My First Yellow Letter Response.

[Jonathan Davis]

Good Morning BP! well i received my first response from my yellow letter mailings Sunday night via text i got excited and nervous at the same time the letter stated i want to buy your house for cash and my phone number,he asked me what was my offer i had no idea what to say so i asked if i could go and view the property then i could make an offer he has tenants and did not want to disturb them i was loss again lol so i asked did he have an idea of how much he would accept he sent me the zestimate from zillow 330,000 when i saw that i was like i cant do anything with that when i saw the property  i assumed it was vacant so i responded by asking would he consider seller financing he laughted and said clearly you must be joking then he goes on to say he would finance at 30% apr with a 50,000 prepayment penalty i asked if i could get back with him tomorrow was that his way of telling me to kick rocks??? or should i further pursue and try and find an investor? any words of wisdom would be great thank you guys ohhh and he did say he was an investor also.

[Bryan Chuchta]

Good morning @Jonathan Davis, First, there are scripts available that can provide a rough gauge of the information you should ask. Asking to see the house is always a good next step one way or another. If he wants a price without having you see it then you need to do what he apparently did, pull Zillow, Redfin, Trulia, etc; or pull MLS comps if you have the ability or are connected to a realtor. (https://www.biggerpockets.com/rei/real-estate-comp...).  

If the retail value or ARV (After Remodel Value) is 330k your goal is to ball park a price around 70% of this value.

Second, if you sent a letter saying you would buy his house cash and then asked him to finance it I am sure this deflated your credibility.  Make the deal then worry about getting the money.  But make sure the deal is a good deal or it is worthless.  Don't get the cart before the horse, once you find a deal, there will be people wanting to put up the cash. Either as a JV flip or perhaps you could wholesale it. What was your plan once you found a deal? Flip? Rental? Wholesale?

Third, If he has tenants find out what they pay & how long they have been there.  

What prompted you to contact this homeowner?  If it was driving for dollars and the house looked in disrepair, you can follow up with questions about the upkeep and what things is he aware of that would need to be replaced or updated if he were going to put the house on the market.

Financing at 30% interest with a 50k prepayment penalty is his way of saying no.  If he is an investor also it might be best to let this one go.  Otherwise shoot a ballpark price back to him at 70% percent of ARV.  If he is interested then go to the next step and see the house, if hes not, find number next.  

You don't necessarily need to know everything about each step but you should know what the steps are.  There are ample blogs, podcasts, and books that can help fill in some of these blanks for you.  You can go to the BP Education tab and tools tab for assistance.  If you are a podcast fan I highly recommend the BP podcast (https://www.biggerpockets.com/podcast) and @Danny Johnson has a fantastic podcast (http://flippingjunkie.com/flipping-junkie-podcast/)

Good luck,

Bryan Chuchta