Wholesaler Misrepresented himself

Wholesaler Misrepresented himself

Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes

I am in the midst of dealing with a wholesaler that has left a bad taste in my mouth for the wholesaling business, and am wondering if this is common practice.

A little background:  So, I'm trying to sell my house and move to Central Florida for a job opportunity for my husband. The plan is for us to began a real estate business, with me focusing on it fulltime, and him eventually joining me once we are successful enough to afford it.  

The key to doing all of this is selling my home. It is an inherited home that needs updating.  We initially were selling it to a family friend so that it could stay within the family in a way, but that didn't work.  At this point, we are just interested in selling it quickly, and willing to leave a substantial amount of money on the table to do so, if necessary.  I had started filling out some of the "we buy houses" forms online to see if any investors would make it worthwhile for us.  I got several hits, and chose to go with someone who established themselves as a cash buyer who could close within 2 weeks.  I informed him of the comps in the area, and my knowledge of the property, and we haggled a price that my husband and I felt comfortable with.  I researched him a bit, seeing that he was a flipper and wholesaler.  At the time I was not too familiar with how wholesaling worked, and he had never mentioned wholesaling.  We signed an offer, sight unseen, with a 7 day inspection period.  He said he would be scheduling an inspector the next day.  The next day, he said he would schedule the inspector for early in the week because he wanted to come with him and was stuck in Broward (we are in Miami).  The following day(Saturday), he said his partner was in the area and wanted to take a look at the property. We obliged. On Monday(labor day), I asked when I should expect him and the inspector. He told me he would let me know Tuesday morning.  Tuesday morning, he asked if the inspector could come by at 7pm. I said yes and asked if he was coming also. He informed me he would not be.  Later in the day, he told me another "partner" was in the area and would like to visit the property. Again, we obliged, but I started to become more suspicious. I had already did some digging into his social media presence to see if he had listed our property with his wholesales over the weekend, and found nothing.  The next partner showed up at 5:30pm, and had another woman with her.  We chatted, and they took pictures, and left.  At 7pm, there was a knock on the door, and I assumed it to be the inspector, but it was someone different, someone who I had not been informed to expect.  I asked him if he was "blank", the inspector. He was not. He was another "partner", and mentioned "xyz" wasn't going to make it, but didn't "xyz" tell me that he was coming? No, also, I have no idea who that is. I spoke with "insert cash buyer name". "Oh, yeah. "Xyz" and "cash buyer" work in the same office." We go ahead and let this person view the property, and I check in with "cash buyer" to straighten if and when inspector is coming and who this guy was. He apologizes for his slip up, and not notifying me of the other "partner", says he will check in with the inspector and get back to me.  Inspector shows up. Now, I'm expecting and prepared for a full official home inspection.  This guy looks around the property for less than 10 minutes. He does no more than any of the "partners" do and leaves.  At this point, I'm very nervous about the whole situation, so I start digging again, and find that he has listed the property with his wholesales.  I do a bit of research on wholesaling and find out that there is a practice of putting a property under contract by identifying yourself as a cash buyer, trying to flip it to an end buyer, and then using the inspection period to back out if you can't flip it to an end buyer.  I confront the "cash buyer" with the knowledge that he has listed my property as a wholesale property.  I ask him if he intends to terminate the contract if he can't flip it to an end buyer. I don't want the property tied up unnecessarily as I am looking to move quickly.  His exact response: "Yes I either close on the property myself first or flip to an end buyer. I will know by the end of today so no worries about dragging it any further.  I knew your situation from the beginning that's why I kept the inspection to seven days only.  It's normally 15 days."  I wait until the end day and ask him what the plan is. He says that he has two cash buyers that would like to view the property tomorrow, and then will decide from there.(At least he us finally honest about who these people are)  I ask him if this means he intends to terminate the contract if he can't find an end buyer? His response: "Please give me till tomorrow afternoon I am doing absolutely everything I can to make this work. I know how important it is to you and your family"

I'm wondering if there is any recourse I have at this point.  I will wait and see what he says tomorrow, and maybe we will get lucky, and one of these investors will want the property. However, I don't have faith in that. The deal I made with him is great for an investor.  The money he has tacked on to wholesale it, makes it a little too expensive for an investment opportunity, I feel.  The whole situation has taught me some big lessons, and I'm trying hard to keep my cool.  Is this how it always works? 

