I've just recently sent out my first YL campaign and think I might have my first actual motivated seller to work a wholesale deal.
Some info about the property - about 2,200sqft, 2 story SFR, 4b/2.5b, built 95', unfinished basement, 2 car garage, owner owes approx. 30k on mortgage.
Motivation on the seller's end - got remarried and moved out 2-3 years ago, still paying on mortgage, new wife hates he is always stopping over there checking on the property, busy with work so hasn't got around to deferred maintenance (water damage, broken gutters, etc...), doesn't really have time to fix up to list property.
Best comps I could find in neighborhood within past 9 months - 2,630sqft, 3b/3b, 2 story SFR, $173,000... 2,688sqft, 3b/3b, fully finished basement, tandem 4 car garage, 2 story SFR, $235,000... 1,992sqft, 3b/2b, ranch, $205,000... 2,300sqft, 4b/2.5b, built 95', 2 story SFR, $243.000.
Do I have something potentially good to work with here? Without actually seeing the property yet what would be a good number to start with?
If more numbers or other information would help please let me know and I'll answer to best of my knowledge.
I would say you for sure have a deal here with him only owing 30k! And it looks like your ARV is somewhere around 230-245k. What did those comps look like also matters though. Were they rehabs? How far away are they?
However, If you take 230k/.65=149.5k. For repairs base it off of what he says it needs or if he does not know I start with around 20-25k. Subtract that and your fee and you have your initial offer. It would be easier if you could have gotten a asking price out of him then you could have landed maybe around that if reasonable but either way i would probably be offering around 90-100k just to get negotiations going. Hope this helps! There is much more experienced people here than me so maybe they will chime in and help you out.
I have leads coming in but waiting on my first deal as well.
Here's what I would do (please critique!)
Ask him how much the repair costs are (ballpark) and then how much he thinks it worth as-is, then ask how much he wants for it. In that order.
His answer(s) will go a LONG way in determining motivation.
I would then go back and get newer comps. 9 months is a long time out. 90 days is ideal.
But using the information provided, I would go off that last comp at $240k and assume I may be able to get that as an ARV (would like to see pics obv). However, I would want to get the best deal for my end buyer and myself, and would conservatively figure the ARV to be around $230k.
Standard wholesale MAO formula is :
ARV x %70 - repair costs - your fee = MAO.
Assuming $30k in repairs/updates we get $230k x .7 - 30,000 - 10,000 = $121k
I would then call back and tell them I could offer anywhere from $100-120k depending on the actual repairs needed. If they agree to that ball park, I would set the appointment.
What do guys think?
I would meet him at the house, with a yellow pad of paper. After commenting on all the work that is needed, I would hand him the pad and say, "If you were to sell to me today for cash, and allow me to assume the mortgage payments, taxes, repairs, immediately, what would you take?" And hand him the pad and a pen.
He will write something down. Trust me, he will write something down.
When he hands the yellow pad back, look at what he has written-for a long time.
Hidden camera footage of a recent @Joseph Ball negotiation:
@Jeremy T. Ha! Busted!
I wouldn't try to get the sellers estimate for what it is "worth". I think that will be too influenced by what the house should sell for in fixed up condition - even if they realize it is not there currently. I would try to get the number he "needs", especially with only owing 30K on the property. I think the approach from @Joseph Ball will get there.
If what he gives you looks like a retail number, show him you repair calculations and state that you need a 30%+fee buffer for costs and profits.
ask the seller how much he wants for the house. That will give you an idea on how motivated he is and if he has researched his market. He might just say he wants 90k for it and you can wholesale fast. If he doesn't have a number in mind then make him an offer. It is as simple as that. write up a contingent contract with no earnest money for 30 days and find a buyer.
Thanks for all the helpful advice!
As far as asking him what the property is worth, I did that during our first phone call and his answer was he really has no idea. I did not ask him what he wants for the house though. I will be speaking with him again tomorrow and if we can get a number in the same ballpark he will show me the house this weekend.
Very interested in seeing how this turns out. Pulling for ya!
@Timothy Cervantes Thanks! I'm hoping tomorrow evening I'll have some good news to post.
Well I made an appointment and went to the property but it doesn't appear we are going to be able to agree upon a price at the moment. I believe he is grossly underestimating the money it will cost to get the place market ready and he isn't motivated enough yet to go any lower. He said he was going to get someone to give him some estimates on the things that need to be fixed and I think that should be a good reality check for him. I'm going to continue to keep in touch with him and hope when he's finally tired of the place I'll still be there waiting.
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