How to make a good offer to the seller?
Member since 2022 · 2 posts · 0 votes
How to make a good offer to the seller?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesYour 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.
16 Replies
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
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.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
You should focus on what would be a good offer for you! I say 70% minus repairs
- Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes3y
@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!
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesExactly. The only difference between a buyer and a wholesaler, is the buyer closes. The wholesaler must know everything a buyer knows, and what they want. So start at the bookends, buyers and sellers, and determine your deals in the middle. Not every deal on paper is a good deal. A good deal has three things for you as a wholesaler:
Quote from @Michael Dumler:
@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!
1 - It meets the buyer's requirements
2 - It meets the seller's requirements
3 - It meets your requirements...and,...
out of those three things, the only one you have control over is the middle one...and as I said much earlier, you should NEVER negotiate against yourself. - 3yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Present your offer to the seller and get the property under contract. Be sure your contract includes the right to assign the contract to another party. Also, include in your contract a contingency that allows you, as the wholesaler, to withdraw from the deal if unable to find a buyer before the contract expiration. This limits your risk.
Good luck!
NETWORTH BUILDERS5236 Reviews - Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
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 requirements
2 - It meets the seller's requirements
3 - 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.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
You should focus on what would be a good offer for you! I say 70% minus repairs
guys.... PLEASE stop promoting the 70% rule.
It is a really REALLY srtupid rule.
If you come in with your 70% offer, I will beart it by 10s of thousands of dollars. The 70% rule is not meant to make good offer. The 70% rule is designed to keep you safe. The 70% rule, THUS, is meant for people that SUCK at investing, that don't know their numbers, that don't know their flips, that don't know the market.
Answer me this.
WHY 70%?
Give me a mathematical reason why it is 70, why not 72.5 hell why not 61%? The 61% rule would give you even MORE money right?
No seriosuly.. answer me this. WHY 70? It is a gadamn random number that some friggin clown just pulled out of their butt, and everyone without a brain, no intelligence, jsut loved it and because there are far more dumb people than smart ones... the 70% stuck!
The 70% doesn't account for "risk" in the project.
If you have a crumbling basement, the repairs may be $30K... and the 70% rule will account for that cost in the repairs section... but the risk is astronomical. No one is going to buy a crumbling foundation house even if it is "fixed"...
the 70% rule doesn't account for an underground oil tank that may have been leaking for 30 years being at risk for 100's fo thousands in clean up fees.
The 70% rule doesn't account for the house being next to a loud bar.
STOP advertizing the 70% rule. Whats with you all and textbook answers?! Are any of you TRULY wholesaling?
lastly.. how are you going to explain to the selelr the 70% rule?
"Ohh I am going to take off 30% of the value of the home, just because... and then I am going to deduct all sorts of costs, yeah.. yup."
If you can't honestly directly with full transparency tell the seller the truth on something... that is a good indication you are being shady.
The 70% rule is SHADY!
stop promoting it!
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Quote from @Jerryll Noorden:
Quote from @Eliott Elias:
You should focus on what would be a good offer for you! I say 70% minus repairs
guys.... PLEASE stop promoting the 70% rule.
It is a really REALLY srtupid rule.
If you come in with your 70% offer, I will beart it by 10s of thousands of dollars. The 70% rule is not meant to make good offer. The 70% rule is designed to keep you safe. The 70% rule, THUS, is meant for people that SUCK at investing, that don't know their numbers, that don't know their flips, that don't know the market.
Answer me this.
WHY 70%?
Give me a mathematical reason why it is 70, why not 72.5 hell why not 61%? The 61% rule would give you even MORE money right?
No seriosuly.. answer me this. WHY 70? It is a gadamn random number that some friggin clown just pulled out of their butt, and everyone without a brain, no intelligence, jsut loved it and because there are for more dumb people than smart ones... the 70% stuck!
The 70% doesn't account for "risk" in the project.
If you have a crumbling basement, the repairs may be $30K... and the 70% rule will account for that cost in the repairs section... but the risk is astronomical. No one is going to buy a crumbling foundation house even if it is "fixed"...
the 70% rule doesn't account for an underground oil tank that may have been leaking for 30 years being at risk for 100's fo thousands in clean up fees.
