Wholesaling contract assignment
Hello Biggerpockets community,
I am a young aspiring real estate investor. After many months of researching and learning i am ready to get off my butt and get in the field. Like many of you all i am interested in wholesaling.
Wholesaling is a concept I heard of before from real estate "gurus" who claimed it to be a no risk no money down oppertunity. Of course i knew this was too good to be true. Over the months i have been scouring the web for anything i could find on real estate investing. The question i have come up with is this: If i get a house on contract and cannot find a buyer who is willing to take my assignment what do i do?
With little to no capital of my own what would be some viable exit strategies in a situation that i have described?
I would make sure you're very upfront with the seller from the beginning. If you don't have a buyer lined up already but have already networked with a few, you can tell the seller something like this: "I work with several investors throughout the city. My job is to find properties that fit their criteria, and I think yours will be a good fit. Once you and I reach an agreement and open up escrow, I'll schedule a time with you to get them in here in the next couple days to verify the condition and my numbers."
If none of your buyers are interested, find out why. If it's the price, you can find out where they need to be for the deal to make sense. Then you can try renegotiating with the seller for this lower price, hopefully while still within your inspection period.
Originally posted by @Andrew Abbott:
I would make sure you're very upfront with the seller from the beginning. If you don't have a buyer lined up already but have already networked with a few, you can tell the seller something like this: "I work with several investors throughout the city. My job is to find properties that fit their criteria, and I think yours will be a good fit. Once you and I reach an agreement and open up escrow, I'll schedule a time with you to get them in here in the next couple days to verify the condition and my numbers."
If none of your buyers are interested, find out why. If it's the price, you can find out where they need to be for the deal to make sense. Then you can try renegotiating with the seller for this lower price, hopefully while still within your inspection period.
You say to schedule a time for the investor to meet the seller and confirm which numbers? the amount you are reselling it for? or what. Say the investor tells the original buyer the price you offered it at, wouldn't the original buyer want the money you are charging extra, or they have no right to it since you already have it under contract?
Keith:
1st the property will be UNDER contract, not on one.
Network and form a close alliance with a trusted rehabber or 2. You can then get the seller down to the lowest price you think he/she will go. Then, before you give your approval of her/his lowest price, you let the seller know that you will bring your funding partner in and confirm the price so that you can give them a final decision. Add your fee and bring your buyer in with strict rules:
No discussing numbers with seller.
No exchange of contact info with seller.
This may take some posturing on your part. You will have to sound confident and let the buyer know that you regularly find good deals and want to establish a relationship with a handful of serious buyers you can just pick up the phone and call (or text/email). So you need to be able to trust her.
ITM , do your homework. Establish a relationship with an agent (or better yet, get your license) and have them run comps so that you know what your numbers should be (ARV, price Investors are paying for properties as-is using all cash). If a seller wants too much, you promise to refer that seller to the realtor for the listing.
Awesome advice from Ibrahim Hughes. Just put a contingency in the contract that says the contract is subject to you partner's approval. Your partner or "funding partner" can be your buyer. If you don't find a buyer simply send the closing attorney/title company and/or your seller a notice stating your partner does not approve and you can't move forward on that deal. At that point you could even re-negotiate your price with the seller.
I like Ibrahim advice, i may venture into wholesaling as a cash generator, there is something to the "Art of the deal" and understanding the criteria of your buyer (s) is critical. Being truthful with the buyer, don't try to make the deal look better then it is, you lose credibility with your buyers, if you don't know the facts. the buyer will find out anyway through his own due diligence.
I've definitely gained insight from Ibrahim and Andrew. Being upfront and building relationships with buyers first is great advice. Thank you