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Hey Cash Flow Depot members. My name is Manny Ventura and I have been dying to get my first Highest Bidder Sale going ever since I learned the concept at the last Panama Convention in April. I tried a couple times to convince sellers but just could not get a Yes. Finally, today a seller called me letting me know she wanted to sell. We discussed the possibility of doing a highest bidder sale. I did a presentation on the benefits of doing the sale. She was convinced the property (a triple Decker in Rhode Island with an 3 bedroom attic) was worth 140k. I should let you know this house needs work (50-60k) The comps were tops at 180k. But the property does come with an Extra lot. Anyway, I offered in my presentation we could strike price 70k. I would take the first 5k over and the split the rest 50/50. They were interested in the idea and said they would think about it. Any ideas member can give me to make this a better deal?
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This House would appeal most to landlords (each floor rents for 900- attic extra (750-800). Although not located in the best neighborhood its a quite street. Any other way could I have structured the deal? Or is there another way to convince her that 140 is not realistic? I developed great rapport with the seller. She liked that I was persistent and was not pushy so I know there is big possibility. She will call me soon to let me know if this will work for her. Will keep cash flow depot members updated!
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I’m looking forward to going again to the Panama Convention in January! I will make a highest bidder sale work!!
Hey Manny
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, Great to hear from you again. It’s been awhile.
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, While it is great to get options and split profits on a HBS. sometimes you need to take a different approach. Yes, it’s nice to make $25,000 to $100,000 profits on a Highest Bidder Sale, it might be better to go for a lower profit on this first one to just get them going.
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, Tell the seller that you will take a flat fee of $7,000 to do the highest bidder sale for her. That is less than she would have to pay a real estate agent’s commission and the whole sale will happen a LOT faster than if she listed. Tell her that if you do not sell the house, she does not owe you a penny. She only pays if you are successful… and you KNOW you will be successful. All sales proceeds will be hers regardless of the sales price.
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, This takes all the pressure off the seller. How could she say no!?? She won’t with this offer.
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, An interesting thing happens when you do a HBS – in a good safe low crime area — a lot of other sellers will come to the open house and ask you to do one for them too. So, you have a good chance of picking up 1-2 more highest bidder sale opportunities.
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, This would be an ideal property to do for your first HBS because an investor is more likely to be your buyer. Investors often have cash or access to fast cash so you can close in a week or two versus waiting for the buyer to get financing.
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, I think the seller did not jump on your offer for a couple of reasons.
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, 1. The $70,000 price is much less than she thinks the house is worth. Though it would be a realistic starting price for a HBS
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, 2. She probably is concerned that you are going to make TOO much profit on HER house. Even though the house might only sell for $90,000, if she gets the first $70k, then you get 5k, and you split $15,000 – that means that you are making about $12,500 profit. Which is great for you, but she may see it as too much.
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, On another note… you might add in to your agreement that if you are able to sell the house for more than $100,000 – or some number you both agree too — that you will make an additional $5,000 or at that point you will split profits.
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,When I’m negotiating a HBS option, or a wholesale flip, I RARELY throw out a number. Instead, I ask the seller, what is the least they could take to sell this house in 2 weeks or 30 days. When they quote a number, I ask if that is the best they can do. Let them name the price. If their price is still way too high, then you need to show her comps for similar properties, show her an estimate of what the repairs would cost, and show her what her closing cost will be but explain that the buyer will pay them if she sells with a HBS, and mention the cost of waiting to sell (especially if she has a mortgage payment).
, With the cash flow potential in this property, you should be able to get buyers coming out of the woodwork which will help the price go up up up.
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, Making $7,000 is a really great profit for 2 days of doing an open house plus the week of online marketing you do before the open house.
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, Let us know what she says.Jackie- Thank you so much for the advice. I will go ahead and ask for the flat 7k fee. That should defintely work since the seller was apprehensive on the 70k structured deal. How can she say no now? This made me realize its about helping the client the best way not about trying to make the most. Can’t wait to learn more in January. I will keep you updated on this deal.
It’s always about solving a real estate problem… first and foremost.
Even if you only make $5,000 on this one. That’s a good profit. If you help the seller, she will tell everyone what a great job you did, then you will get a lot of referrals.
You don’t ever want to leave a bad taste in the seller’s mouth – feeling like you took advantage of them.
make it win-win
Hi cash flow depot members!
I have a highest bidder sale opportunity that I need some advice on. I have a property in a nicer area in Rhode Island. North Providence where single familys range comp at 200k-220k. I have a property I will be putting under contract this Sunday for 135k. We plan to use hard money to close. I asked the seller if she be willing to do a hbs sale and she mentioned she just wants cash and is only willing to sell to me becuase I contacted her before a realtor and stayed persistent (left atleast 5 messages). Anyway so I will lock in agreement Sunday but will aim to do a highest bidder sale instead of rehabbing ( needs bathroom and kitchen n carpet 15k budget we have for it). So im ready to get started on a hbs with this house but is there a problem with seasoning of title if I aim for a retail buyer? I dont know if I’ll get cash buyers at that price but will try anyways. Any suggestions on how should I approach this HBS?
HI Manny
Closing with hard money is risky. The HML will charge points and interest every day you have the loan and eat in to your profit substantially. You could try to negotiate an equity position in the deal instead of points and interest.
Also, because the house needs a new kitchen and bathroom, you will not be able to sell to a retail buyer. Don’t expect to get $200k for the house unless it is in perfect condition.
Realistically, you will get $150,000 to maybe $170,000 which hardly makes it worth getting a hard money loan. The lender could make more than you do.
AVOID THE RISKS and just get an option do a Highest Bidder Sale. A little more sweet talking will get the seller to say YES.
Also, you can avoid any seasoning issues if you just get an option instead of buying the house first. some lenders will want 90 days seasoning. Depends on the type of loan the buyer gets.
Thank you Jackie. Yes HML charging 12% and couple points. So I do see how the cost can eat from the profit plus holding costs taxes and insurance. I tried convincing seller to do a highest bidder sale but she would rather go with a realtor. When I see her sunday with our agreement I will again push for a highest bidder sale. The deal is a decent one with some potential but I defintely would not want to take on hard money for this project. I will wrap it up to have it under agreement. If she saids no to a highest bidder sale. What would you suggest?
Tell the seller that a real estate agent will want a minimum of a 6 month listing. Maybe 12 months. And the real estate agent is not willing to put their money where their mouth is by putting up a $100 earnest money deposit
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but you are willing to pay the seller $100 for an option that will ONLY last for 30 days. If you are not successful in selling the house in 30 days, you will part ways, she can keep the $100, then she can go with the realtor. She has nothing to lose.
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her best chance for getting this house sold FAST for the maximum profit is a highest bidder sale.
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You could agree to split profits 50/50 over the $135,000. You’ll make less money but it may be exactly what the seller needs to push her over to saying YES to the highest bidder sale.
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, Let’s say the house sold for $185,000. The first $135k is hers, then you split $50,000. She would make an extra $25,000 and have NO CLOSING COSTS. So, instead of getting $135,000, she will make about $160,000. put these figures on paper so she can visualize it. I think that will get her to say yes to the HBS.,
You might show her other figures,
, if the house sells for $150,000 – what would she make
, if the house sells for $170,000 – what would she make
, if the house sells for $180,000 – what would she make
, etc,
You’ll make less money ( it would be about what you’d pay a HML) – BUT you’ll get the experience of doing a highest bidder sale without the risks if buying with HML first or dealing with seasoning issues. There is a good chance that other sellers in the neighborhood will come to the sale and ask you to do a HBS for them too.
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