An "as is" FSBO in suburban area, what do I do?

33 Replies

An "as is" FSBO in suburban area, what do I do? 

This will possibly be my 1st wholesale deal but I don't have a buyer, my purchase contract I'm not sure is correct and don't have money to get it checked by an attorney. Here's the deal (so far):

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Townhome

Owner recently put sign up on the weekend

Owner is looking to sell & move out ASAP (he still lives in the home)

Owner wants to sell for business opportunity

Owner is selling "as is" for $189,900 (2 bedroom, 2 & half bath, 1,412 sqft.), according to comps. properties exact (only found 2), might sell for $205k

INSPECTION: Due to it being "as is" there's no need for property inspection, since end buyer might do that anyway. Or do I still need to do it?

PICS: I'm not sure If i'll be able to take any pics of the inside, but the property was sold a year ago on the MLS by someone else so there's old pics of the inside of the home.

MORTGAGE: owner has one and won't disclose it to me, should I care about this since he's selling "as is" and I'm wholesale it?

H.O.A:  $132/M

The owner asks for a loan but I preferred to pay him in cash

My assignment fee: $2K earnest money + $13 assign = $15k profit

(making the purchase for the end buyer be out to $200k + any closing costs)

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Due to the very high price that the end buyer will possibly be paying, should I bother with putting this property under contract? Would this be too much or should I just assign. for $15k with no earnest money (since i'll be having a memorandum on the property and a liquidation damage fee on the contract)?

Could someone also be willing to check my purchase contract for me. Like I said I don't have money to get it checked by an attorney, this to me is surprisingly rare due to Realtor signs being all over the area. Am I forgetting anything, is there a way to do this virtually to save on travel time (bus, transit).?

@Octavia D.   you should absolutely have an inspection done, if you don't feel comfortable assessing this for yourself.  As-is just means that you can't sue him if it falls down after closing from a termite infestation.  Always be sure to complete your due-diligence.

I don't really see this being a wholesale deal.... 

With him at 189k you are at 92% of the ARV. If he is selling it as is there is probably some work that has to be done. When you generally wholesale you want to be at 65-75% the arv -repair costs-your fee. You as a wholesaler will have a hard time getting paid by a Retail buyer if there is a loan/bank involved. I would be interested in this at 135k or less as a wholesaler.

Ryan Dossey, Real Estate Agent in IN (#RB15001099)
800-347-9296

@Octavia D.

Apologies, missed this was the wholesale forum.  The inspection does not have to be done, however you should have a very good idea of what needs to be done in order to find a buyer and evaluate the deal. 

With the asking price and the comps you have located in your area, it doesn't seem like a great deal if you consider in monies for you, monies for an investor and any required rehab costs.

There is no way you are making 15k on that. Example of one of my wholesale deals

3/1 Home. Arv 118k

Repairs: 45k

Contract price 18k.

Sale price 30k

Profit 12k

The investor I wholesaled it to was "all in" for 65% of the ARV. This was a great deal for him. It sold within a week.

You should shoot for 65% of the ARV with your max being more like 70-72% of the ARV.

Ryan Dossey, Real Estate Agent in IN (#RB15001099)
800-347-9296

You are missing something. If the property is worth $205k AND needs work, you getting it under contract for $189k is NOT A DEAL. But we might be misunderstanding you. You did a good job on explaining the deal but not the numbers. 3 simple questions:

How much will the property be worth when its all fixed up and in great shape?

How much money will a contractor charge you to make it like that?

How much will the seller take if you pay all cash and settle quickly?

I agree with Ryan and Judah. But don't have an inspection done till you have the house locked up with a subject to inspection of any major defects. It might be "as is" as Derrick mentioned but that just means he won't be paying for any repair costs. You are still entitled to make an informed decision.

Now, if you are saying $205k is the ARV, or are you saying similar "as is" houses sell for that figure at market?

According to everyone's response this does not seem like a good deal, is there some other way to help the seller and make this work for both of us?

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Lucas the comps I found were from properties in the subdivision that were sold in the past (not recently) for $205K, my mistake it was actually just one similar exact property, not two. The market value for the one the owner is selling is actually $209K according to the website, yet the appraisal website states the value of the owners property is $155K. I know I should not be going by all these different websites, but the $155K value of the owners property is from the county website I stay in.

