Newbie wants to know if I have a good deal

Here is the details on the house:

2 BD 1 BA 776 sq ft. Not in the best of neighborhoods but rents a lot of Section 8. Could probably get $400/mo.

ARV: 42,000
approx repairs: 7,000
Contract Price: 5,500

Here’s the deal: The seller is the son of the original owners who bought the house in 1911. He just really needs cash asap to buy a car. So, although I know it’s a huge REI no-no, he wants $1,000 up front earnest deposit so that he can go and buy a car right away. He will accept the rest at closing. So here’s the thing, a realtor (who is not in a contract with him- just wanted to help) has already started the process of getting the abstract done. She assured me it would be done today, but gave me the title agents number to call to verify. The title company says that it is free and clear, but it will take until tomorrow to get it all done.

So, should I give him the $1,000 tomorrow after I hear back from the title company? Or should I run? The man is in a wheelchair and has three kids and really just wants to give his wife a car. He even gave me the key before we even signed the agreement! And he is willing to give me the title to the car as collateral to prove he can be trusted. The real estate agent is vouching for him and although she is not wanting a commission, I told her I would pay her referral fee.

Any suggestions or advice is greatly appreciated!


It sounds like your doing a cash purchase, it could be closed in 5 to 10 business days, hold your money, put $1000 earnest money into escrow and move to close quickly - Title insurance commitment is longest holdup, close as fast as you can and be sure of your numbers!

Then seller has his money in 5 to 12 days!


Under NO circumstances do you give him even a dollar… much less $1,000. You can do it like Gold River says, but the seller won’t take it. He needs cash now. And, this deal is no slam dunk. But, it’s a decent rental opportunity. Check the numbers:

ARV $42,000
Max % of ARV 55%

Repairs $7,000
Closing Costs (%) 3%
Holding Costs $156

Wholesale Profit $10,000
Max Offer $5,617

Rental Rate of Return:
End-Buyer Cost Basis $23,100
Max Rent $400
Projected Monthly Expenses $64
Cap Rate (Rate of Return) 17.45%

17.5% CAP and Return is pretty nice. That is how you want to market it to your buyers. De-emphasize the 2/1, 776. Emphasize the long-term investment opportunity.

Here is what you need to understand. This guy has no other options, really. So he shouldn’t be making demands. Tell him he’ll have his new car in less than 2 weeks. But, only if he abides by what you say.

Thank you so much for the advice Gold River. And thank you for the breakdown Maestro. I didn’t look at it that way. I guess that’s why I’m learning.

I ended up calling him this morning and telling him that giving him $1,000 upfront was just now how we do things and against everything we believe in but that the offer was still on the table.

Then the title company called me back and told me that it hasn’t even gone through probate yet and that it would take a while so it’s probably not the deal I wanted. I agreed and thanked her for giving me the heads-up. We made a good connection and we are now building a relationship to do future deals together. So although I didn’t get the deal, I gained a team member!

On to the next one!

Ha! I just read this thread dialogue - interesting! Guard your emotions with any deal - don’t marry the first one you meet! Keep a tactical head like Maestro suggests - the numbers don’t lie - unlike this scammer trying to pry $1000 from you! That’s why these forums are great - lean on experience. Lots of people genuinely wanting to help their brethren in the RE game! Peace.

Thanks vdestefa!

Appreciate all the great advice!