Highest Bidder Home Sale, Start to Finish

[Lagron]

Okay, I was made aware of this great real estate opportunity for people all while not requiring a real estate license, thanks to @CashFlowDepot and his thread.

First, I don't have experience in this kind of thing. I have been to some tax lien sales but that's about it, and that I don't think that helps in this situation.

I am running something else daily, and as a result, will work on this, only after 5PM, M-F's and perhaps all day Saturdays and Sundays. This way, people can't use the "I work and don't have time excuse to try this out for themselves," plus I believe from start to finish, from finding the property and selling, it should take no more than 1 month and 1 week (The 1 week is to find the property, maybe its too much time but hey, it's my set limitation and I'm sticking to it, I'll evaluate/change it next time around.)

So, my to do list...

1. Find the property I will be doing a highest bidder sale for.

2. Contact the owner, and have an option contract signed.

3. Figure out a way to sufficiently market the property so as to ensure numerous bids, and hopefully bids that result in a good 20-40k profit for myself. (I will use a part of these funds for the next highest bidder sale, and keep it in a separate bank account so as to "save" it for a new business idea I have thought of (a way to scale this, that I may open a thread for on this forum for people to keep me motivated, when this works out well.)

4. Hold the 2 day, open house.

5. Elect the highest bidder and receive payment.

6. Post screenshot of profit generated.
-------------

I will write everything I do for this here on this thread, so that you can follow along (even copy me afterwards, if its successful, for yourself/even help me/advise me if you see it fit doing so.)

-------------

Without further ado...

Thanks again for reading! This should surely be fun.

 

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[Lagron]

First task, I need to figure out how to find these properties and choose the one to pursue.

I'll get back to you as to how/what I did to find it, and will share what I have found.

 

[CBilly]

Good luck! I look forward to you sharing your success story.

 

[Gale4rc]

I would suggest targeting FSBO's

If the properties already listed it's most likely under an exclusive contract with the agent.

& finding a property to sell that isn't listed is going to be very, very hard.

 

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[Guest24480]

Good luck, this is something I'd like to learn about for future reference, so I will follow along.

 

[tido]

I'm also considering doing this for a co-worker, his house has been listed for 6-7 months, he's considering firing the agent. I'm interest in learning how to do this without having a license so I'll follow along on your journey. Good luck!

 

[MoneyDoc]

Will be watching this thread closely! I am planning on doing this for my parents condo!

One thing I don't understand after reading several threads on this, maybe you can help me understand this.

You list the product for under %20-25 market value. Say I find a condo valued at $290,000 and the seller agrees to the highest bidder sale. What would the option consist of? I don't understand how I would make a profit?

 

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[Mike.B]

Will be watching this thread closely! I am planning on doing this for my parents condo!

One thing I don't understand after reading several threads on this, maybe you can help me understand this.

You list the product for under %20-25 market value. Say I find a condo valued at $290,000 and the seller agrees to the highest bidder sale. What would the option consist of? I don't understand how I would make a profit?

You as the "optionee" and the seller "optionor" sign an agreement with the option to purchase the property for a set amount. When the highest bidder sale is complete, you can "assign" your option agreement to the buyer for the difference.

Take your example: Seller agrees to sell the condo for $290,000 and gives you the option to purchase the property for that price. Now say you sell the property for $310,000 at the highest bidder sale, you would assign your option to the buyer for $20,000 and then the buyer would sign a purchase agreement for the remaining $290,000 with the seller.

Clear as mud I'm sure ...

I prefer an actual purchase agreement over an option agreement because there aren't as many moving parts, but to each their own. The down side of the purchase agreement vs the option agreement, is you can get stuck with obligation to purchase the property.

 

[MoneyDoc]

You as the "optionee" and the seller "optionor" sign an agreement with the option to purchase the property for a set amount. When the highest bidder sale is complete, you can "assign" your option agreement to the buyer for the difference.

Take your example: Seller agrees to sell the condo for $290,000 and gives you the option to purchase the property for that price. Now say you sell the property for $310,000 at the highest bidder sale, you would assign your option to the buyer for $20,000 and then the buyer would sign a purchase agreement for the remaining $290,000 with the seller.

