A Few Questions for a Beginner Wholesaler

11 Replies

I have been doing quite an extensive amount of research on wholesaling real estate in my home town of Jacksonville Florida as I would to start actively wholesaling real estate. With all the research I've done I haven't found the answers to some questions which are as follows. Now please bare with me as like I said am new to this field and understand one of the following question might be common knowledge in this field.

1. For the contracts we fill out and sign with property owners can those be acquired from the local office supply store which I did notice have real estate sales agreement forms or do they have to be acquired from another source such as Realtors?

2. For those contract forms that we present to the owner which state various terms such as the purchase price, estimated cost of repairs, wholesaler fee, that I will be assigning the contract to an investor, how and when potential buyers can see the property, and etc. how would I go about negotiate with a potential buyer if the prices are already established with the owner in the contract and given to a title company during the process of finding a buyer?

3. Also regarding the general concept of wholesaling first I read some places but not all that wholesaler's are to give a deposit to the property owner. Is this the norm of this field and if so how much. I've read anywhere from $10 to over $100. Also in the agreement of the contract whether the closing is in 30,60, or 90 days once that time passes and I legally responsible to purchase the property if I can't find a buyer? This I have also gotten mixed information within all of the research I've done.

4. After reading about completing the wholesale process with a title company I also have read that it is very back and fourth whether title companies work well with wholesalers. If I went to a title company asking to process a contract and assist with the wholesaling of a property can they turn me down. I read that sometimes title companies either don't want to work with wholesalers and tell them they are not able to.

Thanks so much in advance to anyone who responds it is greatly appreciated

Kyle

1. A good place to start is your state real estate board's official forms. Then consult with an attorney to make any adjustments.

2. You tack on an assignment fee to the price you have with the seller. Or do a completely separate contract with the end buyer.

3. IMHO if you write a contract to buy a house you better be able to close, buyer or not. Now, if you're totally up front and make it clear you are not actually going to buy the house but simply try to find a buyer, then its not so bad to back out if you can't find a buyer. But if you tell the seller you're going to buy it, you should buy it.

4. If a title company required to provide services to you? No. The trickier the transaction, the less likely they will. Straightforward purchases are mostly what they deal with. Most would do an assignment. Almost none will do a double closing using end buyers funds. Some will do double closings if you have transactional funds. Few will have any clue if you say "I'm a wholesaler and need help". If you said "I'm a new agent and need some help" you would likely get it. But that's a well-recognized role in the business. Wholesalers are not.

@Kyle Nelson

Welcome. Time to build the foundation below.

Check out the Start Here page http://www.biggerpockets.com/starthere

Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having 50 past ones to catch up on.

Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet fellow wholesalers perhaps if you locate a smokin deal they will work it with you and all the cash buyers (rehabbers) you will need.

Couple good reads

Try to read everything you can here on BP for wholesaling.

Good luck

Paul

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Great questions Kyle, I'm so glad someone asked them.

@Jon Holdman - how do people usually respond to you when you say you're putting a property under contract in order to try to find a buyer, with no intention of closing. The honesty appeals to me and I'd like to go this route but not sure how people would react.

I agree with @Jon Holdman 's assessment, get good paperwork, it will save your butt later. Larry Bernard is one of the local attorneys that is really good with the agreements and I would recommend him. Call him and speak with him. Again, highly recommended, I have closed a house with him. You need an attorney to review ANYTHING you are using in Real Estate, period!

Jack

There seems to be a lot of confusion on this topic here. First off all contracts by definition are assignable unless specifically stated in the contract that it is not assignable. So, if you have taken a house under contract with a standard purchase and sell agreement. You can buy it or assign it. In my experience the seller could not care less how you get this accomplished as long as you get it done. If you assign it there are no closing costs for you. If you wholesale it you will need transactional funding, you cannot fund your deal with your buyers money since the last recession, this typically is about 5% of the borrowed amount but there are restrictions to this so do your research. Either way you are fulfilling your contract with the seller.

There is no need to add anything to a contract the purchase price is all that you need. Of course your buyer will want to know what repairs are needed to arrive at a reasonable estimate of repairs and the price they can pay. It does help if you have done a few rehabs before so you can accurately determine the cost of repairs and be able to tell your what those costs will be.

Ten dollars is fine, there needs to be an exchange of something to make it a legal contract. negotiations with your buyer are between you and your buyer, it is no ones business but yours and your buyer. Many times the house is vacant so very few issues.

@Kate Pierse I'm not a wholesaler. Not my cup of tea, and I already have a job. So I can't directly answer your question of how people react.

I will say I think any business that relies on deceiving the people you work with is fundamentally flawed. Wholesaling is unlicensed brokering. Period. All the business with getting a contract between the seller and wholesaler and then assigning or double closing that is to avoid the legal requirement to have a real estate license in order to broker transactions.