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Should I try to negotiate to the owner to drop their price a little.? He told me that his inspection was good but would not disclose to me a copy of it to see, so it makes me think the owner did repairs on it, of course is trying to get his mortgage paid off, and trying to cover for money payed to maintain the home while he's lived there. since he's selling it for $189,900. But yet he's only had the property for a year according to the appraisal website.

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Sorry if what I'm saying is confusing and clearly shows that I don't know what I'm doing hehehe! I'm a tactical learner so I understand best by doing things hands on, i know i'll eventually get it. Just for now it seems like I still have a long way to go before doing a deal.

I applaud you for actually getting out there and talking to owners. The hardest step is actually taking action. This guy seems like he is probably pretty set on his asking (I dont see him coming down 30k). I like to talk to FSBO people after they haven't been able to sell. The big thing you need is motivation. A motivated seller NEEDS out of the home. They can't afford to keep it.

He has only had it listed for 3-4 days now. He doesn't have any reason to not hold out a bit longer. You could always offer lower and tell him that it is open ended he may call you back. But you are probably better off continuing to look for homes. 

Ryan Dossey, Real Estate Agent in IN (#RB15001099)
800-347-9296

I don't talk to them, I text them heheh!, the reason is my pre-paid phone doesn't support call recording, and texting them gives me time to know what to say next rather than have them hold on the phone waiting for me to talk ( I always think before I speak ). Also I'll have copies of the conversation and the times it was made. I do prefer to have a recording though, but saved text messages are just as good. So far though I haven't actually spoken to a seller by phone and I'm interested in trying virtual wholesaling to save on travel time since I don't have a car and the bus takes too long.

@Octavia D.   the value shown on the county website, assuming the assessors page is usually always low - at least for my area it's very common to be listed well under your comps.

Still, like @Ryan D. has mentioned, the owners price needs to come down quite a ways in order for this to be a good deal, waiting it out might be your best bet.

Best of luck!

I just text the owner and asked if he would accept $180K all cash and he told me ..........

The value play on this if you shifted gears is taking it sub2 or doing a sandwich L/O, but I wouldn't recommend doing that at your experience level and cash position.

This doesn't sound like anything resembling a good wholesale deal. You should be at 65-70% of ARV less repairs, less your fees. I wouldn't spend too much time on it, but say "I'd be a buyer at $X, does that work?" I don't intentionally do wholesaling, but if I was I'd be worried more about making lots of offers than trying to make non deals into deals. The single quickest way to get frustrated in this biz is to try to make unmotivated sellers motivated...

owner ....... "my friend jack will give you a call, this may work"

me ......... "please have him text me so this conversation will be recorded for reference"

owner ........ "I'll ask him"

Does this seem like a possible deal now or did I make a mistake and not ask for a lower price? The owner did tell me hes trying to sell and move out ASAP, so it seems he might be motivated. I really need step by step guidance on this, heheh baby steps. Is it possible to determine the ARV before property inspection? because ryan you said my ARV for the owners price of $189,900 is 92%, how did you figure that. And will I have to pay an inspector before the deal is closed? also i never mentioned to him that I'm a wholesaler, should I tell him to see if he still wants to work with me?

$180k isn't a deal at your numbers either. A 12% discount to value doesn't mean much in this game. He'd have to pay 6% to a realtor and we're assuming this thing still needs some work. Sounds like he's basically asking retail net value.

The only way that'd work is if it'd make a good rental and you find a buy and hold guy that doesn't mind a little repairs for a small discount. They're out there, but usually don't like townhomes and condos.

No way does that come close to working for a flip.

You should also have at least some sort of buyers list prior to making offers. I don't want to discourage you, but you really need to have a solid exit planned before you tie up the property.

189 divided by 205 = 92% of the ARV (after repair value)

180 divided by 205= 87% of the ARV.

What is the $ amount of repairs that are needed to the home? If I was looking to move in myself and could by the home for 180 and have 20k in equity that would be a nice buy. 

As a wholesaler this deal would have to be at under 160k. I don't know why you offered him 180k. It is kind of unfair to the home owner to offer prices that you can't pay and don't have a buyer for. 

If he took your offer of 180k what would you try to sell it for?

Ryan Dossey, Real Estate Agent in IN (#RB15001099)
800-347-9296

@Octavia D.  congrats on taking action.  

