Expired

17 Replies

Hey BP-

I am a Seattle local real estate broker starting in investing and am looking for a few pointers to deal with expireds in my market. Am I looking to wholesale to Buy and Hold, rehabers I'm a little green on the subject. Can someone kinda point me in the right direction?

Emory,

This would be a good question for the Seattle Investors Club at the next meeting.  If you are looking to contact expired listings, as a broker, you can try to list it for them, etc.  Also depends on the house and why it didn't sell.  Asking price too high and in nice condition, it is not a wholesale or rehab type property.  If it didn't sell because of condition of home, which could cause it to not get traditional financing, it could be a good property to get under contract and wholesale to a rehabber, if the numbers are right.  

If the price is right and condition is right, it could be a lead for buy and hold, but in this market here, buy and hold is not that easy to find (in Seattle at least).  

From my little experience with expired listings, you need to get their price down from what they are asking.  One good way to do this is to start with their price, back out commissions, repair costs, concessions, etc., then give is an additional discount for a cash offer.  When you explain your offer (discounted) using the reasoning above, you can potentially find leads to wholesale to rehabbers.  

okay so expireds won't really give me an alternative to wholesaling foreclosures. so what could I go after on the mls to increase my leads for wholesaling... PS thanks for the heads up

Perhaps reach out to Julie.  Not sure what you are referring to about wholesaling foreclosures.

Going after leads to wholesale off the MLS is a tough game. Lot's of agents have filters set up to look for MLS properties that fit a certain criteria. We get daily lists from about 5 different agents and might make one offer a week. We expect to get one offer accepted for every 25 offers we make. Numbers game.

Typically, the best wholesale leads seem to be off-market sellers. They will not be on the MLS.

Emory,

Expired listings are a great source of leads if you know what to do with them.  You may find a conventional wholesale deal every once in awhile.  In my opinion, the real money in expired listings is creating either owner financing or doing a lease purchase.  You can wholesale both of those type deals to another investor or an owner occupant. Just work out the terms of the deal and pass it on to someone else (assignment).  You collect a fee and are done!   If the numbers make sense (equity, low payment or great terms) you may want to stay in the middle of the transaction and collect a nice monthly cash flow and a nice payday when your new buyer gets a loan and cashes you out.  Please don't try this without the right type of training and knowledge.  Any type of wholesaling can get you in some trouble if you are not careful. Hope that helps!

Originally posted by @Jeff Rappaport :

Emory,

Expired listings are a great source of leads if you know what to do with them.  You may find a conventional wholesale deal every once in awhile.  In my opinion, the real money in expired listings is creating either owner financing or doing a lease purchase.  You can wholesale both of those type deals to another investor or an owner occupant. Just work out the terms of the deal and pass it on to someone else (assignment).  You collect a fee and are done!   If the numbers make sense (equity, low payment or great terms) you may want to stay in the middle of the transaction and collect a nice monthly cash flow and a nice payday when your new buyer gets a loan and cashes you out.  Please don't try this without the right type of training and knowledge.  Any type of wholesaling can get you in some trouble if you are not careful. Hope that helps!

 This is great info. Thanks Jeff. I will definitely keep this in mind for lease options.

Originally posted by @Emory Crawford :

Hey BP-

I am a Seattle local real estate broker starting in investing and am looking for a few pointers to deal with expireds in my market. Am I looking to wholesale to Buy and Hold, rehabbers I'm a little green on the subject. Can someone kinda point me in the right direction?

 Expireds and cancelled listings are generally overpriced.

I knock on their doors for sub2, wraps, and lease option - lease purchase offers.

I act as a principal buyer.

If you can negotiate well, you can have sellers sell on terms versus sell on cash.

Let's use an example of what we mean by that negotiate well.

Let's say that Bob and Susan Johnson, live at 123 Frost Ave., in Des Moines Iowa. Let's say that they bought at the top of the market. Could be 2005, 2006, or 2007. But say they bought FHA with 3 and 1/2 percent down. Let's say their payoff amount is $200,000. Comparable Sales are $210,000. And market rent is $1200 a month, and their PITI payment is $1359 per month.

Bob and Susan tried to sell an agent for six months. They hired an agent for six months with no written offers. Because they had very little equity, they did not get their asking price of $210,000.

Enter into the situation Gary, who owns a "We Buy and Lease Houses" business.

Gary sends out postcards and yellow letters to houses that were purchased in 2007, 2008, and 2009.

Bob sees postcards and yellow letters come to his house over three months, and ignores all of them. But on the fourth mailing, he calls Gary and tries to get more information.

