Wholesaler newbie question

26 Replies

I have potential wholesale deal on the table. Its a multi unit that was appraised at 106k and me and my partner got her down to 82k. We have a potential buyer lined up that is willing to take off our hands between 88-89k. This would be my first wholesale deal. We sent her a basic contact that listed the earnest money etc. She sent the contract back as a total revision. She obviously got her attorney involved. Our biggest gripe is she didn't like that we put $10 in the earnest money category. She said that is not a true deposit and she said it should be $1000. I'm not willing to put up a $1000 especially on my first deal. How should we deal with this objection ? Any help would be appreciative. 

I agree with your Seller; but I don't wholesale so maybe those transactions are different.  In traditional RE deals, the seller wants you to be vested in going the distance to make the offer work and 1% shows some effort.  Here in the DMV, on deals/areas where investors are plentiful, 1% doesn't even cut it.  However you are financing your deal, cash; hard money, etc, another deal  could come across your desk that is more profitable and you could drop her in the wind(assuming you couldn't do both deals).  You have to offer her something to let her know you are the read deal and will close.  Offer up Proof of funds letter and the ability to close the deal very very quickly(if possible).  If I'm off base because I do not wholesale, sorry but I think the mechanics of people's trust in the process and wanting to close a deal are the same.

@Sonya Stovall  I agree with you. You have to make the offer with a decent earnest money deposit, but make sure you have your clauses in contract in case you need to get out of deal. $10 is not showing seriousness or gaining the sellers trust.

I guess I'm a little frustrated because its my first wholesale deal and if it was a grand slam like $10-$15k I might consider it but I just think that its not like her property is going to be tied up for a long period of time. 30 days. I could put up $10k, it doesn't guarantee that the deal is going to go through. Its a wholesale deal no bank no realtor no nothing if that was the case she should just go through a realtor and deal with all the fees and time that come with that. Just looking for some advise on how to overcome this objection if possible. 

@Vincent Coney

If I am accurate here, when wholesaling you will just call escrow and open the account for 1k.  You don't actually have to fill it *yet* however you are liable to fill it.  On the backside when you have your buyer, he should backfill that 1k obligation during the assignment contract.

Granted, different escrow companies probably have different procedures.  Regardless, ensure you have your contingencies written into the contract should the deal not proceed.

@Derrick Strope

So I wouldn't neccesarily have to send in a $1000 with the sales agreement but open escrow with $1000 and when I get the assignment contract signed make sure I get enough money from the buyer to cover the $1000 I was suppost to open escrow with ?

If the seller asks for verification of reciept in escrow then the title company will let them know that it has or has not been received/deposited.

Do you have any kind of inspection window?


What's the actual ARV, and how much in repairs does it need?

Some sellers are ok with little to no deposit. Others want more.

I have put up $1,000, $5,000, and $20,000 deposits within the last 3 months on properties. All were non-refundable/no inspections.

Another idea could possibly be to put up $250-$500 at contract signing and the remaining $750-$500 upon the expiriation of any inspection periods.

If you aren't comfortable just move on, and revisit later....maybe the seller will get more motivated.

Thanks everyone for your tips. What I'm going to do is make my stance and stick to it. We are in the business of helping sellers get cash for there property fast and we are not going to make a whole bunch of revisions to our contract just to try to appease the seller. Obviously she is just not that motivated of a seller. I'm going to email her back that we will not be putting $1000 down in earnest money but if she still want to do business and have the potential of getting cash for her property in 30 days let me know if not on to the next property. 

Why don't you ask for that earnest money from YOUR Buyer? If they won't oblige, then how serious were THEY in the first place?  Cheers...

Originally posted by @Brent Coombs :

Why don't you ask for that earnest money from YOUR Buyer? If they won't oblige, then how serious were THEY in the first place?  Cheers...

 Worth a shot. Thanks Brent

Your seller is experienced. $1,000 is pretty typical.   As long as you have a strong option period for you in the contract, you should not have to worry to much about the escrow funds, because if things fall through you will just exercise your options period and back out, receiving your $1,000 back.

I was always under the impression that you didn't need any earnest money?

Vincent, the amount is not as important as the gesture sometimes. If a rehabber wants to do the project, the fact that you were confident enough to put at least 1,000 of your own cash in, improves the buyers confidence that it's a good deal. I'm not saying anyone will ever admit that, but it's simple psychology. Good luck and kick butt, my friend.

