Buying from a wholesaler - feedback needed

6 Replies

Hi BP community,

A wholesaler is selling a property in a good area that I am interested in, but have never bought from a wholesaler before.  Here is the info from the wholesaler:

EST ARV $95,000
EST REPAIRS $9,000
EST MARKET RENT $1,250
EST RENT REPAIRS $3,000
PRICE $41,000

CASH OR HARD MONEY ONLY
BUYER PAYS ALL CLOSING COSTS
PROPERTY TO BE SOLD AS-IS
CLOSE DATE: JUL 2

PLEASE DO YOUR OWN DUE DILIGENCE BEFORE SIGNING CONTRACT

DETAILS
3 BR / 2.5 BA / LARGE ATTACHED GARAGE
RANCH STYLE
LIVING SF - 1421
LARGE LOT - 1/2 ACRE
BRICK

ROOF, HVAC AND FOUNDATION APPEAR TO BE IN GOOD CONDITION.

REPAIR ESTIMATES
KITCHEN FLOORING, UPDATE BATHROOMS, PAINT, MISC
TOTAL FULL ESTIMATE: $9,000

DO YOUR OWN DUE DILIGENCE BEFORE SIGNING CONTRACT

-------------------------------------

Records show that this property was bought at an auction for $32,117 last month. Also, this home currently shows sale pending at $64,500, however, I assume that deal fell through for some reason.  

What information do I need?  Is the July 2 close date set in stone?  Do I need to get my realtor involved?

I look forward to your feedback

Like the ad says, do your own due diligence - what is your ARV estimate based on comparable sales? And what is your repair estimate? ($9k sounds pretty low, but the only way to tell is to look for yourself and calculate yourself).

Are you looking to rehab and flip? If so, accurate ARV and repair costs are even more critical.

If you're looking to buy and hold as a rental, then you can usually get away with a less expensive rehab, and you're more concerned about cash flow than ARV - in which case you'd need to evaluate the potential rental income versus financing, tax and insurance costs very closely.

The pending sale could be the contract to the wholesaler, and the July 2nd date is probably the date their contract and/or contingencies expire. Have you asked the wholesaler about the closing date, and have you seen the contract they're offering to assign so you know exactly what you'd be getting into?

Jeff Copeland, Real Estate Agent in FL (#BK3326487)
727-235-7988
Originally posted by @Jeff Copeland :

Like the ad says, do your own due diligence - what is your ARV estimate based on comparable sales? And what is your repair estimate? ($9k sounds pretty low, but the only way to tell is to look for yourself and calculate yourself).

Are you looking to rehab and flip? If so, accurate ARV and repair costs are even more critical.

If you're looking to buy and hold as a rental, then you can usually get away with a less expensive rehab, and you're more concerned about cash flow than ARV - in which case you'd need to evaluate the potential rental income versus financing, tax and insurance costs very closely.

The pending sale could be the contract to the wholesaler, and the July 2nd date is probably the date their contract and/or contingencies expire. Have you asked the wholesaler about the closing date, and have you seen the contract they're offering to assign so you know exactly what you'd be getting into?

Jeff,

I am looking to rehab and hold as rental.  The numbers the wholesaler provided are fairly accurate.  I received more information from the wholesaler.  The pending sale is my contract with the seller.  $65k was the reduced asking price.  What exactly does this mean?  Do I receive the property for $41k or less (depending on number we negotiate to) or do I need to pay full $65k?  

In addition, the wholesaler will send me the copy of the contract they are offering to assign to me but may need some additional info from you before it's completed.  What does this mean?  Do I need to get my realtor involved to help with closing?  When should I complete an inspection? 

Lastly, should I offer somewhere in the $35K range considering it was bought for a few grand less than that at an auction a month ago?

I look forward to your response.

@Jeff Copeland

I CORRECTED A COUPLE WORDS AS I HAD PASTED THE MESSAGE DIRECTLY FROM WHOLESALER

I am looking to rehab and hold as rental. The numbers the wholesaler provided are fairly accurate. I received more information from the wholesaler. The pending sale is their contract with the seller. $65k was the reduced asking price. What exactly does this mean? Do I receive the property for $41k or less (depending on number we negotiate to) or do I need to pay full $65k?

In addition, the wholesaler will send me the copy of the contract they are offering to assign to me but may need some additional info from me before it's completed. What does this mean? Do I need to get my realtor involved to help with closing? When should I complete an inspection?

Lastly, should I offer somewhere in the $35K range considering it was bought for a few grand less than that at an auction a month ago?

I look forward to your response.

@Ernad D. ,

The pending sale is their contract with the seller. $65k was the reduced asking price. What exactly does this mean? That means that the asking price on the MLS was originally 69,500 and was recently reduced to 64,900.  The wholesaler likely has the pending offer but the list price does not change in the listing when there is a pending offer.  

Do I receive the property for $41k or less (depending on number we negotiate to) or do I need to pay full $65k? If it is a true wholesale deal, the wholesaler has an accepted offer for less than $41k. The difference between the $41k and the accepted offer price is the wholesalers fee.  You can negotiate anything but the accepted contract price must be paid to the seller (in this case, the bank).  

In addition, the wholesaler will send me the copy of the contract they are offering to assign to me but may need some additional info from me before it's completed. What does this mean?  The wholesaler wants more info about you to make sure you can close and may want you to sign a non disclosure.

When should I complete an inspection? Complete your inspections as soon as possible and always before you sign a contract.  Do your due diligence.

Lastly, should I offer somewhere in the $35K range considering it was bought for a few grand less than that at an auction a month ago? There is really nothing to offer until you see the contract.  If the purchase agreement is much lower then $41 then you may be able to negotiate the price of the wholesalers fee.  However, if the deal works at $41 why not pay it?  If the deal doesn't work, then negotiate.

Sorry about all the bold comments, I did not know how else to separate my comments from your questions.

Craig Wilcox, Real Estate Agent in IL (#475.164058)

How does a assignment contract work?  Wholesaler is asking for:

Full name
Street address
City
State
Zip
Work phone
Mobile phone

Wholesaler says as soon as I get this info to them, they will reply with contract form.