Note: It is important understand that when you market for motivated sellers, it takes a frequency of 4 to 6 times of the mailing to the same household to get them to call you, the real estate investor.

The conversation goes someone like this:

Bob: Hi, I got this postcard mail and I understand that you buy houses.

Gary: yes thanks so much for calling, I appreciate you giving us a ring, I would like you to just jot down a couple pieces of information on that marketing piece, do you have a pen handy, I'm happy to wait…

Bob: Uh, yeah sure just a second,… I have a pen, shoot.

Gary: Just for your information is what you write down my name, Brian Gibbons that's G-I-B-B-O-N-S, and my cell phone number which is xxx xxx xxxx

This is important because if you like what I have to say then you'll have a way to get a hold of me. So again that's Brian Gibbons, xxx xxx xxxx

Bob: okay great, I got the number.

Gary: I'm sorry... your first name was?

Bob: yes my name is Bob.

Gary: thanks Bob, to put very simply, our company buys houses. If we like your house, the floorplan, etc.... we will give you a written offer. If it doesn't suit what you and your wife were looking for, we will be able to tell you in less than 10 minutes.

However, if we love your house, we will write an offer on the spot. I assume you want to sell your house, otherwise you wouldn't be calling me, right?

Bob: yeah, I guess so.

Gary: just one more thing, if we like the house we just need to look at your house file folder when you bought the house, there's a legal description on the paperwork, if you could show that to us, then we could note the legal description and place that on the offer, is that a problem to have that file folder available so we can just look at the legal description?

Bob: sure, that is not a problem.

Gary: most of the people I talk to work 9 to 5 and it's hard for us to see the house during daylight time, so we generally write offers on the weekends, do both you and your wife work 9 to 5?

Bob: yes by wife works 9 to 5, and so do I.

Gary: okay, I have two slots available on Saturday at 10:30 AM or is Sunday afternoon at 1 o'clock better for you?

Bob: I have to check with my wife but I imagine 1030 am would be better on Saturday.

Gary: let's great, if you can do me a favor and contact your wife, I'm sorry her name was?

Bob: Susie

Gary: great so if you could call Susie and just ask if 1030 is okay, and to reassure you only take 10 minutes for us to say "yes" this is the house we want or "no" its not our kind house that we want to buy. I'll be on time right at 1030, we have a busy day ahead of us. I'll call you 30 minutes before to confirm and let you know that we will be on time. I look forward to your call confirming Susie says it's okay at 1030.

Bob: okay I'll call you right back.

Gary: thank you, I look forward to your call in a couple of minutes.

----------(end)-----------------------

This script helps you get into the house favorable basis to do lease option assignments. It also helps you make sure that both decision-makers are there in case you can bridge over from buying the house for cash to doing a lease option assignment.

PREVIEW OF NEGOTIATION  

The negotiation training summary (for sellers) contains the following five steps:

1. The rapport step

2. the upfront agreement step

3. The motivation step

4. The money step

5. The "what if" step

1. The rapport step

Allowing them to get more 

The rapport step number one, allows you to build rapport with seller, allowing them to get more emotionally while most all with involved with "liking who you are", and "what you're about". 

People want to do business with people that they like and they trust. 

This step takes no more than five minutes, but is very important in the very beginning. The danger of doing this step poorly is that the will not be open to what you have to offer, which is a terms offer.

2. The upfront agreement step

The upfront agreement step is a vital part to having the seller understand that you are (1), in a business to make profit, and (2), you're not there to waste anybody's time, either the sellers time, or your time. If this step is done properly, you will avoid the objection "let me think it over." If this step is not done properly you may have to keep coming back on your appointments, and you will not be able to do one step closes.

3. The motivation step

The motivation step takes a good amount of talent and execution by the real estate investor. Your purpose is to figure out what the real motivation is from the seller, and what their timeline is. We do this by using negative phrasing and NLP, which is neurolinguistic programming. People tell you the truth if you phrase your questions correctly. This motivation step takes sometimes 45 minutes to even two hours. You have to know what their motivation as if you are going to the design a terms offer that makes sense to them. In comparison, the first two steps only take a few minutes.

4. The money step

The money step has to do with the detail of the offer regarding financial terms. If you do a good job on step three above, the money step should be fairly easy.

5. The "what if" step

The "what if" step has to do with throwing out an idea and testing the waters. It does not make a commitment from the real estate investor's perspective, but if the sellers say "yes they would be open to the idea", then you can move further to go from general to specific terms. If you asked them a question, "Would you consider this solution?"

