so many questions

13 Replies

I've started in wholesaling because I truly have no money or credit. I live paycheck to paycheck and even coming up with a $20 earnest money deposit could potentially be difficult!

For this reason I have many questions. However, here are my most pressing...

1. Can you write up an agreement of sale with no earnest money? Or can you write up an agreement of sale specifying that your end buyer will furnish the deposit? If so, how does a title company look at this? Should you be up front with your end buyer about this? What happens if the property isn't assigned within the time frame specified in the contract? Is it just null and void and you and seller walk away?

2. Is there a generic agreement of sale and assignment form I can get my hands on? Preferably something that I can use in any state(I've recently read Larry Goins book about remote investing) Obviously hiring a lawyer at $200/hr isn't in my budget! :)

3. Someone told me that I should send a none binding letter of intent to the seller that spells out the terms(ie I have no money, but want to assign your property to an end buyer, etc., etc.) before getting it under contract. Does having an executed LOI mean you have the property under contract-meaning can I find my end buyer at this point?

Thank you everyone in advance!

@Christopher Thomas  I, like you, am new to the business of wholesaling.  In my research, one of the biggest things that has jumped out to me are the "out" or "escape clauses".  These are specific clauses included in the contract that allow you a way to back out of your agreement if you cannot execute the deal as agreed.  It is critical, though, that you are clear up front with the seller with these so that if you do have to exit the contract he/she won't feel cheated or used.  I've even seen some people require the seller to initial beside each paragraph and clause as they read through the contract to insure this.  

Some examples of out clauses are: 

"contract subject to partner approval", "contract subject to inspection" "contract subject to due diligence" 

I would definitely consult with a real estate attorney about these.  I don't know about all attorneys, but I have one that is investor friendly and willing to explain these things to me free of charge.  He may be the exception, but perhaps you could network with some that might help you out.  Always return the favor buy using him to help you close!  

Regarding the letter of intent, my (limited) understanding is that there should be a signed contract that gives you a controlling interest in the property before you can market. I'm not sure if the LOI alone will satisfy the controlling interest requirement. Again, find an investor-friendly attorney to help clarify.

Sam,

Thanks for the reply and your words of wisdom. Maybe finding an "investor friendly attorney" is a great start. I definitely want to follow the letter of the law, yet I don't want my current situation to prevent me from really jumping into this thing full throttle!

Sam,

Something of value needs to exchange hands in order for your contract to be in effect. At least that is how California works. I would imagine PA is the same. In Cali we have standard CAR forms (Califonia Association of Realtors). Our purchase contracts are part of this body of documents. Technically, anything can be your contract. However, an LOI would probably leave too many holes. Should your seller find another buyer, he/she could probably easily move on from an agreement written on an LOI. I ran a search and found www.parealtor.com. The state standard forms are there. You most likely will need to be a realtor to access this. In Cali we can use escrow instructions in place of our standard Residential Purchase Contract. Ask a local escrow company if that works in PA. 

When trying to establish terms with a seller consider what would be attractive to him. I wouldn't be too excited to put my house under contract with someone who admits they don't have the ability to close. My advice is to hit the local real estate clubs and make connections. Make realtor contacts, too. In Cali, I know many people in my local market who would buy right now if the deal were right. I'm sure PA is the same. Find those people. If you're willing to find property, I'm certain some of them will be willing to teach you the business. If money is tight, find a different way to invest in your real estate education. If time is all you have, trade it. But be wise about it... Good luck

I'm sorry... It's www.parealtor.org 

Thanks for the advice James. I will check out the website and see if you have to be a member of the board of Realtors to access or not. Good point about networking. If I have a real deal and real connections, I guess how it's structured is just minor details?

Hi Chris, 

I apologize for getting the names mixed up prior. Your question about having a real deal and the structure of it is a little loose and vague. How a deal is structured might be the only thing making it a deal. And your structure might keep it from being a deal. 

If what I think you're saying is right, then if you have a good deal money should follow. Generally, I completely agree. But don't look past the details! That could be a very expensive lesson...

No worries and yes, that's what I meant. Good point about the details, I def don't want to learn the hard way!