Clear as mud I'm sure ...

I prefer an actual purchase agreement over an option agreement because there aren't as many moving parts, but to each their own. The down side of the purchase agreement vs the option agreement, is you can get stuck with obligation to purchase the property.

Oh I see. So say my sellers condo is on the marketplace for $290,000. Shouldn't the option be set at a price lower than that since if people aren't buying the place at $290,000 already, why would they pay more than that?

So Shouldn't the option be set at $280000 or even less? If so, why would the seller agree to that?

 

[Mike.B]

Oh I see. So say my sellers condo is on the marketplace for $290,000. Shouldn't the option be set at a price lower than that since if people aren't buying the place at $290,000 already, why would they pay more than that?

So Shouldn't the option be set at $280000 or even less? If so, why would the seller agree to that?

Yeah I'd say lower if the property hasn't moved for the listed price; I was just using the $290,000 as an example. If the seller has been sitting on the property for some time and they really want out, they'll often consider taking less if you can get it sold quickly.

Think about how much the seller is spending every month to keep the property, and convey that when you're negotiating the price. I think @CashFlowDepot touched on this in a recent post.

 

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[MoneyDoc]

Yeah I'd say lower if the property hasn't moved for the listed price; I was just using the $290,000 as an example. If the seller has been sitting on the property for some time and they really want out, they'll often consider taking less if you can get it sold quickly.

Think about how much the seller is spending every month to keep the property, and convey that when you're negotiating the price.

Ah, that makes perfect sense. My friend was arguing with his agent the other day because his house hasn't sold in 3 months... He was complaining how he was being setback every month because he couldn't afford the payments.

I'm going to reach out to him and let's see what happens.

You've been really helpful Mike! I owe you one.

Last question if you don't mind; is trust an issue sometimes? I'm 20 years old, if I call up the owners and tell them this and that, and they ask me if I have a license, I tell them no. Won't trust be the issue sometimes? How do you get around that?

 

[Mike.B]

Last question if you don't mind; is trust an issue sometimes? I'm 20 years old, if I call up the owners and tell them this and that, and they ask me if I have a license, I tell them no. Won't trust be the issue sometimes? How do you get around that?

Honestly trust has never been an issue, and I don't think it will be if you are as knowledgeable as you can be before you approach people. If you sound professional, motivated sellers usually don't have any issues.

I've never had anyone ask me if I have a real estate license either. I tell them from the beginning that I work with a group of real estate investors and that we are cash buyers. When they are desperate to move the property, and they hear the word CASH, they become less defensive and less skeptical.

 

[Mike.B]

Honestly trust has never been an issue, and I don't think it will be if you are as knowledgeable as you can be before you approach people. If you sound professional, motivated sellers usually don't have any issues.

I've never had anyone ask me if I have a real estate license either. I tell them from the beginning that I work with a group of real estate investors and that we are cash buyers. When they are desperate to move the property, and they hear the word CASH, they become less defensive and less skeptical.

I should note that the properties I deal with are lower in value, and sellers might have a different attitude when selling a 250k property vs a 60-90k property.

 

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[MoneyDoc]

I should note that the properties I deal with are lower in value, and sellers might have a different attitude when selling a 250k property vs a 60-90k property.

And do you create your own options? Or is there a site to download the forms?

 

[BrittanyP]

Sorry to jump in to ya'lls back and forth but I have a question that I haven't seen addressed yet.

I have been reading the info on options for about a week, and read @CashFlowDepot 's book the other night (yes, in one sitting!)

Ok so you find the property, you find an investor to buy, when they go to close they are going to see the difference in price, correct? I assume for a small amount they wouldn't care too much, they got a good deal, so what is forking over $1000 to the "middle man". BUT if the difference in what the seller gets vs what the investor pays is larger, 5,000 or 10,000+, can they get mad at you and refuse to close? I have a huge FEAR (yes, fear) of confrontation...and that is the one thing really holding me back....any insight?

 

[BrittanyP]

@MoneyDoc Jackie (@CashFlowDepot ) had the forms in her book. It's on amazon, she also posted it on a thread in here.