The formula works like this:

ARV: $205,000 X .70% - repair costs - desired profit.

ARV: 205,000 X .70% = $143,500. So, just taking the 70% you are still almost $40,000 off. You have to keep in mind your end buyer will have buying/closing costs, financing, holding, repairs and unforeseen costs that they will factor in. There is also your fee since you plan to wholesale. So, you will need to do some serious negotiating to get it down to where another investor would be interested.

If you plan on wholesaling it, you should let the seller know that.  No reason to hide it.

Do not pay for an inspector, that will be up to your end buyer.

I would suggest you spend more time on this site and connect with fellow wholesalers.  Find someone who knows the business and can walk you through the process step by step.  @J Scott has two great books on real estate investing.  They can both be bought on this site.  Sounds like you have the drive to be successful and already taking action is a big step but spend some more time studying.

I'll probably sell it for $184K because I'm more focused on getting the hands-on understanding on how this is done rather than the profit.  Also if there are no repairs needed is it still necessary to know the ARV. Also the townhomes in this area sell for 6 figures and this area is growing and is near many stores & shops, so I figure that someone would be interested in buying this property since properties around here sell fast.

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I also just got a text back from the owner regarding his friend jack, he's the owners realtor !!!! ............. how can that be and the owner has a FSBO sign in front of the home? Should I just stop talking to this guy and move on, it's obvious that many of you are giving me red flags. I do have another possible owner who might be interested in selling his townhome, it's rented out and if i remember he was selling it for $70 / $80K with 50% owner financing and owned the property free and clear. I still have his contact info. should I contact that other owner and see if he's still interested in selling his property.? 

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My main goal is to own small apts. for buy&hold but am trying to use wholesaling to gain some financing to help me a little on doing so, yet I don't like properties with H.O.A or those with mortgages (knowing a lot of them need help the most) but If I don't know how to help them then I just won't bother trying. I don't want to cause any more headache for an owner who's trying to sell their property that has a mortgage on it If I don't know what i'm really doing.

Your other lead depending on what the home is worth sounds like it could be a better deal. 

I would most likely pass on this one. Sounds like he has it listed FSBO but has a realtor friend who he is running things past. Trying to sell it for 184k won't happen/work. To wholesale you have to have properties at a steep discount.

Go under the learn tab on the top of the page and read through the "how to guides" lots of good stuff there. I would also listen to the podcasts that pertain to what you're trying to do. 

Ryan Dossey, Real Estate Agent in IN (#RB15001099)
800-347-9296

@Octavia D.  I would just give up on the house.  Putting it under contract for $180,000 and selling it for $184,000 will not work.  I imagine there is a far amount of repairs that need to be done and no one will take it for $184,000.

I would put the brakes on a little and spend a lot more time on BP. Learn about wholesaling, how to determine ARV's, repair costs, the buying and selling process, contracts, ect.... You need learn a little more about the process of the deal and how all of the parts work together. All of that can be found right here on BP. Just use the search function and there will literally be step by step detailed descriptions on here. I'm not trying to be harsh and I commend you for taking action but if you do not know what you are doing you can get into a lot of trouble. And, if you start off your career by marketing terrible deals then that will give you a bad reputation in the real estate investing community.

Also, listen to all of the BP podcasts.  There is a lot of great info on them.   Other places to find great info is @Michael Quarles  website buysellfixflip.  He does an excellent podcast that has a tremendous amount of information.  Also, check out Shaw Terry's flip2freedom podcast.  

Originally posted by @Octavia D. :

Lucas the comps I found were from properties in the subdivision that were sold in the past (not recently) for $205K, my mistake it was actually just one similar exact property, not two. The market value for the one the owner is selling is actually $209K according to the website, yet the appraisal website states the value of the owners property is $155K. I know I should not be going by all these different websites, but the $155K value of the owners property is from the county website I stay in.

First things first, you need to establish what the current market price for the home is. If you are going back more than 6 months of sales, that's great but no farther that that initially. And never go off what other properties are currently for sale for. That's the biggest mistake newbies and even home sellers make, is they value what others think their home is worth. If that home that's on the market at $209k starts dropping its price, you're done. Base your research on established figures.