An agent and a seller sign a listing agreement. The agent says they will try to find a buyer and if they do the seller owes them a fee. A wholesaler is really doing the same thing, but uses different contracts. @Patrick Henderson is right that the seller doesn't really care how the deal goes down, as long as it does. And that's the potential problem with a purchase contract.

If the seller is simply told "I'm buying your house" the seller is legitimately entitled to be upset if the wholesaler later comes back and says "sorry, can't close, keep my $10".

OTOH, If the conversation was that the wholesaler is going to try to find a buyer, and the purchase and sale agreement is what allows them to do that and to collect their fee, then backing out is not so bad. As with a listing agreement, its possible the wholesaler might not find a buyer. Or that the price may have to be renegotiated, same as an agent saying "we need to drop the price."

Quick Info and direction for additional mind feeding information to greatly consider when building your business. One thing I have learned being a newer investor as well is this information is priceless when you have good people(BP Community) to help for guidance.

Let me clarify a bit. I do wholesales but it 's not the only thing I do. I'm acquiring a property for rehab now. Apparently you have seen some bad experiences for some but you're assuming a little on the conversation Jon. I've never done anything unethical or illegal.

When a Real Estate agent doesn't perform he leaves the seller without the $10/$100 or whatever amount of earnest money and hopefully he has performed diligently. The majority of Agents simply put it on the MLS And that's fine. I have no problem with that. The money he makes is income. The money I make is capitol gains, no income or social security tax, because I am making an investment. The Agent does not have to fund the deal, I do. My risk is far greater than his, I deserve options. It has nothing to do circumventing laws or cheating someone who has a license. Not to mention that I personally spent much more time and money learning and crafting my business than an Agent.

I think it would be wrong to classify me or anyone who does a wholesale deal as deceitful in any way, simply for using this method as an exit strategy. I'm sure there are dishonest people in every industry.

I personally have never failed to buy a house that I've made an offer on, that was accepted of course. The buying process is the same as buying it for rehab and that's my intent. If I can pass it on to someone who can do the rehab cheaper or more efficiently and I make a little on it, great. I also spend more than the average Agent on marketing to acquire my properties. It's no different than buying a broke down car that the owner doesn't know to do with it. It's my training, experience and expertise that makes the real difference. Jon I take from post that you are a licensed Real Estate Agent.

BTW I don't mean any of this to be condescending in any way.

@Patrick Henderson

Jon is not a real estate agent. From being active here, and in the RE market it's just obvious that most wholesalers don't do it like you do. I have unintentionally "wholesaled" , I guess you could call it, a couple where I bought them, did no rehab, then flipped them. Most wholesalers make the owner believe they are actually buying it, for fear the owner wouldn't deal with them otherwise, and I would venture to guess that most purchase agreements by this type of wholesaler never close.

Wayne, I don't think most wholesalers do anything unethical but I don't know most wholesalers, the ones I do know are ethical. Apparently wholesaling leaves a bad taste in some peoples mouths. I'm not trying to be argumentative, I just don't care for negative statements especially when the statements generalizations, I don't want to bash anyone or their business model. Just so you know. I have known people even in my family I would not teach what I know about this business because I know they are dishonest. Those kinds of people will be dishonest in any industry. Unfortunately they exist in our world.

I believe I have some great information to share on this site based on experience, education and trial and error. I want to share it and I will, either here or somewhere else. Those of us who have good information to share know that poor or uninformed information is damaging to your dreams of making a better life for you and your family. This site, I hope, is here to motivate you to take action. No one can really be helped until they take action. Don't let and dreams and aspirations be stolen by bad information or negativity. Get up and get started, NOW!

One last thing for those less informed on the subject of wholesaling. Every wholesaler must purchase every property he or she wholesales. There are closing costs. And, he or she may have to borrow that money which ads to their costs and risks.

To compare a Real Estate agent to an investor who wholesales when it's in their best interest is at best ludicrous. Most agents, my colleagues and I have dealt with, and this is from my personal experience, only, put the house on the MLS and nothing else. And they get 6 or 7 percent for this. They pretty much know what to list it for through the system and not experience and they are legally bound to the clients best interest. which is to keep them honest. The first thing they do is to tell the seller what needs to be done to get the house in shape to sell. Which cost the agent nothing and seller may or may not have the money to hire someone or talent to do it themselves. And, could make it even harder to sell.

Don't get me wrong there are some Damn fine agents out there. But I guarantee you they paid their dues and learned their business and they never stop Learning.

Most people on this site most likely already know more than the average agent. So many people get into this business and do almost nothing.

Get up, get motivated and get started. You will be surprise yourself if you just take action.