Getting More Offers Accepted With Sellers: A Trick Im Sharing with You

Wholesaling
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Getting More Offers Accepted With Sellers: A Trick Im Sharing with You

Bill Mitchell
Mansfield, TX · Member since 2013 · 207 posts · 26 votes

We all know about the 70% rule and how it works. But if your numbers are correct for ARV and repairs, and then have to back out your assignment fee as well. Sometimes its difficult to get your offers accepted because they are lower than the seller is willing to accept.

A new solution I found to this is simple. Get on the MLS, see what the cash sales are in the area. Try and get under the price of similar properties that have sold recently for cash. Even if the price doesn't give the end investor 70% minus repairs.

I will show you an example.

Property was in bad condition, tenants had destroyed it and deferred maintenance owner wanted out. After getting accurate repair and ARV and backing out my assignment fee I could only offer him 21k for the property. That wouldn't work, I hopped on the MLS and saw recent comps for same type of property.

Sale 1: 32k

Sale 2: 34k

Sale 3: 30k

I got it under contract for 29k and made a quick profit on this one. Even though at those numbers its no longer 70% ARV minus repairs, it doesn't matter because I could see on the MLS investors in the area are buying higher than that. If that's the price they are willing to pay, I will provide them something slightly more discounted than that. Then call up the cash buyers myself and let them know I have a similar property in the area at a better price. This way everyone wins, seller gets more money, you assign the property and the investor gets a "deal".

Even though, in my opinion, buying in this way there is not a ton of meat on the bone for the end investor and allows you to get more offers accepted. But hey if thats what they are willing to pay I will provide for that.

Let me know what you guys think or if you have any questions. I would be curious as to what more experienced wholesalers around here think such as Tim G or Jerry Puckett think.

Thanks everyone

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Tim G.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
13y

So you are asking if doing something that was successful and made you money should be continued? Well, I think you know the answer to that question already!

I basically just sit and watch, you MUST pay attention. Sam has done this in his market and found a way to be successful on more than just rehabs, good for him!

Basically one day I was sitting there wondering why the hell I couldn't close a damn deal and I'm watching people buy rehabs on razor thin margins. Huh, I thought to myself. The rule says my offer should be this but they aren't buying that way.

Wholesaling is not about locking up low, it's about selling high. You are locking up where the average rehabber will buy a deal and selling where the volume rehabber will buy. The 70% rule on here drives me nuts I know its causing newbies to miss deals, there was a painful post on here about a guy in San Diego who missed a deal and asked if he messed up on here. Everyone said "No, they are idiots they paid too much don't feel bad!" Well, I looked it up and my friend wholesaled it, made $20k and the rehabber did well on the deal too. Because he was following advice from individuals in another state and not in his market he missed out.

You have to study your market and know it better than anyone, this is a tough job but when you are good you can be lethal. #1 rule, know your market!

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  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    bingo!

    Your paying attention to YOUR market and what is selling. I believe there are a lot of us and I've witnessed it first hand who are letting deals slip through their hands due to improper pricing of their deals.

    Nice work my friend, paying attention to the details is what makes us money!

    5Reply
  • John Fossetti
    Investor · Pembroke, MA · Member since 2012 · 198 posts · 49 votes
    13y

    Great work. The 70% Rule is just a guideline. If you know you can buy it for more because buyers are paying more there is not problem at all. Some markets it is tough to get the 70% rule and there are some markets people are buying at 80% minus repairs.

    Researching your market is key!

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    Closing a wholesale today @ 82% of ARV less repairs.

    I beat rehabbers out on this deal, the seller got paid MORE going to a wholesaler who knows how to sell a deal than a from a local rehabber.

    Like John said, certain rules here are guidelines but it does not mean you are suddenly going to be broke or lose if you don't follow them. You have to study your own market and take the time to roll up your sleeves and do some work!

    0Reply
  • Sam Craven
    Houston, TX · Member since 2011 · 673 posts · 360 votes
    13y

    In my market, if the deal doesn't meet the criteria for a good flip (insert 70% rule or something similar) and the price is less than $150k chances are its a great rental. Especially when looking at MLS comps, chances are pretty good that those comps you pulled are buy and hold investors.

    ALL of my wholesales are rentals that sell at 90% or better equity AFTER repairs and a COC return of 30% or better assuming 20% down. Some deals are as high as 45% with less equity and as low as 25% with more equity.

    The buy and hold buyer will always be able to pay more than the flipper.

    And if its a good flip...then I flip it!

    1Reply
  • Bill Mitchell
    OP
    Mansfield, TX · Member since 2013 · 207 posts · 26 votes
    13y

    Thanks for your feedback everyone I really appreciate it.

    @Tim G.

    Do you think it would be ok to make this a more standard practice in my business in your opinion? That is paying more attention to what price properties are going for in the subject properties subdivsion and surrounding areas. And then trying to get the property under contract at a somewhat better discount than that for what cash buyers are buying at? I figured it would be hard to lose that way, since doing this you will always be going by local values.

