Hey, Maestro here (aka Andrew Massaro). Glad to be back.
Today I’m going to share a few powerful lessons in deal analysis and negotiating with motivated sellers. This one comes right from the pages of a current deal we’re still working right now – haven’t even closed on it yet, but the takeaways are clear and present.
Ok, so there are a number of scenarios that can present themselves when wholesaling a house, right?
As a dealmaker, you need to be able to recognize the potential scenarios at play if you want to make a lot of money flipping houses. Fail to do this and you can see your $30,000 assignment fee quickly evaporate to a mere $5,000…or even lose the deal altogether. (For shame!)
Ask me how I know this…
An example from a deal I'm working right now
My partner and I got a hot lead (we get lots of them weekly) and began following up in our routine way. Turns out this house is a beauty. Actually a more accurate statement is this deal is a beauty.
We’re talking a big, 5 bedroom, 3 bath, 3,500-sq.-ft. block house with a lovely pool. Oh, and a really motivated seller…
Ba-bam! Freaking bull’s-eye, right?
But, here’s where things got dicey…and, where we almost made a crucial mistake.
So we walk through the house and attempt to estimate the repairs. The roof needs work, but doesn’t need replacing. The concrete-block construction is solid. Nothing major really...
Or so we thought.
So, we made an offer and negotiated back and forth a bit. Eventually, we came to terms based on the ARV, closing costs, holding costs and our assignment fee. The purchase contract is in our sweaty little hands. But before we sign it, we bring our main wholesale buyer to lay eyes on it.
And now it’s tip time
Tip #1 – Shop before you drop.
What I mean is, when wholesaling, it's a good idea to shop your deals to some of your best and most trusted buyers before you contract to purchase. This will help gauge interest before you lock it down.
So, guess what happened? After seeing the property, our buyer told us that the entire inside needed replacing – a full gut job. (And our guts sank, of course.) He said we were looking at $70k - $80k in repairs and updating, easy.
Whoa, did we whiff this one: We budgeted for just $25,000. Live and learn, right?
Tip #2 – You will always encounter learning experiences no matter how long you’ve been doing this.
This is a perfect example of a real-life “seminar.” Learn from them and try your best to minimize the number of zeroes on the end of them.
Course correcting straight ahead
First, we went back to the seller and explained what our “construction guy” told us regarding the extensive repairs needed.
Their response: “No freaking way!”
Typical.
So, then we revised our offer based on the new repair estimate and sent it over to them. When you have to do this, here are the possible outcomes you’ll face:
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Possible Outcome #1: The seller elects to make the $70k to $80k in repairs themselves. (unlikely)
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Possible Outcome #2: The seller chooses to continue living in the house in its current condition. (unlikely)
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Possible Outcome #3: The seller attempts to work with another buyer hoping they’ll get a better price. (unlikely)
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Possible Outcome #4: Sooner or later, the seller realizes you were right in your extensive-repairs assessment and comes back to you to work a new deal. (You guessed it; this one is the more-likely outcome.)
In our situation, all scenarios pointed straight to us. So when the seller came back with a counter offer, what did we do?
We didn't budge. Not one little inch.
Why? Because our numbers were right and the seller had no other choice…
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They weren't going to make the repairs themselves.
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They weren't going to continue living in a house that needed so much work.
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They weren't going to want to start the selling process all over again with someone else. And, we had already dealt with them for a while now, so there was a feeling of familiarity and trust between us. Going for a new sucker…um, I mean, buyer, was notably unappealing.
So they had to sell to us… at our price. They had no other viable option.
And sold to us, they did (said in my best Yoda voice).
At the time I’m writing this, the revised, signed contract is in hand… with a tasty $20,000 assignment in place. Buyer is ready. Closing is scheduled for about two and a half weeks from now. Done deal.
Moral of the story:
Do your best to shop your buyers before you nail down a contract. But, when you can’t and you realize you whiffed the numbers, don’t be afraid to renegotiate with your seller. Just make your case then stick to your guns. More often than not, sooner or later, they’ll see the light and come around.
Practice visualizing all potential scenarios in a deal.
Shop your buyers before you get to the contract stage of a deal.
Hold firm on you offer because eventually, the seller will feel backed into a corner and continue doing business with you because they just want the deal done already.
Andrew Massaro
, also known as "The Maestro", is the founder of Wholesale Coaching, Inc. and is one of the most sought-after wholesale and REO coaches in the U.S. A University of Florida graduate, Andrewís house flipping career started in 2005, during one of the most dramatic and awe-inspiring real estate booms in recent memory.
After many years of success flipping houses in Tampa Bay, Andrew began also pursuing his passion and purpose: hands on, one-on-one coaching and mentoring other investors. Through Wholesale Coaching, students interact with and are coached by Andrew, personally. He has the unique ability to teach and guide his fellow investors to the results they desire. The one-on-one interaction and partnership is the key and what really sets him apart from others who offer coaching.
Andrew is also a loving husband, father to a beautiful little girl, Charlie Lynn, and an active board member of Current of Tampa Bay, a non-profit focusing on humanitarian efforts and showing love to underprivileged individuals.