When Should I Stop Underwriting an Apartment Deal? – Ask The Expert

We are back with the third installment of our “Ask The Expert” series, where experience real estate professionals answer your questions about apartment syndications and other investment strategies.

If you have a question you would like answered by a real estate expert, let us know in the comment section of this blog post.

The first two “Ask the Expert” posts were about multifamily loans. In particular, about the pros and cons of fixed rate and floating rate loans and the pros and cons of securing an interest-only loan and paying down the principal.

This week’s question is about how to approach multifamily deals that have “whisper prices”.

A whisper price is the price that either the seller or the broker wants or believes the value of the property to be.

The question we asked the expert is: “at what point do you pass on a deal when you cannot hit your return projections using the current whisper price? Do you continue underwriting with a price that is lower than the whisper price? What is the cutoff point? 20% below the whisper price? 10%? In other words, how do you know when to stop and not look into a deal anymore?”

The expert we asked this question to is Scott Lebenhart, who is the Director of Acquisitions at Ashcroft Capital, and here is what he said:


We often find that brokers and sellers set their expectations too high when creating a “whisper price”. On the other hand, we have seen deals that far surpass the whisper pricing. While it’s important to understand the expectations of the seller, we tend to put the whisper pricing aside until we have completed our initial review of the deal.

The initial review consists of, first, looking at the property from a high level. Is this a property we want to own? Do we like the location? Is the quality of the asset what we look for? Does it fit the profile of deals we are trying to buy (in our case, value add deals)? If the deal passes these questions, then we start our initial underwriting the deal. After the initial underwriting, we get a general idea of what we feel the property is worth to us in order to hit our desired returns. We then compare this to the whisper price to get a gauge of how close or far we are from the seller’s expectations. If we are significantly off on pricing, we usually have a conversation with the broker or seller and give them our initial feedback to explain that pricing seems a bit aggressive to us. This will typically elicit a response and the broker/seller will provide their feedback that maybe other potential buyers have the same reaction or perhaps that other buyers think the whisper price is reasonable. Depending on this response, this will typically dictate how much additional time we will spend on the deal. If it is a deal that is good fit for us and a property that we want to own, we will continue to make an effort to put our best foot forward. This includes doing some more detailed underwriting such as calling rent comps, discussing the budget with our property management company, speaking to potential lenders, etc.

After completing either just our initial underwriting or performing a more detailed analysis of the property, we will submit a Letter of Intent (LOI) at a price that we are comfortable at or we have another conversation with the broker/seller about where other LOIs have been submitted. Usually, a bid process with have more than one round of bidding, so after this first round we get a general idea of where the “market” is valuing this property as opposed to the “whisper” price. If our value is in line with the other groups bidding on the property, then we will continue to pursue the transaction with the hope of buying it.


In summary, you should always take the whisper price with a grain of salt. The buyers are the ones who tell the seller and the brokers how much the property is actually worth, because they are the ones who are underwriting the deal and formulating a business plan. If a deal doesn’t pencil in at the whisper prices, let the seller and brokers know. Maybe they’ve received similar feedback from other buyers. Submit an LOI at your price and if your offer price is in line with other buyers, continuing pursuing the opportunity.


Would you like to Ask the Expert a question? Let us know in the comment section below! 

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Joe Fairless