Figuring the Selling Price for a Fixup - Posted by JAN

Posted by Morrigoon on April 29, 2002 at 02:46:08:

You said:

But what if I’m working with a broker and I say, “I will offer the seller X dollars in cash.” And the broker or seller wants to know where I’m getting the cash for this…what do I say? Do I lie to them? Do I tell them that’s personal? And as for not letting the seller know I plan on selling the contract or flipping the property, does the same thing go for the broker?

Haven’t done it myself, but here’s the suggestion from Ron LeGrand’s “Fast Cash”:

Tell them the money isn’t a problem, you won’t be needing any bank financing. If they push, repeat it.

(I’m still not sure how I feel about his methods, but his scripts are great!)

Figuring the Selling Price for a Fixup - Posted by JAN

Posted by JAN on April 24, 2002 at 21:10:16:

I’ve taken the Carleton Sheets course and am not exactly sure what is the best way to figure out what sort of an offer I should make on a house I want to flip. Do I take what the seller is asking and subtract X, Y and Z, like fix up costs, taxes… And what exactly should all those things be? Any help on this would be great…I’m looking at my first couple of houses, and at least one needs a lot of work and could make a profit if I buy right…but I want to make sure I buy right. Thanks.

J

Here’s how it works in the real world . . . - Posted by JoeKaiser

Posted by JoeKaiser on April 26, 2002 at 03:14:49:

I am a real estate investor and I know a few things about houses and what it takes to fix them up. But that fix-up thing? I gave up making a career out of it a long time ago.

Today when I encounter a fixer property I understand upfront that what the house is worth or what it takes to fix it up or what I may be able to later sell it for are numbers I can only take a guess at. In truth, it’s often a wild guess. Yes, you can do all your homework and overlook one small matter and all those spread sheets you put together and those comps your agent gave you and essentially worthless.

If you’re brand new and really don’t know what’s what, you might as well just take a trip to Vegas and test your luck there. That way, at least, you won’t lose money AND hurt yourself.

I gave up guessing about such things, btw, a long time ago.

So how does it really work?

There are people who DO make a career out of this sort of thing. Rehabbers and fixer guys take real dollars out of their pockets and puchase junker properties to fix up and resell. I know a few of these guys myself.

Today, when I am involved with a fixer property, I negotiate the very best possible deal I can with the seller. Frankly, have no clue what the place is now worth, what it will take to fix it up, and what it may eventually sell for. And do you know what? I don’t even care.

My goal is to make the very best deal possible, and I’ll do that by negotiating what I believe is the best possible price and the best possible terms.

At that point, I’ll get those fix up guys over to the house and let them kick the bricks and do the math. It’s their money at stake, so they take this very seriously. By the time they’re finished, I know precisely what’s what and know whether or not the deal I’ve made is one that will allow me to make a few bucks along the way. I have a pretty good idea, since I’ve done this a time or two.

If there’s room for me to buy and flip at I profit, I do the deal. If not, I walk away, no harm, no foul.

It’s a little more complicated than this, but you get the idea. Chuck the forms and the spreadsheets and hijack the brain of someone who does this sort of thing for a living. Let him do all the work and the result is REAL numbers that you can in fact take to the bank, not imagined numbers that can be influenced by inexperience, wishful thinking, or more likely, both.

“Both” is baaaaaaaad, btw.

Joe

Re: Figuring the Selling Price for a Fixup - Posted by Chris

Posted by Chris on April 25, 2002 at 14:19:23:

Hi Jan:

Your questions are a great example of what I’ve been writing about. I’d like to work with your situation, if you’ll let me, to see how it goes here. Let’s pretend I’m your real estate agent, your coach, or Carleton Sheets (since you worked with his course). Let me say, up front, that I don’t know if this is the place for the only way I think you will make money on this specific deal or any other to happen–but let’s go through the process of how I would get you to make money doing this.

