Find & Assign in San Diego, CA

 OK, I have an investor list, and I've found LOTS of properties that I'm examining in my area.  (I'm planning on gaining control of properties with a purchase option contract and then assigning the contracts to one of my investors.  I have a few questions though.
 First:  Should I make sure that a seller is OK with signing a purchase option contract BEFORE I make an offer? Similarly, what happens if I have an offer accepted, but the seller won't sign a purchase option?
 Second:  I live in San Diego.  Real estate prices are very, very high.  That being said, please look at this...  I have a seller that's asking $445K for his property.  FMV is $485K.  Obviously that leaves a difference of $40K.  The house does not need any work at all, the guy just wants to sell it because he moved to San Francisco. This means that his asking price is 91.7% of the FMV.  My question is:  If the dollar amount is high ($40K) but the percentage discount relative to FMV is low (8.3% in this example), would it still be a candidate for a contract flip?
 It seems to me that the $40K is screaming out to be a profit, but the small percentage seems to say "stay away."
 In San Diego, there are COUNTLESS properties in situations like this, so I would like some advise as to whether or not scenerios like this are windfalls or pitfalls.
 This is my first post, so any replies will help me make my first deal.  Thanks alot guys!

it seems to me that with the steady rise of interest rates coupled with a nationwide softening of the real estate market that this deal could be quite risky. My first thoughts were that the owner of the property might be asking $445,000 because that is what it is really worth now and possibly even lower. This would also explain the fact you are finding so many properties in this situation as you mentioned. I have a feeling you will soon see even more of these “deals” as the market continues to slow. I would be very scared personally of being left “holding the bag” as it were and losing lots of money.

Anyway just my humble opinion. I think I would offer way under the asking.


 So, is it the experience of most of you wholesalers that investors concentrate more on the percentage rather than the dollars?  In my real life example above, it does seem odd to me that an investor would shell out $445K to make $40K (minus my assignment fee), but has anyone had success with a situation like this?
 It just seems to me that San Diego has a large market for properties that don't need rehabbing, but are still being offered for (slightly) less than FMV.  Slightly less than FMV on a $500K house represents a lot of dollars but only a few percentage points.  See what I mean?  Any input here would be greatly appriciated!

I live in San Diego and did pretty well over the last few years in investing around town. Myself like other investors have sold our properties and invested out of state for cash flow or the hopes of appreciation. It is too risky to invest in California unless you are able to purchase properties for 70 cents on the dollar minus repair costs. Sounds crazy but I have seen condo prices drop by 40K to 50K in the last six months. If interested I have a number of out of state cash flow deals that you can assign to investors or if you find a buyer I’m willing to pay a finders fee so it is less risk for you and still have the opportunity to make some money and learn.
Best regards,
Dan Gutowski

If there are countless situations with that type of spread, then that is NO DEAL.

Why should an investor take your assignment, when he can do down the street and get it cheaper.
If the FMV is $485K, $325K “might” be a deal to me. Now I can assign it to another investor and he will get a deal too.

You should be looking for sellers.

 Thanks for the input guys...  As a noob, it's hard not to get blinded by the dollar signs!
 Does anyone have any input as to the first part of my original question? (Should I make sure a seller is OK with signing a purchase option BEFORE I make the offer?)

Rule of thumb - when in doubt - disclose! disclose! disclose! I live in Los Angeles and this is a SUE HAPPY state so better to be safe than sorry.