Wait a minute, I thought you said no agent commissions?

Question

Good morning everyone! I have been meeting with sellers and making offers but haven't gotten one accepted yet. I got lucky on my first deal of this year. I called a FSBO, got it under contract, and assigned it to make $8k. That skewed my expectations a bit since it was rather easy! No marketing at all.

Anyway, now I've been making offers and haven't gotten one accepted. I know every wholesaler advertises "No Agent Commissions" or "Why pay those expensive agent commissions", but I can't wrap my brain about how to explain that to the seller because, as a buyer, you DO have to deduct the agent commissions since that is a fixed cost.

In my efforts to be fully transparent with the sellers, I give them a breakdown of my renovation costs, holding costs, and selling costs. This is where they say, "Wait, so I am actually paying for the agent commissions?" I reply by saying that I have to take that into consideration because when I try to sell it, putting it on the MLS is the fastes and best way to sell a house.

Should I disclose that part or what would you advise?

Lucas P. · Answer

Hi Brent,

I think you're complicating it too much. This is my simplified approach.

"So the current as is market price of your home, based on comps in your area is $xxxx. These sellers end up paying realtor commissions and title closing costs and end up with $xxxx cash in bank, so my offer to you is $xxxx (the market value of as is, minus fees, minus any major repairs like roof, minus investor discount for being able to close within a few days)."

If there's a point of contention, I see if they are at least trying to be reasonable. If not, I bid them farewell, and follow up in a week. Month. Few months.

Hope this helps.

Aroldo Villarreal · Answer

@Brent Coombs I just got it from other wholesaler websites and large company websites (homevestors, webuyhouses) and from what I see others writing on their direct mail pieces. By "every", I assumed (you know what they say about assumed) that every wholesaler did that. I like your statement about acting on behalf of investors, I am actually going to start using that right away!

I am, however, finding my own buyers to which I assign the contracts for the deals I find. Would that still be considered being dishonest with the seller?

@Jennifer Lee Good to see I'm not the only one making those mistakes. Where I am stuck is wanting to back-up my low offer with solid numbers so that they can see where that offer is coming from and that it is validated by numbers. Should I just show them, "Ok, I ran my numbers and here is my offer," without running them through the numbers I came up with (Market value, repairs, holding costs, selling costs)?

@Chaz Reid Hahaha, good thing I cleared that up! Hahahaha, I didn't want to leave that impression of "this guy is a horrible businessman" in your mind! LOL

Chaz Reid · Answer

Why are you disclosing your selling cost @Aroldo Villarreal ? When you say selling cost, you are talking about the price you'll be selling it as the wholesaler to whoever, correct? Why not just do a double closing and keep your profits your business?

Lucas P. · Answer

@Brent Coombs I'm sorry Brent, I directed my reply towards you when in fact I meant it for @Aroldo Villarreal .

Minus realtor and title fees. Quite simply, those selling in the MLS at market price don't get those realtor fees, so neither do you. Not entirely how I would word it to a seller, but you get my drift.

The investor discount really is up to you. I would not mention the ARV selling price. Ever. It's quite obvious. You don't want your seller having second thoughts and counting your money. Only you should know what you estimate the ARV to be at, and always talk about repairs in retail value. Even better, get them to estimate repairs and then correct them if they are under the mark. You can base the discount you want to take as the investor depending on the situation, how solid the deal is, how precarious their situation is. Figuring out the sweet spot just takes experience.

Remember, you are providing them a service. You are offering to take this problem off their hands as quickly and painlessly as possible.

Brent Coombs · Answer

@Lucas P. All that sounds fine. I am not a Wholesaler so I am not in search of the best marketing hyperbole. When I get back into the market, I will be offering my embarrassingly low prices purely and simply because:- that's all I want to pay!

Aroldo Villarreal · Answer

@Brent Coombs I have already found potential buyers and buyers to which I've already assigned contracts to. My list is small, but am growing it every opportunity I get. Also, no, I would not list it with an agent. I've NEVER done it (in my three months of wholesaling :p) but I would definitely think it would get me in trouble with the seller.

@Lucas P. Can you elaborate on the "minus fees" part of your talk with sellers? I'm trying to get as many tools in my belt so that I have a better way of dealing with sellers and objections. Great info!

Brent Coombs · Answer

@Aroldo Villarreal You commented "I am, however, finding my own buyers to which I assign the contracts for the deals I find. Would that still be considered being dishonest with the seller?". I take it that you haven't yet found a single potential Buyer? Not to worry. It's your INTENTION that ethically matters when you are trying to market for Sellers. If you really believe you will save them money by Selling through you rather than listing through an Agent then say so, but make sure you prove it by coming up with the goods before settlement date. (And trying to sell it by listing it YOURSELF through an Agent seems to be asking for trouble from the Seller). Oh, and if you are looking for some alternative wording (and real ideas), rather than just saying "I am acting on behalf of a number of investors who don't have the time to do all the numbers", you could widen the scope:- "I am acting on behalf of a number of BUYERS (they could be investors or personal home buyers), who don't have the time to do all the INSPECTIONS" (ie. the seller is not concerned with the investment NUMBERS). Cheers...

Jennifer Lee · Answer

i like that, I ran my numbers and here is my offer. Proof is inspection report or bid from contractor. And market value and comps.

You say sell me today at this price ;)

Brent Coombs · Answer

@Aroldo Villarreal Where did you get "I know every wholesaler advertises "No Agent Commissions" or "Why pay those expensive agent commissions" from? That clever ploy should ONLY be used by Wholesalers who can (truthfully) tell Sellers "I am acting on behalf of a number of investors who don't have the time to do all the numbers, so I search out homes for them for a fee, which comes in at much less than Agents Commissions".

If you intend to not bother finding your own Buyer/s, you are effectively (read: actually) lying to the Seller by using the above marketing approach. Cheers...

Jennifer Lee · Answer

wow, I think like u, but never had to explain to seller.

I think its irrelevant.

Wait......

The one time I explained to a seller/sellers agent. They decides to fix the house themselve and sell it. So it actually backfired. And it sold in 1 day at original price they listed when I offered 50k less.

Same as when u approach a seller and they say but I bought it for $x, how can u offer $y.

You say, I don't care what u bought it at...its mkt price. Here is my comp...

Wait a minute, I thought you said no agent commissions?

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