First, I would ask you the following questions (not that I want to know but because YOU have to know on every deal you do, because it will tell you what you can offer on that prop): What is the asking price, is it listed with an agent, what have comparable props sold for (in fixed-up condition) recently, what’s the existing financing on the property, how much cash does the seller need at closing, why are they selling, what would the prop rent for if it didn’t sell immediately, has the agt/owner gotten any bids on costs of repairs/fixup, if you take the fixed-up market value and subtract all the costs of buying it and re-selling it and the costs of repairs/fixup, debt service until it’s resold what amount of profit is there for you?

You’ll want to use the Prop Rehab form in the course to do the numbers, but the Seller Info Sheet is the most important piece of paper in the 2 inches of stuff. You want to have the information on that form to understand what type of offer you can write (after doing the numbers)–meaning you can write offers that work for you, but if they won’t work with the seller’s situation you can’t get them accepted. Do you fill out a Seller Info Sheet on every call you make on props?

After you have that information, it really tells you what you can offer. All courses teach you about the many ways to buy/finance props, but you have to know what the situation is in order to deal with it.

If I was working with you on this prop, and we had the information you need, I would go over with you what you could offer that would work for you and for the seller–remember you have to make offers that work for you, and you want to make offers that work for the seller–then it’s up to them as to whether they accept. The offers you will write WOULD WORK for them, it’s their decision if they WANT to do it. And that’s a factor of their situation with the property (which you have to get a feel for by gathering the info above).

After doing this a few times, you’d learn the process and be able to analyze the situation on each prop quickly and profitably. Plus, you’d have a greater number of offers accepted because you’ve eliminated guessing what would work in each situation. It’s a simple process, but it’s work to actually DO it, I know. And we’re not even getting into working with the agents, what your situation is with credit, available funds, etc. But I do hope you can see there’s “depth” to the process, and a short answer, though encouraging, doesn’t seem to me to make you money. And that’s what I want you to be rewarded with when you’re doing this work. Let me know what you think or if you have questions. Chris

Re: Figuring the Selling Price for a Fixup - Posted by Gib

Posted by Gib on April 25, 2002 at 12:35:23:

You have to get comps for the value of the house after it’s fixed up. Offer would be 70% of AFV minus repairs and holding costs. This is just a guideline.

Gib

Re: Figuring the Selling Price for a Fixup - Posted by Joyce Fraser

Posted by Joyce Fraser on April 24, 2002 at 23:40:07:

Hi Jan
what I can suggest to you is go through chapter11-14 again in carlton sheets. It’s a little scary but, his course works. the wrap around is a good way to go. Whatever eay you decide to go make sure you get your terms. You know the drill, no interest for 5 years, borrowing brokers commission also. Good luck.

Re: Here’s how it works in the real world . . . - Posted by JAN

Posted by JAN on April 26, 2002 at 10:49:42:

Thanks for the feedback. Good idea to find another investor who’s done the dirty work. What would you say is the best way to do that? Call the local Home Depot, and ask them if they could make some calls for me to some investors with accounts there? (I have some friends at the Home Depot so that might be a possibility). There’s no investors’ club in town, as far as I know…so that’s not an option for finding that investor. Any ideas?

Also, I just got off the phone with a local appraiser and asked him about fix ups. He said the smaller fix ups like carpeting, paint, kitchen cabinets, etc. (the kind Carleton talks about) will add about as much value to the house as you spend on them. But Carleton says THOSE are the kinds of fix ups you want to do to add 4-6 dollars for each dollar you spend. So what’s the deal? Is it just my area of the country/state? Is the appraiser crazy? He says I should find something that someone would say “No way am I living here” and then buy that and make it a totally different house. But that doesn’t sound like a 3-or-4 thousand dollar fix up cost to me. Sounds more like 13-14 thousand dollars out of my pocket. Anyway, thanks for any help.

J

Re: Figuring the Selling Price for a Fixup - Posted by JAN

Posted by JAN on April 25, 2002 at 19:19:36:

Thank you so much for you advice…I would like to ask you a few questions though…and answer a few of yours – and I don’t mind answering any of these.

**First, I would ask you the following questions (not that I want to know but because YOU have to know on every deal you do, because it will tell you what you can offer on that prop): What is the asking price?

