Is Low Balling Sellers a Normal Part of Wholesaing?
Wholesaler · Baton Rouge, LA · Member since 2008 · 471 posts · 98 votes
Is Low Balling Sellers a Normal Part of Wholesaing?
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Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes
8yIt's not necessarily low balling. It's figured returns based on current condition and cash deployed.
I wholesale in the St. Tammany area. I tell my sellers often that I may not be the best option for them and that I only add value to the situation if I'm solving a problem (condition, quickness, cash, convenience, etc) because someone living in the property will most likely pay more than me all day long. It's a personal decision for them and a business one for me. Once I pitch it to them like that, I separate the motivated ones from the non-motivated ones and save all of us the time wasted if their just trying to fish for offers.
39 Replies
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Low ball is name of the game.. !! its why I don't play in that sandbox. lots of wasted time energy and money.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yThis is a part of wholesaling, that’s why you need a really motivated seller. Personally I would move on to a different niche
- Investor · New Orleans, LA · Member since 2017 · 336 posts · 148 votes8yIt's not necessarily low balling. It's figured returns based on current condition and cash deployed. I wholesale in the St. Tammany area. I tell my sellers often that I may not be the best option for them and that I only add value to the situation if I'm solving a problem (condition, quickness, cash, convenience, etc) because someone living in the property will most likely pay more than me all day long. It's a personal decision for them and a business one for me. Once I pitch it to them like that, I separate the motivated ones from the non-motivated ones and save all of us the time wasted if their just trying to fish for offers.
- Flipper/Rehabber · Salt Lake City, UT · Member since 2016 · 211 posts · 174 votes8y
As a flipper there is a bunch of things I use to crunch my numbers to see what offer works best for me. This is basically.
Holding Cost
Selling Costs
Repair Costs
desired profit
Even if the repairs are just cosmetic if you are selling to a flipper and not a buy and hold investor there are additional costs that might affect other people. Its all about know who your sellers are and who your buyers are.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
@Robert Burns you can only succeed in wholesaling by low balling. If you offered them fair market value, then you would not make a profit. You need to buy a house cheap enough so that you, the flipper and the flippers realtor can all make profit on the deal. That means three people making a profit from the seller. To make this work, you need to find desperate sellers so it is a numbers game. Lots of marketing to get leads, then lots of low offers to get deals.
- Wholesaler · Baton Rouge, LA · Member since 2008 · 471 posts · 98 votes8y
Joe, Thanks for the logical and accurate comments. Another aspect that is clouding this deal is that the sellers went to school with my brother and they are not "desperate"! So I'm going to call them and tell me why our offer is so low and that it's likely they need to find another buyer.
- Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes8y
Being honest is the best policy, most people who call on a wholesale letter are not going to be super motivated, a lot of times they just want to see what's out there. Many will even have their home listed, and not understand the wholesaling process.
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes8y
$93k offer on a $205k ARV needing significant cosmetic work, does not sound like a low ball offer at all.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes8y
no no no no you all got it wrong.
When wholesaling you do NOT lowball. When ANYTHING investing you do not lowball.
Investing is all about numbers.
You make an offer that simply works for you.
an ARV of 200K that needs 60K in repairs will have a 10% selling cost (20K) and you want to make 40K in profits (The back end buyer/flipper)?
The offer is 200K -60 -20K -40K = 80K
Is this a lowball offer?
No.
What is the definition of lowballing?
DEFINITION of 'Low Ball' A low ball offer is a slang term for an offer that is significantly below the seller's asking price, or a quote that is deliberately lower than the price the seller intends to charge. It also means to give a false estimate for something.
Whatever its literal definition, here it is meant as simply offering an insulting (unjustified) low offer.
If you can show the seller the numbers and they simply make sense, it will never be a lowball offer.
They can take it or leave it. This is the number that will work for us, and the numbers simply do not lie. No matter how much fuss you give, swear or yell at me, I am not making this stuff up, this is the number we can make our minimum desired profit and it is what it is.
Now as a wholesaler, you just add (or more accurately, subtract) your fee to this, and that is your offer. Simple as that.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes8y
Originally posted by @Joe Splitrock:
@Robert Burns you can only succeed in wholesaling by low balling.
