What to do next after getting an interested seller

Question

Hi BP community! I am new to BP and am a new investor. I have been driving for dollars and spreading the word that I am in the market to buy in my home city of Tucson. After looking for off market leads, I developed a relationship with a couple possible contenders who showed strong interest in selling to me. Any recommendations of what to do next? I’d love to hear your thoughts/experience/stories. Thanks!

Bradley Sriro · Answer

@Eric Striegel the answer to your question really depends on what exit strategy or strategies you are considering. Are you considering it as a possible wholesale deal, a whole-tail, fix & flip, acquiring it as a buy/hold rental? You need to have an exit strategy in mind before you can determine how to work with and provide a solution to the homeowner that is interested in selling to you. After all, you are helping them solve a problem. In this case, they want to downsize and don't want to deal with the hassle of making any repairs. When you follow up, dig a little deeper and find out what their other motivations and expectations are. Just like you did before, have a natural conversation with them and see what else you can uncover. You potentially have a great opportunity on your hands.

Some of the things that you have to know for your negotiations are 1) ARV - after repair value of the home once renovated (if you plan on wholesaling/ rehabbing it/ etc.), 2) Cost of needed repairs, 3) MAO - Maximum allowable offer taking into consideration the ARV, comps, repair costs, etc., 4) How you will fund the deal (your own cash/ hard money/ private money/ creative financing/ etc.), 5) Holding costs if you close on it and don't wholesale it immediately, 6) If you sell, will you go the FSBO (for sale buy owner) route, or use a Realtor, etc.

It's all a learning process so keep educating yourself and networking. If you don't feel 100% comfortable with the lead, maybe you can identify another active local investor in your market that you can partner up with to help walk you through it. You will have to figure out a split for any profit but the education will be worth it. Also, make use of the BP calculators under the Tools tab to play around with some numbers to see what makes sense for different strategies. Best of luck!

Steve Vaughan · Answer

I first ask what they would like to see happen and when.  Then I listen.

After they tell me I say I will put pen to paper and see what I can do.

I then draft a letter of intent with 3 scenarios that work for me, catered to what they told me above.

Theresa Harris · Answer

Assuming you are wanting to buy it, make them an offer and draw up a contract.

John Ringgold · Answer

@Alex Kolbo Bring your agent if you have one!  It's difficult for them to represent you and advise you if they have not seen the home.

You should ask the seller to tour of the property so you can accurately determine how much your rehab cost might take so you can pin your numbers down!  The home may be in better or even worse condition than you expect which can drastically skew your numbers.  If the seller hem haw's around because the property has tenants, they may not want the tenants to know they are considering a sale.  We have offered for our buyer to wear a tool belt and act like an inspector or contractor and walk the property with the seller.

Additionally, you could write the contract contingent upon a personal visual inspection and approval of the property as part of your due diligence.  In our area, we make an inspection part of the contract, however in other areas you could bring an inspector with you when you tour the property (if you go this route, let the seller know you are bringing your inspector as it make take more time and they will look much deeper than a typical walk-thru), or the contract may give you a window of opportunity after writing the contract to have any and all inspections with a opportunity to get out if you don't like what you find.  Good luck!

Varun Talluri · Answer

@Eric Striegel We are also looking for the off market deals. Driving for dollars is one of the strategies to find off market properties. Could you please share your experience on how you were able to find this lead?

I am also looking to understand how we close the deal once we have an interested seller. what are the things to be considered while making an offer, writing up a contract etc. Thank you

Steve Vaughan · Answer

Yep, I have a template. For small residential properties it's a warm letter.  Large commercial, much different.

I used to offer on the spot.  I guess I could if someone is really needing that, but I've found the reluctant approach to be much more effective.  Let me think it over type of thing.

Alex Kolbo · Answer

Thanks @John Ringgold! I love the idea of wearing a toolbelt! hah I mean I would be bringing a tape measure, flashlight, screwdriver & outlet checker (blanking on that name) anyway so might as well bring the whole belt! :)

Eric Striegel · Answer

@Varun Talluri I was encouraged by one of the bp podcasts I listened to yesterday that mentioned telling everyone you know that you are in the market for buying homes. While I was at work as a home health physical therapist, I was driving up to my patient's house and noticed that the neighborhood looked old but well taken care of. I just struck up a conversation about how much I liked the neighborhood and how nice their house was, etc. They were very appreciative and friendly. Then I asked them for a quick favor to let me know if they know of anyone in the neighborhood that may be interested in selling. Once I asked them that, they casually mentioned that they were looking to downsize and wanted to sell their house but didn't want to do the work to get it ready/cleaned up to sell.  I kindly told them that I'd be very interested in their home and would purchase it as is and off market so they wouldn't have to fix it up and deal with showings, etc. They were excited and wanted to talk more after they thought about it for a day or two.  I will be following up with them this weekend. It just took a simple and friendly conversation. They loved when I complimented their house and all the things they had done to it. Now I just want to be prepared to negotiate and correctly do a purchase agreement/contract. As I've never done this before, I am interested to hear about successful transactions like this.

April L. Williams · Answer

Hi Eric! Welcome to the investment community!!! I am a newbie in wholesaling as well. I made the fatal mistake of investing in a seminar to learn about real estate. If you are looking to learn about wholesaling, I really recommend www.thewholesalerstoolbox.com. I have learned way more utilizing this website than anything else. A couple of things that this website recommends using to find cash buyers to assign contracts to is Deal Machine app and/or Cash Buyer's Data Feed. I have recently signed up with Deal Machine, so I can't really give a yeah or nay as of yet using their app, but I will say I've read/heard great things about Deal Machine. Best of Luck to you!~April

Robert Lombardi · Answer

I see this a lot. After a ton of training and years of experience, I became a top producer at sales which is what you should shoot for ASAP. If you need some direction, let me know. Read Way of the wolf..

What to do next after getting an interested seller

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