Let’s take this one house – it’s a wreck that’s been on the market for almost three months (a good amount of time around here). It’s going for $84, 900

**Is it listed with an agent?
Yes, I am going through the selling broker…so it’s very hard for me to find out anything about these sellers.

**What have comparable props sold for (in fixed-up condition) recently?
Not sure, I’m getting the comps from the broker tomorrow. But probably a little less or around the asking price (and this house needs A LOT of work too!)

**What’s the existing financing on the property?
FHA, non assumable.

**How much cash does the seller need at closing?
Not sure…20% down and the rest at closing (I think)

**Why are they selling?
Just one of the things my broker doesn’t know and can’t tell me.

**What would the prop rent for if it didn’t sell immediately?
Don’t know, but this neighborhood is mainly an owners neighborhood, not a renters.

**Has the agt/owner gotten any bids on costs of repairs/fixup?
I’m pretty sure no.

**If you take the fixed-up market value and subtract all the costs of buying it and re-selling it and the costs of repairs/fixup, debt service until it’s resold what amount of profit is there for you?

Well, considering no one in their right mind would want to live in this house as is, I believe the sellers are going to continue having trouble selling it if they don’t put some $ into it. So I think I would want to offer substantially less for this property than what the sellers are asking…I think they may be motivated enough to take anything at this point (or at least down the road when they realize I’m the only one who would make an offer on their house). As for calculating the profit, I haven’t determined the totals for the fixups (I just viewed the place today), and I’m in the process of getting pre-approved for financing…but I do have a question about calculating the profit: the best way to figure out how much I’ll be able to sell it for – is it to take the value of other properties that have recently been fixed up or are in good conidition in that neighborhood; or is it to take the $ I spend on fixups, multiply it by about 4 or 5 (since each fixup dollar is supposed to bring 4-6 dollars in value) and then add it to the price I’m offering on it? Should these two numbers be the same? (I hope my Q’s aren’t confusing).

**You’ll want to use the Prop Rehab form in the course to do the numbers.
This sheet is somewhat confusing at the end where it figures out my total profit (again, this profit calculation…I’m a little lost on it).

**But the Seller Info Sheet is the most important piece of paper in the 2 inches of stuff. You want to have the information on that form to understand what type of offer you can write (after doing the numbers)–meaning you can write offers that work for you, but if they won’t work with the seller’s situation you can’t get them accepted. Do you fill out a Seller Info Sheet on every call you make on props?
Again, I’m having trouble getting any info. on the sellers because the broker is involved.

Anyway, you can see, I’m still a little unclear on what the best way to figure out how much I should offer on this distressed property. So, thank you for anyhelp. I really appreciate it and hope someone understands my questions and concerns.

JAN

Re: Here’s how it works in the real world . . . - Posted by JohnBoy

Posted by JohnBoy on April 26, 2002 at 11:51:21:

Your original post said you were looking to flip property. If you are going to be flipping the property then YOU wouldn’t be paying for any repair costs out of your pocket. The investor you would be flipping to would be paying for that! You would only be paying for that if you were going to buy the property, fix it up yourself and retail it to a retail buyer.

As far as the basic stuff where spending $1 for $1 that would be all the property would increase that appraiser is talking about, he is correct. BUT! Here is what he isn’t telling you. If the seller is looking to get top dollar then the seller would need to put the $6k bucks into the property to be able to sell it for top dollar. The average buyer isn’t going to buy a property that needs $6k in repairs, even if they could buy it for $6k under market value to offset the costs of repairs. The average buyer wants to buy a house that is already in good shape that doesn’t need any repairs.

That leaves the seller with two options to get his house sold. Either put the $6k bucks into it to get all his money out of it or sell it at a steep discount “as is” just to get rid of it! The only one that is going to be willing to buy the thing “as is” in need of repairs is going to be an investor. An investor isn’t going to be interested in buying this where they would have to spend $6k for repairs and only be able to resell it for $6k more than they paid for it. The investor needs to make a profit for their work involved. Otherwise they aren’t going to buy it!