They can say no to that, and your dead as far as the negotiation is concerned.

But if you said something along the lines of,

"Bob and Susie, I don't know if you would consider this a good idea, and you might probably hate it, and I would need to clear it with my business partner, but what if we could find a way to get you a payment every month that would match your PITI payment of $1359, and then pay off your mortgage of $200,000 down the road, would that be something you would even consider... or probably not?"

The "what if step" helps you never have to take a "no" and then pack up your bags because you couldn't close.

Good luck!

Also market to FSBOs, landlords and other wholesalers.

@Emory Crawford  Hi Emory!  I love to see that you are going after it!

Give me a call whenever you have time and we can talk shop.  I'll give you a few ideas to pursue to make the most efficient use of your time.  I look forward to catching up with you! You've got my #.

Happy New Year!  I hope to see you soon at an SIC meeting or a BP meet up!

Expires in a seller's market as well as cancelled are a waste of time because it didn't sell because the seller overpriced it. The expired sellers are often looking for over market values.

On the MLS, look for fixers and zoning opportunities like LR1 and LR2.

Realtors in seattle might be suspicious about an "and/or assigns" on an mls contract and so I would look into making offers from an LLC or land trust.

Originally posted by @Ryland Taniguchi :

Expires in a seller's market as well as cancelled are a waste of time because it didn't sell because the seller overpriced it. The expired sellers are often looking for over market values.

On the MLS, look for fixers and zoning opportunities like LR1 and LR2.

Realtors in seattle might be suspicious about an "and/or assigns" on an mls contract and so I would look into making offers from an LLC or land trust.

 Hi Ryland,

I strongly disagree, Many houses expired and cancelled have 0-3% equity, pretty houses, great neighborhoods.

This is TERMS side, not CASH side.  

Tools are sub2, lease option, wrap, etc.

I have done 100s of them in strong markets and weak markets,  since 1986.

Originally posted by @Brian Gibbons :
Originally posted by @Ryland Taniguchi:

Expires in a seller's market as well as cancelled are a waste of time because it didn't sell because the seller overpriced it. The expired sellers are often looking for over market values.

On the MLS, look for fixers and zoning opportunities like LR1 and LR2.

Realtors in seattle might be suspicious about an "and/or assigns" on an mls contract and so I would look into making offers from an LLC or land trust.

 Hi Ryland,

I strongly disagree, Many houses expired and cancelled have 0-3% equity, pretty houses, great neighborhoods.

This is TERMS side, not CASH side.  

Tools are sub2, lease option, wrap, etc.

I have done 100s of them in strong markets and weak markets,  since 1986.

 Makes sense. I buy 100+ houses a year cash. Since I have access to $8 million to $12 million, I haven't looked at TERMS in a long time.

Probably many ways to skin the cat. But in Washington state I would rather be buying cash than on terms with all the liberal laws here.

"Terms Investing" is sub2 with and w/o a note, JVs with home sellers on a minor rehab, wraps, installment sales, private lenders, JVs with doctors as 50 50 partners, TIC flips, and more

@Ryland Taniguchi  based on actual experience the only issues i've had with the "and/or assigns" is when the seller is a bank or lending institution.  Most brokers don't know about wholesaling and who the "and/or" wording is required.  if fact, of the nearly 100 i've been in personal contact with since Labor Day, only 1 knew of wholesaling, but even he didn't know exactly how it worked.  

Originally posted by @Steven Butala:

@Emory Crawford

Great post. We all have to read a post named "Expired."

Here is my advise. Forget the MLS and every part of it. Someone else got there first. Learn to use data from the county to find way undervalued real estate and then contact the owners through direct mail. I wish you the best.

There are great deals on the MLS but you have to know how to spot something that others don't see like subdivision opportunities and zoning.

Originally posted by @Patrick Britton :

@Ryland Taniguchi  based on actual experience the only issues i've had with the "and/or assigns" is when the seller is a bank or lending institution.  Most brokers don't know about wholesaling and who the "and/or" wording is required.  if fact, of the nearly 100 i've been in personal contact with since Labor Day, only 1 knew of wholesaling, but even he didn't know exactly how it worked.  

It's not whether the agent knows about wholesaling... Many of the bigger firms have designed brokers and and they may not like the "and/or assign" language. We make 30 to 40 MLS offers a week and eventually it will come up as a problem.

I think the land trust is so much easier to execute and less hassle when dealing with other agents. In the land trust, the beneficial interest gets assigned but the trustee remains the same.