This post is the final installment of the three part series on how to prepare, handle and execute a direct mail marketing for motivated sellers in Houston, Texas. In part three we will break down the best way to run comps, following up after your initial phone call, visiting the property and getting the house under contract.

 

Once you hang up the phone from taking your motivated seller call, the real work begins. This period is known as the due diligence period. With the information you have, it’s your job to vet it and ensure this is a deal for you or your investors. Here’s what information you should have asked for from the prospect:

  1. How much they want for the property
  2. Confirm the address
  3. Confirm THEY own it and have sole right to sell it (otherwise, you need to get all parties involved)
  4. What kind of repairs are needed
  5. How soon they want to sell
  6. What is the ABSOLUTE lowest they will sell the property
  7. Do they have a mortgage?
  8. Are they open to special financing options (seller financing)?
  9. What are their pain points for the house (you will use this later)

 

Armed with that information, it’s time to get in front of your computer and first and foremost, run the comps.

 

Running Comps

 

In Texas, where we do most of our investing, it can be a challenge to run and get correct comps for a property. That is because Texas is a non-disclosure state.This simply means the sales price of property isn’t public information. There are always two sides to the argument and the Texas Association of Realtors has a great article about what you need to know when it comes to disclosures.

 

This means you can’t go to Zillow, Redfin or Trulia and pull 100% accurate comps. (hotlink all of those). But you can use them as a helpful resource. Here’s how I used to do it.

 

RedFin

 

My favorite way to run comps before I had access to the MLS was to use RedFin. Yes, there are other websites, but I found that RedFin provided the most accurate comps compared to the others. That includes Realtor.com.

To start, I would go to Redfin, create an account, put in the address and wait for the address to generate. From there, halfway down the page, there’s an area that will say, “Comparable Homes”. See below:

Use the map to scroll in and ensure you’re close to the subject house. If you cross any major streets or highways, you’re most likely in a new neighborhood, so exclude those from your comparisons.

Find a couple houses that have the same bedroom, bathroom, square footage and lot size. If you’re unable to find all of those, start with bedrooms, then bath, then square footage.

 

***Ninja Move Alert***

 

If you can only find say square footage, you can divide the square footage to the sales price. This will give you the price per square foot. Then you can take that square foot and understand that House A sold for X dollars per square foot.

Always look at the pictures if you see a house you find that looks similar and fits the comp mold of your subject house. If that house has been fixed up, you know it sold for high retail and you can use that as a good basis for what a comp might be in that neighborhood.

At the end of the page, they have another section called, “Nearby Sold Homes”.

Use this section, but be wary of the distance. Anything more than a mile won’t be an accurate comp, as the neighborhood most likely has changed and won’t be a good comparison property.

 

Other Resources

 

Propelio

Assuming you are not a Realtor, there’s a great resource called Propelio. This is a wonderful tool, giving you access to the MLS through a portal they have created.

Because they created a portal around the MLS, the comps are dead on accurate. They have a ton of other features, including a CRM system, some leads, MLS alerts and rental comps.

 

A Realtor

If you have a Realtor on your team, you can ask them to run comps for you. However, no matter how friendly you are with said Realtor, you are relying on someone else to do a job for you. What if they’re busy, out of town or didn’t get your message? Time it crucial when wholesaling properties. That motivated seller could be on the phone with someone else, getting closed while you’re trying to get an accurate assessment of the house value. This is my least favorite.

Another way is for the Realtor to give you access to their MLS portal. While I do not condone not support this, I have heard this happens.

 

Construction Costs

There is a lot of debate around how to properly estimate rehab costs. I have seen a totally demolished house and the wholesaler says, “Only $35,000 in rehab needed.”

Your job as a wholesaler in Houston is to provide your buyers with the most accurate budget possible. Without involving too many people up front, here is how I would estimate rehab costs.

  1. Read on the Subject

Bigger Pockets released a book by J Scott several years ago called The Book on Estimating Rehab Costs

     2. Ask the Experts

You should have a rolodex of construction crews you can call for an estimate. But first, you should learn it yourself. If you’re not a reader, call a contractor and ask if you can tag along and watch his guys work. Maybe even try to get a job in construction beforehand. This way you can understand what it takes to replace kitchen cabinets, place tile in a bathroom or bring up a sub-floor to ground level.

As a wholesaler, you need to be sharp and accurate. By leveraging other’s knowledge, you can make yourself more useful to the end buyer.