The average investor that likes to buy fixers is going to want to make a least a $20k profit to justify their investment, work and risk involved. Most of these investors will fix the property up to resell at retail. They aren’t going to want to mess with trying to sell it FSBO. They are going to want to get the thing sold ASAP so they can get their money back out and make their profit! So they are going to want to list with a realtor to get the thing sold faster. That’s going to cost them at least 6% of the selling price.

So lets assume the property would be worth about $100k after it was all fixed up.

So now we know the investor is going to want $20k for his profit. We know it’s going to cost him $6k to fix the place up. We know he’s going to need to pay the realtor 6% commission which would be $6k on a $100k sale price.

The investor is also going to need some time to go in and get the placed fixed up, then time to get it sold while it sits on the market until a buyer comes along and closes on the deal. This could usually take up to 6 months from start to Finnish. So that tells us the investor is going to have his money tied up in this deal for up to 6 months. He will have to pay interest on that money and any utilities on the property during this time. This is going to be his holding costs involved. On a $100k property we can safely assume the holding costs on his money, the utilities, insurance, etc. would average about $1000 per month. So over a 6 month period this would cost him $6k in holding costs.

So now we know it will take $20k to account for the investors profit, $6k for repairs, $6k realtor commission, and $6k in holding costs. That comes to a total of $38k just to cover all the investors costs involved and allow him to make his $20k profit.

So now that we know the house would be worth about $100k after its fixed up and that it will take at least $38k to cover the investors costs and minimum profit expected, we now know the MOST we could pay for this house so far is going to be $62k just to break even.

Since we’re going to be wanting to just flip this deal to the investor then we need to figure in how much of a profit we would want to make on this. So lets say we want to make a $5k profit. After accounting for our profit we now know the MOST we could pay for the property is going to be $57k.

Since we’re not rocket scientists when it comes to estimating repair costs we will want to figure in a little for error on our estimates. So lets add in another $3k for safety measures in case we missed anything on our guess as to what the repairs will end up costing. That brings the most we could pay down to $54k.

Since we know $54k is the MOST we could pay on this we will want to leave some room in this for any counter offer from the seller. They almost always make a counter offer and since $54k is the MOST we can pay then we don’t want to start out by offering the seller $54k. We want to leave room to come up on a counter offer.

So we will offer $45k CASH! That leaves us with about $9k breathing room to come up on any counter offers and if we end up getting it for less than the $54k that will just leave more profit for us or even allow more room for the investor if his numbers end up being higher than what our estimates came out to be.

So now we will need to settle on a final price that will need to be somewhere between our $45k offer and our $54k maximum price we can pay. Once we get the price locked in we get the thing tied up under contract to buy it for all cash. Then once we have the property under contract we then contact all our investors in the area that we know of and have them come out and look the property over and make us their best cash offer! If you don’t know of any investors in your area to call on then run an ad in the paper once you got the property under contract by advertising a Handyman Special. You will get several investors calling on your ad to sell the property to and then keep a file on the ones you get so you can just call them up first the next time you have another property to sell.

If our price to the seller was locked in for $54k and we wanted to make $5k on the deal, then the least amount we could sell to the investor for will be $59k. Anything they offer us above that amount would just be more profit to us. Once you agree on a price with the investor you then either assign your contract over to him for the amount of your profit or you set up a double closing with the title company so your investor doesn’t know how much profit you are making on the deal. Then you close the deal, get your money and move on to the next deal!

Re: Figuring the Selling Price for a Fixup - Posted by Chris

Posted by Chris on April 25, 2002 at 23:18:46:

Hi Jan:

Your questions are good ones–exactly what you should want to know at this point, and I understand what you’re asking.

Right away I see you’re having the common problem in working with agents. I’m an agent and have no bias against them–you can’t eliminate them because 90% of the properties out there are listed, and you can’t eliminate 90% of the possibilities for yourself. When you “get it down” on working with agents, they can practically make you rich by bringing you opportunities and helping you put them together. They have great contacts with lenders when you need them, etc. Agents who are lazy and listed a prop without asking any questions, who sit and wait for an offer to come in without knowing their product, who answer your call to inquire with “just bring us an offer” are flat not doing their jobs. You’ll run into it a lot. I work with agents all the time–when I was in “my” town where I knew everyone, it wasn’t a problem. Since moving to a new area over a year ago, they treat me the same way they treat you.

