Wholesale Buying Strategy: Owner Wants More Than Property Worth

31 Replies

Hello and good afternoon everyone.

I'm in California and have a seller who wants a bit more for their property than it's seemingly worth.

The proper is worth $67,512 the seller wants $90,000, and has a loan of $20,000 on the home. The lot size is 5,967 sq ft, it's an older home built in 1937 and days on market is about 71 days.

It is currently listed with a Real Estate agent but the listing comes to an end the beginning of next month.

The only benefit I can see to offset her asking price is that the property is zoned for building 3 properties on the lot.

I am looking to wholesale/quickturn the property to my list of buyers.

What are some strategies I could use to either get the seller to come down on her price (she has already come down from $95.000 to $90.000 when I asked her) and how might other investors or cash buyers look at this deal?

I look forward to your comments and feedback.

Ray

Did you show the seller comps in the area? Make the seller a cash offer.

Joe Gore

You said it is zoned for 3 lots. Have you included that value in your calculation? If not you may be the one undervaluing the property not the seller. 

With the possible exception of the above, clearly the seller is not motivated. I wouldn't waste my time. 

Ray your profile says "just starting." You are making a common mistake of new investors; trying to make a deal out of something that is clearly not a deal.  There are probably 10,000+ houses for sale within an hour or two of you. Why are you focusing on this one?

Make an offer that makes sense to you, then move on.

Thanks for the quick reply Joe.

No I haven't shown her comps in the area. After talking to her and seeing the zestimate, I wanted to get some other peoples opinions and feedback on this. 

However, I believe she knows that the asking price is high. She kept reiterating she bought the property for the vision and I have to see the vision for the property... 

So after seeing the zoning for 3 houses on the lot, I thought I would get some input on this.

And I am making her an all cash offer. We discussed this on the phone.

By the way, what's a good site for comps? I was using findcompsnow.com but it has changed and the information doesn't seem to be what I am looking for.

Originally posted by @Ned Carey:

You said it is zoned for 3 lots. Have you included that value in your calculation? If not you may be the one undervaluing the property not the seller. 

With the possible exception of the above, clearly the seller is not motivated. I wouldn't waste my time. 

Ray your profile says "just starting." You are making a common mistake of new investors; trying to make a deal out of something that is clearly not a deal.  There are probably 10,000+ houses for sale within an hour or two of you. Why are you focusing on this one?

Make an offer that makes sense to you, then move on.

 Ned,

I completely agree with you which is why I am on BP right now asking questions before I simply "forget about it".

To me, this is a learning process as much as it is a "deal".

And yes, it's possible that I am undervaluing the property which is why I am asking some of you what YOU think as an experience RE Pro. Just trying to get my experience under my belt :)

So with that in mind, I am prepared to make her an offer of FMV - Repairs - Costs * 75% which would be about $45,893.28 (a little more than half her asking price).

I would take a small spread on this personally (just for experience) while giving the potential investor wiggle room as well.

Input is appreciated.

Originally posted by @Ray Eason:

Hello and good afternoon everyone.

I'm in California and have a seller who wants a bit more for their property than it's seemingly worth.

The proper is worth $67,512 the seller wants $90,000, and has a loan of $20,000 on the home. The lot size is 5,967 sq ft, it's an older home built in 1937 and days on market is about 71 days.

It is currently listed with a Real Estate agent but the listing comes to an end the beginning of next month.

The only benefit I can see to offset her asking price is that the property is zoned for building 3 properties on the lot.

I am looking to wholesale/quickturn the property to my list of buyers.

What are some strategies I could use to either get the seller to come down on her price (she has already come down from $95.000 to $90.000 when I asked her) and how might other investors or cash buyers look at this deal?

I look forward to your comments and feedback.

Ray

First and foremost, if the owner wants $23,000 more than it's worth, do not spend a lot of time on it. Make your case then tell them to get back to you if they change their mind (maybe send them a letter in a few months). Every second you spend on this one is time you can't spend on another. 

That being said, how do you know the property is worth $67,512? That's a very specific number and there's just no way to value a house so accurately. Is that from the county or a Zestimate? 

Andrew, I completely agree with  you. 

Yes, that is from Zestimate. I also went to a couple other sites that had the same information.

Whats interesting is, I checked this a few days ago and it was a few thousand dollars less.

