Assigned a 1.72M off-market luxury contract for 52k after the seller charged me 18k for consent

What I want to understand is the buyer's side of it. They paid 70k over your contract price on a 1.72M house. That only makes sense if their all-in number still works with 70k of pure friction on top. Did you ever see their scope and exit, or did you just find out they were willing?

The 52k on a 1.738M contract is a 3 percent spread, and the capital you actually risked was the 25k hard deposit plus roughly 9,750 of hard costs. That ratio looks good. The assumption carrying the whole result is that a second qualified buyer existed at your contract price during the nine days after the seller's attorney raised the consent question. You say you had one in writing. That backup is the difference between a documented fee and a 25k loss with a specific performance problem attached, since a seller can have remedies against a buyer who fails to close and those remedies vary by state and by contract.

The structural point for luxury specifically. The thin buyer pool the guide describes applies to your assignee pool too. The number of operators who can close 1.7M in 45 days without a financing contingency in one suburb is small, often a handful. You met five and three passed on a pool shell. That is the constraint on repeating this, not the mailing volume.

On the 18k consent payment, that outcome depends on how your contract handled assignment and what the seller could actually withhold, which is a legal question for an attorney licensed in your state. The same goes for whether advertising a contract for resale triggers brokerage licensing where you are, since roughly the same activity is treated differently state to state, and some states also do not publish sale prices at all, which changes how you build the comp side of your filter.

One number to track next time: days from contract to first assignee walkthrough. Yours was nine days before the deposit went hard. Compressing that is where the risk lives.

Ask the end buyer's lender how they treat an assignment fee on the settlement statement before you assume it clears. Some hard money lenders on high-balance deals will fund to your assignee's contract price and some will underwrite to your original price and make up the difference in required cash. Get it in writing from the lender, because that question can reprice your fee two days before closing.

45k for a cracked pool shell and a roof on a 5,000 plus square foot house is light and you got lucky that they self-perform. A failed shell often means the plumbing under the deck is done too, and on a house that size a full tear-out and rebuild with new decking and equipment can run past that on its own before anybody looks at the roof.

Two years vacant. Who was insuring it, and did you check whether the policy was a vacancy policy or a regular homeowner's policy that had lapsed into being worthless? I manage a lot of empty units and vacant high-end houses fail in expensive ways, mostly water.

How does the 52k physically get to you? Is it a line on the closing statement that escrow wires, or does the buyer pay you separately? I keep reading about paper and this is the part I never see explained.

What does "goes hard" mean? I assume the deposit stops being refundable but I want to be sure I'm not missing something.

I posted about being in a second lien on a 2.15M flip in this room. Reading yours next to mine, we had opposite exposures. Mine was 225k at risk for twelve months with no control. Yours was 25k at risk for nine days with total control until the seller's attorney showed up. I'd rather have had yours.

@pike this is a service business whether you meant it that way or not. You sold sourcing to operators who don't want to mail 640 letters. The interesting question is whether the same five buyers pay you again next time, or whether one of them just copies your permit filter.

Did they tell you the scope number they were underwriting? On a house that era, 6,000 feet, dated primary bath and a wet bar, I'd expect 550k to 750k before anybody touches the pool, and the millwork alone is where those budgets go sideways. If their number was 400k they'll be posting in this room by month five.

So the actual cost of your first paid deal was 9,750 and four months of evenings. That's the number I've been trying to work out for myself, and it's a lot lower than the 60k I keep penciling for a first purchase.

One buyer at 70k over is a comp of one. Three of five passed and one wanted 45k of credits, which tells me the spread was thinner than the headline. If the seller had wanted 40k for consent instead of 18k, would you still have a deal or would you have handed it to the backup at zero?

640 letters for one contract, so about 0.16 percent. That's not a bad rate on that price point. Did the eleven callers mostly want to know how you got their name?

Why wouldn't this owner just list it with an agent and take 2.4M for the dated version? Somebody was going to pay more than 1.72M with a sign in the yard, surely. I've been sitting on this one for a while without asking anyone.