So you have to ask them the questions, and they may be willing to ask the seller for you. If they aren’t, it’s on to the next. Exception I’ve made: if it’s a prop I really want, for some reason, I’ll ask for help from the agent several times so I can understand the situation. If they never call me back, and the seller lives in the prop, I’ll stop by and ask the seller. If they tell me to talk to the agent, I’ll tell them I’ve been making a pest of myself badgering the agent but have never heard a word back from them. I may get the info I need, or I may not. I have no intention of cutting the agent out or not paying a commission, but I’ll try to politely get the info any way I can. One of my little rules for myself in real estate is: “He who gets the information FIRST to put a deal together has first chance to put a deal together”.

You have some good information, but you need everything on the sheet–you can skip whether the broker will manage the prop, etc. But the rest, along with the numbers again, will tell you what you can offer.

If he owes $80K, there’s no room for him to negotiate with you because he has no equity and there’s also a commission to be paid. He basically thinks he has to get full price in order to walk away. And it isn’t going to happen. Maybe he has to have time to get real, maybe he has to make a few payments to see he’s losing money, maybe he lost his job and can’t make the payments or afford the repairs, maybe he got hurt and can’t do the work on it. We just don’t know. Maybe he only owes $25K and you could get a loan to pay that and the commission and make repairs. He could carry a second for the balance, and you could make a profit while he gets his money and doesn’t have to deal with it. Guessing what you could do doesn’t make you a dime. Getting the info you need is the only thing that will make you money.

So it’s great you’re getting the comps to see if there’s a profit to be made by taking this on. The listing agent is the best one to be working with, as you are, since they’re the only one who might know the seller’s situation. As an agent I’ve never had a seller tell me “I won’t tell you why I’m selling this house”, and I’ve never told a seller I don’t want to know why they’re selling–it’s part of my job to know what they want to accomplish so I can help them do it.

As stupid as it sounds when I say it, you might try Carleton’s script for pre-qualifying sellers: after asking the agent the “la-de-dah” questions about how nice the house is, you might say “Gee, it sounds like a great little prop, why are they selling???”

Another thing: the questions on financing have to be asked “with authority”. You’re courting disaster when you beg “I hope you won’t think this is a personal question, but how much do you/they owe on the house?” Nothing about “I hope you don’t mind my asking”, etc. “What’s the existing financing on the property?” is the question–with a total expectation on your part that you’ll be writing down that amount in about 2 seconds on your Seller Info Sheet. It’s not a personal question–it’s like looking at a car in the dealership and asking whether it’s an automatic or a stick shift–you don’t care what the answer is, but you need the answer to make a buying decision. The prop is a product–you’re asking about it–not a personal question like how much the seller makes per hour at his job, how much he has in his checking acct, etc.

You’ll get the hang of it with practice. 25 CALLS PER WEEK RECOMMENDED, remember, ha ha. After 100 calls or so you WON’T care what the answers are, you just want to get them down on your paper so you can compare them all and pick the one that will make you money.

Finally: all sellers want full price, and sellers want all cash. My dad used to say, “people in Hell want ice water, too”. When an agent tells me they want all cash and full price, I’ve been known to say, “I want them to hand me the keys and I’ll pay them when I make some money on it, but let’s see what we can do to meet in the middle”. WANT vs NEED–you have to know what they need or you can’t give it to them and you won’t make a dime. If they don’t need to sell the prop, you won’t make a dime on it.

It’s okay to tell the agent you think you’re really interested in the prop but don’t have a clue what would work for the seller because you have no idea what they need to accomplish. You can say you can write offers all day long trying to figure out what would work for everyone involved but it would take a lot of everybody’s time until you hit upon what they need. The thought of taking up the agent’s time might make them get the info (it definitely takes less time). Hope this helps. Chris

Re: Here’s how it works in the real world . . . - Posted by Wordsmth

Posted by Wordsmth on May 07, 2002 at 16:11:52:

Thanks for your clear explanation, JohnBoy (and your patience!). I have a different question about your example:

We’re dealing with a house that, in good condition would sell for $100,000. It needs about $6,000 in fix-up. So, although the average person might not buy it with the fix-ups being needed, it’s got a value of $94,000. Yet, after you factor in the necessary profit, the real estate commission, etc., you’re offering the seller $45,000 (yes, in cash).

