Potential off market deal?

Question

Hello, I am a fairly new Realtor here in Bakersfield, CA. I was contacted this morning by someone who has a duplex that they say is in good condition and both units are currently being rented out. The owners are not wanting tenants to know about the sale and not wanting to list it on the MLS. I told them I could list it and put do not disturb tenants and they are not wanting to do that..& asked if I could send the info to investors I work with.

They are free and clear and asking for $225k. I told them let me run some numbers and get back to them..The neighborhood is more of a class C neighborhood and after checking some comps it looks like it’s only $102/sq.ft in that area and would put the FMV at 156-157k for this duplex. A tenant occupied two home on 1 lot just sold on that same street for $147.5k a couple weeks ago. They said the property is in good condition, but I haven’t had a contractor go out and see it yet, as I just received the call.

This is my first time being approached with an off market deal and I am wanting to know if there’s anyway I can turn this into a wholesale deal or make a deal of this in some way? Should I ask them if my contractor could go out and see the inside and try to make an offer from there to put it under contract? Or..?

Just wanting some feedback to see if I’m in the right direction or if there are any other tips in a situation like this?

Thanks in advance

Sanjeev Advani · Answer

I agree with @Gene Hacker and @Jeff Cagle.  Wouldn't recommend the deal.  Theres a reason its not on market.

John Thedford · Answer

If you can buy it cheap enough keep it as a rental.

Gene Hacker · Answer

To wholesale a deal, it first needs to be a deal.  You need be able to get it for below fair market value.  In this case, you said the sellers want much more than FMV.

Also, the way the seller is saying that they don't want the tenants to know, it sure does not sounds like they are motivated to sell at all.

From what you are saying, it would be surprising to me if you could reach a deal with the seller which would make this a decent wholesale deal.

Jeff C. · Answer

@Anisha Knox

No deal, unless you can get the seller to reduce their asking price by at least half.

Max Gradowitz · Answer

They want $225k for a property with around $150k?.... That should answer a lot of your questions right there. Don't get your hopes up on this situation.

Tell them if they want you to sell it for them, MLS or off market, they have to be reasonable and sell it for FMV. The "good condition" of the property makes very little difference in that value, all other things being equal (sq ft, area, type and number of units, etc) . Even if you find an investor off market and double end this sale as the sole agent, that investor will expect you to comp it for them to justify the price. You'll never sell it for more than it's worth, that's not how investors do things. If they insist on their delusional price, don't waste your time with them any longer.

If you're thinking of buying it yourself, make sure the cash flow numbers are good and then comp it as accurately as you can and offer to buy it from them for FMV minus 6% they'll save on the commission you won't charge them. Win win for everyone, assuming the numbers make sense for you and your investing goals.

Wholesale? Pshhhh... No way on this one. They are already delusional about the price. Do you think they'll be willing to take 20 or 30 thousand less than FMV? I don't think so. This situation is the polar opposite of what makes a good wholesale.

Amber Smith · Answer

@Anisha Knox what are the gross rents for both units? I have a couple of multi units and what I look at is potential cash flow. As an investor when looking at an income property, I’m not as concerned with comps since it will most likely be a buy and hold situation. So if all the comps in the area are 150k, I would have no problem spending 200k IF the gross rents and cash flow justify it.

Anisha Knox · Answer

@Sanjeev Advani yes I agree. I told them I could list it at the 155k or an investor could take it off their hands for 90-100k..I doubt I’ll hear back lol..

Anisha Knox · Answer

@Max Gradowitz Thanks for the feedback. I should have mentioned in the original post that I know the numbers given above are not a deal at all. I was more so asking how to make a deal of it and you definitely answered my question as far as the FMV - 6%.

But like you and the others on the post said, with the seller asking for such a ridiculous price I doubt a deal will come of this when I tell her the offer price.

Thank you for the info!

Potential off market deal?

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