Wholesale/Flipping question - Posted by AAO (MD)

Posted by Randy (SD) on November 24, 2003 at 12:33:50:

It’s always worth resubmitting your offer, if it’s not profitable enough for you don’t buy it. You don’t say how you justified your initial offer for $56,940, and did you have hard estimates on the amount of repairs necessary to cure the deficiencies? A bigger problem is what you’re going to do with the property if they accept your offer. If your financial resources are limited to the point that you cannot afford to put down anything for deposit you lack the ability to perform if your offer is accepted. Typically these kinds of offers are not assignable, and depending on your end buyers lender- they will not be able to get financing due to the fact that you as the seller have not been on title. You might be able to accomplish this with the use of the performance mortgage.

Wholesale/Flipping question - Posted by AAO (MD)

Posted by AAO (MD) on November 24, 2003 at 12:11:53:

I made several offers this past week and I got a counter offer. The property was originally listed at $105,900. I offered $56,940, and the seller/bank countered at $75,000. The comps are around $125K. According to MRIS, the house next door sold for $125,9K in Jul 2002. I also looked up all the tax assesments for houses in that culdesac, and they were from $109K - $113K, if I’m not mistaken adding another 20% to tax assesed values will give me a ballpark figure the sale values/comps?. I had a contractor look at the property this past Sat. and he actually got excited enough to want to work on this with me (although I’m not prepared to take on a full rehab, nor buy the property). I think the contractor was being overly optimistic, he was estimating repairs at 15K, and saying he could get it to a value of $130K at retail, to be on the safe side I would estimate 20K, it needs a full rehab, replaced CAC, 2 bathrooms, kitchen completely remodelled, carpet & paint every room.

This is a colonial style townhouse (middle unit) built in 1989, vinyl siding, it has 3br 1fb 1hb, (3levels)with an unfinished basement that could have another bathroom and bedroom. It has been on the market for 113 days prior. On the public record I noticed it was bank owned as it’s a CA address with a bank name listed.

My questions are, is it worth risking losing this possible deal to counter again in an attempt to get them lower to maybe $65K or $70K to give myself more room, after all they dropped the price $30K already? Secondly, if my financial resources are limited to the point I can’t afford to put down anything for a deposit, is it still possible to wholesale this deal, and use the deposit from a buyer to cover their deposit request, through an escrow transaction? Lastly, if I had to bird dog this, would I be able to accept the counter offer and assign it or bring the buyer in to write the purchase contract? How does that work step by step? Any suggestions on this from anyone would be gladly appreciated since I’ve never done a deal. Thanks.

Bayo

Re: Wholesale/Flipping question - Posted by GP in Seattle

Posted by GP in Seattle on November 24, 2003 at 12:43:25:

The sale of the “house next door” is a slam dunk comp if it’s the same type of unit. However, is that sale an end unit? They are worth more. Did it have it’s basement finished?

If you put 20K in and sold it for 125K, you’d have invested 95K/125K = 0.76, which is too low; 0.70 is the minimum. If the contractor is so enthusiastic, maybe you could let him do it for 10K plus half the profits. Be careful, though; you want to be the one on the title and in charge of decisions, and be sure he can’t lien the property for more than the 10K.

You might cut some corners on the rehab, but I think that is questionable strategy for townhouses/condos, as I feel that those buyers want “new” or a facsimile.