1Reply
862 views

Most Popular Reply

Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y

"Wholesaler misrepresented himself."

"Water turned out to be wet."

See this reply in the discussion

196 Replies

Jump to latestLatest
  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    And there you have it.  Don't volunteer anything, be honest only if challenged.  That's the advice a wholesaler is giving.

    And you wonder why people don't want to do business with wholesalers?

  • Garland, TX · Member since 2013 · 20 posts · 14 votes
    11y

    @Richard C.

    I see you put your spin on it, I said:

    "you are not obligated to volunteer all your "trade secrets" to sellers. If they ask then by all means be honest but it's not wise to educate your sellers on all your business details of how you conduct business."

    Your interpretation implies that I'm saying be dishonest unless challenged which is not what I was trying to convey and my post dealt with a lot more than what you gleaned.

  • Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    11y

    @Zeak Hill My refusal to work with wholesalers doesn't come from not understanding wholesaling, but rather understanding it very well. Two reasons I don't deal with wholesalers on listed properties; 1) they have to get the property under contract for significantly less than FMV in order to flip it to an investor, and my job is to get the best price for the seller, or 2) If the wholesaler contracts at near FMV, then he's not going to be able to flip it to an investor who wants a "deal", so he simply walks. Perhaps I'm more sensitive to it since I dealt with many short sales, and the last thing I'm going to do is let a wholesaler tie it up for 90 days, then walk, and my seller is 90 days closer to a Foreclosure auction. Texas is odd in that their standard contract has an option period built in.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Zeak Hill:

    @Richard C.

    I see you put your spin on it, I said:

    "you are not obligated to volunteer all your "trade secrets" to sellers. If they ask then by all means be honest but it's not wise to educate your sellers on all your business details of how you conduct business."

    Your interpretation implies that I'm saying be dishonest unless challenged which is not what I was trying to convey and my post dealt with a lot more than what you gleaned.

     Do your seller believe that you are buying their house?  Yes or no?

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Steve Babiak:
    Originally posted by @Richard C.:
    Originally posted by @Account Closed:

    as far as wholesaling goes, he is doing things by the books. But instead of saying "inspection" he should have told you he is waiting for partners approval. 

     Not unless he has a business partnership registered with the state. Prospective customers are not partners.

    Not going to argue law with a lawyer, but in some states a general partnership does not need to be registered. Limited partnerships, well that should require registration everywhere. 

     That was shorthand, to be sure.  But I think you understand the point I was making.  Besides, the general rule with general partnerships (ha! see what I did there?) is that the actions of a partner bind the partnership.  So "partner approval" is a misnomer.

    People who identify themselves as lawyers on a forum like this are taking unnecessary risks, IMO.  So I don't know what you're talking about.

  • Garland, TX · Member since 2013 · 20 posts · 14 votes
    11y

    @Wayne Brooks I don't blame you I wouldn't accept any kind of buyer who wants to close on a residential home in 90 days, 30 days maybe. I don't know of any wholesalers who would try to get a contract on a house for 90 days. Most wholesalers attempt 30 days or less with advertisements that say quick closing. So, it looks like you don't work with wholesalers at all based upon what you said ? Most wholesalers will offer you a wholesale price what most of you realtors call "low ball". 

    The bottom line is the seller got educated after she signed a contract with the wholesaler and continued to work with him for the several days after she fully understood what he was doing including letting his potential buyers view the property. The majority of wholesalers I know operate in this same fashion and the seller will find this out when she gets in the game. Only thing I have a problem with is that he may have not been polished enough to know his numbers and repair costs along with the prices other investors are willing to pay in certain locations.  So he wasn't able to sell the house in the end of 7 days, hopefully some earnest money was collected to compensate for those 7 days ? If not then make sure next time around.

    The other fact is realtor's buyers have option periods and in Texas you pay an option fee for this but it can be waived or negotiated by the seller / buyer if they don't like it. Also realtor's buyers mostly come with bank financing that takes 30 days or longer which that can fall through at the end and repeat itself with another buyer if you are really unlucky. I know you seen this happen and happens quite often.

