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David Dodge and Michael Slane are back at it again in DPI to talk about the second pillar in wholesaling, which is Making Offers. David and Mike use PropStream, an online software, to estimate the value of a property. Use cashoffercontract to make contracts conveniently. Get 7 days for free in PropStream, link down below.
Things that will cover in this episode:
- Ways in Making Offers
- Device Used in Offers
SERVICES MENTIONED IN THIS EPISODE:
David: Welcome back, everybody. Today we are talking about–.
Mike: The three pillars again, Dave.
Mike: So we are diving into the second pillar, okay? So quick recap; three pillars of wholesaling, right? The first one is–.
Mike: You have to be marketing for new leads, new motivated sellers all the time. The second one, you have to be making offers to those people. The third pillar you have to follow up on those offers, follow up on those leads.
Mike: Otherwise you are just spending money– you are not making anything of it. Again, what is that quote? You love this– talking about sales. There are like 1% of sales or something, astronomically low percent of sales are made on the first contact.
David: Oh yeah.
Mike: Then it’s like– 10-15% are made on the second through the 6th contact. It’s like 90% of sales are made on the 7th to the 12th.
David: 7th to the 12th.
Mike: Exactly, you are talking about almost all of your freaking sales are made in that follow up.
David: In 7 to 12 touches.
Mike: Right. Don’t throw your money away. Today we are going to focus on the second pillar though, which is making offers, right? So, Dave, what is your opinion on making offers? Should you make offers over the phone?
Mike: Should you send written offers?
Mike: Should you e-mail offers?
Mike: Should you text offers?
Mike: Alright it sounds like we should make offers.
David: Make offers, so there is no right or wrong answer to making offers unless you are not making them, then you are not doing this right, okay? Real estate investing, wholesaling, rehabbing, landlording, all of these things are after you make an offer on a property. Doesn’t matter what kind of investor you want to be, or you aspire to be, or currently are. You can be better by making more offers. If you make offers, it gives you the opportunity to control the property, then you can make up your mind and have choices on what you want to do with that property. So when it comes to making offers, Mike. You mentioned verbally, of course. Always be throwing out verbal numbers, always be throwing out verbal spreads is what I suggest, because then it will give you wiggle room to come down, but they are going to see the high end of that spread.
Mike: Yeah this is important, so let’s get a little granular on this.
Mike: So when we are wholesaling, we are marketing for motivated sellers, and we get some leads coming in, and we are talking to people, right?
David: Uh huh.
Mike: So this is the beginning of that process. That is when, Dave, I think you like to use the spread– kind of almost– when people won’t give you an offer right away. They don’t have an asking price. “I don’t know, what will you give me for it?”
Mike: It’s really– the balls in your court.
David: Yeah because you don’t want to offer a hundred if they are willing to take forty, right?
Mike: So, sometimes we like to say, “I’ll give you a dollar for it.” You know what I mean?
David: I still do sometimes.
Mike: That is a fun way to play off that. The idea is to be knowledgeable, present that to them, and let them know, hey if this is a property, you pull it up look at your computer, you see the estimate is a $100’000 or going into PropStream, one of the tools we love to use. We can throw a link in there to them.
Mike: It gives you a value of the house. Well, we can basically look at that and just off the top of your head, cut it in half, then play with the numbers up and down. So it it’s a $100’000 that they are saying the property is worth, we would say, we could probably do 50-60’000. Would that number work for you? Are we in the right ball park? That’s the range approach.
David: Yeah absolutely. You could go with an even bigger range and say, I can pay you 40-70. I got to see this place, and I’m only going to pay you 70 grand if it just has been fully rehabbed. I’m not going to say that, but that’s the point. It’s rare I’m going to be able to do that, but it’s possible.
Mike: We are transparent though, I do say that. I will say, if I don’t have to do anything to this property, I can pay you that upper– like if this property is perfect and move in ready, we can do that. The problem is–.
David: It’s never that way.
Mike: It’s never happened, and everyone’s standards for their rentals and rehabs, they are just different. You are always going to go in and paint. If a tenant just moved out, but it doesn’t need anything. Well it’s probably going to need flooring and paint. Most of the landlords out there are still using carpet, people–.
David: It’s going to need some flooring, going to need paint, going to need blinds, going to need cleaning. It’s going to need a new occupancy inspection which is going to flag two things that are not even a problem that you are going to have to fix. So turning over a property, it is never $200 or free, no. It is always 800 to 2’000 to turn a property over. Always.
