after i figure out the arv*70%- repair costs= Max offer.
if i were to go home could i give them a call and say "hi so i was thinking about 70k for your house because of this this and this" and if they accept i would send paperwork over by fax. should i get a lawyer and stuff? how do i figure out the legalities of wholesaling
also, how do i show proof of funds if i am wholesaling?
@Account Closed Remember to subtract our your wholesaling fee also.
.7*ARV- conservative repair costs - wholesale fee = max offer
ya i forgot to write that
Great questions. I'm very new to wholesaling myself and would love to get some insight on these matters.
A bank statement is your proof of funds. If you are saying the reason, I am offering this price is based on this and this show the seller all of that in writing.
If they ask for proof of funds (which they should) you're cooked. You have to have funds in order to show proof of them.
This is one of the many good reasons to be up front with the seller about what you are doing.
@Account Closed You could also try showing the deal to a "hardmoney" lender, if they find the deal to be acceptable to risk requirements. They would be able to provide a proof of funds letter. Whether you chose to use "hardmoney" or not.
The seller just wants to have some level of surety that the contract will close.
I would make sure that the seller knows that you or one of your Buying Partners will be closing on the proposed property.
Hope this helps.
I've yet to be asked for proof of funds from a private seller. It helps if you are confident and look the part, including your car (doesnt have to be expensive, but should be clean and not a POS) and (as silly as this sounds), a nice *** watch.
Been asked for POF from a wholesaler or two, which cracked me up because I could buy the house and they couldn't. You will get asked every time on an REO.
Your offers depend on who you are talking to. I rarely make offers on houses I really want unless I'm in front of all parties that can make a decision and make the negotiation final at that meeting. "Take your time to discuss, and it's totally up to you if you want to move forward, but if I leave Im not coming back, Im just too busy to revisit these things over and over again".
Ill give numbers over the phone if I'm trying to weed them out or set expectations. I dont go into "I can pay 70% less repairs", but will say "Man thats gonna cost a lot" And "this house needs a lot of work" "oh jeez, last time I saw that it cost me $10,000 to fix". blah, blah, blah. Of course I ALWAYS ask "what are your needs in selling this house?" And try to fit the offer to fit that. I got a pretty sweet deal once when the answer to that question was "we just need some help getting into an apartment".
There's more to doing that right stuff than I'm willing to go into here. Just read up on negotiating some. "Secrets of power negotiating" is an oldie but goodie there. The biggest advice I can give is to always ask what the seller wants before making an offer.
If you're buying from MLS your agent should be making the offers. I have no idea who you would be faxing...
You shouldn't be putting houses under contract unless you can close them. Wholesaling is NOT tie up a property and then go out an find a buyer. You need to know your buyers' criteria and be reasonably certain that you have an end buyer before making an offer. As in present the numbers to a cash buyer and get a "sure, if those numbers hold, Ill buy it".
The whole reason we have to do POF's nowadays is because too many yahoo's were putting houses under contract that had no ability to close them.
Someone who can or won't show a POF is tire kickers and cannot buy an ice cream cone. The ones that show a bank statement are very serious buyers. If an investor approaches me on buying and cannot provide a POF I would laugh at them and show them the road.
That's comical, Joe. If I have house buying money in my checking account, I'm looking for someone to lend it to. I wrote a check for my last one, but its rare the buy/sell cash flow swing works out like that. I'm usually using private funds and my guy has better things to do with his time than give me POF letters. I had one last year ask me for POF 4-5 times on a 5 day close. That's pretty silly, nobody that can't buy it is gonna do that short of a timeline and that's exactly what I told him.
Ill do them for the banks because there's no getting around it. I tell wholesalers no (but give real E/M and close quick), and I've never been asked by a private seller. I find the POF stuff rather annoying as it doesn't fit private money well, which is how I fund the vast majority of my deals.
As Darrell said above "The whole reason we have to do POF's nowadays is because too many yahoo's were putting houses under contract that had no ability to close them."
I won't even look at an offer without POF from their bank. If someone comes to me and says "I want to wholesale your property" upfront that's fine but don't be a "Yahoo" and try and tie up my property while you look for a buyer.
Worrying about having a proof of funds when being a wholesaler is like worrying about fire insurance for dragon attacks. Have you been asked for a proof of funds? If so, who are you buying from? I can't recall that I've ever been asked for proof of funds unless it was a stupid bank (who we all know have no money) and I'm well into the triple digits on wholesaled deals.
Don't stop yourself from moving forward with your business because you have all these psychological hurdles. Come back here and post when you run into a problem.
"When we first created Dragon Version 1, we didn't know how to create a spacecraft. We'd never designed a spacecraft before …" ~Elon Musk
POF letters are not worth the paper it's printed on. If you need a proof of funds letter for an REO property, you can just Google it. A ton of sites will pop up offering POF letters, some free and some at a small fee... Of course go for the free ones.
It is not a good idea to submit a fraudulent proof of funds you get off the Internet the lenders are aware of them.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!