ABSOLUTELY NOT!! What the heck?!!
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes8y
Originally posted by @Robert Burns:
Joe, Thanks for the logical and accurate comments. Another aspect that is clouding this deal is that the sellers went to school with my brother and they are not "desperate"! So I'm going to call them and tell me why our offer is so low and that it's likely they need to find another buyer.
NO!!!
That is retarded!!
You call them to to say the offer is too low ONLY if the numbers do not work out. If you are going to count on "super desperate" sellers to lowball them (i.e. scam them i.e. take advantage of their desperate situation), not only are you a prick, you will forever wait to make a deal. You think wholesalers all over the USA are successful because they scam people?
This is sad seriously.
I crealy see NONE of you (most of you) have NO CLUE how to wholesale!!
NO clue!!!!
This entire thread give me such a bad taste. Makes me feel ashamed to say "I have wholesaled before".
Me having several amazing video testimonials including from people I have wholesaled their property (knowingly) is concrete proof I am right!
No one would give a great review knowing you lowballed them.
Bleh!
- Developer · Boston, MA · Member since 2016 · 175 posts · 155 votes8y
As an investor/wholesaler you have to purchase property at a discount price to make a profit; however, this should not be your number one goal. We are problem solvers. Are goal should be to help people first make profit second. Sometimes it is best to tell the seller you are not the best option. Other times the sellers is in a jam and you are the best option. Always focus on adding value. Believe it or not I have a good friend who over 75 percent of the time pays market value. His profit comes from what other people don't see. Example adding bedrooms or adding a second unit.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @Jerryll Noorden:
Originally posted by @Joe Splitrock:
@Robert Burns you can only succeed in wholesaling by low balling.
ABSOLUTELY NOT!! What the heck?!!
I seem to have to struck a nerve here, which was not my intent. I am sure you run your business honestly, but that doesn't mean you are paying top dollar for properties. Successful wholesalers are low balling. Why do you think the majority of wholesale offers are rejected? If all the offers were at "fair market price" then the majority would be accepted, not rejected. The definition of fair is not whatever you need to charge to make your desired profit. That could be fair from your perspective, but if over half your offers are rejected, then the seller doesn't agree it is fair market.
Even if people accept an offer, that doesn't make it a fair market offer. It just means the person believes it to be their best or only option. If they were educated on other options, they may not accept that low offer. When people are desperate, old or uneducated, they sometimes lack ability to make the best financial decisions. That is why assuming because an offer is accepted, means it was fair, is faulty logic.
Wholesalers make money on the spread between buy price and sell price. There is only two ways for them to make more money. Buy at a lower price or sell at a higher price. Selling price is capped by market value, so wholesaling success depends on get people to accept low offers.
- Charleston, SC · Member since 2018 · 26 posts · 15 votes8y
@Robert Burns no deal you come across will be the same, each deal requires you to think with a different mindset. You have to look at what has sold in the area within the last year to determine what an end buyer will pay for the home completely fixed up. From there I work backwards by calculating what the reasonable offer would be.
I determine this by taking what has sold X .7 (70%) - repairs - my assignment fee. I never give the seller a number I always ask them what their "walk away price is" if it is close to my calculations I begin to negotiate. If it is less than my number even better but I still negotiate and aim to close on the contract that day.
I agree with @Aaron K. being honest with the buyer and seller from the first step and letting them know what you are doing will save you time and money in the long run. Also, is you do right by each party it can lead to a referral or more business down the line.
At the end of the day @Josue Velney hit the nail on the head, you are a problem solver and your focus should be to alleviate the problem that the seller has with this property.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes8y
Originally posted by @Joe Splitrock:
Originally posted by @Jerryll Noorden:
Originally posted by @Joe Splitrock:
@Robert Burns you can only succeed in wholesaling by low balling.
ABSOLUTELY NOT!! What the heck?!!
I seem to have to struck a nerve here, which was not my intent. I am sure you run your business honestly, but that doesn't mean you are paying top dollar for properties. Successful wholesalers are low balling. Why do you think the majority of wholesale offers are rejected? If all the offers were at "fair market price" then the majority would be accepted, not rejected. The definition of fair is not whatever you need to charge to make your desired profit. That could be fair from your perspective, but if over half your offers are rejected, then the seller doesn't agree it is fair market.
