Converting semi-motivated sellers

7 Replies

Hey BP Fam,

I have a semi-motivated seller. He plans to relocate soon and wants to liquidate some assets. Also, one long time tenant passed away and he doesn’t feel like the hassle of trying to find another qualified tenant. I want to get some advice from you guys before I spend any more time on this lead. It’s a duplex, 3/1 each unit. One unit rehabbed in 2000 and is occupied, other unit needs 3k rehab and is unoccupied. Seller wants $200k. My offer was $90k. Comps for as is homes are selling for $110k. I informed the seller of my findings. His argument is that those comps are for houses that are in extremely worse condition than his. I haven’t seen the property. I want to provide the seller info regarding comps for his house but I can not find any ‘accurate’ comps for repaired homes. How important is the year built for comparing homes? (1980 vs 1940) Without me actually seeing the property, is there any way to further qualify this lead? I don’t want to waste my time visiting the property if we are extremely far off in terms of price. My exit strategy is wholesaling.

All advice is welcome and greatly appreciated.

Thanks in advance.

E. Harris

Originally posted by @Eric H. :

Hey BP Fam,

I have a semi-motivated seller. He plans to relocate soon and wants to liquidate some assets. Also, one long time tenant passed away and he doesn’t feel like the hassle of trying to find another qualified tenant. I want to get some advice from you guys before I spend any more time on this lead. It’s a duplex, 3/1 each unit. One unit rehabbed in 2000 and is occupied, other unit needs 3k rehab and is unoccupied. Seller wants $200k. My offer was $90k. Comps for as is homes are selling for $110k. I informed the seller of my findings. His argument is that those comps are for houses that are in extremely worse condition than his. I haven’t seen the property. I want to provide the seller info regarding comps for his house but I can not find any ‘accurate’ comps for repaired homes. How important is the year built for comparing homes? (1980 vs 1940) Without me actually seeing the property, is there any way to further qualify this lead? I don’t want to waste my time visiting the property if we are extremely far off in terms of price. My exit strategy is wholesaling.

All advice is welcome and greatly appreciated.

Thanks in advance.

E. Harris

The rule of thumb we use for year build is +/- 10 years. Sometimes you get into neighborhoods where this doesn't work so what you're left with is same square footage +/- 10%; same style; same category of house (SFR, multi family 1-4; ...) Don't make the mistake of only including repaired homes in your comparables. If a property is "move in ready" it usually becomes part of an appraisal. The only way to know if they are move in ready is to review the MLS or FSBO listing and pics. If you're in Baltimore you can use Redfin for this.

This guy sounds dillusional. He wants a $90k premium on a $110k house? Only if the 30lb in gold bricks in the basement conveys.....

My thoughts (and feel free to ignore them, I'm a newbie) is that you need to figure how much it costs to get the nearest comp into the same condition as his place, all while figuring out what an acceptable profit and risk is for you. At the same time, is his place "over-improved" for the neighborhood? If there are no $200k comps in the neighborhood, this guy might be a little crazy. You can't negotiate with crazy. 

But seriously, with that kind of difference, it sounds like it's tough. If you want to spend the time, meet him and go over comps and the benefit of signing a contract with you. If he doesn't like what you have to say, say "listen, it looks like it won't work out with what I have to offer, let me get you the names of a few Realtors who are well-respected/trusted/liked/hungry and who work with properties like this. It's likely going to take more time to sell, but you may be able to get a better offer." Then, walk away and call back in a few weeks.

Not speaking from experience in real estate because I haven't done any wholesaling, but this is my thought based on my negotiations as a lawyer. If there is too much of a gap between the parties, work on building trust, the ability to walk away, and circling back.

@Crystal Smith  Thanks for responding. I have been using Redfin. It's a good tool.

@Andy Gross  Thanks for contributing your ideas. I think building a relationship and trust is definitely important when dealing with sellers. Even if I can't buy his house, he has already made the follow up list. Yeah I was thinking he may be just a little crazy as well considering his asking price.

You mention this is a Duplex and you're trying to "comp" it out with SFRs?..First Mistake.

Age matters, you have Actual Age and Effective Age. Here are guidelines:

Subject Age                                                                 Comp Age Range

•0-10 years                                                              - 5 years to + 5 Years

•11-30 years                                                              1/2 age to +10 years

•31-50 years                                                             -15 years +15 years

•51-75 years                                                              -20 years +20 years

•76+ years                                                                 -25 years +25 years 

Maybe you can get a Rent Roll and P&L and see what the Income Approach tells you it's worth if you can't locate any Duplexes in the area.

You should always view the property, armed with data, and fill in the blanks of your analysis that Redfin or any other online system can't do for you. 

Wholesaling takes work when done right...but you have to want to do the work to make the money. No such thing as "wasting time" on a lead...do the homework and negotiate the best deal with facts. If the motivation isn't there today, you will be respected by the property owner and when the time is right for them, they will remember you./

@Fred T.  Thanks for responding. I have to disagree. There is no point in me taking the time to view the property if there is no way, at this moment, to agree on a #. I will definitely keep in touch with him because he is motivated and actually dropped his offer but it was still nothing I could touch. He said he's not relocating for another 3 years. I am willing to wait 3 years for a great deal.

You can't get your # without looking at the property if all your other resources don't give you enough info to find your #. If you'd rather wait three years than go drive by a property, go ahead. You might think it's a waste of your time, but even the most successful wholesalers have SOMEONE who looks at the property at SOME point in the deal analysis. Spend your time where your business will benefit most.

@Lori Thedorff  Thanks for responding. Without looking at the property I'm assuming full rehab for my #. I got a vibe from this seller that he wasn't being truthful about the condition anyway. Yeah before anything is finalized I will look at a property. So armed with info that this guy is hiding something, the house is probably in worse condition than he is describing, his # is just ridiculous regardless and seeing other 'as is' homes that have sold I think I have enough to say it's time to walk away and use my resources elsewhere. I'm willing to wait 3 years for a GREAT DEAL. It's no where close to a DEAL at this moment. 

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