Hello BP Community! I got my 1st wholesale deal under contract in Miami on July 21st, but it hasn't sold, and the contract expires on the 31st of this month. I'm new at this and fear I may have made a mistake either in my numbers, maybe I overestimated the desirability of this type of property itself, or something I'm not aware of. I wish to get your opinions, but I'm not sure whether it's appropriate to post it here, or share it via inbox.
Any response will be appreciated. Thanks!
Have you contacts that invest in the type of property that you actually have? The hardest thing about being a wholesaler is having a network that is going to be able to accept your contracts with open arms
Well, you can always close unless you told the seller you had no intention of closing and they signed a contract with you anyways.
@Terrance Clark We sent it to a few investors that my friend knows. But he hasn't wholesaled in Fl for over 8yrs. It's a 2/2 townhouse and I saw it as a good rental deal, based on comps. I also posted it on myhousedeals.com and some facebook groups, but got nothing.
Did you represent to the seller that you would close or tell them you would not and they signed anyways?
@John Thedford we let the owners know that we tried, and weren't able to help them. But the contract is still there and I just want to know what went wrong. Maybe nothing was wrong, and I just didn't have the right cash buyers for this deal, @Terrance Clark .
Please be brutally honest! lol.
Here's more info on it (I copied and pasted it from a facebook group where I posted it)...
"Price: $105,500. Nice Townhouse located in North Miami with 2 beds/ 2 bathrooms, 1,200 sq. feet. has been well kept, has an updated kitchen, and well kept bathrooms. Rental comps show an avg of $1,450 per month in rent. Only minor cosmetics such as paint and tile work will be required to make this one ready for rent.
Address: 263 NE 141st St. #5-B
HOA dues are $250 monthly. Owner will be out at closing. $3,500 non-refundable deposit required to lock this one up and buyer pays all closing costs.
Must close by August 15, 2016. Cash or hard money. Contact us for showing instructions. Do not disturb tenants.
Buyers are required and should always do their own due diligence."
Pics are too big to post them all, lol, but here are some...
Great....but I still don't know why a seller would sign a contract with someone who had no intention of closing? Many "wholesalers" are dishonest from the start leading the owner to believe they have the property sold. Don't believe everything you read or take every bit of advice on BP. I just read a blog when some scammer advocated putting $10 earnest money down stating if they walked away they would only lose $10. Florida requires EQUITABLE interest in the property. Without that, operators are violating chapter 475 and it is a 3rd degree felony to broker without a license. Many people are lured into "wholesaling" believing it is easy fast money. Not true.
@Joan Soto Price?
@John Thedford yes, the contract had its contingencies and we abided by them. We let them know we couldn't help them in the end, and they understood. I still have some hope to make this work for them, as well as for me, even if it means finding them a realtor if nothing else works. We're all in this for profit, but I want to do it by solving ppl's problems first, not just mine.
$105,500 Sorry I left that out @Tom S.
So, you told the seller you had no intention of closing and they signed anyways? If so, great marketing!
Well, investors don't go to Facebook looking for their deals. Even if they did, how would they find yours?
Not sure whether there was other text in your original ad, but as posted here, this ad can get you in hot water. You cannot advertise the property for sale. You must be clear that you are selling your contract, not the property, unless you're a licensed agent.
no @John Thedford. Our intention was to close. We did not tell them that we we're not going to close. That doesn't make sense. I must've misread your question.
Here is a link to 475
If you don't have equitable interest you are brokering without a license. There are LOTS of people on BP operating in the same manner. Most don't know it is illegal and other just don't care. The victims are the sellers who believe their properties are sold only to find out the people that signed the contract had no intention of closing. These frauds are all over BP.
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so...close on it and then flip or rent it! Easy enough. Rentals will make you the most money in the long run.
@John Thedford thanks for your advice! How would you go about assigning your interest in a contract without breaking the law? And how do you present your offer to a seller and what kind of contract do you use?
