All Forum Posts by: Sean Cole

I come down on the side of becoming an agent as an investor.  I laugh when I hear investors worried about "disclosures" if they become agents.  I ask if that means that they're doing something underhanded now - of course they insist they aren't!

Your additional disclosures will generally be to the seller (when you buy) that the buyer is a licensed agent and to the public (via MLS marketing remarks) that the listing agent has a financial interest in the property. There are ethical standards, etc. that agents are held to, but most of those (in Ohio, anyway) aren't a negative impact on our business as investors/wholesalers.

In Ohio, we have a few companies that you can pay to get your licensing classes done.  I'd bet that a google search would find out if the same were true in CA.

These guys call me after each of my closings where I act as a REALTOR offering me a $200 referral fee if I give them my customer's information and they buy service.  First, of course, I'm not selling information!  Second, the $200 doesn't mean much for what they want.

Unfortunately, they won't stop calling and emailing me after these deals and today has set me over the edge for some reason.  Well, the reason would be that I mistakenly picked up their call, listened to him long enough to realize what was happening and then informed him that I wasn't interested and would never be interested.  I asked that he not contact me in any way.  Less than 2 minutes later, I got an email from him.

It's silly to let what should be a minor annoyance ruin a day where we closed on 2 deals and look to be putting 3 more into double-pending status, but this guy really harshed my mellow

</end rant>

@Sylvia B.That was the first thing that I noticed, too.  I generally hop on to BP, check my inbox and then hop right to the threads that I've followed.  I can't find those anymore - just the ones that I started.

On auction.com, they'll keep running the asset in auctions if the reserve isn't met. Unfortunately, there's no convincing the seller that the reserve is too high. I've bought several assets that were HUD houses listed on auction.com for much less after they left auction.com and wound up on hudhomestore.com.

The folks at auction.com will share with me (your mileage may vary) the ballpark that I need to be in on a given asset to buy it.  I can also get a general range by looking at the starting bid and then watching the bid increments through the auction once it starts.  When the bid increments get down to $1,000 or less, you're getting very close to reserve.  The "house" (auction.com) will also bid all the way up until the next bid is the reserve price, so don't fall into a trap thinking that the house is worth what it's getting bid to - it could very well just be auction.com bidding.

Generally, a starting bid of $5,000 will sell between $25k-$35k.  A starting bid of $10,000 is usually $40k-$50k.  Starting bids of $25k are generally around $90k-$100k.  I'm not sure that I ever recall reserve price being much less than 3x the starting bid, at least in the areas that I buy in, except when the starting bid has been in the $40k-$70k range.  The one that I saw at $70k starting bid had a reserve of just under $200k.

My strategy on auction.com is to do very basic analysis: what's ARV, what is rehab usually like on a house like that, and what's my MAO. I'll compare my MAO to the starting bid, and if I'm not in the range of where I expect reserve to be based on starting bid, I move on to the next deal. If I'm in the range, I'll drive by the house to try to get a better handle on repairs to fine tune my MAO. If we're still ok, I'll try to buy it preauction if that's available.

My experience with auction.com in the SW Ohio area is that about 15% of the houses listed wind up trading on their platform.  I don't believe that it's an auction.com issue - it's a seller reserve price issue.  If you'd like to PM me the address of the house (again, I only buy in SW Ohio so I'm not competing against you), I'd be happy to look at the listing and pass along any other insight I can.

If it's auction.com as you say, you can stop your analysis now, unfortunately. With a first bud of $50k, the seller will not be accepting a bid of $102,500. Their reserve is likely to be between $150k and $175k. I've bought a couple dozen from them...

Originally posted by @Matt Holmer:

I have a question for those experience investors who have purchased from HUD.

I've been looking at a few properties with a realtor who I have never worked with before. He has experience with REO, HUD, etc. He has said that after an offer is accepted, if we had a inspection that reveals a major issue (i.e. foundation, plumbing) that it is possible for an investor to get his/her earnest money back.

Is that the case? I've read the HUD purchase contract and I am not seeing a provision for investors having the EM refunded.

Thank you for any thoughts that you care to share! 

Right. Once you have a completed/accepted contract package, that EMD isn't coming back unless the property is further damaged. The local listing agent and property preservation company will have to agree that the new damage is actually new, so it's not easy to get away with bogus damage.

There are some games you can play with the contract to get more than their 48 hours, but not a ton more time - usually another 2 days max from my experience.  I'd suggest having someone that you trust already lined up when you get an acceptance, OR be able to do your own inspection prior to submitting an offer.  Your agent can get a Property Condition Report off of HUDs website that has the condition of the water supply, HVAC, roof, electric, etc.

If it's auction.com or similar, it's doubtful that they'll accept $100k with a starting bid of $50k, based on my experience with these sites.  The reserve price is generally some multiple of the starting bid (and it's never just 2x).  They also tend to try to get pretty close to retail on newer homes, in my experience.

If you can buy the house at your number that's great! It's also pretty rare to get that kind of margin using HML.

I'm in Ohio, so it may be different where you are...

We set these up as: "ABC, LLC as Trustee of mylandtrust" When we sign, our signature is "John Smith, member"

Originally posted by @Sarah Ziehr:

@Michaela G. I definitely don't think wholesalers are my competition- there is plenty of business to go around. 

The problem with wholesaling is that it does a disservice to the seller unless the wholesaler is educating the seller to their options. I know there are instances where it makes sense to sell a property off market to an investor, but not all sellers are aware of how it all works, and 99% of buyers (including investors) are looking on the MLS. What that means, is that listing a property on the MLS will get the best sales price for the seller.

Selling homes is not like selling pencils wholesale to staples. You are talking about someones lively hood and I think there are some ethical standards to adhere to. 

As REALTORS, we definitely pay a lot of money to the NAR to convince folks that selling their house on the MLS will result in the highest sales price, don't we?! Unfortunately, there are many factors in play, even for a house listed on the MLS. When a house is initially priced too high, it can wind up not selling and becoming stale. A desperate owner can wind up taking my below market offer in this case, just as easily as they could if I went to them directly.

In addition, not all sellers are looking for the most money they can get.  Many of my off-market purchases have been more about avoiding showings, avoiding the cleanup required for showings, being able to leave items they don't want to take/throw away, etc.

We also haven't considered real estate commissions, which can certainly change the net to the seller such that selling off-market is a better deal for the property owner.

My point is only that listing on the MLS isn't the right course of action for everyone all the time. As a licensed agent in Ohio, I wind up talking to some owners about whether or not they should list on the MLS vs. sell to me. I lay out the pros and cons of each scenario and let them decide. Typically, however, they have an unrealistic opinion of the value of the house and I can't help them as a REALTOR or wholesaler/investor.

@Micah Dickson I signed up for a free trial of Xero today and reconciled one bank account from 1/1/16 through today.  Pretty interesting, though it'll take a ton of time to customize the chart of accounts the way I'd need them.

Looks like it integrates with Salesforce, but only invoices (through Breadwinner), right?