Mike: That’s when we are using the same paint colors in all of our units. Just going in and touching up for the most part, we don’t have to repaint. Getting off track though. It’s using that offer range to start, right? That is obviously not a real firm, or a real solid offer. You are making an offer, you are engaging with that person. You are not abstract anymore, you are actually saying, yeah I could pay you real dollars. I am here to buy this house, I will give you– I don’t know, somewhere between $40 and 70’000. That is real. You are saying, I will do that. As opposed to– I don’t know what I could pay for it. You know what I mean? Again, it just makes it more real for the person. I think that’s a great way to start.
So the next step– if that offer is in the ball park for them you are probably going to go out and look at the property, right, Dave?
Mike: Okay, so what happens next? What is the next step? You look at the property, determine repairs. We are going to do what? One, we are going to bring a contract with us so we can make an offer there on the spot.
Mike: So that is a written offer, we are going to hand it to them, we hope we get it signed that day. It doesn’t happen, like we just talked about. You get maybe like 1%– I mean 5% tops–.
David: 5-10% if you’re really good.
Mike: But you are not necessarily going to make all those sales on day one.
David: No, not at all. Don’t expect to.
Mike: So you bring contracts, we put a written contract in front of them. If we don’t bring a written contract, what do we do? I mean we get a hot lead, one of our assistants calls us, hey can you go check out this house? We are going to try and get their e-mail.
Mike: Because we want to what?
David: Send them a written offer.
David: That way there is something in writing that they have, they can sign it, send it back. It also creates a way for us to follow up with them if they are not answering calls, or responsing to text messages. We have an e-mail so now we can re-send the offer, or we can just respond or follow up on the email that was already sent, and just say, hey did you get a chance to look at the offer I sent you? If so, what are your thoughts? Keep it simple.
Mike: There’s another approach to it too, which is more in line with the virtual wholesaling, right? I said, oh we are going to go out and look at the property first. Well if it’s more in line with the virtual wholesaling, you are going to ask the seller a lot more details. You are going to say, how long ago was it painted? How long ago was the kitchen updated? You are going to try to virtually figure out the repair costs, have them calculate the repair costs for you. Then you send that contract. You get that email and you send them a contract. You get it under contract before you are able to physically inspect it. Then you send in your inspectors, partners or buyers, or whatever if you want to call them.
David: All of the above.
Mike: Then you can– if the repairs do not match what the seller told you, you are going to have to–.
David: Amend the contract, but now you have a reason to low the price. It is very rare that you would ever go up, right? Because they are going to tell you what’s wrong and you’re gonna know. So you are never going to do that. If you get there and it has all the things they mentioned plus it needs roof, windows and plumbing; that is 15’000 extra dollars that is not there, that you can essentially say, hey we can still do the deal, but I have to take this 15’000 worth of work off that you neglected to tell me about.
Mike: That you forgot about. No big deal, it happens.
David: No big deal. But either way, you have to have control of a property in order to do a wholesale deal. Offers are really where it’s at.
Mike: What I like to say, and I know we both kind of feel this way now. The contract is the beginning of our conversation about the purchase of that house. So don’t be afraid to send offers. Don’t be afraid to make offers. Don’t be afraid to give offers in writing. What we just discussed was a perfect example of getting a property under contract, then doing your due diligence, and discovering whether or not you are able to buy it. So as– a real estate investor, that’s what we do on every property, every time. That’s what home owners do every time. That’s what everyone does. There is always an inspection period. So Dave, we kind of skipped over this, the cash over contract, we were going to talk about that.
David: CashOfferContract.com. This is a way to send an offer in writing to a seller. Mike and I have been sending offers from our cell phones for five years now. A lot of people always rely on going and getting a contract somewhere, then printing it out, which we recommend you do, put it in your trunk, a hundred copies of it. So you have one in writing always with you, right? But, you can actually send offers to your sellers at CashOfferContract.com. So what it does– it is a very basic website, it is a web form. You fill out the seller’s information, you fill out the price and the address. You put your information on there including your name, phone, company and e-mail. Then what this does, you go ahead and click submit at the bottom. The whole process probably takes maybe two or three minutes to fill out the form. You have to put in the right information to fill out a contract. So you have to be a little diligent on what you’re doing when you’re filling the form out. But it takes about three minutes. It’s very short and sweet. What it’s going to do is generate a contract on the back end. Then it is going to send that contract to the seller from your email. You get CC’ed on the email. So you are going to get an email, and the seller is going to get and email. You will both get and email. It is going to have the contract terms on it filled out. So it is going to generate and send it, CashOfferContract.com.
