Hey guys I am becoming increasingly interested in the topic of wholesaling. I think it will be my way into real estate, something I have always wanted to pursue. I have one question about wholesaling properties that as of yet no one has addressed. What happens if you get a property under contract but can not sell it? Thanks!
The seller keeps the earnest money and there is potential for legal action.
There are some weasel clauses that might make you feel a little better about not being able to find a buyer but they significantly weaken your offer.
Good deals sell themselves so getting one is your first priority.
don't contract to buy a property unless you can close on the property, or have a ready buyer before you contract to buy. In which case, why would the buyers need you.
I had a dude call me the other day testing the water in asking if I was a buyer and was I looking to buy anything. He then asked if I was interested in a deal on a house that was this and that. I said of his this and that house that the address was such and such.
The key being that he was working me to buy a deal that he thought he could wholesale to me, but it was a property that I had already looked at and had talked to the actual owner.
That is why actual wholesaling is tough. Most investors already know where the deals are.
Get after it, there are plenty of deals out there.
That has been addressed in tons of forum threads. But...short version...
You lose your earnest money, unless you have included what is referred to around here as "weasel clauses".
Look, if your deal is good enough, you will have no trouble selling it. If your deals are good enough, people will be coming to you asking if you have new deals available.
It doesn't sound like you will have the ability to actually close on a property yourself. Therefore, it is crucial that you are super conservative on your analysis. Remember, if you put a property under contract and can't close on it, you have hurt the seller. You have tied up their property and wasted their time. If you do that often enough, no one will work with you. Reputation is everything.
Wholesaling is hard. It's work. You have to be an expert on the market you're working in, on marketing, deal analysis, estimating rehab costs, etc. It's hard. It's also not without cost. Yes, you can drive for dollars and put up bandit signs with very little money. But, to really get your lead pipeline cranked up, you're going to need a marketing budget.
Spend some time getting educated. Pick one or two zip codes and learn everything there is to know about the market within those zip codes. Become an expert on deal analysis...creating comps, determining ARV, estimating rehab, etc. Get educated. Get involved with your local REIA. Listen to the podcasts. Read the Ultimate Beginner's Guide. Take action, but make sure you know what action to take first.
Never go hard until you have a buyer. What Tim calls weasel clauses are actually good ways to stay safe. Due diligence clauses, or inspection clauses. My most common one would be PM approval. I never have an issue with them in contracts providing you present yourself as a genuine person and don't tell any lies.
I agree with Hattie Dizmond, it is a very tough business. As someone who has been trying to get his foot in the door some time now, I have seen the good and bad in wholesaling. But regardless what anyone tells you, no matter what you read in any book or blog forum you have to ask yourself one question.. WHY is it, that you want to wholesale properties? And that WHY has to be stronger than anything else..
"You don't have to be great to get started, but you have to get started to be great." Another, tip I found to work well.. Business cards. make mini bandit cards. you can usually get like 500 for $20. Then you can stick them in the car door window of parking lots.. Make sure to check all laws and city code first..But I have actually found this to work great, I have actually found many leads using this method..
There is never a right time to get started, you got to decide if this is what you want.. After that take know that it is your dream, not anyone else, so don't expect people to see it. Don't worry about the fact you don't have all the things you need to make it happen. Just decide you are gonna do something about it...
It depends on how you wrote the contract. If you cancel during your inspection period, you get your earnest money back, and all parties generally return to their original status. UNLESS of course you have contracted to make some or all of your EMD subject to forfeit.
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