Okay. Here goes. I’m a new investor just starting out, so I 'm focusing on wholesaling unitl I can get some money and credit established. I was looking at this one property, though, and I decided I wanted it for myself to buy and hold. Well, unfortunately, unless I find someone to go in on it with me, my credit isn’t good enough to purchase it myself. It is listed with a realtor and my realtor showed it to me. I was thinking of making a double offer. One cash. One terms. How do I do that with a property that’s listed like that? I mean, how do the realtors get paid?? And can that even be done? :help
I dont want to high jack your thread but
Yeah I am actually a bit curious on how seller financing works as well… I know each case is purely situational however how long does a seller usually hold the note?
I’ve had sellers hold notes 12 months up to 20 years. Offer what ever you need them to make your deal work. One guy who held a note for 12 months, I originally offered him 30 yrs, 10 yr balloon and he said he wanted paid off in 1 year so I changed the terms to 12 months with no payments until the balloon in 12 months, it worked out fine.
Don’t make a ‘double offer’. You’ll look like you don’t know what you’re doing and therefore in the seller’s eyes are less likely to close the transaction, and they probably won’t accept your offer. I have used letters of intent before and said hey I’m thinking of making you an offer here are a few scenarios pick one and that’s worked.
Realtors get paid on commission only as a percentage of the sale. Generally, and I mean generally, speaking the seller pays a 6% commission to the participating agencies. Of that 3% goes to the selling firm and 3% goes to the listing firm. So on a $100,000 sale the seller would pay $6,000 to the 2 agencies who would then split that number. Of the 3% that each side gets the broker takes his/her cut and so the Realtor’s take is actually about 1.5% of the sale price. Some more established Realtors get higher than 1.5%, some get lower. Some commissions may be lower, some may be higher but 6% is the norm. Good luck.
Let’s see, Amberg. You have no cash or credit and you plan on making an offer. So that offer will be for the seller to finance 100%? Is that seller that one in a thousand who is that motivated? I seriously doubt it, if it’s listed on MLS. Nor would he lend to someone who doesn’t have stellar credit.
But for the sake of discussion, he was that 1/1000. With your offer, the realtor is going to want cash for the commission, that’s 6%, plus another 3% for closing. Even with the the seller carrying the entire note, he is not going to pony up that 3% cash to close on 100% financing to a person with poor credit. So even with a ridiculous offer, you would still have to come up with $9k on a $100k house.
Can you see where this is a newbie pipedream? Also you don’t want to be starting off with buy and hold. That comes after you have significant cash for down and reserves.