Here’s something most wholesalers experience at one point in their journey or another: they price a property too high. While seemingly harmless, in some cases, pricing a property too high can cost you the deal! However, rather than looking at it as a mistake, consider it a great learning opportunity for you.
In this episode, the brilliant Cody Hofhine shared what you can do when you price a property too high, the valuable data and insights you can learn from the experience, and how you can use the information you’ve gathered to work for you.
If you want to make 2020 the year when things change for the better for you, consider listening to this episode a must!
How To Save The Deal When Your Contract Price Is Too High
I’m super excited to be with you because we’re going to break down what happens inevitably to every single one of us. That’s what do we do and what we can learn when we put a home under contract at too high of a price. This can happen, especially when you’re at the beginning stages of wholesaling. Sometimes you go out there, think you know the price, put it under contract and then find out that, “No one wants to buy this home.” Nine times out of ten, it’s because you’ve put the home under contract at too high of a price. What can we learn from this? How do we learn from this? What are the processes? What steps should you do so that this doesn’t happen in the future?
Here’s something I want you to think of. If you were to go out there, put a home under contract, and it’s at too high of a price because your cash buyers have no interest. You’re not getting any feedback and cash buyers saying, “I want it.” Maybe some of them called you back and said, “I can’t buy this. There’s no deal here.” Here’s what I want you to do. Instead of getting frustrated, take this incredible teaching moment and learn something from it. A quote I heard that was brilliant says, “There’s no such thing as losing. You either win or you learn.” I want you to think about this. There’s no such thing as a loss. It’s not a loss that you put this home under contract at too high of a price.
You’re either going to win or learn. This is an incredible learning opportunity for you. When you put a home under contract at too high of a price, you should be learning some of your greatest lessons during that moment. The first thing is, let’s say you hear from your cash buyers or maybe you don’t hear from any cash buyers that the price is too high. This is a great opportunity to have your cash buyers start teaching you what a good price is and the price point this is the deal. Instead of giving up and canceling the contract, what I want you to do is call one by one. This is where work is going to take place and where it’s going to get tough because you’re going to have to take action and call.
Contract Price: Every zip code should have a circle around it. You are gaining knowledge every time a deal needs to be closed, needs to be assigned, is unable to be moved, or must be canceled.
Maybe there are 250 cash buyers on your list. What I need you to do is I want you to call each one of those cash buyers and only ask them a couple of questions. First, you want to ask them, “Did you see the property located at 123 Main Street where I have the contract to buy that property? Were you able to take a look at this?” They may say yes or no. If they say no, “I want to send this over so you can look at it.” Have them look at it. If they say yes, “Is it something you’re interested in?” Start having the dialogue. They’re going to say, “I don’t have an interest in that home.” Don’t stop there.
Most people are like, “Thank you.” They hang up and call the next cash buyer. No. Take a moment to learn. This would be the further question, “You’re not interested in this home. At what price point would this make sense to purchase?” I want you to think about that. “You’re not interested in the home at this price point. At what price point would this make sense?” Start to get numbers from your cash buyers. Maybe you have the home put under contract at $150,000 and marketed it to them at $160,000 so that you were going to make $10,000. Maybe you’re going to find out that someone’s like, “I can’t pay $160,000, but I could pay $155,000.” You’re still going to make $5,000.
Maybe you’re going to find out what you think is bad and they say, “I can’t pay nowhere near the $160,000. I have to be around $140,000.” In your mind, you’re thinking, “This is bad. That’s $10,000 less than what I put it under contract for.” It’s not bad unless you only think in that direction. This should be something that you’re calling every cash buyer and getting the same questions asked to every one of them to find out the highest price that one of your cash buyers would be willing to pay if they got their price. You’re asking them, “At what price point does this make sense?” They tell you their price.
There’s no such thing as winning or losing. You either win or learn something.
