Lost 22k on my first luxury contract because I found the seller before I found the buyer

The line that stopped me was the deposit being released to the seller. Was that written in, or did the escrow agent just do it? On the two contracts I have signed, both small, the money stayed with the title company until closing or until a written release from both sides. If your contract let it go straight to the seller after the inspection window, that is the single most expensive sentence in the document and I would want to know whether an attorney read it before you signed.

The comp problem is the one I recognize. I buy land and hold it, and the moment a parcel is unusual the comparables stop being comparables. Four sales on a 6,400 square foot estate is not a valuation, it is a range with a story attached. You needed the range wide and the price low enough that being wrong by 400k still left you room.

Every unit I own has taught me something and this taught me for free, so thanks. My version at a much smaller scale: I had a fourplex where I assumed three buyers and got one, and the one knew he was the one. Thin buyer pools price themselves. Your guy telling you to call him at 1.7 was not being rude, he was telling you what the pool clears at.

I am new enough that I need to ask, what is the inspection window doing here exactly? Is that just the period where you can walk and keep the earnest money, and after that the money belongs to the seller no matter what? And how does someone build a list of 40 buyers who can pay two million cash in the first place, I would not know where to start.

@wren yes, roughly, though the specific terms differ by contract and by state so read yours.

I manage a handful of high-end rentals and the renovation numbers your buyers gave you are not padding. A pool shell replacement alone ran one of my owners north of 90k, and that was before the deck. When your buyers doubled your rehab number, they were closer than you were.

Worth asking what your four buyers were going to fund with. Bridge and hard money on a distressed two million dollar house is a much shorter list of lenders than on a 300k flip, and the terms move around a lot, so anyone quoting you a rate should put it in writing. If even one of them needed financing to close, your 30 day window was never realistic.

Two acres with a pool and a roof at end of life makes me wonder about septic and well, if it was on either. On the estate lots I look at, the county permit history is usually the cheapest read available and it tells you what was done without pulling a permit. Did you pull it before you went hard?

900 pieces of mail is a test, not a campaign. Five years running a service business taught me that response rates at low volume are noise. You got one seller out of 900 and treated it as proof the funnel worked.

What were the four comps? Same submarket, same lot size, closed within a year? I ask because in the market I research half the high-end sales never show a price publicly at all, and about a dozen states are non-disclosure, so people end up building a value off list prices and assessor guesses.

The wholesaling part is not what scared me, and I say that as someone still deciding where I fit. The 15k going hard on an opinion did.

I've been researching for six months without closing a deal, and threads like this are part of why. I had luxury on my list of things to try first because the fee looked like it solved the whole problem in one go. What you have described is a deal where the fee was the only easy part.

I tried this last year at a smaller size, 1.3M contract on a lake house, and got out with only my inspection cost because I refused to let the deposit go hard without a signed assignment ready. The fee number is genuinely dazzling. 100k plus on one transaction makes you generous with your assumptions in a way you never are on a 240k house.

Adding it up: 4,100 mail, 15,000 deposit, 2,800 inspections, so 21,900. I am still working out what my first deal costs and this is a useful ceiling on what a mistake looks like. Did you have any other costs, attorney review, mileage, anything you left out?

I think the buyer pool is getting blamed for a pricing failure. You bought at 2.05 against a retail guess of 2.9 to 3.1 with a rehab you had at maybe 375k. That is not a wholesale price, that is a light discount. At 1.7 with 750k of work a buyer is all in at 2.45 on a 3.0 house and your phone rings. The pool was thin, and it was also never going to matter at 2.35.

@windlass is close but the rehab number is where it actually died. Ask me about scope creep and I will tell you about a 4,800 square foot house where the finish level the market expected added 190k over what I had budgeted, because you cannot put builder-grade cabinets in a house someone is paying three million for. Once you accept 600 to 850 as the real range, 2.05 was underwater the day you signed.

Small portfolio here, and what I have learned is that a single deal big enough to matter is a different animal from ten deals that each matter a little. One bad assumption and there is nothing else in the quarter to absorb it.

I have a 1.2M under contract right now and this thread made me go reread my extension language. Mine gives me two 15 day extensions at 5k each, credited to purchase price, and the deposit stays in escrow the whole time. Cost me a bit of price to get that. Reading your day 26 extension request, I would pay it again.

@windlass I do not think you can separate them the way you want to. At 1.7 the heir probably says no and there is no deal at all, which is a better outcome than this one but it is still not a paycheck. The whole strategy only works when a seller will take a number your buyer pool can live with, and that is rare, which is exactly why so few people do this.

When you assign a contract does the seller have to agree to it? I assumed you just sold your position and the seller found out at closing.

@wren on list building, I am 200 names in on the ordinary side and the method that works is unglamorous. Pull deed records for cash purchases above your price band, find who is behind the LLCs, call them. At the luxury end the same method gives you a much shorter list, which is the whole problem @sable ran into.

Thin margins and fast deals is my whole game and I will take ten buyers on a 250k house over four on a two million dollar one every time. When I have ten, one of them competing sets the price. When you have four and they all agree with each other, they are the market.

Just started and I did not know a deposit could be released to a seller before closing. Filing that away.

I have been going back and forth on which strategy fits me and this thread settled one thing. Anything where the buyer pool is under a dozen people is a relationship business first, and I do not have those relationships yet. Sourcing the seller was apparently the easy half for you, @sable, which is backwards from what the courses sell.

Asking the thing I would have been embarrassed to ask in a room: once you were stuck at 2.05 and no investor wanted it, why not just list it retail with a good agent and try to sell your contract position that way, or close on it yourself and resell? Was the problem that you had no way to fund the purchase, or that 2.05 was above what retail would pay for it as-is?

@ledger the 90 day inspection window with a 1,000 deposit is the part I want to test. Does a motivated seller actually sign that on a two million dollar house, or does the first agent who looks at it tell them no?

Curious about the service angle. Could you have gone to the buyer who said 1.7 and worked for him instead, finding and vetting estates for a flat fee? Feels like the four people who walked that house were the actual asset you built and you only tried to sell them one thing. Worth checking whether that arrangement triggers licensing where you are, since that varies by state.

One thing I keep getting stuck on. If the assignment fee is 60k or 100k, does the seller see it on the closing documents? I would think a seller who saw a number that size would feel differently about the price they agreed to, and I do not understand how that conversation usually goes.

Coming from the build side, your 375k rehab number was probably a per square foot figure you found somewhere. On a 6,400 square foot house with a dead pool and a roof at end of life you need an actual walkthrough with a GC and line items, and at that size a real bid takes two weeks and sometimes costs money. Your 10 day window did not allow for the one piece of information the whole deal turned on.

Still mostly confused about paper, but I keep wondering whether the heir would have taken 1.6 cash plus a note for the rest, since he wanted out more than he wanted the top price. Maybe that solves nothing because the note is only worth what the buyer's exit is worth, and the buyer was the missing piece all along.