I am a starting out wholesaler in the DFW/Arlington area (I literally just bought business cards). I have already started marketing and looking for sellers. It's a slow burn because I quit my serving job (risky move I know) in order to devote more time to driving for dollars and finding properties in more inexpensive ways. While that works, I am trying to nail down the specifics of the actions that I should be taking.
The way I understand VERY basic wholesaling overview is as follows:
1. Find a motivated seller
2. Inspect the property
3. Make an offer (Say $50k)
4. Get the property under contract
5. Give contract to title company (or lawyer?).
6. Find a buyer
7. Assign the contract to the buyer (Say $60k, or are these two numbers flipped?)
8. Swim in my buckets of money /s
I just have a few questions that I would like to have answered before I actually have to do them.
1. In Texas I can use the TREC contracts, but I understand that I need an out clause. Are there any other modifications any wholesalers have made to them? Did you have a lawyer do this or is this something you can do yourself? How much did that cost you? Do I HAVE to have an Earnest Money Deposit to make the contract legally binding? Do I need it notarized? How do I make it assignable?
2.I hear a lot of wholesalers saying that they do cash for houses. Is that something I can advertise, or is there only a certain type of financing that allows the seller to receive cash for their home?
3. Do I assign the contract by simply talking with the title company?
4. How do I ensure that I get my assignment fee?
I've tried to make this as organized as possible, let me know if anything doesn't make sense. My few questions, kinda turned into a lot..
Thank you everyone!
Consider working with another investor who will pay you to bring a solid lead that they can then work on your behalf. You simply don't know what you don't know and a bullet point answer here will only lead you astray even further. Consider the fact that you're dealing with people's largest investment and not understanding the contract you're having them sign, giving them false hope about a cash purchase when you don't have cash, and possibly leading them to lose their house while you're trying to learn this business is the wrong way to start out. Since you don't know how to negotiate and draft a solid contract, you're much less likely to find an assignee causing greater stress on the seller. Spend some time building relationships with active, seasoned investors so you can find someone who will show you the ropes so you can both make money and you will learn to do things legally, morally and ethically from the start.
Of course that would be nice, but is not always realistic. I'm also trying to avoid analysis paralysis. I have yet to run into another wholesaler in my area. I've only been to a couple REIA meetings, but through all the people I've met, they've all been flippers or buy&hold people. These awesome people did say that if I brought them a property, they would give me a finder's fee, but there's no contract with that. I would have loved to meet a wholesaler in my area who is willing to walk me through stuff, it's definitely harder trying to find this information on my own, but I'm pretty confident I can do it.
I have set a goal for myself by the end of the year to have done two wholesale deals, and in order to do so I am asking questions and starting marketing. Also, I am going to a REIA meeting on 11 Nov that is all about wholesaling, so I'm hoping to meet some people there. I am just trying to get some information in the meantime.
Do you happen to know any wholesalers in the DFW or Arlington area that are willing to talk with noobies?
Sounds like you have a plan...much success Jonathan.
@Jonathan Westerdale Congrats for taking action. In some respects, this is a "fake it til you make it" business - figure out the next step and take action before going beyond that. However, you are also dealing with people in some tough situations with probably the biggest asset they own. You owe it to them to treat them with respect and integrity. If you don't know an answer to a question, don't make it up. Be honest with them about your intentions (you don't have to use the word "wholesale", but you need to explain that you have partners/investors/etc that will close on the deal, not you, and they have to agree with your assumptions and numbers).
That said, to answer your specific questions...
1. In the TREC contract, the option period is your out clause. Generally a 7-10 day option for $100 is acceptable, but you can negotiate whatever you want. You need EMD to make it a valid contract. It does not need to be notarized. In Texas, contracts are assignable unless they specifically say they aren't.
2. Technically the seller will always get cash at the closing table regardless of the source of the funds. Generally when you advertise this you are saying you will close in cash or hard money (i.e. not go through a 30-60 day financing process where the bank has endless opportunity to kill the deal). If you intend to get conventional financing, don't advertise you can pay cash.
3. You need a separate assignment agreement signed by you and the end buyer.
4. You should be paid out of the closing funds by the title company.
I would highly encourage you to find a mentor in your area for your first few deals. There are wholesalers literally everywhere in DFW. First things first though - find a deal. If you think you've found a deal, run it by your mentor and make sure it's a deal before putting it under contract. If at that point you don't have a mentor, PM me with the details and I can at least try to point you in the right direction. I am in Dallas, but fairly familiar with Arlington area.
Oh absolutely, integrity first is something I'm a firm believer in. I don't want anyone to think that I want to mislead any seller I interact with. Like most people, I'm here to make money, but I learned a while ago that burning bridges only hurts you.
1. Awesome, this is super useful information. I'm reading over the contract so that I might better explain it to sellers and I plan on bringing this to a business law professor I know who can explain some parts I don't understand.
2. Is this something that I will have to confirm with the buyer that I find? So when I advertise to buyers I should make it known that I'm looking for cash buyers?
3. Where do you find this contract?
Thank you Andrew! I took @Guy Gimenez 's advice and have been trying to find a mentor, he was right. I was rushing myself because the sooner I complete my first deal, the sooner I can start building a website/marketing strategy and gaining credibility. If I find anything, I'll be sure to contact you in the meantime though.
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