Originally posted by @Tim Wilkinson :

Vincent, the amount is not as important as the gesture sometimes. If a rehabber wants to do the project, the fact that you were confident enough to put at least 1,000 of your own cash in, improves the buyers confidence that it's a good deal. I'm not saying anyone will ever admit that, but it's simple psychology. Good luck and kick butt, my friend.

 Thanks Tim

What I'm thinking about doing is getting with the buyer and just doing a birg dog agreement of some sort. I hate leaving a potential good lead on the table without trying to do something to monetize it. I hope me being persistent pays off in this real estate game.

@Vincent Coney  It seems you have a REAL opportunity here. It would be a shame if you were to talk yourself out of the potential $6-7k to maybe settle for as little a $1k or less over the mere matter of who pays the deposit. This IS a learning curve for you, but are you serious about wanting to do these sort of deals regularly? If so, you need to go for the MAXIMUM, NOW. If on the other hand it is only a one-off and you don't expect to do any more deals, then, you STILL need to go for the MAXIMUM, NOW! Cheers...

@Britney Miller  So when you come to sell your home and someone says to you "I offer you $100k and will settle in three months so please don't offer it to anyone else in the meantime", you won't ask for any earnest money? Hmmm...

Originally posted by @Brent Coombs :

@Vincent Coney It seems you have a REAL opportunity here. It would be a shame if you were to talk yourself out of the potential $6-7k to maybe settle for as little a $1k or less over the mere matter of who pays the deposit. This IS a learning curve for you, but are you serious about wanting to do these sort of deals regularly? If so, you need to go for the MAXIMUM, NOW. If on the other hand it is only a one-off and you don't expect to do any more deals, then, you STILL need to go for the MAXIMUM, NOW! Cheers...

Hi Brent. No I want to do this as a ongoing business. I guess its the principle. My first deal out I didn't want to have to put up $1000 as a earnest deposit. I know it may seem silly. Also the other problem is she revised the whole contract which is definitely not a motivated seller. I know that these deals will not just be a walk in the park. I just think I shouldn't have to jump through so many hoops to help someone get what they agreed upon 82K.


@Britney Miller  So when you come to sell your home and someone says to you "I offer you $100k and will settle in three months so please don't offer it to anyone else in the meantime", you won't ask for any earnest money? Hmmm...

Britney the difference is that we are helping her get cash for her property in 30 days or so not 3 months. She is not dealing with mortgage companies, closing costs etc. It still should be some sort of trade off. Plus if she takes 30 days out of her life and the deal doesn't go through is it really that bad. If she went the conventional route it could sit on the market for months and months. 

@Ricky Butler  Hey Ricky, it was me (Brent) who said Go for the MAXIMUM NOW !!!

And @Vincent Coney  , when I addressed @Britney Miller  it was as a hypothetical because she had said in her post "I was always under the impression that you didn't need any earnest money?" which was surprising to me, so I just put the Sellers perspective on why they DO want earnest money.  

There are a lot of threads that deal with ways to not be much out of pocket when giving earnest deposit - usually relating to making sure the deposit is refundable if the deal does not proceed. THAT is the education that you quickly require. Go for it. Cheers...

@Brent Coombs, Apologies! As I read the thread your response just made sense. To often we place obstacles in our own paths that don't really exist or are just minor distractions to obtaining our goal. I agree with you Earnest Funds of $1k paid by the wholesaler and/ or cash buyer makes sense #Each deal is different #Go for the MAX NOW #Where there's a will, there's a way #Thank$

Well everyone there has been a turn of events. I emailed the buyer back and basically said this is a cash deal no earnest money etc and she wrote back and said shes fine with no deposit lets do the deal. It goes to show. Stick to your guns and sometimes be ready to walk away from a deal if its not right in your eyes. At the end of the day you run your business how you want to run it. But before I celebrate let me go through getting the check. I will keep everyone posted and thanks everyone for there input. Its definitely motivational.  

@Vincent Coney  What happened with this potential deal?  Did you move forward with it?

- Tom

No the deal turned out to be a no go. Someone explained to her exactly how the wholesaling process works so she either wanted  non refundable earnest money or she said lets just do the deal with out a contract. 

But I do have some good newa. I went to my court house and made a probate list and mailed off a flyer to about 60 names. I got a call on one yesterday were a financial adviser is handling a sale of a house for his dead clients brother. The house ARV is $115K and it needs about $15-$20 thousand worth of work rough guesstimate. Initially the seller is asking price of $75k. I go to see it this weekend. The seller seems motivated especially being out of state and he wants nothing to do with the property. I will keep everyone posted on the outcome. I'm anxious to see how they will respond to my low ball offer.

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