Originally posted by @Doug Pretorius :
@Mike M. I take it the $50k to fund the LLC is used for paying the seller any equity you agree to, closing costs, and repairs. Good system!
Right. And I would think a similar set up would work in your neck of the woods.
You mentioned that realtors that promise too much to get the listing are a problem. I see that happen too. While wholesalers tend to offer way below the value, realtors can for instance get the listing by exaggerating what the value of the property is - they list high at $200,000 - they get the listing and after the house doesn't sell their solution is to reduce the price to say $190,000.
When you do the math, since listing fees in my markets run about 6% (or $12,000 for a $200,000 listing) - and the agent gives their cuts to their broker, the other agent and the other agent's broker - so by 4 people - the agent winds up with $3,000
The house doesn't sell so the agent cuts the price to $190,000 - a four way split of 6% on $190,000 is $2,850 or about $150 hit to the agent - so, buy dropping the price the agent loses only $150
However, the Seller has taken a $10,000 hit. That is enough money for me to take you and everybody else on the thread to the Four Seasons Resort here for a very nice night out. That is a lot of money to the seller.
I got a call last thursday from a potential seller that went off market. The agent had the property at $399,900. No offers. I looked at comps (sold within the last 90 days) and all three comps put her place at about $340,00. Doesn't the agent realize that the buyer has to have an appraisal and the appraiser is going to use "Solds", and not use wishful thinking? Why deceive the seller? It gives false hope.
Rather than argue with the seller who was convinced her property is worth $399,900 (I could hear the disappointment in her voice) I sent her to a wholesaler. :-)