Just closed my First Wholesale deal. My story
Well I walked out of the title company today with my first check wholesaling. Here is the deal and I must say it was a learning experience from start to finish.
I was marketing to people who had not paid taxes and had tax liens against the property. I received a call from a woman who lived in Kentucky and she said that it was her moms place and that she had passed away. Two of her siblings were living in the house and had not paid any of the taxes for several years and she was just tired of dealing with it and sick of throwing money away. I asked her if she would take $10k for it and I would pay the back taxes which were about $4700 she said yes right away.
I used an option to purchase the property, the option fee was $100 but I only gave her $1 as a deposit with the rest to be paid once I exercised my option.
She was fine with that and I sent out the option agreement and a memorandum of option and had her sign and send them back, once I got the signed option I recorded the memo with the county.
Now since this was my first deal I made this offer before even seeing the place, I made the mistake of believing her when she said it was in good shape even though she hadn't been there in a few years, and based off what had sold in the last six months I thought the offer was good. Well I went to see the place and to my disappointment it was a wreck. It needed a least $15k in repairs. This was a 3bd 1.5 bath townhouse. Well I went back to her and said that the place needed to much work at the price I offered her I said I could give her $5k, she agreed.
Next I listed the property on the MLS using my wife who is an agent. I've always questioned why more wholesalers were not using the MLS, and I know now that not all will allow someone who is not on title to market. I did my research with her Listing board and found that I could market my interest in the property, as long as it states it in the option agreement and that the seller is aware I am going to do so.
I decided to list it at $25k. the listing went on about 5pm on a Thursday by Friday at 10am I had my first showing and my first cash offer of $20k, I told the gentleman, let me think about it and I will get back to you later today. Was shocked that I got an offer on the first showing, my wife said just take it and I agreed I should just take the money, but then I said lets see how the rest of the day goes. Well I was glad I did had another showing at 8pm and they made an offer of $23k. So now we are in a multiple bid situation, my wife tells them to bring their highest and best, the $20k sticks with that and the other guy went to $25, 595.
I was stoked this is the first day and I have this thing sold. Then that night I get a call from the sister living in the home saying that she was behind on the HOA. So I ask her how far behind, she says five and I say 5 months she then says no $5k. I couldn't believe it there goes a big chunk of my profit. I asked the seller if they were current on them and she said yes. Mistake number two, never believe what the seller is telling you always research it. It turns out that they owe $5950 in back HOA fees, Call the HOA and tell them that I am trying to buy the property and that I will give them $1000 and that I am the only chance they have of getting any money because if the tax lien investors gets the deed they will get nothing. Well we went back in forth and settled on $2500.
So I was going to take the $25,595 then the next day got two more offers one for $26 and another for $31k. There was so much activity on this place in just a few days, my wife was able to find about 10 others looking for properties in that price range and area. So we were able to start up a good buyers list by having it on the MLS.
I took the $31k offer and had him sign an assignment agreement, we agreed I would pay for title and he would pay for the rest of closing costs. He was fiine with the option and wanted to close quickly, so was I, but wait that would be to easy.
Turns out the mother died without a will and the property did not go through probate so the one sister I was dealing with could not make the decisions alone to sell, mistake number three always verify and order title commitment before you have an offer. So now I have to get four siblings to sign everything to sell this property and if one doesn't then the deal is down the drain.
Now there is a bunch more paper work needed to complete this deal, I needed an affidavit of heirship and death certificate, and everything has to be signed and notorized by everyone. So now I have to go to Joliet , Aurora , and then I took the wife and kid down to Louisville, Ky for a weekend trip to have the other two siblings sign the paperwork, I didn't want to chance anything being messed up.
I got everything all signed on Saturday and set the closing for today at 3pm, I had all my paperwork in orde,r paid the transfer tax and final water bill yesterday. Went in to the title company and they were impressed with how well organized I was. They were fine with the option and assignment agreement. I had my lawyer prepare all the closing documents and was able to go in there all by myself. Walked out 2hrs later with my first check for over $10k. My wife also made over $1k in commission, so we made close to $11,500 on the deal.
What a great feeling, I know this is a long thread but I hope it helps others out there. I have studied real estate for many years reading a ton about the subject, but was always too afraid to jump in, but finally decided to just do it. There are going to be bumps along the way, but I learned so much on this first deal. The next one will hopefully be a lot easier.
By the way I just signed up my next deal the other day and if my numbers hold up I could make close to $30k. I will post about that deal when it's done.