House under contract with no buyers lined up
Edgewood, MD · Member since 2014 · 283 posts · 59 votes
Sometime this weekend my partner and I will have our first property under contract. We agreed on the price we just have to meet and sign the contract. Our problem is we haven't began to build our buyers list. I was going to market the property on Craigslist and at a REIA meeting. My question is how did everyone else build their buyers list?
Pay no attention to John Thedford. He hates on all the wholesalers but apparently really enjoys hearing himself rant about the guys that "W". His favorite tactic is to call you uneducated and be very condescending. He won't even call you the "W" word because he prefers unlicensed agent or broker. Unlike John, I'll contribute some advice that might actually help you since after all, that's what this site is supposed to be for.
All that being said, what do you have stated in your contract? I have 3 important paragraphs in all of my contracts. 1. Contract is assignable, 2. Marketing: Seller gives buyer permission to market the property to owner occupants, tenants and other investors during escrow. 3. Resell: Seller acknowledges and understands that buyer intends to resell the property for a HUGE PROFIT.
I actually use all caps and bold font when spelling out HUGE PROFIT. (Michael Quarles gets credit for that one)
Next, find out exactly what your state laws are regarding wholesaling, assigning contracts, marketing properties you don't own and receiving compensation from the sale/purchase of a real estate transaction. I personally am a licensed agent and have been for 6 years. For me, it was the right decision and certainly allows me to stay withing the regulations of the Div. Of RE in Ohio. However, I know many others that are unlicensed and are able to operate within the laws for our state. However, you have to start by knowing what those laws are.
Regarding a buyer's list, DM me your email and I'll send you my best tools for building a massive buyers list. It's very basic but will help you begin to establish relationships with the buyers in your area. People buy from people they like so those relationships are key. Good luck and I look forward to hearing from you!
@Brent Coombs I'm not a conventional realtor. I have my license strictly for investing but of course I disclose that I'm a licensed agent . And yes, I offer to refer seller's to realtors all of the time. Not everyone wants to list their home on the MLS and go through that process. I've never bought a house from someone that didn't agree to my offer price. I would never be able to cover my costs if I listed properties for 3%. I'm mailing 20,000 pieces of mail per month. I offer people an alternative and could honestly care less if the decide to sell to me. If they want cash within 10-30 days or whenever, I offer that option. What you fail to see is that there is an absolute need for investors like me. Not everyone trusts realtors, wants to deal with prepping the property, allowing showings, etc. The situations I deal with are far to many to detail here. One thing I will say is that I don't tie up properties for long periods of time. I have standard inspection periods and terminate immediately if the condition turns out to be far worse than expected with repairs exceeding original estimates. Just like a conventional transaction. I keep the Seller in the loop the entire time and yes it works all the time. Finally, I have no fiduciary responsibility to a Seller. I disclose I'm an agent, deal with them honestly and fairly and simply tell them what I can afford to pay for their property. There's no hype, no pressure, I don't do presentations where I print out all the low comps and try to tell them "Your house is only worth $X" In addition, I wholesale deals where my profit is less than a 3% commission. I've even increased an offer by $2K because I liked the Seller and made a slightly larger profit than expected. I get thanked all the time for helping them out of their situation and making it so easy. There's a way to do this business honestly and ethically. I thought that putting HUGE PROFIT in my contracts would cause me to lose deals and I haven't lost one. I was just as surprised as you probably are to hear it too. One final comment for all wholesalers. Go about this business with the intent of providing a service and helping people find a solution to their situation. Help people and you'll be rewarded.
let me address the core root of your question: how to build your buyers list.
REIA groups are a great way to meet local people in your area - try to make it to as many as you can and be very active in the group. Introduce yourself - let the other investors know what you are doing and collect business cards. I really like the auction idea - it couldn't hurt to get yourself in front of some of those investors.
WE BUY HOUSES signs could connect you some some investors who are looking to buy properties. Just be aware that many of them are also beginners who are looking to build their own list too.
Talk to some real estate agents in the area and let them know that you occasionally have 'pocket listings' ( houses that are not on the market or the MLS) for them - they may have buyers who are interested in picking them up from you. Or may call you to see if you have anything when a buyer is looking for something. See if any realtors in your area specialize in investment properties - they will have contacts also.
Keep coming to Bigger Pockets and connecting with others. Keep learning as much as you can about your local market - see who the players are and try to connect with them.
It will take a while to build a buyers list - you are going to have built rapport with many people before you have good list of real buyers.
I've gotten names from title companies who see transactions all the time and know who is doing the deals. They may be helpful to you.
Start up some dialog with a few Hard Money lenders and they may also be able to point you towards some buyers.
you may have to get creative to build your list - there is no one right way to do it - there are many ways to connect with investors. Don't forget to tell everyone you know that this is what you do - and remind them - so they will keep you in mind when the subject comes up - maybe someone at work is complaining about not being able to find a good investment to buy and a friend or family member mentions you to them.
