Cion

Sounds good. Myself or Patrick will be able to assist.

Thanks

As you know in the short sale business there are a ton of different strategies on how to profit off of a deal whether it is a straight listing commission, buy rehab and resell, buy and wholesale, etc. I understand everything you are stating above.

Our strategy and philosophy is to make sure we profit off of every single property we work on all the while making sure we get the property sold for the sellers.

With that being said, your feedback is awesome and if you want to talk about this and strategize it would be a lot quicker then me typing this. Keep the comments coming and it is great to see that you are active doing this business and doing well!

Thanks for the great reply!

Following Matt’s post, how do you make a profit on the deal.

Brad

I’m kinda in the camp of Brad above, and am a bit confused…but would like to learn what I, too, am missing.

I understand your strategy however it could pose some risks…and please correct me if I’ve missed something.

#1. The first risk is Margin Compression. By listing at 10% over FMV and then decreasing by 5% every 3 weeks or so, it would take approx. 23 weeks to get the property to approx. 30% off FMV which is somewhere in the neighborhood (at max) of where an investor would want to buy.

For example, assume FMV = $100k. I list at 10% over or $110k and then decrease that amount by 5% every 3 weeks. In 23 weeks (approx. 6 months), I’d be $72k. Assuming FMV is still $100k I will have to resell it at a discount, say $90-$95k (remember, I’m competing with REOs and other short sales, so I need to price better). After all expenses, that doesn’t leave a whole lot for the investor. And, if FMV drops, I could be at breakeven or worse.

Now, if the listing is at $100k, I wouldn’t want to put in my A to B SS offer of $65k because if the BPO comes in at around $100k, its pretty game over for my SS offer. So, I need to wait for the listing price to come down to somewhere close to my offer. Would you agree with this approach?

#2. The second risk is listing “freshness.” Within that time period your listing will get stale…even if you cancel and relist…agents will remember your home as the one that sat there for 6 months and thereby think something is wrong with it. I’ll have to price it even more aggressively to get the B to C end buyer.

#3. The third risk is other offers In that time period you could get one or more other offers…some lowballs and some good, whether you’ve submitted your A to B SS offer or not. Assume you get a good offer (e.g., an offer equal to or higher than what you would pay the SS lender) on your A to B listing that the seller takes – and should. That pretty much blows your potential offer out of contention and thereby leaves you with, at best, a loss mit fee for all your work.

There may be some other risks that I am missing, but these are some initial thoughts. Above you mention that the end lender’s appraisers are looking at the listing history my SS property. While that may hold some weight, wouldn’t the current market value of similar/local comps hold a greater weight vs. where my listing started out?

Bob, I appreciate your work and want to learn more. I’ll look forward to your response.

Thanks, Matt

I hear what you are saying however, when we resell the property the appraiser for the end buyer will look at the listing history and make his actual valuation using that fact. This is happening more and more in our down economy which will greatly affect your resale value.

Thanks for the feedback and i love it!

As an investor I want to get the listing agent to list the propety at about 65% to 70% low comps. This represents the wholesale value of the property and will be just above our offer. The BPO will hopefully come in aroung the list price which will make the negotiations on the SS much smoother and faster.

This is totally opposite of your recommendation.

What am I missing?