Second, if this guy purchased a year ago, did he rehab it himself? So it's a flip? Move on to the next deal if you answer yes to any of these because you WILL NOT wholesale this. It's not a wholesale deal.

I hope this helps you.

Originally posted by @John Hixon :

@Octavia D. congrats on taking action.  

The formula works like this:

ARV: $205,000 X .70% - repair costs - desired profit.

ARV: 205,000 X .70% = $143,500. So, just taking the 70% you are still almost $40,000 off. You have to keep in mind your end buyer will have buying/closing costs, financing, holding, repairs and unforeseen costs that they will factor in. There is also your fee since you plan to wholesale. So, you will need to do some serious negotiating to get it down to where another investor would be interested.

If you plan on wholesaling it, you should let the seller know that.  No reason to hide it.

Do not pay for an inspector, that will be up to your end buyer.

I would suggest you spend more time on this site and connect with fellow wholesalers.  Find someone who knows the business and can walk you through the process step by step.  @J Scott has two great books on real estate investing.  They can both be bought on this site.  Sounds like you have the drive to be successful and already taking action is a big step but spend some more time studying.

Understanding a little more on this ARV, is it the purchase offer of the home X .70% / the actual value of the home based on comps. X .70%? and what is a good 6 figure offer for an end buyer, I don't know?

Originally posted by @Ryan Dossey :

Your other lead depending on what the home is worth sounds like it could be a better deal. 

Not if the comps are at $50k. There just isn't enough detail to know if it's good or bad.

But I agree, leave the first one alone.

Originally posted by @Lucas P. :
Originally posted by @Octavia D.:

Lucas the comps I found were from properties in the subdivision that were sold in the past (not recently) for $205K, my mistake it was actually just one similar exact property, not two. The market value for the one the owner is selling is actually $209K according to the website, yet the appraisal website states the value of the owners property is $155K. I know I should not be going by all these different websites, but the $155K value of the owners property is from the county website I stay in.

First things first, you need to establish what the current market price for the home is. If you are going back more than 6 months of sales, that's great but no farther that that initially. And never go off what other properties are currently for sale for. That's the biggest mistake newbies and even home sellers make, is they value what others think their home is worth. If that home that's on the market at $209k starts dropping its price, you're done. Base your research on established figures.

Second, if this guy purchased a year ago, did he rehab it himself? So it's a flip? Move on to the next deal if you answer yes to any of these because you WILL NOT wholesale this. It's not a wholesale deal.

I hope this helps you.

 you're right, always go by the exact property that has SOLD in the past 6 months and not by an owners best guess. This kind of seems like a flip, but am not sure. thank you. :)

Originally posted by @John Hixon :

@Octavia D. I would just give up on the house.  Putting it under contract for $180,000 and selling it for $184,000 will not work.  I imagine there is a far amount of repairs that need to be done and no one will take it for $184,000.

I would put the brakes on a little and spend a lot more time on BP. Learn about wholesaling, how to determine ARV's, repair costs, the buying and selling process, contracts, ect.... You need learn a little more about the process of the deal and how all of the parts work together. All of that can be found right here on BP. Just use the search function and there will literally be step by step detailed descriptions on here. I'm not trying to be harsh and I commend you for taking action but if you do not know what you are doing you can get into a lot of trouble. And, if you start off your career by marketing terrible deals then that will give you a bad reputation in the real estate investing community.

Also, listen to all of the BP podcasts.  There is a lot of great info on them.   Other places to find great info is @Michael Quarles  website buysellfixflip.  He does an excellent podcast that has a tremendous amount of information.  Also, check out Shaw Terry's flip2freedom podcast.  

 Thank you john, i know that learning about this is very important and after learning a lot about it for so long obviously I was surprised and excited to see a rare FSBO in an area where i live that realtors mostly do deals in. So that's my mistake for letting my excited emotions make me forget what I've learned so far about wholesaling. I've listened to many podcasts and are very great and even was told to not try and make a unmotivated seller motivated (yet he seems motivated because he's trying to sell ASAP) but I guess many of you guys see it's still doesn't look like motivation according to the numbers. I never was good at math hehe!, was even told in school I was diagnosed with a learning disability in math. So I always hated math because my brain just never seemed to process the many details of it. Other than that, I'll take a step back, re-focus and try again with the preference and standards I had all along. My emotions took over a little heheh!! oops.