Inspections And Repair Estimates.
Hi,
Most if the absentee owners I am speaking to are asking me to make an offer without looking inside the house since they have tennents and do not want them to know that the home may get sold.
In this situation, I have 2 questions:
1. If you cannot get inside the house do you assume the worst and make a low ball offer?
2. If I do make an offer and it gets accepted and I plan to wholesale this house to a investor (assignment) then how do the inspections work? Does the buyer do the inspections? What happens if we find something serious in the inspection (crumbling foundation, significant termites etc..).
This seems like a catch-22, hope to get some advice on how to go about this.
Thanks.
these are some of the questions that I ask
1) how old is the roof
2) how old is the CHA
3) would you say it is poor, average, or good condition
4) when was the last time you were in the unit
5) how is the paint, flooring, kitchen cabinets, bathroom cabinets, and bathroom tile
These questions try to make them think about what kind of condition is the house really in.
6) what number do they have in their head to sell the house for.
7) what do they think the house would appraise for
why do they think the house would appraise for that number
This lets me know off the bat if they are unrealistic or are they really motiviated and how much do they really know about housing prices in their area.
I try not to spend much time on the phone and the time on the phone is with me directing the conversation. i do not need to hear about all their custom decorating.
If their number is something that I can work with, then I tell them that I will do a drive by and give them a ball park amount. If that seems acceptable then I will need to get inside the house to do an inspection. Of course the interior inspection will determine the true offer price. The home owners just want to see if you are wasting their time. Is your offer anywhere close to what they want to get.
I also off tell them that I will make it as easy as possible for them. That they do not even have to be at my inspection if they do not want. I can contact the tenant and arrange a time. They just need to give me the tenant phone number and that they should leave a message for the tenant telling them that I will be calling. I can be an insurance agent inspection, a mortgage company inspection, whatever they want to tell the tenant.
Also, it is very hard to wholesale occupied houses, unless you have a serious wholesaler list and you know that you can flip this house with only having to get inside once. If you have to parade several people through an occupied house, it will probably not work.
Get the tenants phone number and build a rapport with them. You can start calling them directly instead of going through the owner, if the tenant is friendly.
Hi Bgrossnickle,
Thanks for your reply. I had two questions:
1. All the landlords I speak to tend to ask me to make an offer without telling how much they expect. "Just make an offer and I will see" is the response. How do you deal with that?
2. If you are wholesaling how do you manage the inspection? If the owner does not accept the offer, then who pays for the inspection?
Thanks.
I almost always get them to give me a price. I usually start with "now do you already have a number in your head of what you want to sell the house for"? Most say yes, but if they say no "look, I do not want to waste your time, and I do not want to waste my time. It takes me several hours to properly research a property, and it is my experience that most sellers already know what they want for the property"
When I said inspection, I meant that I would do an inspection on my own. After you get a signed contract, then the person who you wholesale to can get an inspection that he pays for. but again, it is very difficult to wholesale occupied homes. If it in unoccupied I ask for a key once the contract is signed.
Brend
Maybe you could use more posture the seller.
He says “make me an offer”
You say “I’m extremely busy leave me your number and the address and I’ll get back to you as soon as I can”. This would give you time to get comps.
If he says no to that he was probably wasting your time anyway.
I hardly ever give someone an offer on the first phone call. If I happen to know the area well, I will give a ball park figure. Again, I am trying to not waste time. If was not doing about all the business I could handle, then I would be more patient.
When they call and immediately want to use me as an free appraisal service, I usually say that "I can not give you an offer now. I do not even start my research until the owner calls me and indicates that they are interested in selling the house. How much time would I waste researching houses that the owner did not want to sell? Are you interested in selling the house?" If they say something like, "if the offer is good enough", or "if the price is right" I then usually cut to the chase and indicate that I am an investor and that I mail lots of letters. I did not specifically select their house as the one and only house for me. If they are interested in selling at a reasonable price, then fine, but I am not making an offer at above retail price. Then I ask "are you in a hurry to sell and what condition is your house in". if they are living in the house, they are in no hurry, and the house is in good condition, then "we are probably not the best fit. I need to buy at a discount so that I can make a profit. I offer lots of benefits to the seller for selling at a discount. But if you are not in a hurry and your house is in good coniditon you are probably not interested in my benefits." I just do not have time to do a drive by, pull comps, maybe even do an interior inspection just to give them a free pseudo appraisal or to find out that they want full retail.
Brenda
Guess my point is to find out their motivation on that first phone call. Do not waste time pulling comps and returning a phone call from a person who is not motivated.
I do not want to call back people who are not motivated.
Bgrossnickle, GQ
Thanks for your insight. I think its a good idea to get the intent clarified right in the begining so that it sets up the correct expectation.
In general when you wholesale a house what kind of discounts are you looking at. Say for a place which needs 5% repair, and assuming you want to make 5%, would you make an offer of 20% below fixed up price?
Ron LeGrand teaches the MAO - maximum allowable offer
MAO = (ARP * .7) - repairs
So if the after repairs value is 100k, and there were 10k of repairs the offer would by 60k.
60 = 100 * .7 - 10
For my area this is low and I would not get many deals. If I am doing a conventional purchase of a house, then I try to work it out so that I make at least 20k per deal if it is a minor rehab. The more rehab, the more I need to make. When I buy houses, I typically buy houses in the 80-150k range. If you are working higher end homes, you need to make more because your risk is higher.
If there is very little rehab, the project is close to my house, there is creative financing, I am bored, etc - then I would go lower. Hell, I have made 3k on a house, but I had no out of pocket money in the house and no risk.
But when you are on the phone with someone doing a conventional buy, if you use the MAO or use the MAO with .75 you can at least tell if they want a price that you can not work with.
Of course you should also ask them if they are current on their payments. If they answer no, then the ball game changes.
Brenda
Forgot that you want to wholesale. You need to know what investors in your area need to make to want to do the deal. Landlords traditionally will pay more than rehabbers. But to use me as an example, I want to make 20k. I have never found a wholesaler that would give me a price that I could work with. And I have not had good luck wholesaling, although lots of people do it. Think you need to have a group of reliable RE investors. If you put the property "out to the world", you will get RE wantabes that will never pull the trigger, or you get sleazy investors that go to the home owner and offer them more money (has happened to me twice).
Brenda