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ould like to talk about what I call the "WOWWW" formula. It is a simple formula that you've got to understand and incorporate into your business if you are serious about real estate investment.
There is simply no way that you can structure a truly no money down and creative offer if you don't understand this formula. There are just five pieces to it. Four of which are "W's" and one of which is an "O". The five important elements to working with a seller before you can structure an offer you must know these five pieces of information.
"W" When
You must know when. That is basically when do they want to sell? You want to understand their sense of urgency, their motivational level. If they want to sell months from now, they're not very urgent. You're not going to get a very good deal, and it's really not something you should be spending much time on.
I'm not saying you don't capture that person's name [link widoczny dla zalogowanych], email and phone number, and put it in a database somewhere and follow up with them on a regular basis through postcards and what not. But they're not going to be a deal this week or next month. They're simply not.
If they're not properly motivated, and the when is motivation, if they are going to be doing a deal in the next 30 days because of a foreclosure, they're moving out of state, or they're out of state or about to miss a mortgage payment because they've been trying to sell it for a year and they can't sell it and they've run out of money, then their 'when' has really shortened up.
"W" What
What is their situation? That's kind of related but you need to understand what's going on with them. Why do they need to sell? Is it a foreclosure or pre-foreclosure? Is it a divorce? Is it a sale where they can't get it sold? Is it that they bought it to flip?
We're seeing a lot of this. People have bought things to flip them, went in and rehabbed it - spent a lot of money - and they were hoping to sell it but the market turned on them and they got stuck. So you need to understand what their situation is. That's an important element of this.
"W" What Is the House Worth
Worth is always difficult to nail down, but you should do your homework and figure this out. You should look at comps or appraisals or whatever other sources of information you want to try to figure out what the properties worth fixed up.
It may be worth $150,000, $200,000, $300,000 or who knows. You should have some sense of what the property's worth to make an offer.
"O" Owe You should know what the person's owes on the mortgage or mortgages. This is a critical element and something a lot of people don't understand. You cannot make an offer through the MLS system if you don't know what the other person owes. It's very hard to make a creative offer if you don't know what they owe.
If the property is free and clear and there's no mortgage, then that will dictate a completely different type of offer. If they're completely under water and the house is worth $130,000 and the mortgage is $150,000 that will drive a completely different type of offer. If they owe $90,000 that will drive the ultimate offer.
You cannot make quality offers to sellers if you don't understand what they owe. It's absolutely critical. All five of these are critical.
"W" What They Want
Probably the least important is what they want. That will change over time. If they're not motivated and don't need a quick sale - one and two aren't really in place - most likely they're going to want a high price. They are not truly ready to do a deal. They are not where you need them to be to do a deal.
What they want first all changes over time. It's also probably the least important of the five items. However, you do need to know what that is. If they want some outlandish number, you don't want to spend a lot of your time and effort on it.
That is the WOWWW formula. Use it on e