You must put up a reasonable amount of earnest money. I suggest with a title company. As long as you made the contract assignable you can sell the contract. The question is: WHO would sign a contract if told the truth that the "buyer" had no intention of closing? Nobody. So, most of these operators lie to the seller and use BOGUS reasons for backing out (inspection, financing, their partner, etc). In reality, these people are simply trying to operate as brokers without a license. I don't "wholesale". I make offers, PROMISING the seller I will close if it passes inspection, and then close. I typically use a 3-5 day inspection period (my inspector might be booked). I use the Florida FAR-BAR as is contract. On the properties I backed out on due to inspection, the seller was notified immediately, the contract was cancelled, and we parted ways no hard feelings. The frauds like to use long "inspection periods" when in fact they are marketing the property and have no intention of closing. Another seller is victimized!
Ok that sounds great. I sure don't wanna unknowingly break the law! lol Thanks again! @John Thedford
So now your options. Close or walk. Are you enough under market it makes sense to buy and hold?
Never really understood wholesaling. Why not just get your license? You have so many more benefits.
Contact a local RE Agent to give you a list of all the houses in that neighborhood that have sold in the last 5 years with all cash. This typically is investors. Then again go to the assessors website and find their name and mailing address. Then look for these buyers by name to see what else they bought. The ones that buy multiple properties are obviously investors.
Once you get this list of potential buyers, then immediately contact all the cash buyers you just found that buy properties in that neighborhood and tell them about the house and would they be interested in buying it.
Once you have done all that with that neighborhood, go to the next one and 'rinse and repeat.'
I hope this helps.
@Joan Soto - If you can't tell, @John Thedford has some pretty strong feelings about how many wholesalers operate, and I happen to agree with him. Folks are essentially be told to/trained to break some pretty serious laws, and he's just trying to keep anyone from inadvertently committing a felony (while giving real estate investors a bad name, no less.) You need to be very careful with wholesaling in Florida, and if you're going to be serious about it, you're best off just getting your license (one man's opinion, not a lawyer, etc.)
All that said: $105,500 for a dated-ish looking condo that rents for $1,450 with a $250 HOA isn't super attractive to me. Not screaming "Deal!" anyways. What I would be even more concerned about is the fact that Miami/Ft. Lauderdale gets hit with a hurricane every 4-5 years - meaning 'special assessments' that will eat any profit out of this deal.
Bathroom needs a remodel, maybe some paint on the kitchen cabinets instead of a whole tear-out. I see a fan in the bedroom - makes me worry about AC unit. I don't know Pembroke Pines at all, but the bars on the windows would definitely freak me out as a buyer. For a 1.25% deal, (full price offer, $10k rehab) I'd save my money for a SFR - doubly so with how I feel about the market right now. That's just my quick read - take it for what it's worth.
I don't think it's a bad deal, per se, but it also isn't one I would be interested in, especially if I'm buying it from someone I don't have any history or track record with.
But don't get discouraged! Keep working hard - do it intelligently and ethically, and you'll be able to build an awesome business. Good luck!
YES thank you @Jason V. this is exactly what I wanted from this forum, comments like yours and John's, where he laid out some laws, and you gave me some insights on the deal. And yes, my wife and I talked about getting licensed. Now it's a matter of whether one of us gets it, or both. As far as wholesaling, I have found many people on BP who are successful, partly for being transparent with the sellers, and helping them figure out if this is the right option for them, and if not, being completely honest with them in letting them know their situation calls for other exits, maybe the seller is better off with a realtor. Maybe they're better off holding it for longer. Maybe they need a shortsale, or foreclose. But I also believe there are cases where, for different reasons, a wholesaler winds up being the best way out for a seller. If I don't believe that, then I wouldn't be here. When done the right way (just like anything), I truly believe there's a real need, morally and ethically, for wholesaling in RE, if not I wouldn't be here. And I believe it serves not only the sellers, and the buyers, but also the community.
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