FIRST DEAL and..the end buyer is wanting more of my spread of the deal...

I am guessing it was because I posted late last night that this might not have been seen by many people. Gonna bump it to keep active and hopefully someone will have some advice or past experiences with this type of issue. ^^

I assume you are dealing directly with the homeowner/seller?
This is what I would do. First and foremost, get the property under contract for the agreed on amount. That is job #1
Number two, Assign that contract to your cash buyer. Use a second contract, the assignment contract. YOU control where and with who the closing takes place, just like a bank will do when you buy a REO. Your buyer can bring whoever she likes to closing.
NEVER act desperate, as far as your buyer knows you have several other cash buyers waiting in the wings. If they don't want the deal, hey no problem, the next guy will. You say "Thanks and I will contact you when I get another 70% of ARV - repair deal".
If the numbers work any real cash investor will take the deal and gladly pay your fee. If they don't want to pay your fee, you don't want to work with them anyway!

Also, as soon as I got the property under contract I would take pictures and blast it out on craigs list. A real property for sale, not some silly ghost ad. You will build your buyers list and most likely find a buyer for this specific property!

PM me with any questions

Michael Mangham
MD Home Acquisitions LLC

Also, you should call FOR RENT ads that's in the same area of the property you have under contract. Call those FOR RENT ADS and ask if they buy property from other investors and how quick can they close and if they are using CASH. Only work with investors that have CASH and can close no later than 2 weeks. Always have at least 5 buyers for 1 deal just in case one of your buyers try to back out. Good luck!

I would agree with michael for your first exit strategy,You can also call Hard money lenders in your area and ask if they know anyone who would be interested.

I am dealing directly with the homeowner/seller's agent, I still haven't met the homeowners. It has been a bit frustrating because of that but, I think all will turn out well in the end I have a good feeling about the house and its owners. My only worry was my single cash buyer. So you suggest still going with an assignment of contract? I'm also considering an exit strategy having two contingencies added to the purchase contract: contingent on approval of the buyers partner within __ day's (my assignee) and Contingent on ability to assign contract (I will have my lawyer look these over to make sure I can use them and once assigned I am released of liability to the property from the seller (just in case). Not sure assignment of contract does that and if it does should I have the assignment of contract reworded to remove my liability to the end buyer then or not...thoughts?

I am using the Assignment of contract on this site as I have not found a better one http://www.deangraziosi.com/documents/Assignment-of-Contract.pdf . The only part that confuses me or makes me wonder is the line that says

"In exchange for compensation in the amount of $_I know this is where I put my fee_.
(____Just not sure what this line is for on the contract under my fee___________)"

So far this is what I've gotten set up a friend real estate agent did a CMA for me showing my ARV by sq/ft $70.29, avg for the area being sq/ft $72.84, I did my own personal research and got sq/ft $64.62. The place is 1990 sq/ft btw. I felt safer with my own numbers as this is my first felt this best the end buyer might even make more cash from her resale after rehab *shrugs. So ARV with my numbers is: 128,585.66*.7 (for 70%) = 90,009.96 less my fee (charging 10,000 fee) = 80,009.96 now just waiting to - rehab fee when get numbers from my contracter for my offer to home owners.

Note.- wondering if my fee might be to high also seeing a lot of others in forums charging only 1-5k fee for wholesaling to an end buyer. So beginning to wonder...

The owners Orig listed 119,000 then dropped it 7,000 giving 112,000 in 16 days showing me very motivated seller. I spoke with the agent and was told the owner really wants to sell badly b/c he bought it for his sister and her children and now they have grown and all left then started renting it out and now is just wanting it gone because he is tired of dealing with tenants. Like I said the place needs a bit of cosmetic work because the guy did a lot of DIY work and did a sour job I'm foreseeing 3-5k for just the the kitchen as it is in bad shape and they are keeping the old appliances (they were junk imho anyways). He even converted 1/4 part of the Garage into a game room (also bad DIYed) and then someone used black permanent marker over one of the wooden panel walls to draw 3 ft diameter dart board...and the other 1/4th of it into a small room that has cracked walls and sagging sheet rock ceiling (didn't see this in any other room though). It also has cheap old aluminum window frames and their window sills are rotting slightly. I noticed some more stuff and this is all before calling my contractor. I was going on my walk-through and kind upset agent when started inspecting things I was noticing as I didn't want to waste mine or the contractors work if this was to much of a rehab though, my first deal so not sure that might be normal. I apologized to agent telling her I don't normally inspect was just told by my partner to look everything over...It definitely has some work needed done needless to say. Hopefully with a detailed sheet explaining my offer the motivated seller will see I'm not trying to give an unreasonable low-ball purchase offer.

