profit from distressed owner's ignorance

When you sell a house you’ve flipped, how much money (perhaps as a percentage of the sale price) would you say you make on average from the underestimation of the original owner about the true value of the house?

It sounds like you have a bad negative attitude.
As investors we evaluate the condition & repair costs with a profit margin and give the seller a fair cash offer.
Did you really want an answer or just an argument?
Maybe you can get some of your family members to argue with you.
I suggest getting an attitude adjustment and becoming more positive and able to see the good in life.

Nope, not looking for an argument or to bash anybody here. Is this something that folks could put a number to? I just started researching this industry as a possible career and, for example, learned about double close sales, which some wholesalers (I’ve heard) use to hide profit from the seller.

The title of this thread just reeks of a bad attitude! LOL

You can sheer a sheep over and over again. You can skin it only once.

b2001, you can say anything you want. It’s just the way you say it.

This is enormously important in RE negotiations.

I promise you that even motivated sellers are rarely that ignorant, especially about the value of their properties.

The deciding factor is their level of flexibility in their price and/or terms. Flexibility trumps everything, including plan old motivation. Lots of sellers are highly motivated …to get retail-plus, but not accept a discount, or terms. That’s just not enough flexibility to make that motivation profitable.

The answer to your question is ‘whatever you can negotiate is what your profits will be’ …while paying attention to your limits.

So, ask yourself, “What is the most I can pay for this property?” And just as importantly, “What is the least I can pay.” There should be a point below which you will not buy.

Again you can sheer the sheep over and over, but you can only skin them once.

Regarding the latter, if you skin the sheep, that sheep is likely to come back with a pack of wolves and sue your butt …especially if you’re a professional investor.

Thanks, javipa.

I promise you that even motivated sellers are rarely that ignorant, especially about the value of their properties.

But isn’t that ignorance often the basis for wholesaling? (Sometimes I know the motivation is the seller’s convenience.) So, is the wholesale markup a component of the number I’m looking for?

You’ve got several issues going on at the same time in your negotiations that you have to account for in arriving at a “fair” price. I put fair in quotes, because what’s “fair” to one person is “stealing them blind” to others. It’s mostly relative, and how you frame your offer.

I’m not sure what you mean by “is the wholesale markup a component of the number I’m looking for?”

Whatever you mark-up the wholesale price to, depends on the price you got yourself, and the demand for that property.

For example, if you negotiated a 30% discount, after repairs, on a given deal, there’s theoretically no room for your wholesaling fee.

What ever fee you take, has to come from a bigger discount on the price you negotiate. There’s a LOT more to be said here, but the bottom line is you have to know what the market will bear at a given time.

When I said, “is the wholesale markup a component of the number I’m looking for?”, I meant that it seems like the existence of the wholesale fee, except in cases where the wholesaler is unable to find a buyer for a while or the seller wants to sell ASAP, is proof that the seller doesn’t know what he’s doing, because he could just call around and find a buyer like the one the wholesaler would’ve sold to anyway.

The reason I asked is because I wanted to get some idea of how often making a profit in this industry relies on the seller being ignorant. If it were overwhelmingly this way I’d consider a different career.

I think you’ll find that sellers are mostly not ignorant, and mostly not flexible on price or terms.

As far as sellers selling their own properties, that happens all the time. Just go through craigslist and you can find fsbo’s all over the place that are asking for the moon for their dumps. That’s more the rule, than the exception.

The issue comes back to finding sellers who are flexible on either price or terms. It’s that simple. And to be flexible, is not to equate that with ignorance or stupidity.

This business is NOT about relying on finding ignorant sellers that write with crayons. You’ll go broke mining that niche.

Instead you look for sellers who need a solution yesterday. They happen all the time. More accurately, these suspects ripen over time, and you want to be the one who’s there to catch the fruit as it falls. That’s where direct mail works enormously well.

A code-violating seller might not pay much attention for several months, while getting your postcards in the mail, until the city/country begins foreclosing on their liens. All of the sudden they realize they can’t fix the house, pay the fines, and otherwise salvage the deal on their own, so they call you, and you make them an offer that makes investment sense, either to you, or another investor.

After you’ve started talking with sellers, and made some offers, your perception of the ignoramus, mouth-breathing, moron of a seller will morph into more the lying, conniving, cheating, and greedy knucklehead of a seller, who’s just waiting with baited breath to ‘reject’ your low-ball offers.

Meantime, you’ll get cured of that misconception pretty fast.

That is, if you don’t learn to sift and qualify the suspects you’re willing to make offers to in the first place.

And that brings us to a completely new discussion for a different thread. “How do I sift for motivated sellers?”


Thank you so much for taking the time to write out this thoughtful reply. I’m a little more confident about joining you all as a result.


Glad I could help. Go for it!