HERE IS A GREAT ARTICLE FROM A GOOD FRIEND JERRY NORTON IN MICHIGAN! FINDING THIS TYPE OF OPPORTUNITY IN THE WORLD OF REAL ESTATE AND MAKING YOUR OWN “ECONOMY” IS WHAT TRUE ENTREPRENEURS ARE ABOUT!

I have found that Today’s market calls for extreme meassures. You must be willing to put in “WORK” if you want to succeed. Our Nation needs those willing to go the extra mile.

Fixing homes to resale is nothing new, BUT poses and HUGE gap in today’s market of individuals willing to put in the effort to get it done! Thanks Jerry, for leading a charge!

BY Jerry Norton: I would like to share a recent experience where I decided to wholesale a deal instead of fixing and flipping it.

A few weeks ago a new REO property came on the market for sale. I saw it first thing in the morning at 8:00 am. It was priced at $44,900. Since I knew that area fairly well, it immediately stuck out as being a potential deal.

I noticed a note on the comments section of the listing that stated, “cash offers only.” I found that odd so I called the listing agent and found out that the property had an old boiler system for heating but it was completely removed and therefore, the bank knew traditional financing would never pass. The listing agent also disclosed to me that originally the bank was going to list it for $74,900 but since only a “cash buyer” would be able to purchase it, the bank decided to price it significantly lower at $44,900. I interpreted this information to mean that the bank was motivated to sell this property.

Step 1 – Determine the ARV:
Next, I spent about 45 minutes analyzing the after repair value (ARV). That is to say, what the house would sell for if it were totally renovated. To do so, I researched everything that was for sale on the market, pending, or sold in the past 4-5 months within a one-mile radius. I determined that the ARV was $135,000.

Step 2 – Determine the Cost of Repairs:
Following that, I quickly ran out to the property and did my inspection. After about 15 minutes walking the property and crunching the numbers, I determined it needed $35k in repairs.

Step 3 – Run the Formula:
Once I determined the ARV and repair cost, I ran my “fix and flip formula” to determine the purchase price. The formula I used in this situation was: (ARV x 60%) – repairs = buy price

($135,000 x .60) – $35,000 = $46,000

Step 4 – Make an Offer:
So the property was listed for $44,900 and I could pay up to $46,000 clearly making this a property a great deal. At this point it was 10 am. I immediately called back the listing agent to make an offer. I explained that I am a licensed agent but more importantly a cash investor and would like to submit an offer on his listing.

Now this next part is very, very important. I told him that I would like him to submit my offer as my buyer’s agent so that he would gut both sides of the commission. Do you realize how motivating it is for a listing agent to get both commissions?

In other words, he will make double what he normally would make to sell this property. In return, I asked that he work extra hard to get my offer accepted (even though that is self explanatory).

My offer was for full list price of $44,900. Why did I offer full price? For 2 reasons:
1). It fit my fix and flip formula and
2). I knew it was priced right and didn’t want to risk a higher offer being submitted by another investor.

The listing agent said he would electronically submit my offer immediately and that we’d follow up on the paperwork later.

So within 2 hours of the property being on the market, I had an offer in. About 2 hours later the listing agent calls me back and explains to me that the bank is going to wait until 2 pm the following day before accepting any offers. This was disheartening to me because I knew that would give plenty of time for competition to get in on the deal. I can’t tell you how many times I’ve gotten great deals simply by being faster than the competition.

Well, by noon the following day there were 2 other cash offers submitted and the listing agent called to inform me (and the others) that the bank was requesting everyone to submit their “highest and best” offers. I decided to stay put at $44,900.

Fully anticipating one or more of the other investors to offer above list price, I waited. That evening the list agent called me to inform me that the bank accepted my offer! He went on to tell me that both the other offers were over list price and one was significantly higher but they didn’t get them re-submitted in time and the bank just went ahead and accepted mine!

Step 5 – Put Together a Wholesale Deal:
Now, having been in this situation before, I recognized that there are other investors (at least one) who were willing to pay more for this property than what I had it under contract for. Bells were going off loud and clear in my head. I waited until I had all the paperwork signed from the seller and the deal officially “locked up.”

Then I called back the listing agent and asked if I could have the contact info for the buyers’ agents for the other 2 investors that offered on the property. He gave me the info without hesitation (after all, he just made a double commission sale!).

Next, I called the agents and told them that I was the winner on the property and that I’d be willing to sell it to their buyer for $55,000. To make it worth their while I offered the buyer’s agents a $1,500 commission if they put the deal together.

Note: don’t try to go around the agent. That is their buyer and you will have much more success getting the agent working for you than trying to go around them.

Both agents agreed to discuss it with their buyers. The following morning, one agent called back and said their buyer accepted! I requested that the buyer’s agent get me a purchase agreement and a $2,000 earnest money deposit (EMD).

Note: always, always get an EMD. I’ve had buyers back out at the last second by not having an EMD. Also make sure there is no inspection clauses or any reason to back out.

Step 6 – Close and Collect Your Check
Two weeks later was the closing. I arranged for a double closing back to back. First was my closing with the bank with me as the buyer. Immediately after by closing was the closing from me as the seller to the investor. I even got the title company to just accept the cash from the 2nd closing to fund my closing and didn’t have to come with any money (Not all title companies will do this)! After paying some closing fees and the $1,500 commission to the buyer’s agent, I walked away with a net profit of $8,100.00! Not bad for not having to do any work to the property or even owning it!

Now the question is posed, would I have made more money if I kept the property, renovated it and sold it? The answer is yes but here is my motto;

“Better to take less profit now with no work than more profit later with a lot of work.”

That motto has served me well. The key for this to work to be well prepared to buy, fix and flip the property in case you are unable to put a wholesale deal together.

To learn more, visit, http://www.FixandFlipGuru.com. To see a list of fully renovated and rented investment properties for under $50k, visit: http://www.EquityServicesLLC.com,