How do you handle the seller’s likely psychological problem with this: He/she knows the house is worth, say, roughly $90,000 without the repairs…and maybe $100,000 if the repairs were made. Even assuming the seller has substantial equity…even assuming the seller is a severe “don’t wanter,”…even though you’re offering all cash…how do you close this perception gap between a property worth (in the seller’s mind) around $90,000 and your offer of $45,000?

And, second question: Even though they’re legally required to present all offers, how do you persuade the real estate agent–the seller’s agent–to present such an offer? Demand to be there when the agent presents the offer?

Thanks.

Re: Here’s how it works in the real world . . . - Posted by JAN

Posted by JAN on April 26, 2002 at 13:11:36:

But what if I don’t have the money to buy for all cash? And what if I don’t have the right investor “friends” who would be willing to invest 40-50k on a house so I could buy it? And what if I wanted to sell to a retail buyer as opposed to an investor…who might not be as willing to pay the higher prices? Thanks for you info. Big help.

J

RE:Figuring the Selling Price for a Fixup - Posted by Phil

Posted by Phil on June 17, 2002 at 17:42:28:

Hi, I am new to this myself and think this is a very good sorce of feed back, am looking to place a bid on a place in TX, Austin. doing all the research I can to understand the rules (right)

Phil

Re: Here’s how it works in the real world . . . - Posted by JohnBoy

Posted by JohnBoy on May 07, 2002 at 17:40:34:

I don’t handle the seller’s likely psychological problem with this. That is my offer. If they have a problem they don’t have to take it. If they want the thing sold bad enough they will take it. This is why it takes submitting LOTS of offers before you usually get one offer accepted. Many won’t take an offer like this. I’m only interested in the ones that will. That requires making offers on lots of properties in order to find the ones that will take it.

If the realtor has a problem with it and doesn’t want to submit the offer or allow me to be present, no problem. Then I’ll just go submit it directly to the seller myself! I’m not working for the agent nor are they working for me. They work for the seller and if they refuse to do their job then I’ll go around them. Makes no difference to me. If the seller accepts my offer then they can deal with chewing their agent out for refusing to submit my offer in the first place. If the seller refuses my offer, no problem…NEXT!

Re: Here’s how it works in the real world . . . - Posted by JohnBoy

Posted by JohnBoy on April 26, 2002 at 13:22:14:

If you are flipping you don’t need any money to buy with. You won’t be buying anything, the investor you would be flipping to would be buying using his money. Your contract would have a contingency clause that allows you to back out. So if you couldn’t find a buyer to flip to you would just back out of the deal.

You don’t need any investor “friends” that you know. You can find plenty of investors once you get a property under contract and run an ad in the paper offering a handyman special for sale. They will line up to get a crack at buying the property. This is the least of your worries. Find the property, get it under contract with good numbers that will provide a good profit to an investor and the investors will come out of the woodwork!

“And if I wanted to sell to a retail buyer as opposed to an investor…who might not be as willing to pay the higher prices?”

And WHY would you even want to consider that??? You only want buyers that are willing and able to close! If anyone wasn’t willing to buy at my price then, no problem! They won’t be buying from me then! Simple! Only those that can perform and are willing to buy at my price are the only one’s I’m interested in dealing with! They call on the ad. They come look. If they like they make an offer. If I like the offer we deal. If not, NEXT!