If you stay consistent - followup with everyone who contacts you and stay in touch with your base - you will find that you have suddenly got a buyers list.
Best of luck to you - I hope you find your buyer.
Also - the big question of the day - what are the details of your wholesale opportunity? How much is it under contract for and how much do you plan to wholesale it for? How much time do you have to move it? thanks in advance!
OK..you got advice..but the question never changes. Do you intend to tell the owner you will walk if you cannot assign? This is my main problem with most unlicensed brokers. It causes problems. It can cause financial harm to the seller. It can cause emotional distress. And besides these factors, lies and deceit that are an integral part of any business strategy are wrong. Think about it. Would you want your mother, sister, brother, best friend to be conned by some fast talking unlicensed broker playing these games. There are many dishonest operators promoting that garbage on BP.
"Never once did we lie to the owner lol. I'm not sure where you got that from. The owner knows we're wholesalers and we plan on presenting the house to our investors."
But see that's a part of the problem. You don't have the proper investors to present the house to, hence this post, so you have already misrepresented yourself as a competent investor able to complete the deal. Furthermore, it sounds to me like you have no intention of actually purchasing this property in a worst case scenario, and you are most likely illegally acting as an unlicensed broker. There is a fine line between legally wholesaling, versus being an unlicensed broker.
"However, I do believe the way many wholesalers work could be considered illegal.
Putting a deal under contract, marketing the deal all over Craigslist, and then assigning that deal is a fast way to get fined by your state government and get a nice misdemeanor on your record!
As Dave J. asked in about Ohio wholesaling, “What is your intent and how comfortable are you if you have to defend that position if you find the local real estate commission asking questions?” "
-Source BP blog 28 Mar 2015, Brandon Turner.
The legal aspect of things aside, in the end you signed a contract stating you will buy a home, when in reality you have no desire to actually follow through and purchase it. You reached out and contacted the seller, and presented yourself as a competent investor able to get the deal done, when it is entirely possible that you can not since you have never done it before, and have no contacts that are buyers. You can't tell me that you don't see the ethical dilemma in all of this.
Attend as many Investor Networking meetings in your area, you will find plenty of investors thirsty for Deals.
Make Sure to go to a hard money lender and get pre-approved for transactional funding, this will make you a legitimate investor, they will collect a fee of the deal, the hard money lenders will help you move the deal if you put one on contract and you will have their full support (They want to Lend on those properties as bad as you want to make an assignment fee).
You may also find an experience wholesaler that has track record so you can share those first few properties and get some experience with them, the last thing you want to do is not move that deal after you have it on contract, the main porpuse of a wholesaler is to make a profit while solving the distressed seller problems.
"Never once did we lie to the owner lol. I'm not sure where you got that from. The owner knows we're wholesalers and we plan on presenting the house to our investors."
But see that's a part of the problem. You don't have the proper investors to present the house to, hence this post, so you have already misrepresented yourself as a competent investor able to complete the deal. Furthermore, it sounds to me like you have no intention of actually purchasing this property in a worst case scenario, and you are most likely illegally acting as an unlicensed broker. There is a fine line between legally wholesaling, versus being an unlicensed broker.
"However, I do believe the way many wholesalers work could be considered illegal.
Putting a deal under contract, marketing the deal all over Craigslist, and then assigning that deal is a fast way to get fined by your state government and get a nice misdemeanor on your record!
As Dave J. asked in about Ohio wholesaling, “What is your intent and how comfortable are you if you have to defend that position if you find the local real estate commission asking questions?” "
-Source BP blog 28 Mar 2015, Brandon Turner.
The legal aspect of things aside, in the end you signed a contract stating you will buy a home, when in reality you have no desire to actually follow through and purchase it. You reached out and contacted the seller, and presented yourself as a competent investor able to get the deal done, when it is entirely possible that you can not since you have never done it before, and have no contacts that are buyers. You can't tell me that you don't see the ethical dilemma in all of this.
We're (my partner and myself) are working with my mentor is a wholesaler. No I don't have a buyers list. But he has a buyer who he believes will buy the house if the numbers are right. And nothing is signed as of right now. We told her that we are wholesalers and we intend of marketing the property to investors which isn't a lie. My question is how do I build a buyers list since I'm using someone (my mentors) buyers. I made a suggestion of using Craigslist and going to REIA's because I'm throwing ideas out there. I still plan on going to REIA's but if Craigslist is looked down upon or possibly illegal then we won't go that route.
Taking action is the first step! @David White continue to learn, grow, and improve!
Market to investors, cash buyers for the last 5 years, consult a couple of realtors, maybe you can find some folks in your area on BP!
