Submitting Offers

[Marques Rounds]

We need your assistance. We live in San Francisco, CA, starting off in wholesaling. We are having a hard time getting offers accepted. Were always told that our offers are too low. We feel like were doing all the calculations correctly, ie closing costs, rehab cost, assign fees, so that whomever we assign it to can make a generous profit. For instance, there was a probate property in Richmond CA which we submitted an offer for $144,726. The listing price was $195,000. Someone else submitted an offer price above ours, and is getting preference over ours (which I understand). The ARV is $206,752. How low should we have gone? What should have been our assignment fee? We really need assistance with submitting offers. Thanks!

[Kerry Smith]

@Marques Rounds - Welcome to BP!

From the sounds of it you're making offers on the MLS. Keep in mind that these are likely not what we would classically define as "motivated sellers." For you to get the best deals on properties, you need to be making offers to motivated sellers. Yes, you can find deals on the MLS, but it may be tougher to wholesale a property once you factor in agent fees etc.

I'm not sure which formula you are using for your calculations. The numbers you gave do not meet the 70% rule, but they appear to work with the Flipping Formula.

Let's say the property needs $10k in repairs, and you want to make $5k wholesaling it.

70% Rule:
ARV $206k x .70 = $144k
$144k - $10k Rehab Costs = $134k
$134k - $5k Wholesale Fee = $129k Maximum Purchase Price

That $129k should be your offer to the sellers.

Flipping Formula:
ARV $206k - $10k Rehab Costs = $196k
196k - $20k (10%) Fixed Costs (Agent Fees, Closing Costs, Warranty Etc.) = $176k
$176k - $25k Profit For Flipper = $151k
$151k - $5k Wholesale Fee = $146k Maximum Purchase Price

Looking at the Flipping Formula, it looks like your offer is on the mark. I'm not sure how many offers you've made, but if it's under 20 I'd say you simply haven't made enough yet. Clearly define your criteria and stick to those numbers! Do not worry about how you make the seller or seller's agent feel. You should cringe a little when you submit that offer!