Even if people accept an offer, that doesn't make it a fair market offer. It just means the person believes it to be their best or only option. If they were educated on other options, they may not accept that low offer. When people are desperate, old or uneducated, they sometimes lack ability to make the best financial decisions. That is why assuming because an offer is accepted, means it was fair, is faulty logic.
Wholesalers make money on the spread between buy price and sell price. There is only two ways for them to make more money. Buy at a lower price or sell at a higher price. Selling price is capped by market value, so wholesaling success depends on get people to accept low offers.
Wrong again On all counts. There is a huge difference between a lowball offer and make an offer below market value. That is where you are wrong. You need to get your terms straight.
Also you can make plenty of wholesale deals without actually making a below Market offer. You can give actual Market offers if the house is in bad shape. You make your money by selling the contract to a flipper that has some vision and understanding how you can add value to a house doing the right renovations.
This is what it is important to find good buyers and not just random people that have no idea how flipping works
- Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes8y
@Jerryll Noorden, I think that you are oversimplifying @Joe Splitrock 's argument, he is saying that for an offer to be fair both parties must agree, the actual definition of lowball can be found below. Thus if it is seen as unfair or low in the eyes of the seller it is a lowball offer, whether you are justified in making it or not. What seems fair to you might be a lowball to someone else. The simple fact that a wholesaler must sell the property to another investor also means that someone was willing to pay more for the house than you offered the seller.
- Katy, TX · Member since 2017 · 372 posts · 140 votes8yDepends what your market commands. Yea, ARV is X but as a wholesaler you know Johnny M buys in your area for appreciation, his strategy not mine. So you know you have at least 2-3 buyers willing to pay more because of the area. It’s not that black and white
- Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes8y
@Joe Splitrock are you saying that as an " investor" you pay retail for all of your units?? If so you must be a purely buy & hold person.
On the flip side of investing there is not ONE flipper/rehabber or wholesaler that contracts a property at retail/market value. There has to be equity/profit in the deal at the end.
Lowballing tends to have a negative connotation. Do you gladly walk into a car dealership and pay top dollar or do you "low ball" them ...some might even call it negotiate. Good wholesalers & rehabbers negotiate deals that work for them & the seller. It either works for all involved or not. The formula and the exit strategy drives the numbers.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes8y
Originally posted by @Jerryll Noorden:
You think wholesalers all over the USA are successful because they scam people?
Actually yes. Most wholesalers are trying to scam sellers. They go to "buy" properties without two nickles to rub together. They pretend to be the actual buyer. They seek out vulnerable people (often elderly or uneducated) who dont understand the various ways they can sell their property. I have attended seminars by the "Ugly Houses" crowd and this is exactly what the teach. So yes, most wholesalers are out to scam people. Flippers on the other hand actually pay real money for the property, put more money and effort into rehabbing it and selling it for a profit. They take real risks and deserve some rewards. Not so for most wholesalers.
- Member since 2018 · 25 posts · 20 votes8y
The flipper may have been willing to pay more for the house than the wholesaler offered the seller, but he wasn't willing to put in the time, effort, marketing dollars, phone calls and myriad other things the wholesaler had to put in to secure the deal. There's a fee for that just like anything else. Some of the posts here are almost intimating that there is something wrong or unethical with being that cog in the wheel.
If a seller wants 500k for his property worth 400k and I offer him 400k, did I lowball him because he thinks so? Try convincing 10 people of that logic.
There may not be a lot of glamour to wholesaling, there's no TV shows about it, you are injecting yourself right into other people's financial and emotional problems and issues, but you're doing so as a problem and issue solver. Your fee for that has to get factored into the value of the property just like anyone else who will be eventually involved in getting that problem property turned around and into the hands of the end user.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
Originally posted by @James Green:
@Joe Splitrock are you saying that as an " investor" you pay retail for all of your units?? If so you must be a purely buy & hold person.
On the flip side of investing there is not ONE flipper/rehabber or wholesaler that contracts a property at retail/market value. There has to be equity/profit in the deal at the end.