Just get it for the price your buyer wants it at, minus your fee and assign it. $10k is too high to start out with anyway. The nationwide average is $1k-5k for an assignment fee. BUY LOW SELL LOW SELL OFTEN Repeat business is what you are after.

If the buyer doesn't agrree to your fee, move on to the next. If the deal is good enough it will sell itself.

Thank you. I figured I might be over thinking it and it was probably to high but, I wish to like you said have repeat business with this cash buyer if at all possible while looking for more buyers. I'll go with 5k then. Trying to make enough to cover Deans real estate success academy and some other paid sites and services suggested by dean and other members here to make this process faster like you said. Should I be looking for anything else? my investor only said no properties over 150,000 for investment. I must have AVR 70% - repair so my offer should be, AVR 70% - repair - 5,000 =offer to seller. Reason I am wondering is the other 30% should cover holding, closing if need be, her profit and anything else she would require I'm thinking...

would probably say that you could charge a 10K fee if your negotiating gets you a price that allows for that much profit.
As Lane said, if you know what your buyer will be happy to pay for the house, your fee is dependent upon how much below that price you can get it under contract for. If there is only room for a 1K fee then so be it. You have to ask yourself if it's worth your time. Most would say "YES!!!" Remember, you are looking for repeat biz so keep that in mind when you are setting your fee. Know your buyers.

FYI: My first cash buyer to respond to my marketing said to me " If I can get my margins, I don't care what you make on the deal. I'm hoping you make 100K!"
That's the kind of buyers you want on your list and are trying to help.

Hope this helps....

Andy Sager
DG's AndyS

don't be too greedy... if you leave enough $ on the deal for it to be a great deal for your buyer, you will be able to do repeat business with her/him.

Also, you need to have more than one buyer; but as Michael points out, if you have a great deal and post it on CL, you will have many buyers calling you; make sure you get their contact info and put them on your buyers list for future deals.

good luck!
Valerie

$72.84 / Sq. Ft ~ Being the fact it gives you more ARV to play with. Now in the numbers, did you factor in closing/holding costs, realtor fees, optional fudge factor, etc.? If not, you probably should. Yeah, it drops your offer amounts, but it makes sense if you're the end buyer and you're gonna buy this property.

I think I made a post on the DG site with a couple good youtube links that talk about this. Lane is right ~ Greed can kill anything. And Andy is right, if the buyer doesn't care what you make as long as he gets what he wants, it'll work out.

I am using the Assignment of contract on this site as I have not found a better one http://www.deangraziosi.com/documents/Assignment-of-Contract.pdf . The only part that confuses me or makes me wonder is the line that says

"In exchange for compensation in the amount of $_I know this is where I put my fee_.
(____Just not sure what this line is for on the contract under my fee___________)"

Anyone know?

I did not add those factors in I thought the closing/holding and realtor fees were from their other 30%. My buyer wants ARV * .7 - rehab. didn't realize i needed to also figure in her holding costs/closing and realtor fees. Yet I guess it would be wise to view it from her side to see her ROI return. Is that why you mentioned those?? Also how much "optional fudge factor do you think I should be using?

I guess I should use nstreet's formula for the end buyers point of view..

"Value of the Property
- Profit of at least 10%
- Fix up costs
- Holding costs (value of the property x 1.2% x number of months I will hold the property to sell or rent)
- Closing costs (3% of the value)
- Realtor Fee (6% of the value)
= the most I will offer on the house.

Holding costs: I use value times 1.2% because I have seen that this will cover my mortgage, taxes, insurances and utilities for one month. The amount that is calculated actually covers more than I need but I include it to take care of my what ifs."

I felt better with these numbers, ARV 120,054.84 - sell cost (this has everything I could think of) 19,448.88, my fee 5,000+500 for earnest cash if I can't lock it up without it, gives the cash buyer 9.2% ROI on her investment. I think this should be a good deal for any end buyer even if the one I'm working with flakes. Just waiting for G.contractor to give me rehab costs to put in my offer now.

Dean & Matt Mentioned this same thing back in March or so when they did their live training, about being a full-service wholesale investor to your buyers. That formula would work, too.

