Buy box from the buyer's mouth, or from what he actually closed

Question

A buyer handed me a written box in March: 3/2 minimum, 1,100 square feet and up, ARV band of 220 to 340, offers at 70 percent of ARV minus repairs, nothing with slab movement, nothing north of the highway. Clean sheet, signed, dated.

Then a title rep pulled his last eighteen months for me as a favor. Half of what he bought were 2/1s. Two were north of the highway. The average went out closer to 78 percent of what I would have called ARV, and at least three had real structural scope in them, because I recognized one of the framing crews.

So which sheet do I hunt against. The stated box is what he defends to his money partner, and when I bring something off-box he can decline without either of us losing face. The closing history is the record of what he actually signs, and stated boxes tend to drift toward the deal a guy wishes he had bought rather than the one he keeps buying.

One wrinkle: sale prices are not public record in roughly a dozen states, so this pull is trivial in some markets and basically unavailable in others. Mine is friendly. Yours may not be.

It matters because of hours. I get maybe fifteen hours a week of driving, calling and door knocking, and hunting the wrong sheet burns all of them. Where do you point?

laurenkim53 · Answer

In my county the whole question dissolves. Prices are not public here, my buyer pool is three people, and one of them buys through an LLC that changes every year. All I have is what he tells me over coffee, so I write it down and then watch which of my calls he takes fastest. That is my closing history.

luis_carrera · Answer

I would want both, weighted, and I know exactly how that sounds coming from me. But your two documents disagree on the thing that matters most, which is price. 70 versus 78 percent of ARV is the whole assignment fee and then some. If he is really buying at 78 you have been throwing away houses that fit him.

joe_delgado5 · Answer

Closing history, every time. Guys describe the buyer they want to be and then sign whatever pencils that Tuesday.

hannah_west29 · Answer

The 78 percent number is doing a lot of work here and I do not trust it yet. You said 78 percent of what you would have called ARV. That is your ARV opinion applied to his purchases after the fact, and if your comps run 8 percent hot on the resale side then he bought at 70 and your model is the thing that is off. Before you re-aim fifteen hours a week, take three of his closings, pull the actual resale price he got out the other side, and back into the ARV he was underwriting. If his exits land where you thought, your read stands and he lied on the sheet. If his exits came in under, he is disciplined at 70 and you have been comping optimistically. Those two conclusions send you to completely different neighborhoods.

raj_mehta14 · Answer

Naive question from the paper side. If his stated box and his behavior differ that much, is the sheet even for you? It reads like a document written for whoever funds him, and you happened to be handed a copy. That would explain why it is conservative on structure and tight on price.

aliyah_b · Answer

The title rep favor is the part I would not gloss over. I priced out what a data subscription would cost me to do that pull myself and it was more per month than I have made in this business so far, which is zero. So for now my version of closing history is asking the buyer what the last three houses cost him and watching whether he answers fast or vaguely.

omar_haddad · Answer

Structural work in three of his closings tells you something separate from the box, which is that his repair number and yours are not on the same scale. If he is comfortable putting a crew under a house, his rehab budget on a bad one is probably 20 to 30 percent under what I would write for the same scope, because he is not paying retail for the hard part. That changes which houses fit him more than the bedroom count does. Ask him what he paid all in on the worst one and compare it to your own estimate for that scope.

carlos_nunez · Answer

I ran this exact test on a buyer last year and the answer turned out to be neither sheet. What actually predicted his yes was days on market of the surrounding resales, because his money had a nine month clock on it. His written box never mentioned time, and I only found it when he passed on a house that fit every stated criterion. So I would add a question to your call: how long does the capital have, and what happens on the day it runs out. Then re-read both sheets with that in mind, because @ledger is right that price and ARV opinion are tangled, and time is what forces a buyer to accept a worse price.

Buy box from the buyer's mouth, or from what he actually closed

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