How to make a good offer to the seller?

Question

Hi Guys!
I am just starting out in wholesaling and I wanted inquire about factors that helps a wholesaler make a good offer to the seller. Is there a percentage to go by? I understand that I look at the comps in the area and the est. equity, but how do I determine a good wholesale offer that makes the owner want to sell and the investor want to buy?

Any insight would get appreciated and helpful.
Thanks!

Any insight would get appreciated and helpful. Thanks!

Joe Villeneuve · Answer

Your buyer determines that, not the seller.  The seller takes care of themselves.  In order to make a deal happen, all parties must meet their own requirements, but it isn't your responsibility to do it for them.  As a wholesaler, your responsibility is to find out what each needs, and then make that offer based on what works for YOU.  If this isn't possible, then go onto the next deal...and don't try to force it, and above all, don't negotiate against yourself.  You are doing this for YOU, not them.  They make their decisions on what's good for them, not you.

Michael Dumler · Answer

@Gabrielle Quarles, Joe just about nailed it. Your under-contract wholesale price is largely determined by the end buyer's purchasing and investment criteria. I would advise before blasting lowball offers to homeowners, to instead start the conversation by pinpointing their motivation to sell in the first place. This is where the gates of opportunity begin to open in my opinion and you won't come off as harsh when negotiating. The 70% guideline is useful but not every end buyer solely relies on it. As I cousel to all wholesalers, you really need to harp in on your skills of determining ARV and factoring rehab costs appropriately. Focus on developing these skills and making offers will soon become an instinct. Hope this all makes sense and helps!

Jerryll Noorden · Answer

No!

Guys I know you mean well... but don't answer whoelsaling questions if you are not wholesaling.

Your contract is NOT "ultimately determined by your end buyer". That is wrong. Your contract is determined by the NUMBERS! Not what the end buyer wants. You need to make sure it is a good deal where the end buyer can still make a profit, sure, but that is not the end buyers decision. I decide what a good profit is for a flip... BECAUSE I am a good wholesaler. and if a and buyer says it is not a good deal he can GTFO of my way. I know my numbers, I know what is a good deal or not.

The WHOLESALER determines the offer, NOT the buyer.

I see some of you don't understand the job of a wholesaler.

A wholesaler is not some sleazeball that does minimal work and then collects an (undeserved) fee.

The wholesaer (a good one):

1) Finds the seller

2) Does his/her due diligance

3) Takes note of all the things wrong with the house

4) Forms a solid Cost Of Repairs, ARV, and As-Is value of the house

5) Negotiates with the seller to put it under contract for a price that works by the NUMBERS, not the end buyer.

6) Presents the contract and explains the contracts

7) Makes sure the seller knows it all, what they can expect, how it works, what the risks are, what the time line is, etc.

8) Finds a cash buyer for the contract

9) Presents the cash buyer with the property report where all the pertinent information is lists for the buyer

10) Makes absolutely clear that it is the buyer's responsibility to verify the numbers.

11) Works as the communication middleperson between buyer and seller

12) Makes sure the buyer follows throuhj with their responsibilities as well as the seller's responsibilities

13) Keeps constant communication with the seller till closing.

So I think I see where you guys are coming from when saying "it is the buyer that makes the offer".. as in the buyer will ultimately need to be fine with the offer... and yes, the end buyer needs to make a profit sure... BUT HE DOESN'T MAKE THE OFFER! You present YOUR offer to them and they can decide whether they want to buy it or not! It is not them that make the offer or has any influence on the offer. YOU as a whoelsaer simply needs to make sure that the numbers work regardless of any cash buyer. It is about the DEAL, it is about the property, NOT the end buyer, their mood, their greediness or what ever else.

It is the wholesaler that NEEDS to know what profits that house would have as a flip, or what the numbers would look like as a rental etc. etc.

Please understand that this is not an opinion. This is fact. It is the wholesaler that negotiates the offer, NOT the buyer. If it were the buyer, there wouldn't be room for a wholesale fee right?

If the buyer would make the offer, it would then also be the buyer that would determine the wholesale fee right?... YEAH NO!!

If it was the buyer that would make the offer, my business would flop in 3 days flat. I have no stinkin time to deal with buyers handeling 15 offers a day thus having to wait for a ton of buyers to finally approve the offer before I get a contract signed?!

Someone said this:1 - It meets the buyer's requirements2 - It meets the seller's requirements3 - It meets your requirements...and,...

BE CAREFUL:

As brutal as this may sound, it is NOT about meeting the seller's requirements. NOT AT ALL. If that were the case no one would ever buy a house from a seller. When in history was a seller actually fair with what they want for their house? Most (all?) selelrs are absolutely not realistic with their requirements. They need to get a reality check.. and THAT is the job as a good wholesaler. Realistic expectations.