 

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[Mike.B]

And do you create your own options? Or is there a site to download the forms?

I couldn't find any online that were exactly what I was looking for, so I created my own in MS Word that I can just fill in and print or email.

I can't remember any specific sites, I just googled what I was looking for.

 

[Mike.B]

Sorry to jump in to ya'lls back and forth but I have a question that I haven't seen addressed yet.

I have been reading the info on options for about a week, and read @CashFlowDepot 's book the other night (yes, in one sitting!)

Ok so you find the property, you find an investor to buy, when they go to close they are going to see the difference in price, correct? I assume for a small amount they wouldn't care too much, they got a good deal, so what is forking over $1000 to the "middle man". BUT if the difference in what the seller gets vs what the investor pays is larger, 5,000 or 10,000+, can they get mad at you and refuse to close? I have a huge FEAR (yes, fear) of confrontation...and that is the one thing really holding me back....any insight?

In my experiences if the investor stands to make a lot more money on the deal than what he/she is paying you, then there shouldn't be any "confrontation". Still there are some that won't be happy no matter how little you make.

You'll know fairly quickly which investors actually want to work with you and don't mind paying for good deals. Just don't get greedy! They'll dump you in a heartbeat.

 

[BrittanyP]

In my experiences if the investor stands to make a lot more money on the deal than what he/she is paying you, then there shouldn't be any "confrontation". Still there are some that won't be happy no matter how little you make.
You'll know fairly quickly which investors actually want to work with you and don't mind paying for good deals. Just don't get greedy! They'll dump you in a heartbeat.

Thanks, And I figured by having a good "team" to work with everyone would be happy, however, I wasn't sure how that could/would play out. I assume in most cases both the seller and they buyer/investor would be happy with the transaction but I always worry about that moment when the seller would go..."selling price 63,000....well hell I thought it was selling for 50,000, I could have gotten $13,000 more!" or something and que the planet earth exploding.

I'm dramatic. I know. lol

 

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[CashFlowDepot]

You as the "optionee" and the seller "optionor" sign an agreement with the option to purchase the property for a set amount. When the highest bidder sale is complete, you can "assign" your option agreement to the buyer for the difference.

Take your example: Seller agrees to sell the condo for $290,000 and gives you the option to purchase the property for that price. Now say you sell the property for $310,000 at the highest bidder sale, you would assign your option to the buyer for $20,000 and then the buyer would sign a purchase agreement for the remaining $290,000 with the seller.

Clear as mud I'm sure ...

I prefer an actual purchase agreement over an option agreement because there aren't as many moving parts, but to each their own. The down side of the purchase agreement vs the option agreement, is you can get stuck with obligation to purchase the property.

 

[CashFlowDepot]

An option agreement is actually a purchase agreement - with all terms and conditions spelled out -- the thing that turns it in to an option is the contingency clause which would state that the property will only be purchased if there is a successful bidder at the HIghest Bidder Sale.

There are several ways to get paid

1. You make the difference between the option strike price

2. you and the seller agree to split the difference between what the option price is and what the property sells for. Could be 50/50 or 70/30 - what ever you and the seller agree to.

3. you get paid a flat fee to do the HIghest Bidder Sale

4. You assign your option contract to the buyer then either the buyer pays you for the assignement of contract or the seller pays you to release your option contract so they can go to contract directly with the buyer. Either way, you want this written agreement to go to the title/escrow office so they pay you out of the proceeds at closing.

 

[CashFlowDepot]

Honestly trust has never been an issue, and I don't think it will be if you are as knowledgeable as you can be before you approach people. If you sound professional, motivated sellers usually don't have any issues.

I've never had anyone ask me if I have a real estate license either. I tell them from the beginning that I work with a group of real estate investors and that we are cash buyers. When they are desperate to move the property, and they hear the word CASH, they become less defensive and less skeptical.

 

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[CashFlowDepot]

Only the old run down houses that need a lot of work will be sold to investors who pay cash.

If it is a nice house in good condition then you are more likely to attract owner/occupants.

