Are you wholesaling houses deals from the MLS yet?
If you’re not, you should be…and if you are, check this out anyway.
I developed a cool little system about 13 years ago. Back when, as an agent, I was helping several rehab investors find great deals to flip.
The system arose out of a growing problem.
When a great deal came up on the MLS, everybody knew about it. Didn’t even matter that it had only been on the market for a few hours.
By the time I previewed the property, called my investor, showed them the house, wrote the offer, got it signed, and sent it to the other agent…they already had multiple offers.
So now my chances of selling that property just dropped to below 25% (unless I knew the listing agent but we’ll talk about the “good ‘ol boys club” another day.)
Anyways, long story short…I had to find a better way and I did.
I thought, What if I could secure great deals that nobody knew about?
What if wrote offers on properties that were not screaming deals but smelled of equity?
What if I wrote so many offers that the law of numbers would kick in and I’d be almost guaranteed to find at least one deal?
After all, if I got one accepted…I could still back out if I had to under my due diligence clause; The verbiage that makes my purchase contingent on inspection.
The next day I did an MLS search for the area where I sold most of my investor’s properties.
No keywords, no # of days on market, just a general search: *less than $100k; *2 bed minimum; *single family; …that’s it.
Then I skimmed each listing, selecting ones that looked like “estate sales”, “grandmas house”, “rentals”, “motivated owner-occupants”, “quit-claim deeds”, “held in a Trust”, “over-priced bank foreclosures and short-sales”.
After I had a list of about 30 properties to write offers on…I called my investor and told him about my plan to write multiple offers in his name to see if we could snag him a deal.
He agreed so I had him sign a blank offer.
Then I printed out the properties and because I knew the area well, I had a pretty good idea of what each home would sell for in it’s “best condition”.
On each printed listing I wrote the ARV (After Repaired Value) at the top of the page, next to the listed price. Sometimes the ARV was higher than the listed price, sometimes it was lower.
In any case, the listed price didn’t matter much to me anyway…but most properties were over-priced for their current condition.
I estimated an average of $15k in repairs, 15% profit and 10% in selling fees and buyer concessions.
Let’s say the home was listed for $85,000…here’s how I’d determine our offer price.
$80,000 ARV (After Repaired Value)
-$15,000 Estimated Repairs
-$12,000 Profit (15% of ARV)
-$8,000 Selling Costs (10% of ARV)
=$55,000 Target Acquisition Price
=$53,000 Initial Offer Price (leaving $2k for negotiating)
Now keep in mind, because the property was listed…my commission as a Realtor was already built in @ 3% of the agreed sales price so I didn’t have to account for this in my formula.
I calculated the numbers for every property and wrote the “Target Price” next to the ARV on the MLS print-outs….
Next, I made 1 copy of my investor’s signed contract and put the original in a manila folder for future use…obviously this was long before Dropbox and Google Drive.
Then I took the copy and filled in the information that would be the same on each offer like: dates; buyer broker’s name; buyer agent’s name; deadlines; earnest money deposit; checkboxes; etc.
After, I printed 30 copies of the copy I just edited and continued to fill out each offer.
I then faxed (hey, it was 2001) each offer with a cover letter to the agents.
On the fax cover page I simply wrote a brief message:
hi Tracy, attached is an all cash offer on your listing at 1234 Happy Place in Fruit Heights. Please present to your seller and let us know if we can put a deal together. My buyer will purchase the property ‘As-Is’ and can close as soon as the seller is ready. Call me if you have any questions. Thanks, Will
Now, here’s what I didn’t think about.
Some agent’s can be lazy, pompous, negative, and super egotistical.
Right away, I got few calls from these guys saying:
- my seller will never go that low!
- this offer is ridiculous!
- have you even seen the property?
- bring me a real offer and then we’ll talk.
I couldn’t believe it! These agents were killing the deal before they even presented the offer.
However, other agents were calling me saying things like:
- do you have a proof of funds?
- is this the best your client will do?
- it’s low but they’re motivated, I’ll see what I can do
Two completely different approaches from two completely different mindsets. And guess which set of agents did more deals? …EXACTLY. I’ll share more on networking with like-minded agents soon but for now let’s get back on topic.
Well, now I had a bunch of offers flying, I needed a way to keep track and follow up.
I put them all into a spreadsheet with about 8 columns: “MLS #”; “Agent Name”; “Agent Phone”; “Property Address”; “Target Price”; “1st Counter”; “2nd Counter”; and “Final Price”
That way, I knew who rejected my offers and who I was still negotiating with.
When I would get the first counter offer back from the agent, I would input that amount in the “1st Counter” column.
Then I would send them a counter that was $1,000 higher than our original offer.
If they countered us back a second time, that amount went into the “2nd Counter” column and I would send them another counter offer at our “Target Price”.
About a third of the offers were either rejected immediately or the agents simply didn’t respond…Did they present the offer? who knows.
The rest were countered and negotiated to anywhere between full price and a very respectable discount.
But check this out…
Within a week, I HAD 1 ACCEPTED OFFER AT MY TARGET PRICE!
Well not yet, right? …remember, I still hadn’t seen any of these properties in person.
So I jumped in my car, cruised over to the property and I was utterly shocked.
The home was incredibly clean and had a mother-in-law apartment that wasn’t even noted in the MLS. This property was worth more than I initially estimated.
It had been lived in for over 30 years, kept up immaculately just never updated.
I estimated a remodel at about $18,000…sure, $3k higher than originally accounted for…but after updating this bad-boy I knew we could sell if for about $10k more than I first estimated.
Immediately I called my investor and had him meet me at the property.
He loved it. DONE!
We closed a week later, he rehabbed the house in 45 days, then I listed it and found an owner-occupant buyer within 3 weeks.
The deal closed about 25 days later and everybody was happy…EVERYBODY.
Needless to say, I rinsed and repeated.
I continued to use and perfect this system and went on to close an additional 14 deals within about 9 months…using just that strategy alone.
In fact, I still use a modified and almost completely automated version of this system today.
It’s accounted for 2 closings already this month.
Only now, I am the buyer…or wholesaler I should say
So here’s a question for you.
There are homes sitting on your local MLS right now, that if someone made them a low-ball offer…they would take it.
Frustrated landlords, sellers with inherited properties, failed sales, highly motivated owner-occupants and the list goes on…
Will you let them go to someone else or will you be the one to help them solve their problems?
Next week we’ll continue with Part II where I’ll break down how I’ve almost completely automated the entire process for flipping MLS houses.
In the meanwhile, I’ve got a favor to ask.
I’m on the fence about this whole blogging thing, I like sharing but get discouraged if I feel like it’s not helping anybody. And the only way I can track results is from your likes, comments and shares.