If you're living pay check to pay check and $20 isn't in your budget, you need to get your financial house in order before you start thinking of getting into real estate. Whatever your challenges are now are only going to be multiplied by making more money. More money isn't the solution most people think it is. It doesn't make you happy. It rarely solves problems. 'More money' is the big lie. You need to learn to work with what you have. I'd recommend reading The Compound Effect by Darren Hardy. Think and Grow Rich by Napoleon Hill was also instrumental in my early (and continuing) financial education. The Millionaire Next Door by By Stanely & Danko is also a good read for those just getting started out.

Aaron,

Thanks for the advice and I agree with you 100% about getting my finances in order, which I'm also working on as well. Looking ahead, I see RE Investing as a life long thing that will grow with my increased financial stability.

I've read the millionaire mind about 7 years ago which is what inspired me to get into real estate in the first place. I will check out the millionaire next door. I've heard of Think and Grow Rich, but have never heard of The Compound Effect...thanks Aaron!

@Christopher Thomas  I agree with the other posters. You have been given some sound advice for free! Now comes the hard knocks...

I agree with Account Closed , and unfortunately I came from the school of hard knocks. So you may not like what you are about to read...

 I remember the day that I clearly decided I would never be poor again.

I was sitting outside of an Exxon gas station with $10 to my name (at least until my paycheck came through... Which was two days away), and I realized I could either eat or buy gas to get to school and work, but that I didn't have money for both. Even the bus was too expensive. I sat in my car for 20mins deciding what to do, my stomach was growling and I was afraid to turn on the car because I was that low on gas...

 Ultimately, I went with what would make me money: my education and work. That same day, after eating a snagged apple from a friend's lunch tray and a sample piece of bread from the bakery next to my university, I headed over to the computer lab and put an ad on Craigslist to become a house-sitter/pet sitter. Then I started cleaning houses for the people I was working for as well. I also worked a full-time job, while putting myself through college on grants and scholarships. Every single moment of my life was spent studying or working. To save even more money, I ate ramen noodles because they were 10/$1. Every now and then, I would splurge on eggs for protein.

Within a year, I was one of the 'richest' students in my class (excluding those who were given money for simply breathing). In two years, I was hiring other people to the work for me.

My goal was, and always has been, to make money even when I am sleeping.

No guru, no book, can replace the fire in your gut. If you decide that you never want to be down to your last $20 again, it will never happen. And even if someone tries to push you over, you will get right back up, because ultimately the power to change your financial future is in your hands. And you will know this.

My Final Tip:

Find your big WHY... The reason you are willing to work so hard for so little (and in the beginning that was/is all of us), and it won't be money. Maybe it is to put your kids through school... To be able to retire... To be able to care for your parents as they get older...

Whatever that WHY is, never lose sight of it, and you will do okay.

206‑849‑5730

Fyi... The whole point of my post is that if there s a will there is a way... At least to come up with some extra money for earnest money.

206‑849‑5730

Originally posted by @Tiffany Plovie :

@Christopher Thomas  I agree with the other posters. You have been given some sound advice for free! Now comes the hard knocks...

I agree with @Aaron Mazzrillo , and unfortunately I came from the school of hard knocks. So you may not like what you are about to read...

 I remember the day that I clearly decided I would never be poor again.

I was sitting outside of an Exxon gas station with $10 to my name (at least until my paycheck came through... Which was two days away), and I realized I could either eat or buy gas to get to school and work, but that I didn't have money for both. Even the bus was too expensive. I sat in my car for 20mins deciding what to do, my stomach was growling and I was afraid to turn on the car because I was that low on gas...

The guy who I learned this business from had a very similar experience as you. He was eating Doritos and drinking a chocolate milk, sitting the curb outside a 7-11 when he decided he would change his life.

It is only up to us to decide how our life turns out. My own brother, who lives in a mobile home park and borrowed money from our mother to buy his home, once said it was because of my friends that I have it so easy. Well, we all get to choose our friends don't we! I choose to surround myself with more successful people and the difference that circle of influence has had on me is extraordinary. But it wasn't my friends who changed my life. It was me, tired of working for a super d#$k and wanting to make a change. I think Jim Rohn can also help on the path to success. I love his writings and his Leading an Inspired Life is a book worth reading more than once.
Great post Tiffany.

@Tiffany Plovie

Wow, that's a great story! I totally understand what you're saying and where you are coming from. My big "why" is certainly my kids. I never want them to not have $20 for earnest money (or anything for that matter) in life!

One day owning a house at the beach is #2 :)

Thanks @Tiffany Plovie

and

Account Closed

One day I will be schooling someone on here about what it takes with my story!