The 70% rule doesn't account for the house being next to a loud bar.
STOP advertizing the 70% rule. Whats with you all and textbook answers?! Are any of you TRULY wholesaling?
I stay at 70% so that I can cash out refinance in 6 months at 75% LTV and still make 5% profit. Make sense?
I could do the 40% rule if i wanted, 70% is my max i'm willing to go
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
Quote from @Jerryll Noorden:
Quote from @Eliott Elias:
You should focus on what would be a good offer for you! I say 70% minus repairs
guys.... PLEASE stop promoting the 70% rule.
It is a really REALLY srtupid rule.
If you come in with your 70% offer, I will beart it by 10s of thousands of dollars. The 70% rule is not meant to make good offer. The 70% rule is designed to keep you safe. The 70% rule, THUS, is meant for people that SUCK at investing, that don't know their numbers, that don't know their flips, that don't know the market.
Answer me this.
WHY 70%?
Give me a mathematical reason why it is 70, why not 72.5 hell why not 61%? The 61% rule would give you even MORE money right?
No seriosuly.. answer me this. WHY 70? It is a gadamn random number that some friggin clown just pulled out of their butt, and everyone without a brain, no intelligence, jsut loved it and because there are for more dumb people than smart ones... the 70% stuck!
The 70% doesn't account for "risk" in the project.
If you have a crumbling basement, the repairs may be $30K... and the 70% rule will account for that cost in the repairs section... but the risk is astronomical. No one is going to buy a crumbling foundation house even if it is "fixed"...
the 70% rule doesn't account for an underground oil tank that may have been leaking for 30 years being at risk for 100's fo thousands in clean up fees.
The 70% rule doesn't account for the house being next to a loud bar.
STOP advertizing the 70% rule. Whats with you all and textbook answers?! Are any of you TRULY wholesaling?
I stay at 70% so that I can cash out refinance in 6 months at 75% LTV and still make 5% profit. Make sense?
I could do the 40% rule if i wanted, 70% is my max i'm willing to go
That is YOUR reason to do the 70%.
What you are doing is blindly applying a 70% rule ONLY looking at the refinance options but COMPLETELY neglecting the property, their issues and everything else that comes with it.
You are still not accounting for the risk and every point I made above. Who cares if you can refinance at 75% when you have a 40 year old underground leaking oil tank that will cost you $200K to clean up?See my point?
YOUR reason to do 70% is just YOUR reason, it doesn't make it right or the right strategy!
That is my point. You are completely ommiting a HUGE fineprint, everytime you are pushing the 70% rule.
Also we are talking about wholesaling. Not buy and holding right? You are reaching for reasons to try to make yourself right. It is not about you, or your ego. It is baout giving the correct advise to others.
The dude asked about how to make good whoelsale offers. The end buyer could be and most likely will be a flipper.
So sorry, but your answer doesn't hold here.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
The 70% rule accounts for that, 70% MINUS repairs. If there is a 200k repair, you subtract that from the number you land on after 70%.
What metric do you use?
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
The 70% rule accounts for that, 70% MINUS repairs. If there is a 200k repair, you subtract that from the number you land on after 70%.
What metric do you use?
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?
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Quote from @Jerryll Noorden:
Quote from @Eliott Elias:
The 70% rule accounts for that, 70% MINUS repairs. If there is a 200k repair, you subtract that from the number you land on after 70%.
What metric do you use?
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 selelrs for WHOLESALING. The end buyer is most likely going to be a flipper.
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 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 evert 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?
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.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
Quote from @Jerryll Noorden:
Quote from @Eliott Elias:
The 70% rule accounts for that, 70% MINUS repairs. If there is a 200k repair, you subtract that from the number you land on after 70%.
What metric do you use?
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 selelrs for WHOLESALING. The end buyer is most likely going to be a flipper.
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 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 evert 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?
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.
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!
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes3y
Welcome!
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes3y
70% of ARV - major repairs - your fee.
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