Last week, between myself and my Protégé Partners, we had nine REO offers accepted. This is not only an amazing day; it’s also OVER A MILLION DOLLARS (IN EQUITY) IN ONE DAY!
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Now, don’t get me wrong, profits will probably be less, especially if the students who did these deals with me decide to wholesale flip all or most of these. But even if they wholesale them all, you’re still talking several hundred thousand to half a million in CASH profits at a minimum. Not bad for 1 day’s offers, huh?
I’ve personally had as many as 3 in one day before, but never anything like this. And if you’ve ever seen the offers we make (VERY LOW), you’d understand why we don’t normally get so many at once.
Here is the first interesting part – these are the exact same offers that the listing agents called “ridiculous, too low, I’m not even going to bother to show them, forget it, you have to offer more or they won’t even look at it, we already had two offers for more” etc.
The BIG LIE real estate agents are (knowingly or unknowingly) telling real estate investors is that they have to offer at or near the asking price on these REO deals. In reality, EVERY SINGLE ONE OF THESE OFFERS WAS WELL BELOW THE ASKING PRICE.
For example, one deal was listed at $188,000. We offered $80,000. The agent laughed and argued, even showed us the sales numbers showing how every deal this particular lender had sold was sold for its listed price or more!
2 hours later he called us back with a verbal acceptance at $90,000 or less than half what they were asking. We countered at $88,000 and they agreed. An hour after that we had a signed, accepted contract back via fax.
Here’s where the “Agents Lie With Numbers” comes in:
Later that SAME DAY I got another batch of REO’s from a different agent, and saw our deal- the same one that had gone under contract just an hour ago- listed, with the price reduced that very same day to $90,000.
So what’s the deal with that?
I asked the SECOND agent to pull the MLS stats on what deals were selling for relative to their asking price, thinking the first guy was lying all along.
Nope- there it was. According to the sales comps and listings, every single one of that lenders REO’s had sold at or near (sometimes above) it’s listing price.
So what’s the real deal? What’s the reason we’re seeing this?
The reason is very simple – the listing agents have been changing the last listing price to match the final offer accepted. So technically, the statistics agents show about “All our sales are at or above the listing price” is correct.
But in reality, the TRUTH is that every single one of our offers was WELL below the asking price AT THE TIME WE MADE THE OFFER!
In this case, as with many, LESS THAN 50% of the listed price- and it got ACCEPTED! I have actually talked to folks who paid full listing price or more, because they were told (and believed) that if they offered less, the lender’s Asset Manager wouldn’t even look at it.
See why I hate these kind of agents and their misleading double-speak?
And that same listing agent is probably right now telling some poor newbie that we paid more than list price for the deal, and showing him “the numbers” that prove it.
And think about this- I get asked a lot by students, “What percentage of the listing price should I offer for REO’s?” And of course, that’s not how it works.
What if you offered 60% of the first listing price? If you offered 60% of the listing price of $188,000 and “only” paid $112,800 – did you get a great price or did you overpay by $24,000?
If you try to take that kind of “just offer X% of the list price” formula and make offers, you’re playinf right into their game! They know that they can just jack up the prices and you’ll STILL pay too much!
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