Fudge factor can be about 5%, and it's optional but used as a "just in case"
thing.

Check out the following video link below to get a better idea of what I mean. I also posted this along with a couple other great videos on this site but I can't find 'em. Anyway, here it is:

http://www.youtube.com/watch?v=P1O2zWFVrbs

When tomas and i did our first deal (pre-dean classes/books), we allowed a cash buyer to pretty much talk us out of our profit due to foundation problems. We had no clue what we were doing; we just knew we had to jump in and get our feet wet! I think we made 1-2k on the first deal but we got rid of it pretty quick. We look back now and say, wow! What a great property! But we are okay with the outcome because we did not have a lot of time in this property and we made quick cash.

My advice on your first deal: be strong and don't let this buyer bully you since she may sense you are just starting! You have a lot of training behind you. Make sure the numbers make sense. Also remember, if this cash buyer is going to haggle you over a fee now, she will always expect for you to reduce your fees later. If she really wants the house and her numbers make sense, she'll take it like andy said above. Also, don't let them intimidate you because this buyer is partnered with an attorney. They both put their pants on one leg at a time, including warrern buffet....i asked him once! Jk.

my husband would probably tell you to take the money from this cash buyer and run! It may not be as much profit as you originally wished for but a little bit of something is better than nothing! Sometimes volume versus higher profit margins make sense, depending on the deals. I know matt larson prefers volume--sometimes he only makes 1k/deal, but he does a lot of volume. Use this property to gain experience under your belt. The more properties you do, the more confident you will become.

Be strong! Don't be greedy. Always keep your word!

Hope this helps!
Jeri

Thank you for the video. Yea, today is the big day with the contractor and I put my offer in. I spoke with the agent last night since we had to wait over the weekend to see if she got any more offers...she said one guy scheduled to meet tomorrow and will be putting an offer in. I believe this to be a way to rush me to put in an offer as she also went back on what she said that her seller wasn't a motivated seller or anything playing it cool like they could hold it few more listings...I'm not playing her game when they cut 7k off the top in only a short amount of time and all she already told me pointed clearly to motivated seller so not gonna let that deter me from the offer I already got ready just waiting on contractor for rehab cost. Wish me luck!

Yea, I wont let the end buyers bully me now that I am more confident in my numbers. I believe 9.2% is more than enough for anyone and they need not be greedy my reduced fee of 5,000 (my own choice from what I've learned here) should be just fine and if they don't take it I know someone else will! Thank you for the advice everyone it has been so helpful in bringing my confidence up to where I needed it. Even if this somehow fails I have learned so much and I will slam my next deal without fail! RAWR! ^_^

your new numbers look good; best of luck getting your offer accepted!

the ( __________________ ) under your fee is where you write it out (i.e. five thousand dlls), like on a check...

Learning and progressing every day,
Valerie

Thank you I've been wondering that. I just got to printing out some of the forms I realized I didn't have glad I checked here to see your comment! ^_^

Hi she sounds greedy to me an all she is concerned with is what she will get. Thats not a win-win situation, everyone needs to feel good about this deal an that there needs have been addressed as well, Jim

Before the other guy does and he puts in a counter offer, have your agent send YOU any counter offers that come in after your accepted offer. That way, if any are also cash offers or what not, you can use it to your advantage & maybe add them to your buyer's list & sell them the deal. You can do this with reos, too. Good luck with everything ~ sometimes people are dishonest like that, even if they create a sense of URGENCY when there's not. Keep us informed on what happens with this ~ Good luck! you're welcome for the video link, too.

okay so I went with my G.contractor and we got to the kitchen..game room then stopped at the garage.When I got my first walk-though (lesson learned) saw it at night with bad lighting so didn't know until today that they had some BAD foundation issues...the listing agent didn't show up AT ALL...and the owner came out to talk to us and show us the house. I ran some numbers with my contractor and minimum 20,000 in foundation repairs as it does a nice 2-3inch cross crack in the garage that goes all the way out to the back ally...so yea and I knew some of the work was DIY but, not that most of the house was that way until my contractor pulled me aside and was like I doubt they pulled any permits to do even 3/4 of the work they've done this is not going to be cheap and asked me what numbers I was looking at for repair...I told him 30,000? he said consider 40,000 or 50,000 if u want it looking new so I est 45,000 rehab work and gave the owners my verbal offer of 35,000 for their house told them why (couldn't make out if they were upset or not but, they seemed realistic) even though the listing price was 112,000. They told me to give my offer to their agent. Not sure if that is good or not but, I'm being optimistic. I'm going to go to my lawyer and have written offer drawn up with a 10 day inspection requirement as I am pretty sure the G.contractor looking it over isn't considered as that but, will check. Either way I have a good feeling about this one!