    Therefore, lets not make wholesaling seem fraudulent and pretend that working with a realtor / broker is better or faster way to sell a house. In some instances it is an advantage like the market we are in Texas not sure about Florida. It still depends on the condition of the property and price.

    Most realtors I know like to tie up a listing for 6 months are more, is that right ? Watch out for that if this seller decides to go with a realtor / broker.

    One good advice that I saw was someone said that if she was willing to sell at a heavily discounted price then she should be able to do it herself if the price is right.

    Don't do it through a realtor unless you negotiate their listing fee but you still have to come off that 3% for the buyers agent fee so you will be out of 5% or more. Since your dad is realtor he can do it for free. Isn't that what most of us do for our kids..LOL. Here in Texas we have what you call discounted realtors were you pay a fee up front light $500 - $700 & you pay the 3% to the buyers agent.

    You can also call the wholesaler back and ask him why none of his buyers was interested in buying the property. If you get this information this may help you sell it faster if you can eliminate the obstacle.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Steve Babiak:
    Originally posted by @Richard C.:
    Originally posted by @Account Closed:

    ...

    ...

    Not going to argue law with a lawyer, ...

    ...

    People who identify themselves as lawyers on a forum like this are taking unnecessary risks, IMO.  So I don't know what you're talking about.

    Stated as only a lawyer would ;)

    There's this old saying, "if it quacks like a duck ..." ;)

  • Garland, TX · Member since 2013 · 20 posts · 14 votes
    11y
    Originally posted by @Richard C.:
    Originally posted by @Zeak Hill:

    @Richard C.

    I see you put your spin on it, I said:

    "you are not obligated to volunteer all your "trade secrets" to sellers. If they ask then by all means be honest but it's not wise to educate your sellers on all your business details of how you conduct business."

    Your interpretation implies that I'm saying be dishonest unless challenged which is not what I was trying to convey and my post dealt with a lot more than what you gleaned.

     Do your seller believe that you are buying their house?  Yes or no?

     Are you familiar with "and/or assigns" ?  Yes or no ?

    Did the contract specify that it "could not be assigned" ?  Yes or no ?

    Most wholesale investors know what I'm talking about but I think you are approaching it as someone who is not familiar with what goes on in biggerpockets.com and many other investor local reia across America

  • Portland, OR · Member since 2015 · 29 posts · 9 votes
    11y

    So I am curious @Nikki Harmon.....how did this deal turn out?

  • Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    11y
    Originally posted by @James Wise:

    @Nikki Harmon

    Sorry that you were put in this situation. Unfortunately there is a huge industry of clueless unlicensed folks running around doing this kind of stuff.

    As a licensed Broker I can tell you with a certainty that what these people are doing is unlicensed brokerage activity. It's unfortunate that there are so many people, many here on BP that have no idea what they are talking about. The good news is that there are a lot here on BP who do know what they are talking about and are giving you some good advice.

    Thankfully we have people like @Jay Hinrichs, @Richard C., & @John Thedford who try and spread the word to the uneducated so that more people become educated about this unlicensed and unregulated industry.

    I would recommend you sell this house with a real estate agent. There is a misconception that real estate agents don't work with or know investors. Or that "wholesalers" are the only ones that can move properties quickly for cash. This notion is the furthest thing from the truth. If you find yourself an agent that has an investor network and use the MLS to sell this thing at an incredibly aggressive price it will sell in mere days. The reach of the MLS and an investor agent is 100x further than any clueless unlicensed agent.

    Good luck to you.

     Thanks James. I hate to see victims of these types of operators. My last listing was about 3 weeks from listing date to closing date. I took a listing about Tuesday of this week...may have been Wednesday...already got 3 contracts on the property and I believe my client will accept one this evening. Wholesalers are not the solution as some may state...often they are the problem. 

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Andrea Johnson:

    So I am curious @Nikki Harmon.....how did this deal turn out?

     He informed me verbally that he could not close, that the previously agreed upon numbers did not work for him.  He offered up a lowball offer from someone, and said that was all he could make work.  I emailed him that since he could not close at the contracted price, we would like a written and signed termination of the contract.  He said he would have it to me by end of yesterday.  He did not.  I again texted him today that I needed that termination of contract by today, as this was the last day of his "inspection" period.  He finally sent me an email as the official termination.

