Reality check: We’re wholesalers, not contractors. (Well, that’s truth for most of us anyway.)
Point is, most of us build deals not houses, so what do you do when your seller thinks her house needs “a facelift,” but in reality it needs a wrecking ball?
And believe me - Andrew “The Maestro” Massaro - it happens all the time. Look, I’ve been around the block more than a few times. I’ve shared some epic (if I do say so myself) lessons with you here at Mogul, and I even had the privilege of talking with some of you about blueprinting your business on this training call. By now, you know me, The Maestro, to be a straight shooter, straight up.
So you know I’m not blowing smoke when I say that you need to be prepared to renegotiate a repair estimate gone wrong - because sooner or later - it will happen. Being prepared will likely alleviate some of the anxiety you may feel.
Once Upon a Time
Not too long ago, one of my students sent me what turned out to be a freaking amazing lead.
I’ll spare you the boring math, but the numbers in the deal looked like this:
ARV $140,000 | MAX % of ARV 60% | REPAIRS $15,000 | WHOLESALE PROFIT $27,000
You read that right, profit was $27,000. Can you say cha-ching?!
We offered $40k, and my lead accepted. The contract was signed, and we were loving life!
And then the bomb dropped (insert gloom and doom music).
We were attracting potential buyers left and right only to find out along the way that the repairs were piling up more than we had estimated. Much more.
Have you seen the movie, The Money Pit? Sure, it’s funny as hell to watch, but not so much when you’re living the nightmare… which we were. We were facing upwards of $50,000 in repairs, and you don’t have to be a math genius to know that $50,000 is a hell of a lot more than $15,000.
Remember, our contract was for $40,000 cash, so our too-good-to-be-true deal quickly became just that. I mean, what rehabber in his or her right mind (and sober) would agree to $50,000 in repairs?
What to Do?
Did I panic? Absofreakinglutely I did!
But I didn’t cancel the contract.
You heard me right. I didn’t bail. Instead, I put my big boy pants on, called my seller, and explained our dilemma. Needless to say, she was shocked to hear just how much of a crap-shack her house was, but she politely declined my (significantly revised) offer of $20,000 (that’s half my original offer).
So, THEN we bailed. And I’ll bet you can guess what happened next...
She called me back a day later and basically begged to still do business with me. And therein, my friend, lies the beauty of being a wholesaler. And not just any wholesaler, but one who is smart, fair and direct – one who others will WANT to do business with even when the business gets tough.
Truth be told in this situation, she had no other choice… and she knew that! So we agreed on a new deal, got a new inspection and finished the deal.
From nightmare to one sweet dream - that’s how it’s done.
Look, don’t be afraid to renegotiate – think of it as another tool in your tool belt if Plan A doesn’t work out. But, use correct numbers as a basis for your renegotiation and always be honest and fair when you go in to renegotiate. It’s more likely to work out if you are.
What’s the Good Word?
Got a repair estimate nightmare to share? Here’s hoping it has a happy ending. Give us the goods below.
Be direct, respectful and fair when renegotiating.
Bail only when the deal doesn’t make financial sense anymore.
Keep an open mind when assessing repairs and be ready for more than you bargained for.
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.