Are You Missing These Wholesaling Red Flags?

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If you’re new to my channel my name is RJ Bates III. Myself and my partner Cassi DeHaas are the founders of Titanium Investments.

We are nationwide virtual wholesalers and on this channel we share EVERYTHING that we do inside our business. So if you’re looking to close more deals - at higher assignments - anywhere in the country… You’re in the right place.

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Over 10 years in the real estate investing business
Closed deals in all 50 states
​Owned rentals in 12 states
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​Closed on over 2,000 properties
​125 contracts in 50 days (all live on YouTube)
​Back to back Closers Olympics Champion
Trained thousands of wholesalers to close more deals

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Chapters

• 0:00 Unrealistic Pricing Introduction
• 0:28 Acquisition Red Flags
• 2:35 Strategies for Seller Price Education
• 4:58 Dealing with Buyer Price Manipulation
• 9:54 Building Relationships with Quality Buyers
• 10:12 Final Thoughts and Call to Action

Transcript

Speaker 1: 0:06

welcome back to wholesaling red flags, the unrealistic pricing edition. This is the series where I talk about all the things that you need to be aware of so your deals don't fall apart and they can make it to the closing table. So when we talk about unrealistic pricing, I want to talk about both on the acquisitions and the disposition side. So, starting on acquisitions, I talk about this during the four seller buckets. But one of the things that you want to be aware of when you're doing acquisitions is when you talk to a seller who wants a great price for their property but yet the motivation isn't quite there or it doesn't quite make sense as to why a seller would want to sell a property for as low as what they're saying. Now, there are several different reasons why we need to be aware of this. One of the things that has happened and I've seen it happen time and time again during acquisitions, live seller calls and trainings is where a seller will say something like yeah, I just want $20,000 for the house and $20,000 purchase price would be a fantastic wholesale price. Except what they're really saying is I want to walk away netting $20,000, but I owe $50,000 on the house, so the price actually is $70,000. That's one thing that can happen. The other thing that can happen during this is if the price is so amazing and there's no motivation, it could be that there's a judgment, there's a lien, there's something going on. Maybe there's a discrepancy over the ownership of the property right. We've had the adopted sibling right wanted to sell the property, but he didn't have the rights. He actually did not inherit the property. The actual blood siblings inherited the property. So there's things that can just come up. So I always suggest, if the price is too good to be true, you need to ask questions, uncover and get the layers of the motivation to truly understand where that price is coming from.

Speaker 1: 2:20

Now, the next unrealistic pricing that can come up during acquisitions is with the most common type of seller, the one where the price is incorrect. But they're highly motivated and as we start educating them, there's two different unrealistic pricings that can come up. One on the after repair value what could the property be worth? And two, how much work does the property need to achieve that after repair value what could the property be worth? And two, how much work does the property need to achieve that after repair value? Now, in this scenario, it is very common for a seller to believe that the after repair value is much higher than it actually is. The way that you can. That is just with facts. It's very easy to say, mr and Mrs Seller, if you look 0.15 miles down the road, a property sold for X amount. It was the same year built, same bed and bath count, same square footage as yours. In fact, a lot of times if you have a blueprint comp, it can be literally the exact same floor plan as their subject property, same floor plan as their subject property. So use the actual facts and talk about the comps that exist. This is one of the many reasons why you should be comping while you're on the phone with the seller.

Speaker 1: 3:34

Now, when we talk about the rehab, typically the sellers believe that you can get a lot more work done for less money. So use specific examples. Again, I like using flooring as an example. Cassie loves using things like insulation, because a lot of times homeowners won't even think about these items and they don't think about it from the perspective of we have to come in and do all of these different types of items of flooring and painting kitchens and bathrooms and light fixtures and the subtle little nuances of the house that's required for us to get maximum repair value right. They're just looking at it and saying, well, if you could do, if you spent $30,000, of course you could remodel this entire house. But we know because we talked to the end buyers and some of you are actually doing your own flips or have done your own flips and remodels. You know that the money doesn't go nearly as far as sellers believe. So combat that with facts.

