Advice needed – 1st Wholesale


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  • Hi Jackie & team,

    Thank you for taking the time to read this and any help you can offer me would be greatly appreciated. This potential deal would be my first! Here’s what I’ve got:

    * Friend’s mother passed away and she inherited her mother’s home in San Francisco.
    * House just finished probate process
    * Stepdad Not on title but is on mortgage
    * Mortgage is about $250k
    * Probate appraisal $727, 500
    * Zillow says house estimated at $747, 137
    * No liens or judgments
    * Many repairs needed – friend won’t let me view interior until her stepdad moves out in August.
    * 900sq ft – 2bd / 1 bth
    * No central air
    * I have a list of buyers

    Questions:
    Should I just ask her what the lowest amount she is willing to take?
    Shall I have her sign my contract now or wait until stepdad moves out next month and I view interior?
    She really wants me to take this off her hands – she’s not willing on using another investor or agent at this time.
    Can you please offer me your thoughts or questions that may help me with closing this?

    Many thanks,
    Alena

    Is the mother on the mortgage? I am assuming so, but someone who might be able to offer an opinion might want to know that detail.

    Otherwise, curious to see what others say, but this sounds like a possible Highest Bidder Sale opportunity based upon what I know. It needs repairs and you don’t want to do them and your seller likely wants their money fast. And there is a lot of equity to play with for pricing.

    Since your friend is an heir, they won’t be real attached to getting a retail price, so you have that psychology in your favor.

    My $0.02 worth, but wait for the experts to give you their opinions!

    Thank you, William. Yes, her late mother is on the mortgage with stepdad and only one on title.

    .
    A couple of thoughts. Alena, unless you have some experience in evaluating houses and all the things that can wear out, be damaged, or need replacing, I’m thinking that you’ll get a lot better information after a professional house inspector does his walkthrough and testing. Your seller(s) might (no guarantees) even be more receptive to a pro doing a lookover than an amateur (in their eyes) whose walkthough would likely have to be repeated.

    Second, the San Francisco housing market is volatile as the dickens. There are stories of mainland Chinese money coming in and doing all the fix-and-flips they can. Here is one of the most extensive discussions I’ve seen (June 6, 2017) on that market:

    San Francisco Home Prices Suddenly Go Nuts Again

    Don’t pass up on the extensive comments. The author’s remark in the comments is that he expects when the crash hits SF that the housing prices will drop by a third. So the sooner an HBS could be conducted, the better. And its results should be the best if you can provide the best professional information on the house condition about what needs to be fixed, refurbed or replaced.

    Not knowing WHEN that crash will happen means you don’t want to be on the hook for rehab money. Much better to control that house as early as possible with a negotiated option (structured to protect you, in case the crash hits before your HBS can happen), and clear the field of all possible competitors, in case the fix-and-flip hordes offer what the seller(s) think is a better deal.

    Best wishes, and good luck,

    –Dee

    .

    Dee,

    I really appreciate your thoughts and feedback. I like the idea of having a pro evaluate the house and I think the seller will be much more receptive to that as well.
    Very interesting article from Wolf Street on the significant role foreign buyers have played in the SF market. I agree the sooner we do an HBS, the better. I just started reading Jackie’s book – Highest Bidder Sale Manual and when I run into any q’s or bumps along the way, I will be sure to reach back out on this forum.

    Thank you so much and have a happy and safe 4th.
    Alena

    Alena

    Congratulations on your first wholesale opportunity.

    Ask the seller what’s the least she would take. Then ask her again if that is the best she can do. The price should drop more the 2nd time you ask.

    Have a contract ready for her to sign asap. It should state “subject to inspection and approval once the step-dad moves out”

    At that time, I suggest that you have a pro inspector evaluate the damages and repair costs.

    Use this information to negotiate the price down more IF necessary.

    I agree that a Highest Bidder Sale is the best way to go with this — NOT a straight wholesale deal. You’ll make a lot more when you get buyers fighting over who will pay the most You’ll want to schedule a 2 day open house where you accept bids on the property.

    To get the option strike price down even more, you could offer to split the profits 50/50 over the strike price. Sellers love this!

    Get a contract asap. You also need to get an authorization from the step-dad to contact the mortgage company for a payoff. You’ll need the account number and one of the borrowers social security numbers. There is usually an automated system for getting the payoff. (you won’t need to talk to anyone)

    Get your own comps. Verify the mortgage payoff. Don’t trust the information the seller gives you.

    Be prepared that there could be potential problems from the step-dad claiming rights to the property.
    Get a copy of the will if possible. It may be in public records.

    Thank you, Jackie! Your advice is so helpful and appreciated. I will definitely do all the steps you suggested and will let you know how things go. This is exciting and a great learning experience for me. I’m reading your manual and it’s easy to understand and a valuable resource.

    Much appreciated,
    Alena

    @Alena Caldwell, send me a PM to introduce you with a very active SF investor who does value add Rehabs in the Bay Area, and may even buy it off of you, or help you through this deal for a profit share. You will learn a lot from him even if you do not make much this time. That really is priceless.

    -Ayesha

    Alena

    My advice is to do the wholesale deal on your own. You do not need someone else to take part or most of your profits. Be careful of people who want to squeeze in on your wholesale deals.

    When I wholesale a property I will never, EVER, wholesale it to another wholesaler or allow them to market my deals. I will only sell to an end buyer who has the proof of funds to close the deal and who is willing to put up a substantial non-refundable earnest money deposit.

    Way too often deals fall apart when there are multiple people involved in the middle of a deal. Avoid working with other people who want to help. There have been many instances where another wholesaler/investor will try to squeeze you out of the deal completely. Don’t let that happen to you.

    I know several real buyers and rehabbers in the SF area. Once you get a contract on the house, let me know. I have known these people for 20+ years and I know they will be honest.

    Jackie, I have a question after you get your buyers list together how can you attract motivated sellers?

    Jackie is right, there will be many instances when so called experienced investors will try to squeeze you out of a deal, or do nothing and expect to get a piece of the pie. You should be wary of them. ONLY take advice from, and work with, honest investors; there are very few of them, one of them being Jackie Lange. There are others who show another side to the investor community, but on a one-on-one basis are unscrupulous at one level or another.

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