    I have several showings this weekend, including an old friend who I haven't spoken to in a long time that has become an investor. I'm pretty confident that I will be able to make something work with someone this weekend, but if nothing comes of any of that, I will be listing it on the MLS with my father at the beginning of the week, hoping that an offer that can close quickly comes along.

  • Portland, OR · Member since 2015 · 29 posts · 9 votes
    11y

    Well I'm really sorry he misrepresented his intentions like that and I wish you the best of luck in selling your property! I have been following this thread and I have learned a lot about the wholesaling business.....lots of opinions here!

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Zeak Hill come to think of it I saw a 100 dollar option fee as a line item on the HUD and thought that odd... but what ever works in Texas. although like @Chris Clothier mentioned I did mention it to my client.. IE I said hey client do you realize this deal was on MLS and some dude got in there before you and then flipped it to you.. You need to be sharper on the MLS stuff.. but at the end of the day If it all works for everyone it does not keep me from funding the deals... As this is completely different than my stance as a RE broker for 40 years and what I deem personally appropriate in dealing with sellers .. but I know I have a minority view.. but I still go back to my thoughts.. If individuals can just ty up properteis stick them on their wholesaling website or craigslist or BP marketplace then tell me why we need to have a licensed RE industry at all.. why does any one have or need license should they not all just wing it like wholesalers do

  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    11y

    @Jay Hinrichs - I don't know the legality of it, but I sure know that TREC is not an organization to mess with.  That is one organization that you want to make sure whatever you are doing is within the rules.

  • Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y

    Also, found out, he was wholesaling it, and he had other wholesalers remarketing it at even higher prices than his.  who knows how many buyers I missed because they were looking at the property with a much higher price in mind.

  • Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

    How much work does it need? From a flipper perspective the 70 percent rule says it would need to be priced from 210k to 230k minus the repairs. If it needs 30k in work 180 to 210k would be the price range most flippers would buy at assuming that value for after repaired condition is right. 

    It sounds like the wholesaler didn't want it for himself because there wasn't enough room to flup ajd he was hoping he coupd find another investor to take it, but there wasn't room for them either. 

    Once you factor in commissions and other costs you aren't taking much 9f a discount from mls. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Zeak Hill  I think you will find that Brandon has made posts that encourage anyone thinking of wholesaling to check their state regs.  and or close on the property before they resell or get a license.  Every state is different.

    However most if not every state has a statue like the one in Florida they almost all read verbatim.. its really up to each state as to which =battles they want to pick and with who.

    It appears  that Ohio,, FLA,,, CA  are being aggressive in enforcement of brokering without a license.  

    the practice is not going away but that does not make it legal in most jurisdictions. 

    I know one of my clients in Mississippi was also presented with a cease and desist and fined. So i created a transaction funding mech for him so he could legally come into title and continue his flipping and turn key business. He eventually though went rougue again and this time they arrested him put him in jail on a Friday at 3pm and he could not bail out until late Monday... not a place most would want to be.  

    So again I would like to hear from some very experienced Texas brokers that have brokers license's and hear what their stand is on this wholesaling.. and the 100 dollar option  that is a unique one as well... as stated I saw my first one this Tuesday when I funded a deal for a flipper in Dallas.

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

    How much work does it need? From a flipper perspective the 70 percent rule says it would need to be priced from 210k to 230k minus the repairs. If it needs 30k in work 180 to 210k would be the price range most flippers would buy at assuming that value for after repaired condition is right. 

    It sounds like the wholesaler didn't want it for himself because there wasn't enough room to flup ajd he was hoping he coupd find another investor to take it, but there wasn't room for them either. 

    Once you factor in commissions and other costs you aren't taking much 9f a discount from mls. 

     That is very honestly correct.  My original intention however wasn't to sell to an investor.  I was looking for maybe someone looking to fix it up and live in it.  I went into this telling the guy I was listing on Monday at 260k.  I was just researching to see what kind of price/closing these "we buy houses" places offer.  I had a few appts next week from various interested people.  He made an offer to purchase it himself as a cash buyer with a 2 week closing.  We negotiated a price based on us signing immediately and me canceling my other showings.  It was a good deal for us so we took it.  While, we would really appreciate a quick sale, we did not go into it expecting that. 

    He shouldn't have made an offer he couldn't follow through on.   