“If I was able to get you this home at this price, is this something that you would move forward?” You get them to commit, “If you could get it at that, I would buy it all day long.” “I’ll let you know about that.” What you’re going to do is you’re going to learn from every one of your cash buyers at what price point you need to be at. You’ve got it under contract at $150,000 and you have a cash buyer that’s willing to pay $145,000. Now you know when you go back to the seller at what price point you need to renegotiate the deal. You can’t perform at the $150,000. “I’m sorry, Mr. Seller or Mrs. Seller. I can’t buy this home at this price point. It’s not going to work. Is this the best you’re able to do?” They may say no or, “Yes, that’s the best I can do.” You might lose the contract.
They also might tell you, which has happened many times, “I still want to sell this and move forward. I can go down to $130,000.” I’m making this up. These are all hypothetical possibilities here. You have someone that says, “I can go down to $130,000, $140,000, or $135,000.” They tell you a number. You look at it and say, “I have a cash buyer that’s $145,000. In the worst-case scenario, I had 3 or 4 that are willing to pay $140,000.” You re-put this home under contract because you’ve learned from your cash buyers at what price point it is a deal and you’re able to still find out if there’s money to be made if you can get it lower than what someone is willing to pay.
Learn from your cash buyers. Don’t simply cancel the contract. Go to them and ask them what are they willing to pay, at what price point does it make sense and commit them. “If I was able to get it at that price point, would you move forward?” Those are the things you want to look at. Another thing I always do right out of the gates is at the beginning, you don’t know every area. “If it’s in this city, it should go for this price. If it’s in this city, ZIP code or county, the home should be this price.” What’s nice is every time that you’re putting a home under contract, whether it doesn’t go through or it does go through, you should remember all the data from that deal.
Contract Price: Let your cash buyers inform you what they can pay and the price point. Then you simply set the price lower than that so you can make some money.
You should look at it and say, “This is a rambler, two-story, split-entry,” or whatever the different styles. It’s a ranch-style house. It’s a 3-bedroom, 2-bathroom. What I would do is I would get a map and put it in your office. The biggest map of your county, I would put it in your office on the wall and hang it up. I would learn every time you put a home under contract and you’re able to move it, at what price point did you get it for, at what price point did you sell it to a cash buyer. “I put this under contract and it didn’t move because I thought it was going to move at $150,000, but I needed to be at $140,000.”
What you’re doing is you start to build this avatar for every ZIP code and city. On that huge map of your county, you can draw out zones, put circles around areas, and start to build out an avatar. “If I find a home in this area and it’s a two-story, then I’m going to put it under contract at this price point. If it’s a rambler or a ranch-style home, I’m going to have to put it under contract at this price point.” Every ZIP code or every area should have a circle around it because you’re gaining knowledge every time you either close on a deal or assign a deal, but you’re also gaining knowledge every time you can’t move a deal and you have to cancel the contract.
Going forward, what happens is next time you’re in that area, you don’t have to think, “What was the price point that I put it under contract and didn’t work last time? What was it again?” You go to that map. You look and say, “I’ve got a motivated seller. It’s in this area. The last time I was here, I found out that I need to put homes under contract at this price point.” You can simply get out there and do your best at getting it as low as possible because you already know the backend knowledge of your cash buyers on what they’re willing to pay in that area. If you will do this, you will indeed find out that none of these homes that you put under contract at a high price are ever a loss.
They’re always a great learning moment. Remember, there’s no such thing as losing or losses. You’re either going to win or learn. Take this moment to learn and it will be some of the greatest lessons you will ever receive in wholesaling. Let your cash buyers inform you what they’re able to pay and tell you what the price point is. You’ve got to go simply get it lower than that so you can make some money.
I hope you took notes and see within yourself the action you must take so that you can get out there and do your first or next deal. If you need help building your wholesaling business, head on over to WholesalingInc.com where you can book a strategy call with our team, begin to have the conversation and see if it is the right fit. If so, we may invite you to be part of this elite group to keep moving forward, accomplishing the goals you want to accomplish and making it the year where things change drastically for you for the better. Thank you for joining us on the show. Take care. We will see each one of you on our next episode.