Our office has, in any given week, about 9-15 properties that are submitted to us by wholesalers in MA, NH & Maine (And I’m thankful for each one!). Most of our business comes from wholesalers, and non-MLS listed properties with real estate agents who understand the power of a performing cash buyer.
Unfortunately, we see so many wholesale deals with an inflated ARV, or “after repaired value.” My friend and colleague Ann Bellamy recently wrote this dead-on article on why agents leave out lower priced homes in the CMA. She nailed it!
Many gurus and national speakers even teach the wholesalers to “get the 5 highest comps, and the 3 lowest contractor bids to put in your packet, to sell to the rehabber-buyer.” I know exactly what people were taught and by which guru when I see their wholesale packet… and I know immediately if their ARV is inflated or rehab is under when I see it, even BEFORE I verify any numbers.
Take some time to read Ann’s words below. I strongly encourage wholesalers to submit accurate–dare we say even conservative figures–as that’s exactly what the smart buyers on your list will do to verify your work.
I wonder why I buy more properties from my students than anyone else?? They know accurate figures are the best way to build relationship with their buyers. They don’t need to “sell” the deal, because their consistently accurate numbers speak for themselves.
If you’re looking to be trained to be effective in the local New England market, I’d love to see you at my next Wholesaler All-Day Intensive in May (NH) and one in the Fall (Maine). Ask us how you can get paid to attend the event…
I train you so I can pay you for your deals!!
Your friendly investor,
Enjoy Ann’s article, below:
When a real estate investor buys a distressed property with the intention of rehabbing and reselling to an end buyer, those investors are frequently not agents, but they often work with agents to purchase the property. They also get CMA’s from those agents to evaluate the end value of the property after rehab. The end value is the beginning point of evaluating the rehab budget and how much they can afford to pay for the property.
Their offers are not usually based on the list price, they are, and should be, based on the end price, working backwards toward the offer price. Starting from the end price, they will work backwards taking into account the cost of :
- Rehab budget w permits
- Contingency for unknowns
- Finance costs
- Two sets of closing costs
- Carrying costs including taxes, insurance, utilities, HOA dues, grass cutting, snow plowing, trash removal, etc
- Let’s not forget entrepreneur’s profit
If they call me for funding, the first thing I look at is end value, called the ARV, or after repaired value. Often the investor supplies me with the CMA provided by their real estate agent. This CMA is done for the purpose of estimating ARV. I look at sold comps in the immediate area of the property in question, in the same size range and hopefully the same style/age. In New England, there is frequently a huge variety of properties in the same area, so exact comps are admittedly difficult.
But time after time, I find that the agent totally ignored properties close to the subject property that are viable comps.