    I have a question that I have been researching for a while and haven't come up with any conclusive information. When purchasing a buy and hold, does the 70 percent of ARV minus repairs formula still apply, or should you go buy different calculations?

  • Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

    How much work does it need? From a flipper perspective the 70 percent rule says it would need to be priced from 210k to 230k minus the repairs. If it needs 30k in work 180 to 210k would be the price range most flippers would buy at assuming that value for after repaired condition is right. 

    It sounds like the wholesaler didn't want it for himself because there wasn't enough room to flup ajd he was hoping he coupd find another investor to take it, but there wasn't room for them either. 

    Once you factor in commissions and other costs you aren't taking much 9f a discount from mls. 

     That is very honestly correct.  My original intention however wasn't to sell to an investor.  I was looking for maybe someone looking to fix it up and live in it.  I went into this telling the guy I was listing on Monday at 260k.  I was just researching to see what kind of price/closing these "we buy houses" places offer.  I had a few appts next week from various interested people.  He made an offer to purchase it himself as a cash buyer with a 2 week closing.  We negotiated a price based on us signing immediately and me canceling my other showings.  It was a good deal for us so we took it.  While, we would really appreciate a quick sale, we did not go into it expecting that. 

    He shouldn't have made an offer he couldn't follow through on.   

    I have a question that I have been researching for a while and haven't come up with any conclusive information. When purchasing a buy and hold, does the 70 percent of ARV minus repairs formula still apply, or should you go buy different calculations?

     Completely different set of numbers for rentals. It would be about cash flow instead of arv. But arv would still play a part as most investors still want a good deal. 

  • Real Estate Agent · Davenport, FL · Member since 2015 · 45 posts · 6 votes
    11y
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

    How much work does it need? From a flipper perspective the 70 percent rule says it would need to be priced from 210k to 230k minus the repairs. If it needs 30k in work 180 to 210k would be the price range most flippers would buy at assuming that value for after repaired condition is right. 

    It sounds like the wholesaler didn't want it for himself because there wasn't enough room to flup ajd he was hoping he coupd find another investor to take it, but there wasn't room for them either. 

    Once you factor in commissions and other costs you aren't taking much 9f a discount from mls. 

     That is very honestly correct.  My original intention however wasn't to sell to an investor.  I was looking for maybe someone looking to fix it up and live in it.  I went into this telling the guy I was listing on Monday at 260k.  I was just researching to see what kind of price/closing these "we buy houses" places offer.  I had a few appts next week from various interested people.  He made an offer to purchase it himself as a cash buyer with a 2 week closing.  We negotiated a price based on us signing immediately and me canceling my other showings.  It was a good deal for us so we took it.  While, we would really appreciate a quick sale, we did not go into it expecting that. 

    He shouldn't have made an offer he couldn't follow through on.   

    I have a question that I have been researching for a while and haven't come up with any conclusive information. When purchasing a buy and hold, does the 70 percent of ARV minus repairs formula still apply, or should you go buy different calculations?

     Completely different set of numbers for rentals. It would be about cash flow instead of arv. But arv would still play a part as most investors still want a good deal. 

    If cash flow is strong, what kind of percentage of ARV should you limit yourself to? I imagine that in a case with really good cash flow, you might consider full ARV minus repairs? Is that completely off base?

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Mark Ferguson  so Mark your a top broker in your state... 

    How would the CO department of RE  respond to someone who would go into contract on a property with their only ability and intention to close is if they can flip the property

    They then advertise the property with pictures etc and craigs list or their website.

    they then find this next buyer they assign the contract to the new buyer and they get paid off of the HUD like a broker with the fee being called an assignment fee instead of were you usually see broker's commissions listed on huds.

    Also in your state will title co. do a double close IE  let you pay  seller A  with buyer C's cash proceeds and middle man B makes the delta. 

    Like to get your take on this as a RE professional. 

    And how would you advise your sellers when you know or have a reasonable reason to know your buyer is tying the property up and can only perform if they find another buyer. how would you handle this with your sellers. ?

  • Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:
    Originally posted by @Nikki Harmon:
    Originally posted by @Mark Ferguson:

    Interesting thread. I think in the end the OP got a very cheap education about the process and will know from now on how many wholesalers work. 7 days to have the house tied up is not too bad. Most of the good wholesalers I know make offers knowing they will close whether it is them buying it or another investor. Too bad most wholesalers are not good or these situations would not happen. 