 

The Second Call  

 

Now that you’ve armed yourself with good comps and some estimated costs for rehab, it’s time to make that second call from your direct mail marketing campaign. This can be a difficult and scary call to make, because in my experience, most homeowners don’t have any idea how much their house is really worth. Great example here.

We recently had a lead call in and the owner knew the house needed a full remodel. SHe told ME it would cost around $45,000 to get the house to a full retail condition. She know the house would sell for $95,000 fully remodeled but wouldn’t sell for less than $80,000. And there was no budging her.

In this case, it’s best to walk away. If they really wanted to sell, they will call back.

In the second call, your goal is to explain what you’ve learned from your research and explain it to them without telling them they’re wrong with their current assessment. I like to use a set of questions and answer models that get them to respond with “yes” and “no”. For instance:

Me: “Based upon your assessment of needing a new kitchen and replacing all the floors, that will cost around X dollars. Does that make sense?”

Another example:

Me: “Do you want to make these repairs, get the house ready for showings, then pay a Realtor 6% to sell the house?”

“I can provide you with a walk away solution. This means you don’t have to do anything except sign the documents at closing. You have no hassle of dealing with contractors, Realtors, showings, etc. I can save you time and a giant headache.”

Your goal is to convince the owner you can provide the best, fastest and most reliable solution to their current situation. If you can do that, schedule the visit and get to the property.

 

The Night Before the Property Visit

 

Being prepared is your key factor to closing any deal. The night before the property visit, have the following ready:

1) Any objections you might get

2) Camera/phone ready for photos

3) Some wholesalers will bring a lockbox for the front door

In my opinion, this is the most important, but to have your contract pre-filled out and ready to sign!!! We use the standard TREC (Texas Real Estate Commission) and have all the regular information filled out, leading the sales price, etc. blank.  

 

The Property Visit

 

Get to the property early. There’s nothing wrong with sitting there for 10 minutes while you wait for the person. Being punctual shows you care, which shows you have professionalism. Have you ever seen a person show up late to a meeting with a fresh coffee in their hands? That’s frustrating and tacky. Be respectful of people’s time.

Getting proper photos of the property will be key when you’re working to sell the contract. Key areas to photo include the following:

HVAC
Kitchen
Bathrooms
Electrical Box
Anything good about the property
More importantly anything bad, items that stand out

 

Negotiation

 

Ever read The Art of Negotiation? This book is another great tool for wholesaler in Texas.

Part of your “night before” routine will be the magic number. This magic number is the most you can lock up the house for and still make an assignment fee. I’ve hear crazy high assignment fees and really low assignment fees. Each deal is different. As a wholesaler, everyone needs to win. You need to provide the owner with a fast home-selling solution, the end buyer needs enough meat on the bone to make money and you should be compensated for your time.

If you can get $20k on a wholesale fee, congrats! You found a great deal. Think you should get $20k on every deal? Not so much. Be realistic. There’s nothing wrong with making a couple grand. It’s better to make a little of something than nothing at all.

 

After the Contract is Signed

 

If everything so far has gone to plan, you’ve got a great situation for everyone. The owner’s problem is soon to be gone but now you’ve got to shop out this contract.

You will need to take the contract and get it to a title company that’s friendly with assigning contracts. Not sure what a title company does? Here’s a great article

After that, call your investors or blast out an email with the photos and numbers. If it’s a deal, it will sell. If you hear crickets, I would ask people you know in the business why or why not no one is calling you to buy. You might need to go back to the seller and re-negotiate for a lower price.

 

Helpful Hint  

 

There are always tons of little tips and tricks you pick up along the way, but one of my favorites is the option fee. In the simplest form, you give the owner a small sum of money to be under contract and have full right to cancel the contract before the option period expires. Might you lose a little bit of money? Yes, but it gives you an option.

Also note, the above might be a great option for you, but what about the seller? You told them you would get their house sold and now you’re copping out? That’s why wholesalers get a bad name. If you promised to close on the house, you should be holding up to your end of the bargain and closing no matter what.

Don’t have the money? Find it. There are hard money lenders galore nowadays who will loan you the money if the deal is right. Partner up with another investor. Take a hit on your assignment fee to ensure you’re fulfilling your end of the deal.

 

 

This concludes part three of our three part series, “How to Handle Calls From a Direct Mail Campaign”. In case you’re reading this out of order, part one can be read here and part two here.