Yea, well she never hid that fact from me that she was greedy and that is why I knew she would want more of my spread. I however believe what everyone has stated that 5,000 is fair for this deal and I will stick with it. Either way it will work if I get it locked up as I am still in the process of doing that...kinda hard without an agent of my own...honestly this started out as I was just looking at houses to build up courage to do this while talking to a lawyer about learning the contracts and he brought an investor and turns out I fell head first into it LOL. It fun and I'm enjoying it. I have learned so much. I see this as a career and as such I've spent hours every day trying to find answers until I can afford help like Dean's real estate success academy. It will work, it will happen, and it could be today! Thank you again for everyone's posts with very useful advice I couldn't do this without everyone's help!

Thanks I might need it. I made my verbal offer to the owners agent (as requested by the owners)and she told me it was to low and probably would not be accepted as they owed to much (though wouldn't say how much even when I asked before making my offer...). I am honestly thinking she might be just wanting more commission herself *shrugs that is why I made sure to give my offer to the owner first chance I was able to. Sadly they I don't think speak English very well but, maybe their daughter that was there can explained it to them. Either way I'll keep giving my offer once a week until they close and maybe I'll get lucky or they will wise up I wasn't low-balling them. Until then I am going to keep learning and find my perfect agent. This was pretty hard finding comps solo and unable to ask questions along the way, I was lucky one agent took pity on me and gave me a CMA, finally! I also made a lot of dumb mistakes along the way. I don't recall if I said it before but, I regret while on a tour of the house I began inspecting it instead LOL. Like I said it has a lot of work and I was just kind of startled by the amount of DIY work they did, how bad it was and how it seemed never ending! I couldn't figure head from tails and my G.contractor felt the same way so I felt better in the end that I wasn't the only one. I learned to ask after first tour to inspect in detail they might not be ready for you to check everything and it might not even require you too. >< I think a few more houses and a bit more knowledge I'll be able to even generally estimate a ball park figure without a contractor...someday I hope...just have to figure out where to start on that. Like what I really need to look for and what measurements to take so I don't waste time looking inside every cabinet door and seeing what works and doesn't when I might need to just replace the whole thing (yes...I did that ><). I also heard about some program that can give you some numbers on costs but, I still need to know what to look for before I start typing things into any program...someday.

I forgot to say that after giving my verbal offer to this deal I drove down the road and met the total opposite going from moderated seller that seemed realistic to seller with to someone with to much heart in a house that needed more work then they were willing to admit. This house had some of the same foundation issues and this time I had no problem spotting it! Now it wasn't as bad but, after listening to them preach on and on about how great their house was then tell them I'm an investor they did something I didn't see coming...they told me oh...well you don't want our house it is in great condition...it doesn't need fixed up we took care of all that, perfect marketing condition and it will sell for our listing price your looking for some trashy type of place to fix up maybe on another...I politely stopped the owner there and told her okay sure maybe and to have a good day. I felt a bit insulted but, I wasn't going to waste my time defending myself or a house that had someone with no realistic idea of their houses value. It felt good seeing things a little clearer then just a short week ago! Before I would have believed them and felt pretty down yet, I know better now.

I have come a long way since I've joined this site and began reading Deans books. I've spent hours every day researching things I didn't understand with times when it felt hopeless that no one wanted to help without profiting off my ignorance. I am glad there are people here that help keep each other motivated when we start to feel down or confused as the rest of the world is pounding negativity at us. I have invested some money into lawyer consultation fees to make sure I understood the broker-used purchase contracts that all agents use as I saw no need to have something drawn up when they might insist I use there contract. I don't want that to be a deal breaker so I wanted to understand it. I now know my rights no matter what contract I used! I feel more confident even if my wallet is lighter. I support from my peers here and security knowing my foundational knowledge is sturdy and growing. However this deal works out it was worth it! I will do more reading, find my perfect agent, and get more houses estimated with solid offers and put them out faster each time until it is like second nature. I know it will take time to learn every detail and truly I no longer need to second guess myself. This is my career...I am a REAL ESTATE INVESTOR! RAWR! ^_^