Speaker 1: 4:36

Now, on the disposition side, when you go to assign the property and the buyer starts beating you up on your asking price, we always want to reverse engineer, the same way that we do with motivated sellers with our end buyers how are you coming up with that asking price or that offer price? Start with the after repair value. Now, a lot of times your end buyers are going to be super conservative on the after repair value. Now what you want to do is again base this off of facts and see where they're coming in. One thing you don't want to do is get into an argument with your end buyers. You want to have a more educational conversation where you are inquiring about what they are seeing and what you're not seeing inside of the facts that exist on your CMA or inside of your comping software. So, mr and Mrs Seller or Buyer, can you explain to me what you're seeing on the comps? That I am not seeing, am not seeing Now one of the things that I want you to understand about unrealistic pricing on the ARV unless it's ridiculous, where it's very clear.

Speaker 1: 5:48

You have sold comps just recently at, say, $250,000, and it's clear as day. Three, four properties have sold in the last 30 days at $250,000. It's the exact same property and they're saying the ARV is $200,000,. If they're just slightly more conservative and they're saying I'm going to assume it's $235,000 or $240,000, I would not argue too much about that. It's when it's a large discrepancy $25,000, $30,000, $50,000, it's pretty upon the price point because, honestly, flipping a house is difficult. They're taking on a ton of liability. So you want them to be conservative and you, as the wholesaler yourself, should be conservative.

Speaker 1: 6:31

Now, on the rehab side of things, a lot of times some buyers will try to manipulate the numbers to say that the property needs a lot more work than it actually needs. And so in that scenario, when they say, hey, the property needs $100,000 and you thought it was $60,000, ask them how they're coming up with that number and use that as kind of a marker in comparison to the other buyers. And what the buyers the end buyers that you really want to establish that long-term relationship with, are the ones that are kind of in the middle ground. You don't want the ones that are coming in super cheap on the rehab and you don't want the ones that are going full-blown overboard, right, because the ones that are going overboard or saying that needs too much, they're really just trying to manipulate the numbers to get as best of a deal as possible and, honestly, they're not trying to build a relationship with you as a wholesaler. The ones that don't put enough money into the property well, to be honest with you, I fear that they're not gonna be in the business long enough to make enough profit, so I don't know that I'm gonna have the opportunity to build a long-term relationship with them. But the ones that are right in the middle the median price point for rehab needs those are the best types of buyers, the ones that understand what we are trying to accomplish as a wholesaler, understand where the seller's perspective is coming from and then also what they can actually accomplish with a specific dollar amount inside the house. So for the ones that have that unrealistic pricing and it's too much.

Speaker 1: 8:11

Ask them about the specific items and how much they're charging. So, for example, say the house needs a new roof and maybe you didn't know it needed a new roof because we are buying the property sight unseen, virtually, from a seller and they said it was in good condition. And when a seller says good condition, we don't consider that needing a new roof. Now your buyer comes back, says the property needs a new roof. One ask why they believe it needs a new roof and then second how much is that new roof going to cost? Believe it needs a new roof and then second how much is that new roof going to cost?

Speaker 1: 8:49

Now, if it's a normal shingle roof 20-year, 30-year roof then in that scenario you should be able to look at the square footage and determine and you can do this with a simple Google search how much does a three-tab 20-year roof cost on a 1,200-square-foot house in this zip code, and it'll tell you it'll probably be somewhere in the range of $6,000 to $8,000, depending upon where you are in the country. But if they're coming to you and they're saying it's $20,000 in rehab, that's where you need to stand your ground and say why would you think it's going to cost that much? Again, don't allow that end buyer to manipulate the numbers on you to try to get a better deal. Our goal and our intention is obviously to assign the deal to this end buyer, but also to establish a long-term relationship. So we want to understand where they're coming with or coming from with their numbers, but we can't just accept anything and everything that they tell us, because then that would be cutting ourselves short of the profit that we earn on the acquisition side.

Speaker 1: 9:53

So when it comes to unrealistic pricing across the board, just like everything else in the wholesaling industry, the best way to overcome it is by asking questions and combating it with facts. The facts exist, especially with the software nowadays. Don't fall for it. Stand your ground Always. Do business with the people that are basically in the middle, the sellers that want to sell for a discount, but they have the motivation that exists. The buyers that will buy this property and understand a reasonable, slightly conservative ARV and that medium price point rehab those are your ideal buyers. All right, guys, that's our episode of Wholesale on Red Flags. Let me know what you thought about it in the comments. Show me some love. Like the video. We'll see you guys tomorrow.