First call from yellow letters

10 Replies

So I got my first call today from letters I sent yesterday. The call was from an expired listing and it was listed at 109k but the home value is 140k. I am having trouble getting comps online so I am waiting for my real estate buddy to email me back. In all honesty if the guy is motivated and I know there are a lot of factors such as if the house needs repairs or not is there actually a potential for me to make money on this home?

Quick Analysis For you

ARV $140k * 70% = $98k (search for 70% rule in the forums, it is a good rule of thumb to cover carrying costs, acquisition costs, and rehab profit)

Always assume minimum $10k in repairs unless seller tells you it needs more (roof, siding, etc) = $88k

Profit you want to make - ~$5k = $83k

You need to get it for $83k or less as a very rough estimate.

Ask the seller what they would take for a cash offer today, if they won't give you a number I would give them a range $75-80k to see if they express any interest before driving out to the house. If they are sticking to $109k or more move on to the next one.

A key though will be to follow up with them every few weeks to re-express interest - they may become motivated months from now and you don't want to lose a potential deal

Thanks Dave that really helps a lot. So I was looking at the property on zillow and obviously I don't know enough about it but is there a chance the property doesn't need any major repairs and if so should I just pass on the property or still try and hit that 75-80k range?

@Darren Nichols Remember this hit the @ before the name of the person you respond to as this will show up in the forum post.

@Dave Savage Thanks that really helps a lot. So I was looking at the property on zillow and obviously I don't know enough about it but is there a chance the property doesn't need any major repairs and if so should I just pass on the property or still try and hit that 75-80k range?

Hello @Darren Nichols ,

The 70% rule is a good one to follow and is designed to leave some room for mistakes in your numbers. It is also harder to hit in these times of lower inventory. Check the house for needed repairs, know very well what those will cost and be conservative on your ARV in arriving at your offer price.

However, the message you will always get from experienced flippers or mentors or gurus is ALWAYS make the offer. Even if it does not stick the owner may come back to you later. If no offer is made you know for sure that your profit on that deal is zero. Best wishes working this one out.

Ted Akers, Transactional Funder

So a quick update I got some comps from a agent friend of mine and as I said earlier the value of the home is 140k. This particular home is a manufactured/modular home but its not a mobile. There are no comps in the area for this type of home but I got comps for other somewhat similar properties and the price for most of them average around 140k-146k. Can I still use the comps as a negotiating tool or should I just not even mention them?

Call the seller and find a good time to see the home with your GC and the make a cash offer but show the seller what it will take to fix the home and please don't inflate the rehab cost.

Joe Gore

Originally posted by @Darren Nichols :
So a quick update I got some comps from a agent friend of mine and as I said earlier the value of the home is 140k. This particular home is a manufactured/modular home but its not a mobile. There are no comps in the area for this type of home but I got comps for other somewhat similar properties and the price for most of them average around 140k-146k. Can I still use the comps as a negotiating tool or should I just not even mention them?

Mention it to who? I definitely don't think it would be a good idea to mention it to the seller since they're already asking way under that. It may help you when you're negotiating with the buyers.

If you are going to take comps with you try and find some REO comps or something to better represent a house that needs work.

Remember you are a solution to their problem - problem being a house they need to sell, but can't sell through a traditional agent. Frame the discussion as how you can fix their problem, not directly about the numbers. "What do you need to move on from this property" "If I can help you by allowing you to move only what you want, not perform any repairs, not have to worry about the lawn/pool/snow removal, etc what would you take for a cash offer"

IMHO once someone moves out there is always going to be a need to do paint and flooring to get it in shape to sell to a retail buyer. A lot of times if you put $5-10k into those things you can increase the value $20-30k.

Like @Ted Akers said - always make an offer - and ALWAYS follow up a few weeks later