“Come on. Be up front with me. How much are you gonna make off this deal?”
I get people asking me that from time to time. Sometimes I think to myself multiple 10’s of thousands, but I kinda hum and ha about a few thousand or so. How do you all respond to that question?
Dean
who are these people? sellers, buyers, or just people you know?
I just tell them I don’t like people to count my pennies, or I really don’t like to talk about it.
This is the people that I’m buying from. As things keep moving along, I keep explaining more and they keep asking more questions. Typically, what do I plan to do with the house. Since I already own my home, I’m obviously going to re-sell there’s. That typically leads to the question, “How much do you think you’ll make off of it?” So far, I have just kinda hum and ha’d about we won’t really know until all is said and done. I know in my mind that I will make several thousand, or else I wouldn’t be providing the service to begin with. I’m hesitant to say that because it may make people feel offended like they’re missing out on a big chunk of the pie.
Dean
I wouldn’t share your specific financial details with anyone. Who would need that info besides yourself, your wife and your accountant?
Dr
I’d say that you’re either a) supplying too much information about your business to the potential sellers, or b) you aren’t dealing with motivated sellers.
I have NEVER been asked that question by a seller. Granted, dealing with homeowners directly is not my speciality, but I’ve bought from several individuals over the years and not one has ever asked me how much I’ll be making on the property.
They know upfront that I am an investor, that I am attempting to buy a property that I can make a profit from and that I only buy a select few properties and if they and theirs meets the criteria, I might buy it. The only question from there that they ask is “how much can they get for it?”
Raj
“I won’t know until I get it sold. The market is very tough right now, and property is hard to sell and prices are low. But yeah, I sure hope to make a little bit to pay for my time. I might have to hold this for a long time before I can find a buyer”
Whatever you say be careful to not lead them to think you are going to make only a little bit of money. This may be construed as someone with more experience (investor) misleading someone with less experience (the poor homeowner who has to sell his property at a discount). This is why I include wording in my offers to the effect that I am buying the property with intent to make a profit. I recognize that I am hold to a higher standard because I am a realtor. However I believe any investor could find himself in a lot of trouble if a homeowner decides to sue him after the investor turns around and sells the property for a ton of money few weeks after the purchase. My gut (not experience) tells me that a judge would not be very sympatetic to the investor.
In short my recommendation is to disclose in writing that you are planning to make money with the transaction. And if the seller asks how much, you simply state that you don’t know the number because you haven’t gone through the process yet. You are going to add value to the property and then sell it for the most money the market will bear. And if it was so easy to estimate, more people would be making tons of money in real estate. I would leave it at that.
Hope this helps.
Just tell them “More than I should and less than I want.” Then laugh.
I always say “I will keep it as an investment property or sell it, I don’t know” I NEVER say “I’m going to put it back unto the market and flip it”.
:banghead Argh! The sellers cornered me. I was getting the last addendum to the REPC filled out and they asked me, “So how much did you get the payoff for?” umm, ummm, umm, um, sheepishly $103,000 - that’s about $70k or so less than what they owed. Argh! :banghead I gotta start being a total a-hole to the people I contact. :rolleyes I thought about saying that the mortgage companies don’t allow disclosure, but the payoff letters they’ve sent have directly been addressed to the homeowners.
Bleh. Think I figured something out. If that question comes up again, I’ll tell the next people, Its good that it came in that low! Anything higher and we wouldn’t have been able to complete the transaction and you would have been stuck with the auction all over again."
Anything better?
Well, that is one way… another would be not to give them the impression they can ask such questions to begin with. Look at how you presented your services to them, the words you used that made them want to know all this.
Hmm. Well, I was a helpful friend teetering awfully close to a buddy to the home owners. I pretty much laid down what I was going to do with the bank. I gave them update and status on when the lenders agreed. Being my first short-sale that is inches away from succeeding, I took the full disclosure path. It seems like I’m getting stuck in the over and above and beyond disclosure path.
Dean
Yea, so you made them feel comfortable to ask and you gave them too much information. You need to re-evaluate your presentation to them. You’re a company that will negotiate with the lender to see if you can lower the price to where you could buy it. You don’t know if they will or how much they will lower it. You will keep them updated, but it is lengthy process. If they ask for some money if the price reduced enough, explain to them bank will not allow it, in fact it is part of the conditions the bank will put on the transaction. Banks not willing to take less money to give it to you.
First, the “buddy path” isn’t necessarily a bad thing, but first and foremost, you’re a business, and you need to act like one.
Second, why would you NOT want them to know what the final payoff was, and how can they NOT know, as they are ultimately responsible both for the payoff and the difference in the original and the negotiated price.
You seem wholly hung up on the fact that someone MIGHT discover how much you CAN make off the deal. If you have fully disclosed upfront that you are an investor intent on a) helping them stop a foreclosure from showing on the credit, and b) intent on MAKING a profit doing it, how much you can make on the deal will NOT be important.
If you’re in a full disclosure state (ie real estate sales are public knowledge), a similar question is going to come up again when you sell. You will, at some point, get a buyer that says something to the effect “Yeah, you’re asking a $100K but you only paid $50K. Why should I pay you that?”
Now, you can hem and hah, you can “explain” how you’ve put in X and Y into the home, or you can take the simple and direct (and effective) approach which “What I paid for it isn’t the issue, only how much I am willing to sell it for, which is $100K, are you interested?”
It really is that simple.
Raj
Yea, true. All good points.
On top of it all, today in the closing with the title company, it clearly showed on the HUD-1 the final numbers. So, looks like it was gonna come up either sooner or later. Guess in the future I’ll just let the people know that there will be a profit, possibly a very large one - that’s how my business operates.
Dean
In that case I tell them that I take on deals like this not knowing how much money I’ll make, and that sometimes I lose money, sometimes I make money. Sometimes I make no money and break even.
I honestly don’t care how much I make off them because it was never “their” money to begin with so why feel bad about it.
Over leveredged people have already spent everything they can get out of the house. They have no right to ask for more.
My philosophy is that a seller’s equity belongs to whomever negotiates it. It’s just speculation to begin with anyways.
Stop caring.