 

[CashFlowDepot]

Hey all

just wanted to let you know that I will be busy doing a Panama Relocation Tour this week ( it is one of my other businesses) then I'm traveling in South America for a week. So I may be a little slow to respond to questions but I will try to get to them when I can. If you don't hear from me right away it does not mean I am ignoring you.

 

[Lagron]

CashFlowDepot, thanks on the help and information.

---
Update 8/8/2014: Have not been home to find homes I am interested in doing a highest bidder sale for. When I find one, I will post the pics/details etc and how I found it/what methods are available for finding them.

 

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[KLaw]

Sorry to jump in to ya'lls back and forth but I have a question that I haven't seen addressed yet.

I have been reading the info on options for about a week, and read @CashFlowDepot 's book the other night (yes, in one sitting!)

Ok so you find the property, you find an investor to buy, when they go to close they are going to see the difference in price, correct? I assume for a small amount they wouldn't care too much, they got a good deal, so what is forking over $1000 to the "middle man". BUT if the difference in what the seller gets vs what the investor pays is larger, 5,000 or 10,000+, can they get mad at you and refuse to close? I have a huge FEAR (yes, fear) of confrontation...and that is the one thing really holding me back....any insight?

@BrittanyP what is the name of @CashFlowDepot 's book? Thanks.

 

[MCLARENF1]

Okay, I was made aware of this great real estate opportunity for people all while not requiring a real estate license, thanks to @CashFlowDepot and his thread.

First, I don't have experience in this kind of thing. I have been to some tax lien sales but that's about it, and that I don't think that helps in this situation.

I am running something else daily, and as a result, will work on this, only after 5PM, M-F's and perhaps all day Saturdays and Sundays. This way, people can't use the "I work and don't have time excuse to try this out for themselves," plus I believe from start to finish, from finding the property and selling, it should take no more than 1 month and 1 week (The 1 week is to find the property, maybe its too much time but hey, it's my set limitation and I'm sticking to it, I'll evaluate/change it next time around.)

So, my to do list...

1. Find the property I will be doing a highest bidder sale for.

2. Contact the owner, and have an option contract signed.

3. Figure out a way to sufficiently market the property so as to ensure numerous bids, and hopefully bids that result in a good 20-40k profit for myself. (I will use a part of these funds for the next highest bidder sale, and keep it in a separate bank account so as to "save" it for a new business idea I have thought of (a way to scale this, that I may open a thread for on this forum for people to keep me motivated, when this works out well.)

4. Hold the 2 day, open house.

5. Elect the highest bidder and receive payment.

6. Post screenshot of profit generated.
-------------

I will write everything I do for this here on this thread, so that you can follow along (even copy me afterwards, if its successful, for yourself/even help me/advise me if you see it fit doing so.)

-------------

Without further ado...

Thanks again for reading! This should surely be fun.

Good luck man! Im going to attempt the same thing here in NY thanks to @CashFlowDepot. I have an appointment with a homeowner tomorrow to see if we can do a deal on her property.

 

[MoneyDoc]

Good luck man! Im going to attempt the same thing here in NY thanks to @CashFlowDepot. I have an appointment with a homeowner tomorrow to see if we can do a deal on her property.

Just a question, how did you find the seller and how did you make her interested?

 

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[MCLARENF1]

Just a question, how did you find the seller and how did you make her interested?

Its someone that I know through a friend, she knows I was a re broker years ago and has friends that I did business with in the past so she actually asked me to help her sell since her RE agent has been sitting on the listing for 6 months.
BTW, I let my license expire almost 2 yrs ago since I am involved in other ventures. In my opinion this method is a game changer and gets me interested in RE again. Im surprised at how many top RE people have NO idea about this!

 

[MoneyDoc]

Its someone that I know through a friend, she knows I was a re broker years ago and has friends that I did business with in the past so she actually asked me to help her sell since her RE agent has been sitting on the listing for 6 months.
BTW, I let my license expire almost 2 yrs ago since I am involved in other ventures. In my opinion this method is a game changer and gets me interested in RE again. Im surprised at how many top RE people have NO idea about this!

Yeah. My parents agent has no clue what it is... So much money to be made.. Btw, say she has her place listed for $300,000, how are you going to convince her to give you an option say at $285,000?