Mike: This is cool guys.
David: Go check this out.
Mike: Neither one of us is being excited as we should be about this to share with you guys. This is something Dave mentioned. We have been doing this for years. Again, technology caught up, it is super easy for us to share with you guys now. So check it out. Again, you can fill out a contract in about two or three minutes.
David: And send it.
Mike: And send it to the seller.
David: To the seller.
Mike: This is live, this is not a beta, this is not a tester. You can literally fill out a contract and send it in about two minutes.
David: That is how about 80% of our contracts get closed, Mike. By sending contracts to the seller via CashOfferContract. So essentially we are using this tool in our own business.
Mike: Yeah, everyday.
David: Everyday. The cool thing about this though, Mike. You can use this from your cell phone. You don’t need a computer, it is essentially just CashOfferContract.com. You pull it up, you fill in the information. If you are at an appointment, and you are with a seller, this is the best time to say, let me send you an offer. You are going to say, what is your email? What’s the name of the house titled in? Is it your name or is it an entity? You put that in there, right? What’s your mailing address? Of course what you are willing to pay them if there is any additional terms you want to add in terms of like getting a roof inspection, or a sewer inspection, or whatever that might be. You fill in your name and company and phone number and email. That way whenever it sends the email, it now has a place to put it in the signature coming from you, at your company. If they call you back, here is your number. Not only does it generate the contract, but it creates an email that delivers the contract to them with all your information on it. It is very very helpful. You can do it from your cell phone. The whole process probably takes from anywhere from three to five minutes, to send an offer to hopefully be able to wholesale it to make twenty grand; three to five minutes.
Mike: I don’t know whether you want to share this or not. We were just recently talking to a new student. They were talking about their experiences in real estate. They have been doing this for two or three years?
David: Two. Well he has been researching for two.
Mike: That’s what I mean.
David: He hasn’t done anything yet.
Mike: Researching for two or three years, and there wasn’t a contract, there was no offer made. He never sent a contract. Like to me, that is a light bulb moment, or at least hopefully it was with the conversation with him. You have to send the offers, there is no way you’re gonna make a dollar if you don’t have a property under contract.
David: We are going to hop on a cold call or a cold text if that’s what he wants to do, both of those, and we are just going to start talking to people literally, just get on the phone with them, start making spread offers and just saying, hey I can pay anywhere from 40-60% of what we think this is worth without even seeing the repairs. Just to get in the field, just to get some appointments. We are basically looking for those people that are motivated, and that is what we are seeking for.
Making offers. This is the second pillar of wholesaling real estate. One could argue that this is the most important part. But, each of these three pillars is equally important. You have got to market to be able to make offers. You have to be able to get on the phone and call out, or spend money to put your message out so people call you. Essentially though at the end of the day, it is either you calling them, or they are calling you. That’s it. That’s marketing. Making offers, essentially says, hey I want to buy your property. The cool thing is that we use contracts, we should talk about some of the things in the contract that limit your risk, okay? But we use contracts to control properties, not necessarily try to buy them. We just say, hey me and my partner want to buy this property, let me get a contract that gives me a three week inspection period. We will close a week or two after that. During that inspection period, I go and find that cash buyer, that partner. Someone that basically wants to pay me just to get out the way, right? So when we use a contract we are using it to control the property. It is a control to purchase, but not necessarily us that is going to be the one purchasing. Especially if we assign it.
Mike: That’s exactly– that’s going to get into your closing method if you’re going to double close or assign the contract. Quick simply, an assignment– once you get the property under contract with the seller, you are going to assign it to your end buyer. You basically are stepping out of the contract, and the buyer steps into the contract. It is an assignment of the contract. Whereas a double close, you physically close on the property, you are actually taking title. You became a part of the chain of title, so you are buying the property and selling the property on the same day. It is flipping the property not just the paperwork.
Mike: There is a very important distinguishing factor there. But, it’s a detail, and you don’t need to worry about it to get started.
David: No, not at all.
Mike: So yeah– what else do you want to talk about on contract, because I don’t want to dive too deep into the weeds, I just really want to emphasize the importance of making offers on this.