Re: Here’s how it works in the real world . . . - Posted by JAN

Posted by JAN on April 26, 2002 at 15:50:14:

One more question, or clarification. Why would a seller want to make a deal with a guy who’s making the sale contingent upon getting another investor to finance it (basically)…seems like a real risk for the seller? I’d have to be dealing with one desperate seller huh?
J

Re: Here’s how it works in the real world . . . - Posted by JAN

Posted by JAN on April 26, 2002 at 15:40:23:

Okay, some Q’s for you. First, at what point do I make the fixups? While I’m looking for an investor? After I make a deal with an investor? Or is what you’re saying, the investor is actually the one who will make the fixups after I sell to him/her? Because one house I’m looking at, I don’t even know if an investor would want to put the effort into it. It needs a good amount of work. So in this case, would I want to fix it up a little bit before finding/selling to an investor?

Second, I just want to make sure I understand…the price I will ask the investor will be the fix up value less what he’ll want to make (prob. 10-20k) and whatever expenses/costs I believe he/she will have over appx. 6 mos or so. That’s what I want to sell it for right? But what I want to buy it for is that number less the profit I want to make, right? So, it seems the whole fixup concept Carleton talks about doesn’t even come into play here. I’m not making money off of fixups, but off a motivated seller, right?

Also, if I don’t own the house yet since I haven’t closed with the owner, then how can I cut a deal with another investor? What are the finer details there, the in-between steps?
I appreciate all the help. I’m working all day on my days off on this and I’m very motivated to learn and get something going here.

J

Re: Here’s how it works in the real world . . . - Posted by JohnBoy

Posted by JohnBoy on April 26, 2002 at 16:16:37:

You don’t make the deal contingent on you being able to sell to someone else. You are going to offer ALL CASH! You are going to make the deal contingent upon your final inspection within 30 days. Your contract will allow you the right to assign. You find a buyer to sell to and close within the 30 days you have to make a final inspection. If you don’t get a buyer then you don’t approve of your final inspection and cancel the contract. The seller doesn’t need to know anything about your plans to sell to someone else. All they know is that you are offering CASH for the property which will be subject to you having the property inspected prior to closing. If you need to cancel you just say your inspection revealed there will be a lot more cost involved to repair the property than you originally thought so you are canceling the contract since you don’t approve of the final inspection.

Re: Here’s how it works in the real world . . . - Posted by Matt from MA

Posted by Matt from MA on May 02, 2002 at 19:44:42:

JAN
All viable questions, I think you should look into getting a book or a course on the matter. A cheap one that can be bought at Amazon or Barnes and Knobles is Bill Bronchiks Flipping Properties. If you have more cash buy a whole course. All your ?'s will be answered.

Re: Here’s how it works in the real world . . . - Posted by JohnBoy

Posted by JohnBoy on April 26, 2002 at 16:09:05:

You don’t do any of the repairs. The investor you sell to does everything.

You only get the thing under contract to buy at the agreed upon price. Then you sell your contract to the investor. The investor buys your contract from you, pays you your profit, and then the investor closes with the seller and pays the seller off for the amount you agreed to buy the property for from the seller.

If you were going to be making a large profit to where you didn’t want the investor to know how much you were going to make on the deal to avoid the investor from trying to give you less, then you would set up a double closing instead of just assigning your contract to the investor.

You would have your contract with the seller. Then you would enter into another contract between you and the investor. Collect a large nonrefundable deposit from the investor, subject to getting clear title to the property. Take both your contracts to the title company. Give them the contract you have with the seller and set up a closing. Then give them the contract you have with the investor and set up the closing. Tell them you will be closing with the seller on the first contract and then immediately selling the property and closing with your buyer on the other contract. When your buyer shows up to close the title company will take the money from your buyer. Then out of that money they will pay off your seller. What’s left over the title company will pay to you. Everyone goes home happy.

You can sell to the investor because you have an interest in the property once you have it under contract with the seller. If you did a double closing then you would actually be buying the property from the seller and then selling it to your buyer. Only you would own it for only about 60 seconds. Title transfers to you and then immediately transfers from you to your buyer. Since your buyer will be paying more than what you are paying the seller then there is no need for you to have to bring any money to closing to pay off the seller. You can just use the money your buyer is paying you for the property and use that money to pay off your seller. The left over difference would go to you as your profit. It’s a very simple process.

Check out this link for a course on flipping properties:

http://www.creonline.com/c-162.html