My experience is that the Zillow estimate is a questionable estimate of fair value at best. For example, one of my homes in the past showed a Zillow estimate of ~$180k, which we thought was MUCH too high based on comps, so we listed the property at $149k to be more in line with comparables in the area, based on MLS data. We got very little activity in the first 40 days and ultimately closed around $139k. My point is that I would use a method other than the Zillow estimate to attempt to value the home.

Originally posted by @Jordan Decuir:

My experience is that the Zillow estimate is a questionable estimate of fair value at best. For example, one of my homes in the past showed a Zillow estimate of ~$180k, which we thought was MUCH too high based on comps, so we listed the property at $149k to be more in line with comparables in the area, based on MLS data. We got very little activity in the first 40 days and ultimately closed around $139k. My point is that I would use a method other than the Zillow estimate to attempt to value the home.

 Jordan,

What do you use for comps?

With that in mind, I have another seller I have connected with.

He's wanting $175k (obo). He own's the home(s) free and clear.

There is a front house and a back house over a garage.

Zillows shows a listing of $133,934

Last sold in 2008 for $188k. Which is probably why he is wanting $175k.

I am beginning to understand that if a person will not come down in price, then they are not that motivated and move on.

But I would love to hear what you think and have to say.

@Ray Eason  

As an agent, I have access to the MLS here so I can tap into it and look at sales data and come up with an educated guess as to a reliable range for the value of a given property. Do you have any agents on your team locally that would could help you with a valuation based on sales comps? You can get the data straight from the horse's mouth that way.

Quick note: When looking to respond to another BPer, type the "@" and then start typing the first few letters of the BPer's username, their username will appear below the reply box and will be clickable so that you can direct your reply more specifically to that user. This will alert the user immediately that you've reached out to them on the forum   :)

You seem to have a lot of enthusiasm and drive with what you're doing, keep it up and you will do great.

Originally posted by @Jordan Decuir:

@Ray Eason 

As an agent, I have access to the MLS here so I can tap into it and look at sales data and come up with an educated guess as to a reliable range for the value of a given property. Do you have any agents on your team locally that would could help you with a valuation based on sales comps? You can get the data straight from the horse's mouth that way.

Quick note: When looking to respond to another BPer, type the "@" and then start typing the first few letters of the BPer's username, their username will appear below the reply box and will be clickable so that you can direct your reply more specifically to that user. This will alert the user immediately that you've reached out to them on the forum   :)

You seem to have a lot of enthusiasm and drive with what you're doing, keep it up and you will do great.

 @Jordan Decuir

I have made contact with an agent on Linked in and she has mentioned working with me but I am not sure if she is as up to the task as I would hope.

Without her being compensated, initially, for some of the things I am asking, I feel as if she is putting me on the back burner (so to speak).

I just did the @ and your name but nothing was prepopulated. I'll keep fooling around with it.

And thanks Jordan. I am very eager to learn, fail and succeed. Failure and Education are both parts of success.

I am simply wholesaling and quickturning properties right now. So even if I had a general idea of what the property is worth and what the seller is requesting, I would be happy.

But I do understand what you are saying.

I am still looking for a good Agent to add to my team.

Your looking at it from it's zoned for three units so are your making it a new build deal. Can you add two units, or will you need to tear it down and build the three units. The tear down increases the cost of the lot. And paying basically for three units that aren't there is speculation. Any new construction in the area at all?

It is an old habit but I like to check the current tax assessors value. I know it is not the real market value but it makes me think about the property a little bit. If the assessment is a lot higher I have to say what the heck, why?  Lower, maybe I am thinking about offering to much, in any case it doesn't give me the current market value but it does make me think about the property from a different angle for a moment. And this may be a figure you can use with the seller sometimes to help swing their thinking in a different direction.

Originally posted by @Ray Eason:

And I am making her an all cash offer. We discussed this on the phone.

 I thought you were planning to wholesale it?  Will you close with cash if you can't find a buyer?  If not, does she know that your ability to close is contingent on your finding a buyer?

@Ray Eason  

Aside from the commercial possibilities, I have to agree with the others that it doesn't sound like a deal, unless you have the ARV ( After Repaired Value) under valued.

The only way to get REAL and accurate comps is through a Realtor. A Realtor is a important part of your tool box, as well as his/her MLS access. I would try to develop relationships with Realtors that would pull the comps for you. Or you could always offer them $50 for a BPO drive by like they do for the banks. Other than a Realtor, http://www.crsdata.com/main/ would be a great tool but it's not available in your area I don't think. CRS is usually attached to local MLS, and shows you active comps as well as closed comps on the local MLS as there is an icon for each. However you'd have to weed through them as local counties tend to fudge on the sqft numbers often giving you bad comps.

