What Should I Sell This For??? Can I Get a Pro Answer?
Real Estate Investor · West Orange, NJ · Member since 2012 · 130 posts · 19 votes
Hi guys and girls,
So I have a pretty great deal. It's in a very desirable town and neighborhood. It's a 3 Br 2 ba and the lowest comp in the area is $335K and everything is averaging about 350ish. It needs new plumbing throughout, a new roof, kitchen update, 2 baths updated, floors and paint. The floor in one of the rooms is also slightly slanted. I don't know repairs but I estimated and hope 80K would cover that work and anything else necessary. It doesn't need to be gutted to the studs. I just want to know what I should sell this deal for. I could go with the 70% minus repairs formula and sell it for about $150K (that's also using the lowest comp and not considering that everything in this house will be brand new, a rehabber could probably pull the higher 350K) but at that number I'm making an insane amount of money for a wholesale, although I've heard of people making these profits on wholesale deals before. I just would like to know because even at the 150K mark, the rehabber is still going to have about a $105K spread before he pays everyone, I would think on a worst case he would pocket $60K after the transaction is done. Any advice is appreciated everyone. Thanks.
I'm confused. On Dec 28, you said:
"I have the property contracted for $150K with the rehabber."
Then on January 4, you said you called the rehabber and told him you'd have to raise the price to $165K and then on January 5 you said you told the rehabber you'd have to raise the price again or sell to someone else.
If you "had the property contracted" with the rehabber back in December, how did you up the price on him twice in January? You had a contract...I can't imagine any experienced rehabber would sign a contract saying you could just raise the purchase price on your whim. So, how did you raise the price if you had a contract?
Regardless, just some friendly advice as a rehabber -- you're only as good as your word in this business. Even if you didn't have a contract with the rehabber (like you said you did), you at least had a verbal agreement with the rehabber to sell at $150K. And once you had a verbal agreement, to go back and raise the price twice (because you didn't do proper due diligence to begin with) is just flat-out unethical.
You said in other threads that you're only willing to work with serious, experienced rehabbers. I hate to tell you, but any truly serious, experienced rehabbers who read that you jacked up the price after coming to agreement aren't going to want to work with you.
Sorry, but you had an agreement that would have given you $50K and then got greedy after you realized you screwed up your due diligence and broke that agreement. In my opinion, that's not a great way to be starting out in this business...
Personally, I'd rather lose money on a deal than go back on my word, throw my integrity out the door and ruin my reputation. FWIW, I had this happen to me twice last month where I had verbal agreements with other investors to sell a property and got a higher offer before any contract was signed -- I kept my word in both cases and gave up about $20K doing it. I have no regrets.
Deshone Drummond,
You should have them bid on it and and keep it simple. As much as I am for building relationships, who is to say this rehabber will help you out. If he is willing to guarantee what you would already be making from the realtor than go with him. Otherwise, tell him you have to go with the bottom line.
-Steven
Thank you Steven, I'm with you, so should I write in a guaranteed $20,000 on the back end?
That's a great first deal, good for you! I believe that you can always find a buyer if you have a true wholesale deal. I also believe that reputation is everything. So, you can easily replace this rehabber, but what will it do for your reputation? It stinks, but I would sell to your original buyer.
You're already making a great profit, I would gamble and take the percentage instead of the $20k.
I'm confused. On Dec 28, you said:
"I have the property contracted for $150K with the rehabber."
Then on January 4, you said you called the rehabber and told him you'd have to raise the price to $165K and then on January 5 you said you told the rehabber you'd have to raise the price again or sell to someone else.
If you "had the property contracted" with the rehabber back in December, how did you up the price on him twice in January? You had a contract...I can't imagine any experienced rehabber would sign a contract saying you could just raise the purchase price on your whim. So, how did you raise the price if you had a contract?
Regardless, just some friendly advice as a rehabber -- you're only as good as your word in this business. Even if you didn't have a contract with the rehabber (like you said you did), you at least had a verbal agreement with the rehabber to sell at $150K. And once you had a verbal agreement, to go back and raise the price twice (because you didn't do proper due diligence to begin with) is just flat-out unethical.