These responses are very obviously theoretic responses, textbook responses. Responses from people that are not on the ground doing wholesale deals. Not at all realistic responses.

As for the OP...

There is no % rule to make an offer.. all you read about the 70% rule is complete horse crap.

1) You need to deal with motivated sellers. Motivation doesn't have to mean money. It is nice to figure out what their needs are for sure and if you can accomodate the seller  that is amazing... but understand that ultimately this is a business... your business... and the offer is for you to make a minimum profit.. then you can try your best to accomodate the selelr as much as you can, but you can't make an offer that would hurt your business.

Your priority is to help the seller. This is true. But I promise you, very rarely will you be able to "meet the seller's requirements". They need to accept the offer or walk away. it is the seller that need to change their requirements to fit your offer... it is your job however to make a fair offer.

Do you understand we do not negotiate? We honestly make our best offer and if they pull some crap like "meet in the middle", I say "Are you deaf?! I jsut said this is our best offer. And higher and I am not making money of this deal... and i am not kidding. We mkae our best possible offer from the get go. All we need is our minimum profits and we are set.

Anyone that doesn't follow this advice WILL FAIL! That I promise!

And you do not want to "make the seller chose an investor". We give them a choice. We break down the benefits, advantages, disadvanted, expectations, risk to both whoelsaling and listing. And we let them decide. This is extremely powerful. When THEY decide, it is THEIR decision. This has a psychological effect on people. When it is their idea, it is a "good idea". And they will do what ever it takes to make sure to prove to themselves it is a good idea.

If you talk them into it, they will always feel coerced into it. They will always doubt, question, be careful..

Give them a choice. Present them with realistic numbers, don;t care about what the seller thinks, or what the buyer wants, it is completely irrelevant. As long as you run your business honestly, your will be fine.

Jerryll Noorden · Answer

I get that. But you not having time, is on you. That is your issue, not the seller, not the OP of this question. You are answering his question "missleadingly (is that a word?)" because you have no time. It ultimately comes down to what was asked here, and what you reply. YOU may not have time  but that is no reason to give misleading answers.

But don't missunderstand... you DO have a valid point when it comes to the LTV thing, and I think it sould be mentioned... just with a fine print that it was for a very specific case. But you can see where and why I siad not to do the 70% rule right? That was the wrong answer for this scenario.

Also, you may not have time to walk the proeprties.. mind you... neither do I. I hire people to do that for me.

And I am with you... I am all about the homerun deals my man!:D

BTW I like we can disagree contructively and have a awesome back and forth. Don;t see this often!

You got my respect!

Eliott Elias · Answer

You should focus on what would be a good offer for you! I say 70% minus repairs

Nate Sanow · Answer

70% of ARV - major repairs - your fee.

Jerryll Noorden · Answer

Welcome!

Gabrielle Quarles · Answer

Thanks for the helpful advice!

Jerryll Noorden · Answer

Listen to what I am saying.

It is not the cost of repairs. You DON'T KNOW if there is a leaking oil tank burried right? It is the RISK, not the repair cost... what I am talking about. Really try to understand me. It is the RISK what the 70% rule doesn't account for. That burried oil tank is just an example.

Secondly:

We are talking about wholesaling. Not buy and holding right? The entire 75% LTV talk doesn't apply here. He is asking how to make good offer to sellers for WHOLESALING. The end buyer is most likely going to be a flipper. So I don;t know why the 75% LTV refinancing was even brought up here...

What I use?

I do an old fashioned custom offer per house. No shortcuts. I walk the house, I find the best possible exit strategy, flip, buy or hold or what ever, and  I formulate my offer as if I were to buy it for that purpose.

This way I will ALWAYS beat any offer made from someone using the 70% rule. You need to understand that I try to make the HIGHEST possible offer always according to my needs and criteria. I will repeat... it is about making the HIGHEST possible offer. The 70% rule doesn't do that.  The 70% rule is PRO BUYER. Not pro seller.

You do have a good point mind you. That is A way.. ONE reason where the 70% rules is good for... but that is different right? Not because somethign is good for ONE case does it mean it shoudl be applied to every scenario.

The 70% rule to make offers is wrong!

The 70% rule should be used to check if your numbers allow for that refinancing, and if not, how can you make it work, putting an addition in?

Do you start to see my point?

Eliott Elias · Answer

It can be situational I agree, but to pencil out deals quickly and gage where your buyers are I still use the % rule. Where i'm at in my career, I don't have time to walk every single property that comes my way and make a solid offer. Too many deals out there, I want to make sure i'm getting a home run every time in this market.

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