Total newbie's first but big mistake

[Don Lee]

Hi guys
About 2 weeks ago, I got my first HUD property under contract.
Numbers were good. There was nice spread HUD asking price and Purchsing price.
Everything looked fine, but I overlooked one thing: the OFFER PRICE.
My offer price is $189,000 and it's located in Memphis area.
My mentor said it's almost impossible to get a cash buyer who would buy such an expensive price.
Do I have to give up on this one and lose my $1,000 earnest money?
If I have to keep going what kind of marketing would you recommend? Direct mail?
(I'm currently doing marketing on craigslist, backpage, facebook ads, postlets)

P.S: I doing this virtually. I live in Canada.

Thank you in advance

[Jon Holdman]

I'm so confused. In the first post you said "My offer price is $189,000". Then you later said "It's 30K off retail price" and "Purchase price $171,400".

Lets go with the second set of numbers. Its worth $201,400 and you paid $171,400. That is in now way even close to being an acceptable wholesale deal. If you're mentor hasn't taught you enough to know that's not a deal, fire him or her. Today.

To be a deal, you would need to be paying well below $140,000 for a $200K house.

Perhaps its different in other areas, but around here if you bid on a HUD as an investor, get an accepted contract, and hand over the EM, you will never see your EM again. You can close or not, but the money is gone. Something else your mentor should have made you aware of.

HUDs are very difficult to wholesale. The only way I've ever seen it done is to create an LLC, write the offer in the LLC's name. Close the purchase by the LLC and the sell the LLC to your end buyer.

Pretty houses are problematic to wholesale. If someone buys a junker and fixes it up, they can add a lot more value that the cost of the fixup. Especially an experienced rehabber who runs their own crew. And, when they sell the house, they have a list of work to show an appraiser to justify the higher value. When you buy a pretty house, and try to later sell it for a higher value, you have to have some justification for why you're asking more. Sometimes that exists. But if the first sale was straight off the MLS, its tougher to justify why that sale is not, in fact, the true value of the property.

Don't worry, if you persist in the real estate business, you'll make more expensive mistakes than this one. I have. Just write this up as the cost of tuition in the school of hard knocks.