Wholesaling – Working with Houses https://workingwithhouses.com Selling Made Simple Sat, 28 Jan 2023 20:39:03 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 https://workingwithhouses.com/wp-content/uploads/2022/08/favicon-150x150.png Wholesaling – Working with Houses https://workingwithhouses.com 32 32 A Quick Tip for Wholesale Investors on Running Comparables for your Buyers https://workingwithhouses.com/a-quick-tip-for-wholesale-investors-on-running-comparables-for-your-buyers/ Sat, 28 Jan 2023 20:35:20 +0000 https://workingwithhouses.com/?p=2015 As a wholesaler, it is critical to put the best foot forward in the investing community when putting deals out.  Buyers, especially Buyers who understand wholesaling fully understand and can appreciate you should make a profit from your work.  However many wholesalers shoot their own credibility down when it comes to comparables by grossly overvaluing property.  It is one thing to be ‘a little high’ or ‘pushing the market a little bit’ but another altogether when you are way off. 

‘Way off’ varies per market so I will use Atlanta as an example.  Adjust accordingly for your market.

In Atlanta, if an ARV (after repaired value) for a property is off by up to 15-20k depending on the area, most Buyers aren’t going to bark too much.  Unless you are in a low end neighborhood, sub 50k in value, it’s not unusual to see a range of ARV’s vary by a few grand.  Up to 20k may be typical as you get to the higher priced homes, approximately 250k and up in Atlanta.

So here is the example of what typically happens

  • Deal comes in at 50k purchase price, 35k rehab, ARV of 135 – 62.9% LTV – very reasonable
  • Comps are run and there are five comparables.  All comparables are move in ready, finished homes with prices between 95-105k except one at 135k.
  • Wholesaler puts ARV at 135k yet all homes are similar. 

And here is where the break down happens…why did one house sell for 30k more than all the others?  The answer 99% of the time is there is something unique about that property that the others do not have.  Examples in our market are:

  • Additional acreage
  • A special view
  • Additional detached garages for toys
  • Wrap around driveways
  • Water view or waterfront with dock on a lake
  • Offstreet parking if in the city
  • An extra bedroom/bathroom combination
  • The quality of the street vs the others
  • High end custom finishes out of character with the neighborhood that someone was willing to pay for

If you remove the special factor(s) from this one high comp, the ARV drops in line with the other properties.

Therefore, if you run comparables and find a property that sticks out as a sold, investigate further why before assuming that is the new ARV.  This allows you to present your comps in a light that a Buyer can respect and appreciate and not add you to the list of wholesalers who send them ‘junk’ as I hear it called so often.

By presenting it in this light, the Buyer can decide if he wants to take on the extra risk to duplicate the high end comps and pull it off if the potential is there.  Or if the extra feature is not there, it shows your Buyer you are paying attention to detail at a level that can be respected whether it is a deal for them or not. 

Remember Buyers like to assume the worst case for ARV and not the best in most cases that way if we get the higher figure, it is icing on the cake.  No one likes to speculate on ARV and lose.

Lastly, if you are forwarding someone else’s deal to your Buyers list, verify the comps, verify the comps, VERIFY THE COMPS!  Don’t take them at face value.  I tell every wholesaler that asks me to send their deals out to my list this and if I don’t agree with their comps, I will tell them.  If they sell it anyway, then more power to them but putting a deal that doesn’t work for you out there is not something I think any wholesaler should do.

Be conservative and make a deal today!

]]>