Make the return call. This will vary depending on the deal and how the initial conversation went but you may want to call the owner back if you were close to your target price or another offer is warranted. The great thing about this business, a lot of sellers will follow-up with you because they were bluffing.
Know what the house is worth in excellent condition (which is called the ARV – After Repaired Value) before negotiating the price because you may turn down a good deal or agree to a bad deal if you don’t know what the house is worth in excellent condition. There are several free and paid services online to determine the ARV.
Negotiate. It’s real simple, you are buying low and selling low to your buyers/investors. When negotiating, I always try to make the seller give me the least amount they will accept by asking the magic question.
Get the House Under Contract. After you and the seller agree on a price, place the property under contract for at least 30 days and secure the contract with $10 in earnest money. There’s no law that the earnest money has to be more than $10 and most sellers will accept it to secure the contract with no problem.
Pull title. All properties should be checked for a clear title which means any liens, taxes, mortgages, judgments, etc. should be paid or cleared before you close. Normally, this is done with a title company or thru your closing attorney who uses a title company and it shouldn’t take more than a day or 2 to come back.
Find a buyer. You simply market your deal via craigslist.org, newspaper, BuyJunkers.com postcards, etc. The great thing about this biz, is you can only sell the property to one investor but 20 may call and you can build your buyers list from each deal that you market. Its a beautiful thing to have more buyers than deals that to sell to them. You would collect each buyers info when they call to contact them later about other deals.
Talk to buyers. Let your buyers know about the property, the price and how to access the property. Don’t worry, if they are interested after viewing the property they will call you like a crack head to beat anyone else to the deal.
Contract with the Buyer. Meet the buyer to sign your contract to purchase agreement. You will now become the seller and your investor is the buyer. Only give them 10 days to close on the deal. If the buyer is a player he wont need that much time.
ABC: Always Be Closing. Email or fax the closing details over to the title company or closing attorney to make sure they understand who gets paid what. In most cases, this will be you and the seller. Your funds will be in the form of an assignment fee.
Get checks. All 3 parties will show up for the closing and you will simply introduce the seller and your buyer because this will be the first time they meet in most cases. Introduce the buyer as my partner on this deal and they sit down to sign the necessary docs and from there, the attorney will pass out checks to you and the seller.
- You need more than $10. I need at least $500 in earnest money from the buyer to make sure they will close on the deal. Investors are accustomed to putting this amount and more down as earnest money.
- Sound professional and be polite when speaking with sellers. Always show concern for there need which is to sell their property. A lot of times the seller will go into great detail on why they want to sell the property which can be used as a negotiating tool for a lower price.
- Its a Numbers Game. You will speak to a lot of sellers and most of them wont meet your criteria when it comes to price. With the proper tools to evaluate properties you will know very soon in the conversation if its a DEAL or NO DEAL. When you have a live deal, act immediately.
- Try to make a decent margin. That will vary depending on your market.One good margin is $5000 on each deal but be prepared to take less sometimes just to build your buyers list of good buyers. Pigs get fed, Hogs get slaughtered.
Sources and Citations
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