Deal or No deal? 1st Wholesale Deal

6 Replies

Hey guys!

I'm finally jumping in and starting a discussion because I am not to sure on what to offer my seller. I am located in the Miami-Dade /Ft. Lauderdale area so our market prices are higher than your typical flip property, nonetheless the margins are still there if the numbers make sense. This home is vacant and the seller is more than motivated, so I definitely have leverage in what I am going to offer him. Here's a summary of what's going on the property:

4 BD 3BA Single family home, 

-City has Issued nuisance violations due to lack of curb appeal and an unkempt lawn

-Previous contractors began working and then abandoned the job 50% of the way through left lots of material inside property to complete job such as new toilets, paint, tile, etc.

-Owner's realtor quoted me a 360k mortgage payoff, 510k-520k ARV, 30K in repair costs and owner is asking for 409k all cash...

MAO{ (510K X 70%)-30K= 327K So I get 327k is my MAO but this does not include my assignment fee, which will be 18% of the spread.

Regardless of my assignment fee, is this deal possible if my MAO does not satisfy the mortgage? Also I would like to get the official mortgage payoff directly from the lender to be able to better gauge where my offer number should be, how can I go about acquiring this legally and receive the most accurate number?

Of course I'm having my contractor get me a bid on the job, actually 2, just be sure, so for the sake of a ballpark offer I am going to use the 30k that the owner's realtor quoted me for at this time.

I'm nervous my numbers are not adding up...

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I'd probably walk away since you don't have enough to pay off the mortgage.
Agreed.  Do not rely on the sellers ARV.
Your MAO is not (ARV x 70%) - Repairs.  That's the price you need to be able to sell the contract for.  Your MAO should be that minus your minimum fee.  And when negotiating for a price with the seller, you need to be able to start lower than that.
There may be other creative solutions, but I haven't gotten that far myself yet.

No deal here, at your offer price. If you can’t pay off the mtg you can’t buy....this wouldn’t qualify as a short sale either. 

No, you can’t get the pay off from the bank. 

Not sure why you think your assignment should be “18% of the spread”....sounds like some random number you heard somewhere....$30 something K is not realistic. 

So there's no chance that the realtor representing the owner could be lying to me regarding the mortgage payoff with the intentions of 360k being my lowest offer?

As far as my assignment fee, I was taught that my fee should vary according to the spread, instead of me charging a fixed assignment rate and leaving thousands for my self on the table. So me and my partner came up with a comfortable range percentage (15%-18%) depending of the individual circumstances of acquiring the property. if the spread is 183k....why would taking 32k be "unrealistic"?

Originally posted by @Barry Pekin :
I'd probably walk away since you don't have enough to pay off the mortgage.
Agreed.  Do not rely on the sellers ARV.
Your MAO is not (ARV x 70%) - Repairs.  That's the price you need to be able to sell the contract for.  Your MAO should be that minus your minimum fee.  And when negotiating for a price with the seller, you need to be able to start lower than that.
There may be other creative solutions, but I haven't gotten that far myself yet.

I'm fully aware that I can't offer 327k and expect a nice assignment fee. After my contractors give me a bid for the repairs, I intended to offer 250k to test the waters and see if the owner will counter me with something, and ideally we land on a number between 300k-327k. I won't know where they're at with what they are able to accept until that initial offer. Also I want to throw out the fact that the repair est is tentative at the moment.

@Jyvanni Thibodeaux ,

Yes, try to negotiate.  The seller may not need 100% of the money to pay off the mortgage.  I was going to say something along those lines, but I figured that was unlikely.  In my initial conversations with a seller I try to get that information.  It's part of my intake.