Hunt the buy box from the buyer's mouth, or the one from what he actually closed

Question

A scenario that comes up constantly in reverse wholesaling. A buyer hands over a written box: 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. A clean sheet, signed and dated. Then a title rep pulls his last eighteen months 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 most people would call ARV, and at least three had real structural scope in them, the kind you can tell from which framing crew showed up. So which sheet does the wholesaler hunt against. The stated box is what the buyer defends to his money partner, and when something off-box comes in he can decline without either side losing face. The closing history is the record of what he actually signs, and stated boxes tend to drift toward the deal a buyer 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. Check yours before assuming it is easy. It matters because of hours. A wholesaler with maybe fifteen hours a week of driving, calling and door knocking burns all of them hunting the wrong sheet. Where do you point?

laurenkim53 · Answer

In a non-disclosure county the whole question dissolves. Prices are not public, the buyer pool may be three people, and one of them buys through an LLC that changes every year. All the wholesaler has is what the buyer says over coffee, so the working method is to write it down and then watch which calls he takes fastest. That becomes the closing history.

luis_carrera · Answer

Both, weighted, is the honest answer. Your two documents disagree on the thing that matters most, which is price. The gap between 70 and 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 it does not deserve trust 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

A question worth asking about the paper itself. 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

Run that test far enough and the answer often turns out to be neither sheet. Take a buyer whose money carries a nine month clock. What predicts his yes is days on market of the surrounding resales, and his written box never mentions time at all. It surfaces the day he passes on a house that fits every stated criterion. So 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 @hannah_west29 is right that price and ARV opinion are tangled, and time is what forces a buyer to accept a worse price.

Hunt the buy box from the buyer's mouth, or the one from what he actually closed

8 replies