You said in other threads that you're only willing to work with serious, experienced rehabbers. I hate to tell you, but any truly serious, experienced rehabbers who read that you jacked up the price after coming to agreement aren't going to want to work with you.
Sorry, but you had an agreement that would have given you $50K and then got greedy after you realized you screwed up your due diligence and broke that agreement. In my opinion, that's not a great way to be starting out in this business...
Personally, I'd rather lose money on a deal than go back on my word, throw my integrity out the door and ruin my reputation. FWIW, I had this happen to me twice last month where I had verbal agreements with other investors to sell a property and got a higher offer before any contract was signed -- I kept my word in both cases and gave up about $20K doing it. I have no regrets.
Ok, I'm going to give you guys the long version. I didn't think I would have to, but I think from the critical responses I'm getting its necessary. Me and Alfred (rehabber) started to form a relationship in December right before I got this deal locked up. Before my offer was fully even accepted I gave him the heads up on the place. His wife is a realtor so I asked him to run some comps but I was going off of Zillow saying $335-$350. He said that he'd buy it quick at $150 but we never landed on a price. I didn't even have an accepted offer from the seller yet. Once the seller accepted my offer which was right before Christmas we let our attorneys know but my attorney was away for the holidays and so was the seller. Now he sent the contract down to the seller in VA but they were working by snail mail and it took a couple of days to be returned. Right after Christmas Alfred said that they were going to send their contract over just to make sure they had it locked up, but we both agreed I wouldn't sign anything until my contract with the seller was fully executed. So his contract for $150K sat in my attorney's office waiting for my signature. I also knew that I wanted a local realtor's opinion of what we could sell it for from a neutral perspective. When she told me we could probably sell the house for $400-$425K (and more if we expanded the size) that changed the deal because Alfred's wife's comps were the low comps not these which were the mid range, nicer houses most likely colonials like this one and certainly not the bigger houses that are being built. So I didn't call him and say "hey you didn't tell me there were $400K+ comps I just said I did some further evaluation and the comps are higher so I'm going to have to raise the price. I said I'm meeting with the realtor Monday but I know the comps are much higher. That's when he said "we still have room to go up, no problem". He knew what he had. When I met with the realtor yesterday (to get comps), that's when she offered me $200,000.
Now regardless of what you may think J Scott, everyone who I do business with knows my ethics and my faith. If I was a jerk I would have said "deal" immediately to the realtor. I called my wife and told her, then I called Alfred and said how much of a jam I was in. I didn't go to that meeting looking to get a price. I never had the intentions of shopping the deal any further, what I did want to know was "what were the real comps" because I'm going to make a business decision where everyone wins. But I'm not going to ignore the fact this woman just offered me $35,000 more cash. I told Alfred flat out I didn't want him to buy the house at that number because I was still thinking about an ARV of $400K, I wouldn't feel bad about it if its an owner occupant. I told him I don't feel comfortable making the money I'm making if you guys are going to sell the house for $400K. But that's when he said we want the house, we're going to add on to it and look to sell it for close to $500,000 and you'll be in on the deal with us. This guy loves me and said this is just the beginning. So in his mind, he's happy because he'll be in the deal for $300K and looking to sell it for $500K. As a wholesaler it's my job to find deals. The better deals I find, the better for me. If the deal is great, someone will buy it for 70% of ARV, in New Jersey on a $300,000 you'll make about $50,000 profit NET. But I know wholesalers that lock a deal up at say 55% of ARV and sell it to the rehabber for 60% because they found a real killer deal. They walk with like $5,000. That's not me, J Scott, let's say he gets $475K, he's buying this deal at 62% of ARV. If he gets the $500K it's even lower.