Lowballing tends to have a negative connotation. Do you gladly walk into a car dealership and pay top dollar or do you "low ball" them ...some might even call it negotiate. Good wholesalers & rehabbers negotiate deals that work for them & the seller. It either works for all involved or not. The formula and the exit strategy drives the numbers.
I prefer to pay under retail, but I am mainly purchasing off the MLS or FSBO, so I can only go so low. The sellers I work with have agents representing them, so they have a professional counseling them on market value. I have gotten a couple properties with offers that I considered low ball. I don't see anything negative about placing low ball offers as long as you are not preying off the weak or deceiving people.
I understand the need for wholesalers to purchase way below retail. A wholesaler is different than a flipper. A flipper adds value through rehab. A wholesaler adds no value to the property. They are a middle man. Low offers are the only way they make a profit.
- Flipper/Rehabber · Wilton, CT · Member since 2015 · 4k+ posts · 4k+ votes8y
look all.
Keep lowballing to your hearts content. Now I know why I am so successul and taking over the ct market. Now I know why all these sellers rave about me and now I know why i get 90% of my contracts signed.
This is actually funny. Argue away. Argue all you want. The fact is that my numbers speak louder than all your theories and misconceptions about what and how to wholesale.
If you were competing against me here in CT you would simply never make a deal. So be happy you are not in CT!
Just curious...
All the people that swear by lowballing is the way you wholesale...
I wonder if you actually ever did a wholesale deal. And if so how many deals you make a year and if the sellers actually recommend you to others.
Nah I really don' care for the answer honestly.
Do your thing. I will do mine. :)
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yIt’s not necessarily lowballing if you have good reasons for offering what you do. However it will probably be difficult for most sellers today to understand how their 200k house is only worth 90k. Gotta find those desperate sellers for this to work at all.
- Flipper/Rehabber · Salt Lake City, UT · Member since 2016 · 211 posts · 174 votes8y
The art of Real Estate investing IS NOT TAKING ADVANTAGE OF PEOPLE but SEEKING SOLUTIONS.
These individuals are looking at you to provide a certain service: Taking a property that needs to be sold quickly, as is, with repairs that need to be done, and all sort of crap that can come up.
With that being said your buisness is very unique and not for everyone. You will be offering below market value for you services but that is to ensure that you can solve their problems. YOU ARE NOT LOW BALLING, I hate courses that teach to only give rough estimates 30k for cosmetic, 60k for big and 90k for complete gut; these guys don't know anything about flipping!
You job is to determine somewhat accurately the rehab costs, average holding cost for flippers, selling costs, and ARV of a distress property. Then you need to take account of your work and the flippers work. That is how you get to the price you offered.
THEY WOULD NEED TO PAY THOSE COSTS IF THEY WERE GOING TO SELL WITH AN AGENT!
But because they are using you and a flipping company to avoid the hassel the house is being sold below market value but it is still a fair value because: THE COSTS TO GET THE HOUSE UP AND SOLD ARE THE SAME; but because they are using you as a service you buisness deserves to make a profit, not ridicoulous but a REASONABLE PROFIT. NONE OF THESE !@#!@#$ huge wholesaling fees really you charge a 25K finders fee while the flipper only makes 25k for a house that requires 60k worth of repairs!!!!! Sorry got ranty with that last little bit.
In summary NEVER low ball but due to the nature of our work we will be offering a fair price which is below market value.
- Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes8y
"Most wholesalers are trying to scam sellers." - @Account Closed that's a very bold STEROTYPE,..."most". Most of the wholesalers I know, aren't scamming property owners. I do know some that do, but that is the minority. Maybe most (the few) the ones you know, scam individuals.
All the sellers I deal with, absolutely are under no impression that I'm going to buy their property. They know that another investor is going to buy their property. I'm simply matching an investor up with them to buy their property. They know at closing that I will not be closing on their property, but another investor will. You don't have to play those games, if you know what to say & how to talk with the property owner.
The truth is, motivated sellers DON'T CARE about who is buying their property, they want to know when it will close and when will they get their money! Period. I've only had a few contracts fall out & of those that did, they didn't close because the homeowner wanted to much for their distressed property & I told them that up front. They still wanted and were willing to let me find an investor to buy their property. Or they had title issues such as liens which would be their responsibilities as written in the contract.
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