Posted on: July 17, 2020
WI 473 | Property Valuation

 

One of the aspects of wholesaling many people often obsess about is valuations. This is especially true among newbies who are still trying to find their way around. It is crucial to remember, however, that while important, doing valuations is just a small part of the wholesaling process.

In this episode, our very own Cody Hofhine covered all the basics of doing valuations. Our hope is you’ll gain the clarity and confidence needed when it comes to valuations so you can negotiate with sellers with greater ease. If you’re new to wholesaling, this is one episode you can’t afford to miss!

Why Valuations May Be Killing Your Chance At Success In Wholesaling

Episode Transcription

I always am asked, “How do I know the value of a property? When I’m out there looking at deals, when I’m about to look at deals or I have talked to someone I think they are motivated but I don’t know the value of this property?” If this sounds like you, we are going to start breaking down how you can do a simple valuation so that you can get out there with a little bit more confidence. Hopefully, put a home under contract at a deep enough discount where you can make some money. That’s the goal. My name is Cody Hofheinz and I have been teaching thousands of students across this great nation how to simply step by step get their first real estate deal because once it turns from faith to the fact, it’s like, “It’s on, baby.”

At that point, they get out there with a lot more confidence and are able to do more deals. It’s like the snowball effect. It gets bigger, the compound effect. My hope is you can get something that gets you a little bit more clarity, confidence so that you can simply get out there and start doing deals because once you do the deals, it’s addicting. It’s going to roll over to more deals.

How do I know the value of a property and does it matter? Yes, to a little bit but I also want you to know that too many individuals want to spend too much time messing around with valuations. They are always looking for comps and have access, maybe to the MLS. They are like comping out, get on Zillow then on Redfin, and all these different prop streams and software, and start to lose focus on what’s important.

WI 473 | Property Valuation

Property Valuation: If you’re spending more than five minutes valuing a home, you’ve already put too much time into it. Valuation is important, but don’t lose focus on closing your deal.

 

Is valuation important? Yes. I don’t want to say no but I also want to say it hesitant as well. You can see my hesitation that I’m reserved from that because I don’t want you to spend too much time. I don’t want you to think about it too much. It should be something that is five minutes or less. That’s it. If you are spending more than five minutes valuating a home, you have already put too much time into it. What is it that you can do, so you get the down dirty like, “What is a price I can do? What is the price I can offer? How do I know where to begin my negotiation?” You never want to start high. You always want to anchor low and work your way up. How do you do that?

Here’s something that’s super simple, whether it’s Redfin, whether it’s Zillow, whether you do have access to the MLS. What you want to do wherever your home is, you want to expand it out. Maybe 0.25-mile and find homes that have sold for the last maybe 90 to 180 days. If there aren’t enough homes that have sold, then maybe you are going to have to go back twelve months.

What you are going to do is you are going to start looking at what’s sold, look at those properties and see if they are similar like, “It’s about the same style.” You want to look at the cash sales. You want to look at the three lowest sold in that area. If you have twenty homes and a bunch of them sold at $200,000, and you have a couple sold at $150,000 or $120,000.

You have to start low because you can always work your way up. But if you start high, you can never work your way down.

Whatever your lowest ones are, take the three lowest of the sold and I want you to add them up so that you get a big number. Divided by three, that’s your average. Get your three, get the average of the three lowest sold price properties, then get your average. Once you have that average, let’s say the average is $120,000. You get the three lowest. You add them up, divided by three. You’ve got your average and that number says $120,000. Do $120,000 times 0.8. What is that number? It is $96,000.

Now, why do I do the 0.8? If you can get your three lowest sold like the majority are sold at $200,000 but there’s these three lowest that the average was $120,000, then what I want you to do after you get that average is, times it by 80%. Take 80% of that value, times it by 0.8. That gets you to $96,000. That’s our ballpark starting point. Now you are probably thinking, “The homes are selling for $200,000. How am I going to get it for $96,000?” Again, you have to start low.

You can always work your way up but if you start high, you can never work your way down. Always remember that. The valuation, simply gets the 3 lowest sold in the last 6 months. If you have to go further out 9 or 12 months, that’s okay. Get the three lowest sold. Take the average and do 80% of that value and that starts to put you in the ballpark where you need to begin your negotiation. Don’t overthink it. Don’t go further than that. Don’t be like, “This one has linoleum and this one has hardwood. This one has this and this one has this. This one has granite and this one has Formica.” Don’t go that far, five minutes or less.

WI 473 | Property Valuation

Property Valuation: Focus on what is important. It’s not the home or the price. It’s the people. People do business with people they trust. So become someone that they love.

 

You should simply put a circle around the home that you have about a mile radius and start polling what are the three lowest sold? Times it by 0.8 or take 80% of that average and there’s your price point. I hope this has helped. I don’t want this to be drug on any longer than that but it should be short, simple, sweet so that you get out there and focus on what is important. It’s not the home. It’s not the price. It’s the people. People do business with people they trust. Become someone that they love, like, trust, respect. Be that person and you will realize that price will come down. That price, when you are talking to a motivated seller, they want to talk to someone that they love, like, respect, and trust.

Be that person and you will get those contracts. Don’t spend a lot of time on the valuation. Spend more time building rapport, connecting, loving, and serving. The byproduct is you will get contracts that allow you to buy homes at a deep discount. Now, get out there. Take massive imperfect action and start getting your next deal or your first deal. If you need help building your real estate business, head on over to WholesalingInc.com, where we would be glad to hop on the phone with you, see if it’s a fit, and get you into the tribe. Until next time. Get out there and take massive imperfect action and we will see you on the next episode.

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