For the people that watch how much wholesalers make on a deal, I want you to consider this. Let's say you have a private lender that you pay 10% and the average deal you buy is $60,000 including repairs, you sell that deal for $100K and net around $20,000. You then find a deal that's you can buy for $60,000 including repairs but you can sell this for $150,000. Would you say to the private lender, "hey I'm making $50,000 more so I'll give you 18%", No. The lender is happy at 10%, maybe you show him a little more love knowing you got a killer deal and give him 12%, but if he started counting your money you'd be a little upset. So don't criticize me because I've been blessed because I'm passing that blessing to him. Do you think he'd be saying I still want the deal if he wasn't getting a deal. The fact is I was the naive one from the start because he saw the comps and knew what he could be getting at $150K, I didn't, he knows builders are buying homes like this and knocking them down building mansions on them. I didn't, and now I do and if you think I'm not going to make $100K for bringing someone a deal where they can make $175-$200K, then I'm sorry my brother but I don't agree with you.
J Scott If I was greedy I'd take the ARV of $500K, take 70% of that minus the $100K rehab and advertise the deal for $250K. I'd market it to the other rehabbers and builders that don't know anything about what I bought it for (like you do) and they'd buy it. I'd do a double close, and be on my way with my $150K. I think you should do what you said in your sarcasm last year and come up to New Jersey and buy all my deals. If you don't remember
https://www.biggerpockets.com/forums/48/topics/72801?page=2
You were such a non believer, but the reality is everything I find up here will have a minimum of a 6 figure spread. Minimum. That's what I believe. Even when I thought the ARV was $350,000 if I didn't believe in a deal like this how could I have offered the seller $85,000 to get the deal for $100,000? I couldn't. You gotta shoot for the moon! I don't know where my average wholesale will be but I've done one for $18K and one that looks like it will be $100K and I'm getting ready to take the marketing that got me these 2 deals and multiply the volume by almost 10. Maybe I will wholesale 30 of these deals and pay cash for my house. Please no more negativity. God is good
I'm still confused. On Dec 28, you wrote:
"I have the property contracted for $150K with the rehabber..."
One hour ago, you wrote:
"He said that he'd buy it quick at $150 but we never landed on a price."
Those are completely different scenarios. In the first, you agreed to accept $150K to sell the property to this rehabber. In the second, you didn't agree to even sell the property to this rehabber.
Which is it? Did you have an agreement or not? If not, why did he send you a contract to sign?
I can only go by the information you provide, and the information I had when I wrote my last post was that you agreed to sell the property for $150K (it was under contract you said) and then you rescinded.
The other thing I don't understand is, if you haven't promised the property to anyone yet, why would you sell the property to either of these people for $200K or less when you think you can get $250K? I don't understand why you would leave $50K on the table...
The reason I thought increasing your price before was being greedy was because you indicated you had agreed to the price; but if there is no agreement yet, you should get as much as you can. It would be foolish to sell it for $200K when you can make $250K.
Go make an extra $50K!
There was absolutely nothing sarcastic about my comment. You mentioned a deal with a $275K all-in and a $105K profit (minus fixed costs), and I said I would buy every single one of those deals from you (and find you buyers for anything I couldn't buy).
I was completely serious. I will buy every deal you have that will return a straight 27% on my investment, like the deal you mentioned in that thread.
Send me the address, comps, rehab breakdown and pictures of this one and I'll happily make an offer for an amount that mathematically returns me 27% on exit!
Deshone: I not sure why you think J Scott was being sarcastic. He'll buy your deals if they are what you say they are. It appears that you didn't and don't know how to assess value on this one. Hopefully this one will work out better than expected and in your favor, but not knowing value rarely works out like that.
You've got a lot of steps to get through to close this one, so I'd stay focused on pinning down value and holding together all the moving parts. From what it sounds like to me you're being played by both interested buyers. It's your responsibility to get an objective ARV and you relied on the buyer's agent wife, who had every reason to skew the comps in their favor. The fact that your rehab buyer is continuing to work with you and willing to pay more, and is staying in the deal even though it's getting shopped, suggests to me that they thought they had a smoking deal. No offense intended towards the other agent, and maybe she was truthful, but telling sellers that they or their clients want to live in a property is a well-known and often used strategy. Especially when they think it will create an edge in a bidding war.
