If you were able to buy a house that was worth "AS IS" $100K for only $60K, do you think someone might want to buy it for $70 or 80K? That is the basic concept.
Get a house under contract for well below the current as is value. That contract gives you the right to buy the house at a bargain price. You can then sell that right to someone else. Usually this is done by assigning (selling) the contract. You don't have to come up with the money to buy the house. The person who bought your contract does. You get an Assignment fee as payment for your contract.
If this isn't clear ask for clarification but that is the basics. - Ned
If you were able to buy a house that was worth "AS IS" $100K for only $60K, do you think someone might want to buy it for $70 or 80K? That is the basic concept.
Get a house under contract for well below the current as is value. That contract gives you the right to buy the house at a bargain price. You can then sell that right to someone else. Usually this is done by assigning (selling) the contract. You don't have to come up with the money to buy the house. The person who bought your contract does. You get an Assignment fee as payment for your contract.
If this isn't clear ask for clarification but that is the basics. - Ned
Mannington, WV · Member since 2013 · 4 posts · 0 votes
12y
I appreciate your help Ned, and you were very clear. I have other questions though, like what if I can't find anybody to buy the contract? Am I stuck paying the contract amount?
Make sure you are doing real deals not fudging the numbers. Many new investor do not realize how cheap they have to buy houses. You have to assume the worst case scenario - your buyer is. If you buy them cheap enough someone will want it. If nobody wants it, you are paying too much.
This is not legal advice but most contracts say the the sellers only recourse is keeping the deposit. You can limit your risk by putting down a small deposit.
Real Estate Investor · Troutdale, OR · Member since 2013 · 92 posts · 22 votes
12y
I don't personally have any experience in wholesaling but i've read online that pro wholesalers put fellow investors, and other people who might be interested in buying, on their speed dial, metaphorically, so as to sell properties with maximum speed. By doing so, a lot of wholesalers can sell their properties in hours at the best of times.
Residential Real Estate Broker · Alexandria, VA · Member since 2013 · 7 posts · 0 votes
12y
I have a question. Most contracts have the clause of non assignability. How do you get around this? Also, what do you say to the other party that there is a new person to the contract? (is my question clear)??
Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
12y
@Michele Jackson-Wilson , not sure what "most contracts" means? As a wholesaler, I use my own contract which has multiple out clauses. I could see non-assignability in a Licensed Realtor Purchase Contract or something, but typically we wouldn't use those. If you have to work with an agent, which just from experience I would not suggest doing, you can maybe write an addendum to allow it.
As for "what do you tell them", the seller is usually distressed enough not to care that there is an assignment fee in the HUD. The buyer would typically know that you are wholesaling and they shouldn't care if they are still getting good deal. There is also an option to do a "double closing" in states that allow "dry closings". This means that you actually buy the property, just for a moment, with the buyers money, then you sell it to them instantaneously. If the assignment fee is high enough that you think it will make the seller or buyer uncomfortable (typically anything over $5k) , I would use a double closing. A double closing makes your invisible to the seller and buyer.
Residential Real Estate Broker · Alexandria, VA · Member since 2013 · 7 posts · 0 votes
12y
Thank you @John Horner for your response :-). Yes I am a real estate broker. I am very new to investing. I was thinking of getting into wholesaling. All of our contracts have a non assignability clause in them. The information you gave was useful though. I guess in cases like these I'd have to have my investor hat on and not my realtor hat? Is that right? Again, I'm brand spanking new.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
@Michele Jackson-Wilson - I'm no lawyer and not giving legal advice, but I'm surprised to hear that "all of your contracts have a non-assignability clause". I'm an investor/Realtor in TN, and our TN Association of Realtor (TAR) contracts are assignable. Now, most REO contracts provided by the REO asset managers have non-assignability clauses, but our general P/S contract is definitely assignable.
Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
12y
I do know some agents who also wholesale, and I know that they have to put specific verbiage in their contracts that states they ARE agents, but in this circumstance NOT ACTING AS AN AGENT.
Residential Real Estate Broker · Alexandria, VA · Member since 2013 · 7 posts · 0 votes
12y
I am in the Washington, DC area our board is NVAR & MAR(Northern Virginia Association of Realtors& Maryland Association of Realtors). Our Regional Sales Contract are not assignable. Just as you mentioned when you're doing REO's there is also a non assignability clause. Our R/S reads this way: Non-Assignability: "This contract may not be assigned without the written consent of Buyer and Seller. If Buyer and Seller agree in writing to an assignment of this Contract, the original parties to this Contract remain obligated hereunder until settlement".
Yes, I would totally disclose I am a realtor in the transaction. I'm not in the legal profession either so I would consult with an attorney for CYA purposes but I would still like to do wholesaling. I'm sure other realtors wholesale as well.
Where do you find investors who are looking to buy properties? I have seen signs on telephone polls here in Pittsburgh that say " We buy houses", is there another resource that you can use to find people who are interested in buying?
These We Buy Houses signs are usually not from actual buyers but from wholesalers who are simply marketing for deals to flip to investors. I wouldn't call the signs and expect them to want to buy any of your deals. You can, however, call them to network and have your deal put out to their buyer's list. Of course, if you do this expect to split profits with them if they bring a buyer in.
Thanks for the info. Being that you have been in the business for some time do you think networking with other wholesalers is a good idea for someone trying to get into the business?
Thanks for the info. Being that you have been in the business for some time do you think networking with other wholesalers is a good idea for someone trying to get into the business?
Real estate like most businesses is a peoples business. You must learn how to market and be able to communicate with people aka the seller, your team, your ventors, title, etc.
Investor · Santa Rosa, CA · Member since 2012 · 402 posts · 96 votes
12y
If you put out your own "we buy houses" signs then sellers will contact you.
If you put a fishing add on craigslist like "fixer upper on discount- must sell" buyers will contact you (just say that one is no longer available and get their info and find out what they are looking for. Make sure that they are not wholesalers.)
Hard money lenders are a great source of cash buyers. Remember, a cash buyer is anyone who is NOT using bank financing, they could be using hard money, private money, or their own capital.
Accountant · IA · Member since 2019 · 16 posts · 11 votes
6y
I have a video from wholesaling and flipping expert Don Costa that may benefit folks on this thread. In this video he talks about the Do's and Don'ts of wholesaling and flipping in this market, as well as his structure that has allowed him to do approx 200 deals last year! BiggerPockets won't let me post the link here, but go to YouTube and search my Channel "Talking Cash Flow" for the latest episode.