but what if you made thirty offers per month? You would be making 12 profitable deals per year, right?
How To Make Low Ball Offers
Perhaps the most important point to make about low ball offers is that you don't need to ever have one accepted to make money with them. That's because a seller will often make a counter-offer. He is asking, $210,000, for example, you offer $162,000, and he comes back with $175,000. If that suit your purpose you say yes.
One of the primary functions of a low offer is to lower expectations. I was once trying to sell my car and the first offer I had was for half of what I was asking. I was shocked, and said no. But it got me doubting my estimate of value, and I was ready to accept almost any offer higher than that first one. That's how the process works. Here are some other pointers.
Make a lot of offers. Some investors make offers without even looking at the houses to save time. They just write it up at 25% less than the asking price and include a good inspection clause so they can back out of the deal if the home has any serious issues. Of course most offers made this way are rejected, but the idea is to make the process efficient so that one-in-a-hundred can be found more quickly.
See uncertainty as an opportunity. Uncertainty does two things. It scares away buyers, or causes them to make really low offers. It simultaneously scares sellers into accepting less than they otherwise would. Both of these effects are good for an informed investor.
For example, I recently saw a fixer upper with a price of $50,000 get an offer for $5,000. The buyer probably guessed that it was worth more than that, but was uncertain about the repair costs. The seller said no, but was now probably even less certain about the asking price. An investor with the skills and knowledge to say with some confidence, "That will take $20,000 to fix up and will sell for $90,000, might have profitable buy at $30,000 (and the seller might jump on that offer after the first one).
With unique properties uncertainty is a given. This is why Donald Trump was able to buy a 25 million dollar home for 5 million, and why Richard Branson could buy a 3 million pound Caribbean island for just 180,000 pounds. With both islands and high-priced estates nobody can say for certain what the value is. The lesson is to go low when the property is not easily priced.
In fact, some uncertainty is almost a requirement. Why would a seller ever accept 20% less on a home if it is the similar to the other homes around it and they are all selling for close to asking price or appraised value? In other words, choose the right homes to make these offers on if you want to do better than one-in-a-thousand. The right homes include homes that are unique, have problems, have been on the market a while, have very motivated sellers, or have just been listed.
Let the sellers know why they should accept your low offers. List the problems you see, especially those that the sellers may not be aware of. But do this on paper; don't confront sellers with their home's flaws. You want to be nice. In fact, apart from the price, give them anything they want if it won't cost you much, like a fast closing, time to move, or a higher interest rate if seller financing is involved (and especially if you'll be selling soon anyhow).
To sum up, your goal is to get some of your low ball home offers accepted (maybe just one). So choose the right homes to begin with, see the first offer as a negotiating ploy, and be nice to the seller. Then keep trying until you have a deal.
About the Author
Copyright Steve Gillman. To see a photo of the house we bought for $17,500, get a free ebook on how to buy Cheap Homes, and a free real estate investing course, visit: http://www.HousesUnderFiftyThousand.com
Filed under Wedding Dresses by on Jun 29th, 2009.


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