This is the first thing in this room that looked like it might fit somebody with no capital. Then I got to the part where he'd spent six months building relationships with five operators who can close 1.7M cash and I understood the actual barrier.

@girder is right about the millwork. And the 45k credit they asked for will look adorable by month five, because on these the scope grows every time a designer walks the house with the client's realtor. Pike, your job ended at the right moment. Theirs is just starting.

Did you consider raising the money to close it yourself and keeping the whole spread plus the flip profit? I ask because 1.72M plus 650k of work is a raise most people can't do on a first deal, and I'm trying to learn where that line actually sits.

Letting 25k go hard on day 10 was reckless and the backup buyer is the only reason it wasn't a disaster. I run thin margins and I'd have fought for day 21 or a 5k hard piece with the rest at day 21. You got a good result out of a term you should never have agreed to.

@flint I asked for day 21 and the seller's agent said no, and I believed her, because the seller's whole position was that he wanted certainty and no process. Day 10 hard was the price of the price. What I'd do differently is get the assignee walkthrough scheduled before I sign, so day 10 isn't nine days of hoping.

@quarry honest answer, at 40k of consent I hand it to the backup at my contract price and make nothing but keep my 25k. I'd worked that out on paper before the call. That's why I could sit through the conversation without panicking.

@sable I couldn't raise 1.7M and I knew it. I also couldn't underwrite a 650k luxury scope. The people who bought it can do both and that's what I sold them.

@compass answered below better than I could, and it comes down to this, he'd already turned down a listing conversation twice.

Can you say more about how you built the filter? I've been in analysis stage for a year and "no permits pulled in two decades" is the first search criterion I've read here that I could actually run tonight. Was it permit records by parcel, or did you have to pull each one?

The part that sits uneasily with me is the seller finding out on day 19 what was happening. He agreed to 1.72M and then discovered somebody was making 70k in the middle. You paid him 18k and he signed, so it ended fine. But I'd want the letter and the first conversation to say plainly what I do, and I'd want an attorney in my state to tell me what has to be disclosed and when.

Fee income doesn't compound. I've done a few deals and the ceiling I'm finding is exactly this, every dollar of my income starts from zero each January. 42k is real money and it buys you the next 640 letters. It doesn't build a balance sheet.

@wren's point has a licensing edge to it. In some states marketing a property you have under contract, as opposed to marketing your contractual interest in it, looks a lot like brokering without a license, and the line is drawn differently state to state. I'm going through licensing now and this was covered in a way that suggested the regulators care about how you advertise more than what you intend.

Thanks for the deposit explanation. So the 25k is basically the price of the option, and everything after day 10 is you owning that risk.

@pike fair on the backup, that changes it. I'd still have tried a 5k hard piece with the balance going hard at day 21 and let the seller's agent explain to him why 5k is enough certainty on a house nobody else was bidding on. She had less leverage than she let you believe.

@solder what's your actual number on the roof for a house that size, tile or shake? Because if it's 60k and they priced 0 because they self-perform, their labor isn't free, it's just invisible in their spreadsheet. I've watched that exact assumption eat a whole margin.

Ran it again. 52k gross, 9,750 in costs, four months of evenings. If that's 200 hours it's about 210 an hour, and the 25k was exposed for nine days. What I can't price is the six months of meeting operators before there was anything to sell.

Answering my own question after re-reading. The seller didn't want showings, didn't want repairs, didn't want a sign. A listing would have got him more money and required all three. He sold the process, not the house.

With a small team, the piece I'd systematize is the mailing and the call intake, because 640 letters and eleven calls is a job somebody else can do while you're the one walking houses and talking to operators. That's also how this stops being 42k a year and starts being a business.

I'm pulling permit records for my two target zip codes this week and building the same filter with a fifteen year ownership screen. If I'm still describing the filter in three months instead of mailing, somebody in this thread should tell me off.