My Exact Formula for Making Wholesale Offers (Over the Phone)

0:00If you ever watched me call sellers live on YouTube, you'll see that I instantly know what price I need to be at when making offers. And these are properties that I'm just looking at for the first time. Now if you plan on wholesaling virtually where you offer negotiate and contract over the phone, instead of in person at the property, then learning how to quickly and efficiently run the numbers is a skill you must learn and master. From this video, I'm going to show you exactly how I do it coming up. For a limited time, you can get a free copy of Jerry Norton's offer calculator, which gives you the offer price for any property in seconds. Download it now at freeoffercalkulator.com. If you're new here, my name is Jerry Norton. I've been wholesaling and flipping real estate for over 20 years. And here on my YouTube channel, I show you how to master the process. So if you want to be a flipping genius like me, subscribe to my channel and watch my videos. When it comes to wholesaling and flipping, I have two different business models. One is a backyard model where we hyper focus on a specific market and we close deals on appointment at the properties.

1:05Now my backyard markets, the goal is to become what I call a local market expert and dominate that market and do seven figures plus annually. Now the other model I do is a nationwide virtual business. This is where I buy nationwide leads, call sellers, offer negotiate and close over the phone without ever seeing the properties in person. Then I will wholesale or I'll buy and flip these deals again remotely without ever seeing those properties in person. Both models have their pros and cons and both work if you know what you're doing. If you want to see what my nationwide virtual business looks like, watch the weekly show I do on YouTube with my good friend and pro wholesaler RJ Bates. Every week him and I go live for two or three hours, taking turns calling sellers. If you watch that show, you'll see some calls we get unmotivated sellers, angry or rude sellers. And sometimes we talk to motivated sellers. You get to watch live and see how we navigate everything and anything. So it's a great learning experience to see that process in action.

2:07Now when RJ and I go live, you get to see the conversations. But what you don't get to see is what's happening behind the scenes, how we research the property, how we comp, what relevant questions were uncovering, how we're running the numbers or even how we fill out and send contracts. Now years ago, I actually used to screen record my computer so you could see exactly what I was doing, but I had to stop doing that for two reasons. One, people watching the live would try and steal my deals because they could see the information. And more importantly, if you reveal addresses or personal information, YouTube may take down the video because it violates their privacy rules. So what I'd like to do on this video is explain what I do behind the scenes when I'm on the phone with sellers, comping properties, making offers and running the numbers. My hope is this will give you more clarity on how you can improve doing the process in your business. Okay, so first of all, you have to understand the mindset about how I approach the process. I never comp or run numbers before making the call.

3:10Pre-analyzing deals is a big time waste because you may not even get a hold of the seller or you may find out that they're not even motivated at all. So step one is to only begin any type of analysis once the seller answers the call and you confirm that they do in fact want to sell. Assuming you get that far, step two is to get the seller to name the price they want. Simply ask, what price are you hoping to get for this property? If they won't answer, which is common, rephrase the question. If you could sell this property as is for all cash and close on your time frame with no cost to you at all, what would you need to see for an offer like that? Now, once they give a number, step three, is you need to put context to that number. The fastest way to do that is to look up the address on Zillow, Redfin or Rilder.com. Now, each of those megacites give an estimated value of the property. Now, preferably look at all three and get an average.

4:10Now, if you have my offer calculator tool, while on the phone with the seller, enter these three values into the calculator. So in this example, the Zillow value was 249,000. The Rilder.com value was 275,000, and the Redfin value was 265,000, making the average of all three 263,000 dollars. Now, this takes very little effort or energy. By the way, I'll give you my offer calculator tool for free. Keep watching and I'll tell you how to download it for free. So what do these values represent? Let me explain. Zillow, Redfin and Rilder.com invest millions in their algorithms to determine the values of properties. They are compiling hundreds and sometimes thousands of data points to get these estimated values, including homes and poor condition that sold below market value, homes in fair condition that sold at market value, and fixed up homes that sold above or at the top of market value. And since the majority of all sold properties in general are not in poor condition

5:14or fully renovated, the value mostly reflects homes that are in fair condition, or what I call the fair market value, or what I often refer to as the as is value. Now, why is this so important? Because if I'm on the phone talking to a homeowner who is living in the property and they say the property is in fair condition, I can assume with some reliability that the average value of Zillow, Redfin and Rilder.com is probably a fairly accurate as is value of the property. So going back to my calculator, the example I used, the Zillow value was 249,000. The Rilder.com value was 275,000, and the Redfin value was 265,000, making the average of all three 263,000. By using this method in less than 60 seconds while on the phone with little effort, I now have a reference point. Is it perfect? No, because I don't know all of the nuances to each particular property, but it's a very reliable method that allows me to quickly get my head around the properties value