OK..you got advice..but the question never changes. Do you intend to tell the owner you will walk if you cannot assign? This is my main problem with most unlicensed brokers. It causes problems. It can cause financial harm to the seller. It can cause emotional distress. And besides these factors, lies and deceit that are an integral part of any business strategy are wrong. Think about it. Would you want your mother, sister, brother, best friend to be conned by some fast talking unlicensed broker playing these games. There are many dishonest operators promoting that garbage on BP.
Yes. Again I should've stated earlier that we (my partner and I) both have mentors who told us if we found a deal then they would market it to their buyers list. I want to know how to create my own buyers list.
Network.Network.Network
Im also new in the business but basically everyone is saying go out and network & meet new people don't rely on one person to bring you a buyer. This is a place where people come to get advise & tips not get told they are liars and dissevers only because everything isn't being done the way they did it.Some people don't understand not everyone is a veteran at this and everyone starts off as a rookie lol. Don't be discouraged and good luck on your deal & hope all goes well.
I have to agree with you @Mindy Jensen about some wholesalers getting a bit over their heads... Two things however, can also be mentioned as a factor. One is, that a person starting out can only be forthcoming if they know all of the laws and understanding with the seller. Inexperience can get in the way but not on purpose.
Secondly, there are a number of realtors who have burned sellers knowing that a lot of investors are out there, by getting the seller to jack up the price of the properties knowing full well that the prices are too high for selling. Not all realtors are like that but that also hurts the position of the investors as well as the sellers.
Hi, @David White, I wish you luck with finding a buyer. Stick with it... Nothing is worth keeping if it's too easy to let it go...
if you close on the transaction then your problem is solved
Didn't read all the post s here, but from a stand point of building a buyers list, call some of the "I buy houses" numbers, and talk to other whole seller's to see if you could co- wholesale the deal. As far as to get a license or not look at the getting busted ohio thread. It s all about the way in which you operate no matter the business. BP is one of the best places to leverage money, time, and experience. There's a wealth of knowledge here.
Who of you watched that baseball movie that came out in the 90's where they guy built a baseball field in his backward so that the ghost of legendary player's could play? Well in that move was a great quote "If you build it they will come" so I say that to say this.... if you get the right property under contract that has great margin for profit than you'll attractive buyers! My first wholesale deal I played myself short on potentially gaining more profit because I got a great deal from a motivated seller but didn't know the market that well and listed it WAY below what I should of listed it for. Looking back on it I'm not beatn myself up over the potential profit I could of made because many good things happened from that beginner's luck deal...
-I got several calls the first day
- I got it under contract within a week
-I got my asking price
- I got calls afterwards from buyers requesting that I put they on my buyers list and to call them first when I came across any more properties
I build my buyers list on accident buy having a good deal. So find the deals, post them, and if it's a good deal than you can build your buyer's list from it.
Pretty soon all states except the ones that lag behind everything else will make wholesaling restricted.
If you think about it it a realtor at least tries to get the highest price for the owner. A wholesaler just tries to chew the owner down to their lowest acceptable offer.
Not to mention I am sure since these fly by night classes are teaching a supposedly easy way to make money the market is flooded.
Your missing the point. I'm looking for buyers that have bought multiple properties in the last 5 years.
You stated that you and your partner both have mentors. They have buyers. I"m sure you asked them how they formed their buyer's lists. I'm thinking your looking for a method more compatible with your style. Whatever that is. My suggestion is: pick one, try it, see results. If you like it, keep using it, if not try another. Just give it a real effort and be consistent and don't give up.
Real success doesn't come over night. Good luck.
Unlicensed brokers are being scrutinized. They are bending the rules meant to protect the public. There are many victims of these fringe operators. They know darn well how to play games and the states know the games these unlicensed brokers are playing. Just look at the thread titles such as "help...we have a contract and no buyers....what do we do"? The argument they provide a service is not quite true. If indeed it was a VALID service the states would give them guys some form of license category, required education, and licensing. Call it anything you want but the fact is they are unlicensed brokers trying to play real estate agent without the license, education, and oversight.
@David White excellent job on your progress. next step is to let the negative people on bigger pockets who assume that you are broke and put things under contract without money (which even if you did is not really their problem) I applauded you. However on these forums you will mostly find people who are negative about wholesaling avoid them and let them drive for their own dollars (which most wont). My suggestion is to put your deal through the wholesaling calculator on bigger pockets. This will put all the information on one nice colorful page easy for investors to look at then you should post on craigslist and the bigger pockets market place. YOU WILL find a buyer if the numbers are good. Again keep up the momentum and moving forward real investors make their money off wholesalers even if they run into bad ones one good deal can make them 30k not a bad price for turning down couple of 100 emails. The negative ones don't invest enough to offset the cost of running into unethical wholesaler and those you don't want anyways. great job and good luck.
https://www.biggerpockets.com/renewsblog/wholesalers5-strategies-find-assignee/
some more help from the BP site