Re: Hybrid Offers - Posted by Charles Parrish
Posted by Charles Parrish on March 05, 2010 at 01:34:50:
And thanks for your great answers! It’s becoming clearer, but I’m not
quite there yet. I’ll continue with the numbering we started, so it’s
- You negotiate the deposit after you get a good title report? I thought you originally said: “Give the seller a written pledge to pay the portion of your profit, and call it your deposit.”
Not to worry about the deposit. Not to worry about the title report. Your deposit is held un-negotiated until you are satisfied with the report, but again not to worry about that?..what is important is, did you control at the right price. This is where you need to be the master of your market. If you make a mistake in comps here you are in trouble (not really if you use the right exit clauses in the offer).
- Originally, you said “a portion of your profit upon resale within 90 days”, but now, you say “within 3 weeks”. Is the 90 days just to give yourself some eeway?
Yes you want as much time as you can get, or make it 45 banking days with a right to extend for a period of time. 3 weeks to flip it at auctions!
- So in the auction, there is no guarantee that the highest bidder will get the property. Basically you have a reserve price, right? Also, the
$9,500 commission you’re referring to is the auction “commission and
settlement cost”, right?
Right, if the bid is not high enough to cover your offer, he may not get the property unless the seller comes off his number or you take a haircut.
Yes the auction company commission NOT THE SETTLEMENT COST, that is paid by the buyer at auction,
- I’m still not clear about the assignment vs. the auction. In your original post, you said “assign your contract before closing.” But you also talked about an auction. So do you assign the contract to the
Step 1. Control the property, 2. Book it for auction. 3. Sell it at auction (but more clearly, assign your right to the property at auction), collect your profit as an assignment fee at settlement. 4. If you are a Hybrid Deal with the seller, give him the overage percentage. SPEND YOUR PROFIT, FIND ANOTHER DEAL!!!
- So using your numbers of $100K plus 40% above that, and the property going for $130Ks, you would make a profit of 60% of $30K plus 10% of $130K for a total of $31K, less any costs you have associated with the closing?
Yes ? YOU GOT IT REAL GOOD THIS TIME.
- Using the same numbers, the winning bidder actually pays $143K total, $13K of which goes to your auction company, $112K of which goes to the seller, and $18K of which goes to you (or your RE investment company, which is presumably separate from the auction
company)? Does all this get distributed at closing?
Sorry, I thought you had it! If it sells for $143,000 the commission to me is $14,300. The assignor will make $43,000, the owner would get his $100,000 plus 40% of $43,000. Yes we get paid at settlement.
Wishing you good luck,