    Instead of trying to apply the 70% rule as a blanket over every house I ever look at (which is what I used to do).

    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    So you are asking if doing something that was successful and made you money should be continued? Well, I think you know the answer to that question already!

    I basically just sit and watch, you MUST pay attention. Sam has done this in his market and found a way to be successful on more than just rehabs, good for him!

    Basically one day I was sitting there wondering why the hell I couldn't close a damn deal and I'm watching people buy rehabs on razor thin margins. Huh, I thought to myself. The rule says my offer should be this but they aren't buying that way.

    Wholesaling is not about locking up low, it's about selling high. You are locking up where the average rehabber will buy a deal and selling where the volume rehabber will buy. The 70% rule on here drives me nuts I know its causing newbies to miss deals, there was a painful post on here about a guy in San Diego who missed a deal and asked if he messed up on here. Everyone said "No, they are idiots they paid too much don't feel bad!" Well, I looked it up and my friend wholesaled it, made $20k and the rehabber did well on the deal too. Because he was following advice from individuals in another state and not in his market he missed out.

    You have to study your market and know it better than anyone, this is a tough job but when you are good you can be lethal. #1 rule, know your market!

    6Reply
  • Bill Mitchell
    OP
    Mansfield, TX · Member since 2013 · 207 posts · 26 votes
    13y

    @Tim G. Thanks a ton Tim. Again thanks so much for taking the time to offer your expertise in my thread. One last question though. When I use the MLS to find cash buyers, I am usually contacting the real estate agent that represented the buyer. If its a recent sale, it usually hasn't changed over in the tax appraisal district records yet. Therefore, I offer a 3% commission to the agent based on the sales price of the home for connecting their buyer to me.

    The thing I am worried about is giving the agent the address of the lead I put a lot time and money (marketing) into for. And having them wait for my contract to expire and try and get the listing themselves. It has not happened yet, but I wouldn't be suprised if it does eventually.

    I suppose the upshot is, the sellers I typically work with never want to work with a realtor to begin with. And if a realtor were to do something like that, then I could always report them to the real estate commission here in TX.

    0Reply
  • Mike Osterman
    Specialist · Novato, CA · Member since 2012 · 190 posts · 57 votes
    13y

    @Bill Mitchell That's no trick, rather common friggin sense. Took me forever to figure it out.

    My only twist to this is that I marketed my deals to Trustee Sale buyers. This accomplishes two things 1. They have a track record 2. Don't care about problems.

    Nice job on your deal.

    0Reply
  • Jason A.
    Rental Property Investor · North Huntingdon, PA · Member since 2011 · 64 posts · 20 votes
    13y
    Awesome tip! Thank you for sharing. That's what makes this online community great!
    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y

    You can't be afraid.

    If a deal is a deal, it will sell. To them or the next person.

    The deal I am closing today I had a realtor and buyer FROM MY LIST go direct to my sellers and try to circumvent me on the deal. I was livid but more importantly very upset with how it affected the seller.

    We sat down with a 6 pack of beer, talked it out. and I ended up paying more for the deal to make it right. But, I still closed it and those two individuals are being black listed by every wholesaler I know in my market.

    It can happen, who cares. Move on to the next one, you can't live in fear it must be faith!

    1Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    13y
    Originally posted by Mike Osterman:
    @Bill Mitchell That's no trick, rather common friggin sense. Took me forever to figure it out.

    My only twist to this is that I marketed my deals to Trustee Sale buyers. This accomplishes two things 1. They have a track record 2. Don't care about problems.

    Nice job on your deal.

    True, but everyone regurgitates this 70% rule here and its tough to actually see posts suggesting something different!

    Glad to see so much success on here!

    2Reply
  • Bill Mitchell
    OP
    Mansfield, TX · Member since 2013 · 207 posts · 26 votes
    13y
    Originally posted by Tim G.:
    Originally posted by Mike Osterman:
    @Bill Mitchell That's no trick, rather common friggin sense. Took me forever to figure it out.
    My only twist to this is that I marketed my deals to Trustee Sale buyers. This accomplishes two things 1. They have a track record 2. Don't care about problems.
    Nice job on your deal.

    True, but everyone regurgitates this 70% rule here and its tough to actually see posts suggesting something different!

    Glad to see so much success on here!

    I think the people that regurgitate the 70% rule all the time for wholesaling don't know any better, mostly probably because they have done few if any deals themselves. When all I tried to do was 70% all the time and not paying attention to any local market factors all I did was bang my head against the wall trying to figure out why I couldn't get under contract. Some were accepted, but I am finding much more success using this new "trick".

    0Reply
  • Mike Osterman
    Specialist · Novato, CA · Member since 2012 · 190 posts · 57 votes
    13y
    I would also point out this is sellers market strategy. I know people who buy for 10-15cents on the dollar, in California. That's where I want to be.
    0Reply
  • Sam Craven
    Houston, TX · Member since 2011 · 673 posts · 360 votes
    13y

    I just want to echo @Tim G. and say knowing YOUR market is key.

