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HOW ARE WHOLESALE PRICES DETERMINED ?
Market and property conditions determine wholesale prices. The benchmark property wholesale price is really determined by the local investor. Traditionally, in a Normal Market, the local investor is willing to buy property about 20% below current comparable sales. This margin provides either a cash flow edge for long-term rentals, or a reasonable profit margin after short-term repairs and resale expenses.
However, in a Buyer's Market, with slow resales, the short-term local investor needs to offer the property at a very competitive price in order to increase the probability that the property can be rented or sold in a short period of time. So in a Buyer's Market, the local investor is looking for a greater discount, 25 to 35% below current comparable sales.
The property condition and local investor interests will determine the 25 to 35% discount range. A property that needs a lot of repairs needs to be offered at a lower wholesale price than a property that is in great condition.
(If you are buying a property as a primary residence, you will be considered a brilliant buyer when the market returns to a normal balance. And extraordinarily brilliant when the sellers market returns, on average every 12 years!)
Large investors can purchase properties in bulk and get a greater discount, as much as 40 to 65% below current comparable sales. However, unless the large investor is capable of holding, renting, and managing a large volume of vacant homes, the need to resell is great. And when a large REO Package investor individually resells properties (probably through other, smaller, Package investors), the price will again be about 25 to 35% below comparable sales to local investors in a Buyer's Market.
In a Seller's Market, local investors are willing to buy at only 10 to 15% below comparable sales. This is because prices are appreciating, and this smaller discount will appear great in a relatively short period of time.
However, in a Buyer's Market, with slow resales, the short-term local investor needs to offer the property at a very competitive price in order to increase the probability that the property can be rented or sold in a short period of time. So in a Buyer's Market, the local investor is looking for a greater discount, 25 to 35% below current comparable sales.
The property condition and local investor interests will determine the 25 to 35% discount range. A property that needs a lot of repairs needs to be offered at a lower wholesale price than a property that is in great condition.
(If you are buying a property as a primary residence, you will be considered a brilliant buyer when the market returns to a normal balance. And extraordinarily brilliant when the sellers market returns, on average every 12 years!)
Large investors can purchase properties in bulk and get a greater discount, as much as 40 to 65% below current comparable sales. However, unless the large investor is capable of holding, renting, and managing a large volume of vacant homes, the need to resell is great. And when a large REO Package investor individually resells properties (probably through other, smaller, Package investors), the price will again be about 25 to 35% below comparable sales to local investors in a Buyer's Market.
In a Seller's Market, local investors are willing to buy at only 10 to 15% below comparable sales. This is because prices are appreciating, and this smaller discount will appear great in a relatively short period of time.
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Acres4U Land & Development
3030 East Baseline Road Suite 107G • Gilbert, AZ 85234
Direct: 480-309-5048 • eFax: 480-882-0182
Site Map | E-Mail
Acres4U Land & Development
3030 East Baseline Road Suite 107G • Gilbert, AZ 85234
Direct: 480-309-5048 • eFax: 480-882-0182