Remaining balance on house & wholesale deals
Hey guys I'm a wholesaler new to BP! Quick question, when structuring a wholesale deal, does the remaining amount a motivated seller still owes on the house factor into the maximum allowable offer (MAO)? I know the general MAO formula:
MAO = (ARV x profit margin(65-75% in general)) - Est Repairs - wholesale fee
For instance, a hypothetical house with ARV $400,000, buyer wants 75% ARV - $40k est repairs - 10k wholesale fee = $250,000.
Let's say motivated seller still owes $200,000 on house, someone still has to pay that. Is it the end buyer that pays the remaining $200k or the seller (or someone else I'm not aware of)? If it's the buyer, do we as wholesalers subtract remaining house balance from the $250,000 to get the true MAO to adjust for what the buyer has to pay for the seller's remaining balance (meaning max the seller could get would be ($50,000)?? Or is there something I'm missing? Thanks guys!!