6:16and what I'm dealing with. So using my example with an average as is value of 263,000, let's say the seller says the price I'd like to get is 250,000, which is the Zillow value. Still paying for property data? Prop wire gives you unlimited property data, cops and more for free. Download the Prop Wire app on the App Store or Google Play Store today. I now know the seller's starting price is retail. It doesn't mean he won't take less, but now I have a reference point and now I know what direction to take the conversation. Let's say with an average as is value of 263,000, the seller says he'd like to get 150,000. Well, now I know his asking price is significantly below the as is value and I'm either dealing with an extremely motivated seller or there's something else going on with the property. My point is I have a reference point for how to take the conversation. You see, the seller's asking price only has meaning if I have a solid idea on the properties value.

7:19You have to grasp this concept. If you don't, nothing else I share will make any sense. Okay, once I have the as is value step four is to calculate the wholesale exit price. The exit price or dispo price is a discounted percentage off of the as is value that a cash buyer would most likely pay to buy the property. The question you have to ask yourself is, what would a cash buyer pay for this deal that leaves him enough room to make money? Now, how do we determine the discount percentage for the exit price? The answer is it depends. It depends on the price range of the deal. Now, after doing hundreds of deals a year for 20 plus years, I created a simple formula that automatically determines the exit price is based on five different price ranges. Now, if your reference my offer calculator, notice this chart here. If the as is value is under 100,000, the exit price needs to be 35% of the as is value. So let's say the as is value is 75,000. The exit price at 35% would be 26,000.

8:22If the price range is 101,000 to 200,000, the exit is 50%. 200,000 to 300,000, the exit is 60%, 300,000 to 400,000 is 65%, and 400, and 1,000 to 500,000 is 70%. Now, the good news is my offer calculator automatically calculates the exit price for you. Now, in our previous example where the as is value is 263,000, the exit is 60%, or 157,000. Now, after calculating the exit price, that five is to calculate your wholesale fee. Now, this can be whatever you want, but I also follow a percentage of the price range. The higher the price point, the bigger my desired profit. So as the price goes up, so does my expected profit. Now, you can see on my chart here, if the as is value is under 100,000, my wholesale profit is 10,000. If the price range is 101 to 200,000, the wholesale profit is 20,000, 200,000 to 300,000, the profit is 25,000, 300,000 to 400,000, the profit is 30,000, and from 401 to 500,000, the profit is 40,000.

9:34Now, in our example where the as is value is 263,000, the wholesale profit is 25,000. So now that we have our exit price and our wholesale fee, step six, is to calculate the wholesale by price, or what we often refer to as the maximum allowable offer or M.A.O. Now, this calculation is real simple. It's just the exit price minus the wholesale profit. This is where we want to land on price with the seller at the end of negotiations. And finally, step seven is the anchor price or the starting price. Now, I have three rules when it comes to setting the anchor. One, it needs to be a ballpark or a range not a concrete number. So you might say, in the perfect world, I'd be under 100,000, or you might say, if you got offers from other investors, I bet they would be in the high 200,000. Rule number two, the offer needs to be ridiculously low, which brings me to rule number three, it needs to solicit a no. After giving the anchor the seller should say, there's no way I can go that low.

10:35When that happens, you respond with, well, that's my offer in the perfect world, but how close to that can you get? And continue negotiating until you find the seller's best price somewhere between your anchor and your M.A.O. Now, what I want you to notice is I didn't do any comping and I didn't estimate repairs. This method allows you to quickly get your number on the fly in under 60 seconds. And I'll give you my offer calculator tool for free to get the download. Just go to freeoffercalkulator.com. I'll ask you in return as you leave a comment and say, thank you, Jerry, for the free calculator. You are a flipping genius. And then you might be wondering, when will I actually look at comps and estimate repairs? I might look at comps if I'm close and I want to verify the numbers or if the seller is really analytical, I might look at comps so that we have a more detailed conversation. There are exceptions, but what I love about this tool is I don't have to comp or estimate repairs and that puts me in the driver's seat.

11:35So again, download my tool for free, go to freeoffercalkulator.com. And if you found this video helpful and you want to go even deeper, I did an entire hour and 15 minute training on my exact framework I used to close sellers. So if you're serious about becoming a million dollar wholesaler, watch that now and I'll see you on the next video.