Dallas-Fort Worth Real Estate Investor Club

Dealing with out of town realtor

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  • 30 Jul 2012 6:56 PM
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    Message # 1026198
    Michael Mixon
    I'm currently discussing 3 houses with a realtor, but all three are quite a bit out of my way.  My plan was to possibly flip one or more of these properties (or bird dog them) to one of you guys more in the Ft. Worth area.  My question is, how much can I depend on the realtor to give me a good idea of repair costs?  I'm feeling more confident about my comps, and think I can zero in on a possible ARV, but I'd still need to know the approximate cost of repairs before formally submitting an offer.

    Should I straight out ask the guy for more details on what needs to be fixed?  Or would that amount to a waste of both of our time?  Also, if I'm unable to make an educated evaluation, I was thinking about just throwing a number at the guy, maybe 45-50% of what I think ARV may be.  If the seller is willing to accept such an offer, what's the best way to proceed?  I was thinking about, if I can get a purchase price in that area, just giving one of you guys the info, since several of you are closer to that area than I.  Then let you evaluate the deal, and if you move forward, I'll just collect a bird dog fee.

    Any thoughts?

    Thanks, 
    Mike.
  • 30 Jul 2012 7:33 PM
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    Reply # 1026218 on 1026198
    Deleted user
    Most Realtors have no formal training in estimating accurate rehab costs.. If you're talking about wholesale/investor type Realtors like Networth / New Western, they probably have a more experience. Either way, you would be crazy if you don't do your own due diligence!!!
    Last modified: 30 Jul 2012 8:07 PM | Deleted user
  • 30 Jul 2012 8:05 PM
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    Reply # 1026237 on 1026198
    Michael Mixon
    Joe,

    Thank you for your response, I'll definitely keep that in mind about Net Worth and the like having experience in estimating costs.  And I completely agree about doing my own diligence.  But I believe (and I may be wrong) that this is a special case.

    Currently my mind is going in the direction that if I can get a good idea of ARV, even if it's sight unseen, if I make an informal offer of around 50% of ARV, and the seller doesn't send me hate mail, it would be safe to assume they are a motivated seller.

    Once I am pretty sure they are a motivated seller, even if the distance makes the transaction difficult for me to wholesale, bird dogging would still be a very viable option.  If a bird dogs main goal is strictly to find motivated sellers, and determine an approximate price that they'll accept, the cash buyer I sell the info to, will want to do all their own due diligence.  At that time they would make a formal offer that suits what they they think they can do and turn a profit.

    I know you, and most of the other members of the club are much more experienced than I am, so if any of my points are incorrect or mislead, I'd greatly appreciate any advice you guys and gals have.  But at least on these 3 properties (more like 2 of them) I believe this will be how I proceed.  Making a lowball offer then feeding the info to someone in the area who can analyze the deal for themselves.
  • 30 Jul 2012 8:27 PM
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    Reply # 1026245 on 1026198
    Deleted user
    Michael,

    I certainly don't have a ton of experience, so take this for what it's worth.

    Generally speaking, most investors aren't interested in paying you for bird dog leads on property that is currently listed for sale with a real estate brokerage. An investor generally wants to be able to negotiate directly with the seller, not a seller's agent. Also, generally speaking, if the property is listed on MLS there are already ton of people that know about the deal, so most of the time there will be lots of competition and as a result higher price paid for the property.

    Now that's not to say there aren't deals to be had on the MLS, but they are far and few between and come and go really fast. If you happen to get a property under contract that can be assigned and can be had for 60% X ARV - repairs, you will probably have yourself a wholesale deal that you can sell.

    I'm sure some of the resident gurus will chime in soon, so maybe they can add more..  Robin, Greg???
    Last modified: 30 Jul 2012 8:39 PM | Deleted user
  • 30 Jul 2012 10:56 PM
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    Reply # 1026382 on 1026198
    Deleted user
    Is the Realtor willing/able to videotape a walk-thru of the properties for you? 
    Or someone you know that lives in that area perhaps?
    ...Then they could send it to you to check out...? Just a thought.


