So I recently heard a 15+ year veteran in the Wholesaling game say that you should never go see a house unless you have it under contract. It reminded me of the first investment seminar that I ever attended, and the presenter said firmly and boldy "DO NOT, and I repeat DO NOT GO SEE ANOTHER HOUSE UNLESS YOU HAVE IT UNDER CONTRACT."
So my question to all of you wholesalers is, do you lock it down before even seeing it?
And if so, how do you determine an offer price without knowing repairs?
The investors who are doing what you stated in most cases end up wasting peoples time. You should always go look at a home before you make an offer.
The only time I make offers before going to see them are on HUD homes as I can back out within 48hrs with no issues. I would not do this to home owners and you surely cant do this with bank REO's.
I would always go see the home first! In order to give accurate numbers to your buyers and not waste the seller and your time, go see it!!
I agree. Never put something under contract sight unseen. Especially when you are starting out & need to practice negotiating with Sellers etc.
Ok, thanks for the feedback, I personally haven't locked anything down without personally seeing it myself either. Seems really bold to do it that way.
@Michael Chase That's the first time I've ever heard that one and I used to be a REI webinar junky. Definitely doesn't make sense to follow that advice. Its a waste of everyone's time, yours included.
Not looking at the house before making an offer could be a disaster. We thought we found one that was really close to the number we would want to offer. The home owner was asking $60k, and we figured we could make on offer on it for around $45k. ARV should nave been around $85k. When we went and looked at it, it was barely worth an offer of $10k. It needed more than a wall put in to turn it back into a 2 unit and a coat of fresh paint. Both furnaces were gone, needed foundation and brick repaired. roof was bad, I cold go on for a while over how bad of shape it was in.
@Michael Chase Not looking at the house could be a major waste of everyone's time if you do not do it correctly. When wholesaling houses, I rarely go see the house before we get it under contract.
Of course that opens us up to offering more than the house is worth. We mitigate that risk with an option period. The seller and I agree that in exchange for me paying them ($10-$100), I will have the option to terminate my contract for any reason during a specified period.
Therefore, no one's time is wasted because the seller knows that the deal is not 100% until I decide that I will continue with it. During this time buyers & contractors walk the property and identify areas of concern and if we discover something that brings the repair costs outside of the expected number, we can either renegotiate or terminate the contract before the option expires.
Going to see every house is easy when you are working with 1-2 houses, but when you have 20-30 leads, it becomes more important to have a more streamlined process.
We have a very high contract to close rate and we've only had to terminate one contract in the last 12 months. The seller was happy, because during the option period, we helped him evict a non paying tenant. This alleviated his frustration and he still owns the house today.
If you have time, definitely go see the house. If not, get it under contract with a good option period, set proper expectations and you will be fine.
Interesting discussion guys.
I am just starting out and have only wholesaled one deal, but I did not visit the property before making an offer. I had a very frank conversation with the seller about what repairs were needed and based my offer on that. I did include a 15 day due diligence clause in my contract and used that time to have an inspector visit the property. If the repairs were way out of whack, I would have renegotiated the price based on the inspection or walked away from the deal.
Am I missing something?
Stephen you put a contract on the home prior to seeing it, correct? And you paid the inspector to visit the property? At what point did you see the home and if you had walked away from the deal how much EM would you have forfeited?
The house I wholesaled was in Fort Myers. I live in Ottawa, Canada. I never visited the property. I found the house through a direct mail campaign. All of my contact with the seller was by phone or email. I had $500 invested in EMD, but the Due Diligence Clause allowed me to walk away and get my deposit back. Had I decided to back out after the 15 days, I would have forfeited the money, so I have to work fast to get an inspector into the property and start marketing to get a sense of the response and whether I have a deal. One of the challenges of working from out of state (country).
I think that it was Wendell De Guzman that said money loves speed.
@Michael Chase Having someone on the ground taking pics and getting things done on your behalf; should you choose to purchase & flip properties out of state and you haven't physically seen it is one thing, its ok, as many investors do it successfully. yet its another thing to make it a habit to put blind contracts all over the place, in your backyard and out of town without getting viewings, pic or videos o f the subject property. You need someone looking out for you if and when you can't be on the ground. If anyone comes on here and takes credit for spreading that nonsense to always put properties under contract without seeing them. They're being silly and are surely out to sabotage any newbies would be success.
I've got a different point of view on this:
1) "Wholesaling" alone - in 2014 - is not a viable business. You need to be doing more than just wholesaling to monetize leads and make a good profit.
2) We teach that you meet every seller - face to face - if possible. If you can do more than just wholesaling (e.g., listing, lease option, sub2, etc.), it is in your best interest to go meet people, understand their situation and offer them the best solution.
3) If you're new in this business, you know you don't have much going on yet. So someone calls you and they are remotely interested in selling their house... OMG, GO SEE THAT PERSON. What other real estate success plan did you have for today? You have SELLERS calling you! Talk to them, go see them. And guess what - they know OTHER PEOPLE; brothers, sisters, uncles, friends, co-workers. If you go meet someone and they come to know YOU and understand what YOU DO, they are likely to tell people in their COI about you (if they like you, of course; it's hard to be that "likeable" when your trying to get a steep discount - over the phone - on a house you have never seen from a person you have never met.
So often, what I see in new investors is FEAR - afraid to talk to sellers, afraid to meet people, afraid to make offers, etc. etc. etc. This 1971 technique of "get it under contract before you see it" probably works well for investors that don't really want to talk to people or meet them or give a crap about their problems. Turns out a lot of the old wholesaler techniques from decades past simple don't work now.
THIS BUSINESS IS MORE ABOUT PEOPLE THAN IT IS ABOUT NUMBERS. Very few of your deals will be struck over the phone, and you could lose a TON of business if you REQUIRE all your deals to be struck over the phone. Just sounds like old outdated guru talk to me.
OMG I have to talk to a seller?
Cant I just write 300 offers a month in my PJs and make 20K a month like Preston says?
You mean I need soft skills like NLP and negotiation and sales?
I read more about soft skills than I do about "hard skills" such as contract writing real estate law appraisal theory mortgage financing property law construction building codes design marketing
Soft skills are defined as:
Interpersonal and relationship building skills that help people to communicate and collaborate effectively.
A partial list of soft skills that are essential to real estate are:
- personal accountability
- emotional intelligence
- listening skills
- creative thinking
- willingness to learn
- flexibility -
See more at: http://www.thenatureofrealestate.com/soft-skills-a...
More soft skills, think like a financial planner...
I wouldn't go look at anything unless I know that we're both in the same ballpark. Sometimes I get it locked up first, but usually I just prescreen them with something like this:
"Based on blah blah blah my offer would be somewhere in the range of $x. If that ball park works for you then we can set up a time for me to look at it"
Of course you need to set it up a bit and possibly explain how you get to that range because you'll likely hit them with sticker shock.
Last thing i want to do is spend an hour with someone trying to sell me a house for retail pricing.
Not your job to estimate repairs unless you are going to rehab or hold. Leave that part to your buyers. They will let you know.
Your charge is to find out what type of props buyers love and what they will spend to get it?
If you still worry about repairs after reading above, estimate $15k going in. Once you have property under agreement, use your inspection period to show buyers. If they say rehab above $15k cancel or renegotiate price with seller. If they say less than $15k you're on track to cha Ching!!!!
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