If it were me, and I was clear that I wasn't obligated to sell to the rehabber, I'd close on my purchase contract and then offer it for sale on the open market. The cost of the money is a no-brainer. Your highest and best offer will come from opening it up to more buyers and not needing the stars to align in order to double close or assign it.
Got you J Scott but the point is everything we had was speculation that's why we didn't have a signed contract and he wanted to send his contract to show his commitment and not have me sell it to anyone. I'm not being played, I didn't sign anything until I got more info, I purposely made that decision. Now I'm getting ready to make $100k on a wholesale. Praise the Lord. I'm not going to go for the full amount. I'm in the business of leaving extra meat on the bone if I'm making a great deal. This deal is an investment into my year. I'm going to learn to rehab a house including adding an addition. My buyer will hopefully net $150k when the deals all done. If I was making 20k, I'd want to go with the full 70% of ARV. With this profit I'm happy to pass on the rest to Alfred. If she hadnt offered me $200,000 id be selling this deal for $175,000. that meeting made me $35000. If I'm getting played I could only pray that I get played like this a couple more times this year. Add to that I'm getting my realtors license next month which will really give me the advantage I need. We're off to the races. And as far as sending you that info J Scott the reality is I'm not going to do that and you know it. I have the buyers I need right here in my backyard, I'm not going thru that type of process to sell you a deal.
As a side note, I just know there's been more criticism on this forum than I expected. When I said I had the deal locked up, more than half of the people were saying you got the numbers wrong, no way you got a deal for that low, the seller probably doesnt really live there, yada yada yada. There are a few people that were very encouraging but the fact is whether someone is new or not makes no difference. It's about how much they've prepared and what they can do. Dont be negative, but this will be my last time talking about my deals on here because i realize that what im making on wholesale deals people are making on rehabs but I'm in a different market, different living expenses, higher insurance, etc. everything cost more in Nj. i just think its hard not to have some animosity if you're in a place where things are much lower..
K Marie, the only steps left to close this deal is an oil tank removal and title being pulled. Not too much to do, definitely not a lot of work
I have been on this forum for a little while now and this is about the last critical group of people I have ever seen (especially online). The community here is full of members who primarily help one another, give advise freely, and look out for one another. In some cases I have seen threads where it could be percieved as if people are being overly-critical, but I can assure you, the community as a whole is not out to get you. Internet interactions are somewhat limiting and people only have the information you have typed to reference and sometimes details are left out and tone is not easy to convey.
You did have some seemingly contradictory info in your post, which was pointed out, not out of rudeness but because it was relevent to the thread...no harm done. It looks like you have a potentially great deal, so congratulations on that. Several others have asked good questions and brought up topics (that is what forums are for)...gain, no harm done.
As for closing, I dont think K Marie meant there was a ton of work left to do on your part, but a lot of things that can still go wrong. Anyone who has been involved in real estate for very long knows that not all closings go as planned...so many things can happen.
As for the last sentence in your second to last post...I am not even sure what to say about that, but that probably won't help you get the favorable responses you seem to need so badly.
Why would you say i need favorable replies, what are you talking about? I have always been very respectful to everyone on here including you James. I gave the short version and realize I left some details out but don't be negative just ask me to explain. I wouldn't assume the worst and call somebody greedy when you don't know all the details. You call me greedy especially when last year you came at me wrong, how would you expect me to take it. Fact is I love everybody and would never disrespect any one. I'm excited about what's going on in my life and am sharing it as it happens with some people that I feel have the experience and wisdom to help and support. I wish all of you the best in your lives and businesses. God bless.
No problem there. But, you do realize that this is the opposite of what you originally said, right? You originally said that you had a contract, which indicates a firm agreement, not speculation...
And, that was the basis of my "negative" post.
I look forward to hearing how this one turns out and wish you the best of luck!