    PS. Find some more properties, it may be worth making the trip!
  • 30 Jul 2012 11:12 PM
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    Reply # 1026393 on 1026198
    Deleted user
    Bird dogging and wholesaling are different. 
    Bird dogging is just finding abandoned houses, title/ownership search and a few pix. 
    And, you get paid a small finder's fee, if/when it closes. 
    Some investors pay bird dog fees anywhere from $5-$1,000.

    To wholesale a deal to an investor (your end buyer) there must be enough meat on the bone for interest.
    Part of the wholesaler's "fee" is to do as much research as possible. In order to do the numbers accurately. 
    And, you MUST have the property under contract in order to assign it to an end buyer. 
    If the numbers are there, typically, a wholesaler makes anywhere from $2500 to $5000, or even $10,000 dependent upon the deal and the spread. ~Hope this helps!

    PS. Check with Robin and Greg, they have a 3-3-3 formula for comping repairs...

    PPS. If there's a good enough spread...there's a deal!

    PPPS. Joe's right, best deals are found OFF the MLS ;D
  • 30 Jul 2012 11:16 PM
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    Reply # 1026395 on 1026198
    Deleted user
    Another thought: MAKE OFFERS, get it under contract! 
    There are multiple exit strategies to be decided upon and applied.
    Know your end buyers. Rehabbers? Fix and Hold? Fix and Flip?
  • 30 Jul 2012 11:21 PM
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    Reply # 1026397 on 1026198
    Deleted user
    Okay, one final thought: 
    Find a contractor in that area to do a walk-thru with the agent and have him give you a [free] estimation of repairs.
    Good luck! :D
  • 31 Jul 2012 6:43 AM
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    Reply # 1026684 on 1026198
    Deleted user
    A couple of quick thoughts on the thread:

    1. While it true most Realtors do not have as much formal education at estimating repair costs as say Blake Johnson (General Contractor) or a seasoned rehabber, there ARE ways you can get a WAG (wild-assed guess) if you are looking at a property online and have no other way of obtaining a repair estimate. Here's how - Take the ARV and subtract the Original List Price. The resultant number is usually within 10% of the actual repair costs to get the house to a MINIMUM condition to sell. Obviously, this is not a preferred nor a foolproof "R" value estimation methodology, but when you don't have any other options, it's kinda scary how accurate it can be 90% of the time.
    2. My experience (personally, as well as with my students) over the lsat decade when dealing with large, commercial wholesalers, is that you need to reduce the ARV by an average of 20-35% of what they tell you, and increase the repair costs by that amount. Again, this is a generalization, but like with the Realtors, it's surprising how often it's accurate.
    3. I strongly suggest if you are going to go through the trouble of obtaining accurate repair estimates, you pay a professional to generate them for you. TREC licensed inspectors will usually do a walk-thru and give you a called in verbal report (nothing written), for about 40-60% of their regular inspection fees. Seasoned rehabbers and investor-friendly GCs will usually do a walk-thru and give you a verbal report for about $100 - $200 per property. I have not found free GC repair estimates to be useful or accurate.
    If you have more questions, please feel free to contact me:

    -Greg

    Greg Wilson
    The REI Mentor
  • 31 Jul 2012 9:16 AM
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    Reply # 1026813 on 1026198
    Michael Mixon
    Thanks for all the great info everybody.  I do remember Robin mentioning the 3-3-3 at one of the meetings, but for some stupid reason, I didn't write down the details.  Is there a spreadsheet or anything we have on file that gives round about estimates for typical repairs?  I'd hate to estimate $5,000 for demo and rehab of a kitchen only to find out it's usually 15k.

    I know I heard someone going over stuff like that, maybe it was Blake 3 or 4 weeks ago, but I can't seem to find my notes on that.
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