    In a large city like Houston there are submarkets of submarkets and each one acts in its own unique way and has its own type of buyer that targets that area.

    Work to diversify your buyers list and it will pay dividends as you learn what people look for in each area.

    Sometimes our flips fit the 80% rule and sometimes they fit the 60% rule! We havn't lost money yet AND our wholesale deals make our buyers a great deal of money as well. I have a number of wholesale buyers here on BP that will back up what I have said.

    0Reply
  • David Rundle
    Engineer · Oklahoma City, OK · Member since 2013 · 144 posts · 44 votes
    13y

    Thanks for sharing, great insight and congrats on the success.

    0Reply
  • Kevin Tran
    Fort Worth, TX · Member since 2013 · 59 posts · 13 votes
    13y

    I am not into wholesaling, but it is great to see tips from the more experience wholesalers and learn the process. It helps me understand the game a little better when I'm buying from a wholesaler.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y
    I lucked out when I started and didn't know the 70% formula. I've always based my offers on what I could do with the property. Sell it to landlord buyers, sell it to rehabbers, sell it to owner occupants or keep it. If it's vacant land, I can sell it to land banks, developers or the neighbors. And those are just my strategies. There's a whole other world of possibilities that I don't use: of lease/options, equity sharing, pre-development and subdividing.

    After years of looking at comps and possible buyers for your market(s), you'll know more than most agents about values. It's the rare agent that knows values (or has buyers) for every exit.

    Everyone, not just wholesalers, is missing the boat if you use a one-size fits all formula for property that has multiple exist strategies.
    3Reply
  • Winston Spence
    Real Estate Investor · Waterbury, CT · Member since 2012 · 117 posts · 19 votes
    13y

    @Bill Mitchell

    Great tip! Basically forget the 70% rule and take what profit you can as long as the numbers make sense.

    0Reply
  • Alex Baev
    Miami, FL · Member since 2013 · 98 posts · 27 votes
    13y

    Reading this thread makes me realize - perhaps obvious to some - that a successful wholesaler is essentially an unlicensed and therefore unrestricted RE agent, who is therefore allowed to be more creative but has to be more shrewd and most often more knowledgeable.

    By appealing to people's desire to not deal with RE agents, they are essentially still dealing with one - you, but a free agent.

    How many of you place a hight emphasis on working closely with a RE attorney? Seems like if someone want to go behind your back, having a properly written and easily protected and actionable contract that ties a property up is key.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y
    Originally posted by Alex Baev:
    Reading this thread makes me realize - perhaps obvious to some - that a successful wholesaler is essentially an unlicensed and therefore unrestricted RE agent, who is therefore allowed to be more creative but has to be more shrewd and most often more knowledgeable.

    By appealing to people's desire to not deal with RE agents, they are essentially still dealing with one - you, but a free agent.

    How many of you place a hight emphasis on working closely with a RE attorney? Seems like if someone want to go behind your back, having a properly written and easily protected and actionable contract that ties a property up is key.

    I think it depends on what you are using to define wholesale. I buy and then re-sell a lot of property and there is nothing wholesale about it. I sell it for what the market will bear, regardless of the type of buyer. The range the rehabbers will pay is huge. Some rehabbers will work to keep their crews busy for a $10K profit, some will want a $50K profit...on the same $150K property. Landlord buyers are all over the place as well. You don't need a legal team or have to worry about buyers going around you if you buy the property.

    If you define wholesaling as being the buyer and seller in the middle of a double close or assignment, then sometimes the stars really do need to align. For example, try being in the middle of a short sale purchase to a rehabber purchasing with lender funds. Minimum number of players is: seller, seller's agent, lender, buyer, buyer's lender, escrow agent and title company. Throw in some tenants or pressing code compliance issues or a fast approaching foreclosure date.....it's a lot to manage when you technically don't control the property. Experienced "wholesalers" know how to control the property and solve problems that arise for both seller and buyer.

    0Reply
  • Alex Baev
    Miami, FL · Member since 2013 · 98 posts · 27 votes
    13y

    Well, that seems to be the difference between RE agent and a wholesaler - the first one markets, solicits to "help sell a property", whereas a wholesaler either "personally buys and sells a property" through double closing (essentially a FSBO x 2) or "solicits, markets and then sells a contract" in an assignment. Both things that a wholesaler does technically are outside of what a licensed RE agent does - so it's like a loophole in RE law.

    How do you determine if a property is a better candidate for double-closing vs. assignment?

    p.s. forgive my ignorance!

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    The best case scenario for an assignment is a cash buyer with cash upfront to buy your contract and then they step into your shoes and close with the seller. The next best case is when the buyer and/or buyer's lender will allow the assigment cost to be paid at closing. It can be desiginated various ways on the HUD1.

    Double closings, with or without transactional funding, are what is used for pretty much everything else. There are other strategies too, such as deeds of trust in your favor of against the seller's property.

    0Reply
  • Patrick Martinez
    Investor · Stockton, CA · Member since 2013 · 92 posts · 12 votes
    12y

    Priceless information!!

    0Reply
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