David: Yeah you got to.
Mike: We can go into contracts, how– what do you want to do, Dave?
David: I was just thinking maybe a short blurb on– why contracts limit risks. Here’s the thing about wholesaling; we are flipping properties with little to no money, and we are doing it by using control, right? This isn’t landlording, this isn’t fix and flip, this is the three pillars of wholesaling. To understand that, a lot of people are getting into wholesaling and they don’t have a lot of money anyway, otherwise they would just be buying fix and flips, you know what I’m saying? They would be doing this. So the cool thing about contracts is that they give us control. We use contracts that are very cited to the buyer, to reduce as much risk as possible. So when Mike and I go into a deal and we give somebody a contract, 95% of the time the earnest money is $100, and in the event that Mike and I don’t close, and this is the same contract we use at CashOfferContract.com, that we use, that we say, go use ours, it is there ready to go, or it’s going to generate it for you. What it basically says is, if we don’t close for any reason, the buyer has no recourse against us, and all the damages which is loss of time, are going to be fulfilled by us surendering our earnest money. Again, this is 95% of the time, $100. That’s it. Basically what that means is that we take our contract, and our earnest money to the title company once it is signed by both companies, we take our hundred dollars as a check, we take our contract, we deposit into an escrow company aka, title company. By depositing into an escrow account, that is defined as opening escrow, okay? In the event that we don’t close, all damages of the due consideration, which would be the earnest money, are surrendered. So that is it. They can’t come after you, or sue you, or anything else by have our CYA close in there.
Mike: Part of the thing that Dave is expressing is that by accepting that earnest money, they have agreed to the terms of the contract. When they accept that earnest money, they are accepting that further. That was the damages. So if they were to go further and bring civil action against you, they have already accept that as the damages. They agree–.
David: Too late to come back later and try and get more, right.
Mike: They can’t, so again, that is part of the reason why it is important to surrender that earnest money too. I think it’s important–. A lot of people are gonna say–.
David: We are talking a hundred bucks.
Mike: You can put ten on it. Most sellers don’t even know, yeah.
David: There has been a lot of cases where we just do ten dollars.
Mike: Often times we will ask for more and we will say, okay. If you know you’re gonna close, if you know it’s a great deal, you’re gonna do it, who cares?
David: Let’s talk real quick real briefly, Mike, about some of the other CYA clauses, I don’t want to go too long. These are some CYA clauses to not only protect you legally, which is the first and major one, right? That’s the thing. I want to make sure we are reducing your risk as much as possible. I essentially reduce my risk to $100. I can put a number on it. That’s the most I’m willing to gamble with to be able to do this deal, right? Other CYA’s, based upon our contingent on partner’s approval. That is probably one of the most widespread ones. Your partner can be anybody, you’re not labeling. It’s not saying it’s contingent on Mike Slane’s approval. It’s saying that it’s contingent on my partner, that could be Mike, it could be a hundred million other people, which is beautiful. Other than that I would say– contingent or– not contingent but– subject to taxes title and value, because taxes are going to be easy to find, you are going to want to know that to close. Title, same thing, is it clean? Is it not? Why? How do we fix it? Value, that is all just based on your opinion. So if you don’t like the value of this property after you send the contract for any reason, you can either go renegotiated it to where you want to be, or you can walk away.
Mike: Right, and I think stated a little bit more specifically to its subject to buyer’s opinion of taxes title and value. Then it truly is your opinion of it, not necessarily an appraiser’s or– whatever.
Mike: Again, there is very subtle language which is important. That’s again why you can go to the CashOfferContract.com– use that one.
David: Right, a few more, subject to, final walkthrough before closing. If something doesn’t go your way then you just don’t go to your final walkthrough, right? Boom, you’re done. Subject to a sewer scope, or a roof inspection, right? So all the inspection items you can add in there if you want, or you can just be broad and say I want an inspection period of X number of days which is in our contract, check it out. It will generate it for you and send it over. So that’s it, guys. That is the second pillar of wholesaling real estate. This is a marketing business. You are marketing for the opportunity to make the offer. So if you get to the point where you have spoken to a seller, and they have an interest in selling, make them a verbal offer. Get in front of them, make them a written offer. If you have it with you, if not, pull out your cell phone. Pull up CashOfferContract.com, get their information. In three minutes or less you can send– you can generate an offer on the web. Send it to both them and yourself. Offers, offers, offers. Make them.
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