List Source Criteria explained

List Source Criteria explained

Philadelphia, PA · Member since 2013 · 11 posts · 2 votes

Greetings all,

I apologize if the answers to this are buried in the forum and I haven't located it but I'm hoping some folks won't mind explaining direct mail list criteria. I know it may seem like a very foolish question, however, I'm one of those "for dummies" type of people who not only want to know what, but also why. I read the Atrocious Results direct mail thread and I saw where Dev Horn listed his filters (location, value range, equity, etc.) and I want to know if anyone has or would list their criteria and explain why it's a part of their criteria?

So for example if 40% is the minimum equity criteria, what is the thinking behind that? Again, I know it's a basic question that may even cause some eye rolling and questions about my seriousness but still, I'm asking. For me it's the equivalent of telling someone that they should buy a computer with 8GB of memory and them asking, why that amount of memory and what are the benefits of it? I hope that makes sense. Thanks in advance everyone.

Greg

0Reply
38 views

Most Popular Reply

Syndicator and Fund Manager · Victor, NY · Member since 2012 · 760 posts · 345 votes
12y
More room for price negotiation and the ability to purchase at a price that makes sense for an investor. If they only have 10% equity then you don't have any room toake a profit after considering transaction costs, unless by short sale
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Syndicator and Fund Manager · Victor, NY · Member since 2012 · 760 posts · 345 votes
    12y
    More room for price negotiation and the ability to purchase at a price that makes sense for an investor. If they only have 10% equity then you don't have any room toake a profit after considering transaction costs, unless by short sale
  • Dev HornPro Member
    Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
    12y

    I wonder if @Michael Quarles will drop by and share some of the criteria he uses? He considers age of the homeowner. length of residency, and some other factors that I usually don't mention and I don't want to share his list without his permission....

    @Derek Carroll hit the nail on the head on the equity issue. The (simplified) common pricing formula in real estate investing is this:

    ARV x 70% - Repairs = Offer Price

    So consider a house with an AFTER REPAIRED VALUE of $100,000. But it's in poor shape and needs a lot of repairs, so it's not worth that today. The seller owes $80,000 on the property, and you've determined that it needs $15,000 of repairs to be worth the $100,000 ARV.

    So, let's compute the offer price:

    $100,000 x 70% = $70,000 - $15,000 repairs = $55,000

    So you can offer $55,000 and have a good chance of making a profit. But the problem is the guy owes $80,000, so the deal is a non-starter. You can afford to pay what he owes and he can't pay you to take his house. Time spent on this deal would be wasted.

    Make sense?

  • Philadelphia, PA · Member since 2013 · 11 posts · 2 votes
    12y
    Dev Horn and Derek Carroll thank you both very much that explanation, it helps me a lot. This has been "explained" before but without an example and numbers to bring it home for me. I'm now trying to navigate list source companies and knowing the criteria and why should help. A friend of mine suggested listability so I'm investigating that now. Thank you gentlemen. I'm open to any additional explanations as well.
  • Contractor · Modesto, CA · Member since 2013 · 5 posts · 1 vote
    12y

    Gregory, listability can and will make you money. I have a Realtor that I send all of my non wholesale or flip leads to. Last mailing we got 2 traditional listing out of it for my Realtor. I also have sent him 2 short sales from bandit signs this month. He pays me a "fee" and I make money off of a lead I could not otherwise use. Might not be a home run but it pays for this mailing and the next. Good luck and happy hunting.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.