Oct 22 '08, 07:21 PMThis is from all the information I've gathered over multiple hours studying and reading, and is by no means meant to be a comprehensive guide. As always, have a clear goal, a plan to accomplish that goal, and do plenty of research into the business and in your market. (BTW, IT'S A LONG POST)
The Basics: You're going to need a few basic tools in your arsenal if you're plan on being successful. First of all you need to know what contracts are involved. The 3 basic contracts needed are: 1. A Purchase and Sale Contract/Agreement(PSA). 2. An Assignment of Contract(AoC). 3. An affidavit and memorandum of interest.
1. The PSA: While the best move you can make is to talk to an experienced real estate attorney, not everyone will be coming in with the money needed to do that. So your best bet would be to network and talk to others - they may send you a copy. Alternatively, you can scour the internet and find yourself some contracts that others have used and then modify them to your needs. There are some very important elements here:
A. After your name you MUST have "and/or assigns"
B. Explicitly state that the contract IS assignable.
C. Other contingencies that you may want are: i. Inspection contingency stating that the purchase is contingent upon a satisfactory inspection that is acceptable to you and/or your business partners. II. A contingency that explicitly states it is subject to your business partner's approval.
--->Keep in mind that the more contingencies you have, the weaker the offer
D. You should have a time frame for closing, with a max of, imo, 45 days. Remember, you're offering a QUICK close. But you also want to give yourself wiggle room. Some may disagree, some might agree..it's up to you.
E. You need to stipulate what the buyer is entitled to if you CANNOT FIND A BUYER in time. I.E. have the seller agree not to hold you liable for performance of the contract and their only remedy is the earnest money deposit. (remember you tread a fine line between wholesaler and broker and you must make sure that you are not telling the homeowner you are finding them a buyer - that would make you a broker brokering without a license and you can end up heavily penalized)
2. AoC: This contract MUST stipulate the fee you are charging the investor for the right to fulfill the obligations of the original PSA. It should also include a stipulation as to the upfront deposit required at assignment as well as the conditions under which that deposit may be returned. (if the seller doesn't fulfill his end, then it's unfair for you to keep the earnest money deposit. If the buyer messes up, then you should be entitled to it)
3. Affidavit and Memorandum of Interest: The last thing you want after working your back off to find a good deal and put it under contract is for one of your buyers to go behind your back and make a better offer to the seller. You need to cloud the title so that he has no choice but to deal with you. At the time that you sign the contract you should also have the seller sign the affidavit of interest - in front of a notary - and then record it at the clerk's or register's office.
BUYER LISTS
Now that you have your contracts in line, the next step is getting out there and making things happen. Many people advocate getting your buyer list together first. There are a lot of suggestions out there, so do your research. A few methods here are: 1. Post a fake ad for a wholesale property on craigslist, postlets, etc. Record who responds and tell them you have more deals if they're interested. 2. Go to auctions and see who's buying. They will usually have cash. There are others, so do your research and find what works for you.
FINDING SELLERS
Here you have a few options. Your best bet here: MARKETING. Get your name out there. Use bandit signs, use the internet..find the deals. Nowadays there are a ton of websites with listings..find the listings and make offers. This is a number's game..make as many offers as possible and you will come across at least 1 good deal.
Ok, so you've identified a few good deals, you have a buyers list (or you might not) and you'r ready to check out the properties. Remember, these are people you're dealing with, not houses..so one of the most important things you can do is build rapport and trust with the seller and find out WHY he's selling.You need to build a connection with them to make this thing happen. Also realize that some people you just can't work with, so recognize this and just walk away.
If you've built a good rapport with the seller, gotten a good idea about the repairs and you've done your comps you should be able to make an offer right there on the spot. If you're lucky the seller will accept it asap. Go to the nearest notary and sign both the contract and affidavit.
From there it's time to start blasting your buyers (if you have a list already) or start marketing to investors. In fact, it isn't a bad idea to do both. However, remember quantity does not equal quality. You will find that a small group of quality buyers is WAY better than a large group of wishy-washy buyers. If contacted, which you should be, let them know the structure of the deal - what are the numbers. If he likes them, then tell them what your fee is and what your deposit is. Have them sign the assignment contract, and make sure they bring a cashiers check, or cash, for your deposit.
Once the AoC is signed, you don't have to do much. In fact you don't even have to go to closing..you can just have the title company wire the check to you. Or you can go after closing and pick it up yourself.
There's a lot more to this, a WHOLE lot more, but these are the basics as I understand them. I'd like to encourage some of the more experienced wholesalers out there to add to this, let others know what's wrong, what's right, etc.