I'm not sure what's got you so ruffled and where you see negativity. I think you should check yourself on the idea that people are jealous or don't think big spreads on non-rehab deals are possible. Lots of people work in markets with way higher values, hence bigger spreads, than your corner of NJ. I've done non-rehab deals with bigger spreads than your deal here, and in markets with way lower values. Suggesting that your original repair estimates might be off was based on your inexperience, not that big spreads don't exist. Given that you appear to have miscalculated the ARV by a wide margin, that assumption doesn't seem unreasonable. Nothing wrong with positive thinking and faith, but you can't know what you don't know.
Hopefully the deal will be fast and uneventful from here, but if not, BP is an amazing resource to learn, brainstorm and problem solve.
Deshone Drummond I think its great that you've put yourself into a position to make good money from the deal. Most people don't understand about the cost of living here in NJ and even the cost of construction compared to other states.
I see everyone's side here about the words written but he has explained himself when all said and done.
To be honest I wish you were finding deals down by me. Though your not to far. I wouldn't mind if you bought the property for $1 and I don't see why it matters. As long as everything is legit and you are selling it to a rehabber with plenty of meat on the bone you are doing a good and fair deal.
All the best,
It appears to me that many important details were not initially disclosed and thus, many misunderstandings have taken place in this thread. My advice for your next thread post on a deal is to provide all the accurate details so that the advice can be more accurate and not rely on any speculations.
In your PM's to me, you also left out many of the details that I have now read in this thread. I will not regurgitate all the info that was not spelled out.
Based on what. Have gathered thus far, and making one assumption that no written or verbal finalized agreement was made with anyone, as a wholesaler, you should be getting as much as it is worth and if that numb is the $200k offer, then take it. If by marketing it you can easily get $250k, then do that. This is a business and your job is to make money. Unless it is necessary, don't leave any money on the table.
Now, if u did have an agreement with the rehabber, you should honor that agreement, regardless of what you have found out today.
My last piece of advice is to get all your Due diligence done BEFORE you tell anyone what you have to avoid all this back and forth you have caused. Doing so would have informed you that you had a deal worth at least $200k and could have then took it to this rehabber at that price, as well as offered it to many people for that price or more.
That should be the biggest lesson here.
I was just sitting here saying to myself, the next deal, I'm not telling anyone anything until all my research is done. You literally took the thought out of my head. I appreciate the advice and throughout this deal I've been very excited which caused me to leave some details out of my explanation. I will do that Will. Thanks to everyone who has shared their opinions and advice. I will keep you all posted.
Sounds good keep us posted.
Question to you: when will you start doing your marketing for deals like this in Southern CA? Your buyer is me! I get first priority!!!! :)
@will Barnard great point on the lesson here to learn.
@Deshone Drummond let us know the outcome!!
I love this site. I know nothing about the process of purchasing real estate but after reading this thread I feel I can make all the right mistakes and be successful. Thank you all
So I decided since the rumors were there were builders building luxury homes in this neighborhood, I'd get in my car and see if I could find those guys. Well thank the good Lord I did. Within half a mile of this house are at least 12-15 new builds. So I called a couple of these builders, they met me over at the property today. One said it looks like its worth about $250,000 as a tear down to him. He's going to make sure there are no build restrictions and call me tomorrow.
The other person was a realtor who represents a builder who says it looks like $275,000 but he'll get back to me tomorrow. He asked if I'd pay a 3% commission if he brings me a buyer, I told him if he gets me $275k for the house I'll give him 4%. This is definitely a project for a builder and not a rehabber. They're going to put up a house twice the size and depending on what they do and judging by their other projects they're probably going to out a home there that can bring $700,000 or more.
I have to say I didn't know this deal would turn into this but I must thank God. I also went to the property today and it turns out the seller didn't know where the oil tank was. It's actually in the basement and not underground. Amen!!! That was the best news all day. I'll keep you guys posted as always.
Seems like this deal gets better and better for you.
Hope it all works out.
Thanks Steven.
Let me guess! Tomorrow you will find out that under this property is a bed of gold ore worth millions!
Can this deal of $100k get any better?
All I can say is God must really like you on this one.