    I may have missed it, but I am curious what @Nikki Harmon thinks the home is worth fair market value and what kind of discount you were willing to take for a quick sale.

     Comps in the area for the last six months range from 310k to 350k.  In current condition, I price it between 265k and 275k.  For a quick sale, I am offering it up currently at 245k. 

    Once I sell it, I'll post how the deal worked out.

    How much work does it need? From a flipper perspective the 70 percent rule says it would need to be priced from 210k to 230k minus the repairs. If it needs 30k in work 180 to 210k would be the price range most flippers would buy at assuming that value for after repaired condition is right. 

    It sounds like the wholesaler didn't want it for himself because there wasn't enough room to flup ajd he was hoping he coupd find another investor to take it, but there wasn't room for them either. 

    Once you factor in commissions and other costs you aren't taking much 9f a discount from mls. 

     That is very honestly correct.  My original intention however wasn't to sell to an investor.  I was looking for maybe someone looking to fix it up and live in it.  I went into this telling the guy I was listing on Monday at 260k.  I was just researching to see what kind of price/closing these "we buy houses" places offer.  I had a few appts next week from various interested people.  He made an offer to purchase it himself as a cash buyer with a 2 week closing.  We negotiated a price based on us signing immediately and me canceling my other showings.  It was a good deal for us so we took it.  While, we would really appreciate a quick sale, we did not go into it expecting that. 

    He shouldn't have made an offer he couldn't follow through on.   

    I have a question that I have been researching for a while and haven't come up with any conclusive information. When purchasing a buy and hold, does the 70 percent of ARV minus repairs formula still apply, or should you go buy different calculations?

     Completely different set of numbers for rentals. It would be about cash flow instead of arv. But arv would still play a part as most investors still want a good deal. 

    If cash flow is strong, what kind of percentage of ARV should you limit yourself to? I imagine that in a case with really good cash flow, you might consider full ARV minus repairs? Is that completely off base?

     I would never pay arv minus repairs. It takes cash and time to make repairs abd why not buy a house already repaired. I want a 20 percent discount on my properties. 

  • Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Jay Hinrichs:

    @Mark Ferguson  so Mark your a top broker in your state... 

    How would the CO department of RE  respond to someone who would go into contract on a property with their only ability and intention to close is if they can flip the property

    They then advertise the property with pictures etc and craigs list or their website.

    they then find this next buyer they assign the contract to the new buyer and they get paid off of the HUD like a broker with the fee being called an assignment fee instead of were you usually see broker's commissions listed on huds.

    Also in your state will title co. do a double close IE  let you pay  seller A  with buyer C's cash proceeds and middle man B makes the delta. 

    Like to get your take on this as a RE professional. 

    And how would you advise your sellers when you know or have a reasonable reason to know your buyer is tying the property up and can only perform if they find another buyer. how would you handle this with your sellers. ?

     Jay, I don't know honestly as I am not an attorney. From what I have read and seen you can assign contracts. I have seen double closings happen here as well, although I personally don't do them. I don't know how concerned the RE regulatory body would be as they are mostly concerned with agents. People buy and sell things with contracts all the time. 

    If a contract says it is assignable I don't see why it can't be assigned. I woupd be concerned with the wholesaler sending ten people over to look at a house. Especially if they are too lazy to go with them. 

    Do I think all wholesalers are good and honest? No, I think many take advantage and give the good ones a bad name. If I was representing a seller and I knew a buyer was a wholesaler who flaked out all the time I woupd for sure advise my seller what may happen. That doesn't make it illegal. 

    The wholesales I know who kill it buy everything they put under contract because they know the numbers and they have real buyers. They also do not screw around with ten showings and some even take title before they try to sell.  

    Advertising a home publicly before you own it is a no no in my book. That's why the good wholesalers will not have to advertise, but make a few calls or send some emails.  

    I used to think wholesaling was shady, but I have met a few awesome wholesalers who do things right and make a ton. There are some sellers who don't want to list on mls. I have bought off market and I was honest they would make mpre on mls but they would rather sell off market for whatever reason. 

Join the conversationCreate a free account to reply, vote on answers and follow this thread.