Next question since you are starting out, do you have understanding of the formula for a rehab wholesale as well as knowing rehab cost?

The formula is easy and is as follows:

Say you have a house that the ARV is $100 grand for easy math. From there you'd subtract off 65%-70% off the top for holding cost, etc. Then you'd subtract the rehab cost, then your wholesale fee and this is where a lot of newbie wholesalers shoot themselves in the foot by trying to get $10 grand when a grand or 2 is more of the reasonably going rate.

Best of luck to ya.

Originally posted by @J Scott:
Originally posted by @Ray Eason:

And I am making her an all cash offer. We discussed this on the phone.

 I thought you were planning to wholesale it?  Will you close with cash if you can't find a buyer?  If not, does she know that your ability to close is contingent on your finding a buyer?

 J,

I am intending to wholesale it to a cashbuyer.

If I cant find a buyer to assign the contract to, then no, I will not be purchasing the property myself.

We have not gotten into the contractual details of the deal because I wanted to get some advice on this this before getting it under contract.. My coach has been out sick and has not been able to answer my questions which is why I am on BP.

Originally posted by @Brian P.:

Your looking at it from it's zoned for three units so are your making it a new build deal. Can you add two units, or will you need to tear it down and build the three units. The tear down increases the cost of the lot. And paying basically for three units that aren't there is speculation. Any new construction in the area at all?

It is an old habit but I like to check the current tax assessors value. I know it is not the real market value but it makes me think about the property a little bit. If the assessment is a lot higher I have to say what the heck, why?  Lower, maybe I am thinking about offering to much, in any case it doesn't give me the current market value but it does make me think about the property from a different angle for a moment. And this may be a figure you can use with the seller sometimes to help swing their thinking in a different direction.

 @Brian P

I completely agree with you. And this is what I have been needing to here from Investors. But being new to the game, I don't completely know how builders and rehabbers think (completely). But everyone's assessment is pointing towards, this is not a good deal because the seller is not motivated enough.

The Tax assessors site says it's worth $52.6K. A bit less than the Zestimate.

Motivated seller is key!...it will be difficult to wholesale if the numbers don't work...

It's quite simple.  It was on the market for 6 months, and no one was willing to buy it for that price.  And yes, everyone else knew it was zoned for 3 units.  It's over priced......period.

@Wayne Brooks   - While that may be accurate in most places, DOM might be right for where the seller is.  I agree with you however, because in the markets I'm in anything over 30days is an indication it is either 

 1 - a 2MM+ property 

 2 - it is over priced

3 - A Rehabbers Dream

Originally posted by @Ray Eason :

I just did the @ and your name but nothing was prepopulated. I'll keep fooling around with it.

Are you using a tablet or phone? It doesn't work on my tablet. It works fine on my laptop though. I think it requires flash.

Originally posted by @Rolanda Eldridge:

Motivated seller is key!...it will be difficult to wholesale if the numbers don't work...

 @Rolanda Eldridge

Thanks for stating and reminding me Rolanda :)

Originally posted by @Wayne Brooks:

It's quite simple.  It was on the market for 6 months, and no one was willing to buy it for that price.  And yes, everyone else knew it was zoned for 3 units.  It's over priced......period.

 @Wayne Brooks

Definitely. I more so saw the listing as being for Renters but... I am sure some investors would have seen it as well. The Zillows listing said 2 months but I guess it could have been longer.

Originally posted by @Troy Fisher:

@Wayne Brooks   - While that may be accurate in most places, DOM might be right for where the seller is.  I agree with you however, because in the markets I'm in anything over 30days is an indication it is either 

 1 - a 2MM+ property 

 2 - it is over priced

3 - A Rehabbers Dream

 @Wayne Brooks

Whats a 2MM+ property?

Originally posted by @Scott Pigman:
Originally posted by @Ray Eason:

I just did the @ and your name but nothing was prepopulated. I'll keep fooling around with it.

Are you using a tablet or phone? It doesn't work on my tablet. It works fine on my laptop though. I think it requires flash.

 @Scott Pigman

I am using a Desktop PC.

Am I supposed to quote the comment in a certain way?

I'm just hitting QUOTE and then typing the @ and name.

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