Assigning Contracts / Wholesaling Questions

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Assigning Contracts / Wholesaling Questions

Account Closed
Houston, TX · Member since 2008 · 8 posts · 1 vote

I am a novice RE Investor and have several questions about this area of investing. Many people interchange Bird-dogging and Wholesaling. I have studied a great deal and am ready to begin my career in this field. I want to Wholesale properties - put them under contract and "flip" to true end-buyers/rehabbers. In the beginning, due to cash, I do not want to truely purchase the properties unless absolutely necessary and then I have probably made a bad deal if I cannot flip the contract. I understand the numbers game before putting a property under contract. I will build reserves and then look into rehabbing and rental. I want to file an LLC for protection, advertising and credibility. I understand the marketing aspects - buyers lists, ads, business cards, bird dogs, networking, etc.

Questions:

Without a lawyer where can I obtain or purchase Non-Disclosure, Non-Compete and Master Fee Agreements?

I will use the standard (Texas) TREC 20-7 contract but I definitely want to have an exit strategy out of the contract. Do you recommend the "Option Period" for this strategy, maybe for 30 days, with closing 30 - 45 days after?

If not using the option period, how and where on the contract do you indicate how long you have control of the property? I will always be up-front with the seller about assigning the contract. Earnest money will be deposited with a title company.

How do you indicate payment on contract - all cash since flipping to an investor/rehabber? They may be financing through hard money...

Starting out do you recommend finding one or more realtors that works with investors to run comps, etc? If so, any realtor recommendations? Any suggestions for compensation, trade-outs to the realtor.

Any title companies and lenders you recommend that work with investors in Houston?

Sorry for the length of the thread but I would like any and all answers, comments and advice from other investors. Everyone has to start somewhere and I know I will always be learning about this industry. I believe I am off to a good start and this will work as I will not fail. I will not work for someone else again. Thanks for reading. If you would like to network or exchange ideas, please email me.

James

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Ryan Webber
Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
16y

I see that you are going through some of the really old stuff, Stephen. I guess you took my advice and started reading the WHOLE Wholesaling Forum.

There's lots of nuggets in there. It used to frustrate me because when you've been on here even for a couple months you will start seeing newbies ask the same questions over and over again because they don't take the time to go dig first. I eventually got used to the repetition but I firmly think that most people don't realize the absolute gold that they overlook everyday in these forums. You can pay thousands AND thousands of dollars to get it from gurus or you can take a little time and find it here for FREE.

Acres of Diamonds, right here in your BP backyard.

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  • Wes Tuinstra
    Member since 2008 · 664 posts · 18 votes
    20y

    WOW! These are some great questions!

    Welcome to the forum and for posting such a thoughtful
    first post.

    Now we'll just wait to see what discussion this creates.

    0Reply
  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    19y

    I personally don't use the TREC contracts unless I am working with a realtor, just because they are extremely lengthy and can be intimidating to a stressed out, strung out seller of distressed property. I use a simple one page contract that the seller can read and understand in less than five minutes. I want to be able to meet a seller at a property, figure ARV, repairs, and my offer, make my offer, and drive off with a signed contract. An eight page contract will induce people to want to look it over or the dreaded, talk to an attorney. By the time they actually do look it over or get it back from an attorney, 5 other investors have probably made an offer on it. And most likely, if you have properly figured your numbers, the other offers will be more than yours because you would've wholesaled it to one of those other investors for $5,000 more than you bought it for.

    I'm not sure what a Non-Disclosure, Non-Compete and Master Fee Agreement is or what it is going to do for you, but the only additional contract you will need other than a purchase contract is an assignment contract.

    If I were to use a TREC contract and I wanted an out, I would either utilitize the option period (you will have to pay atleast $1 for it), or I would utilitize the financing contingency. You could also put your own contingency into the special provisions.

    If you are going to utilize the financing contingency then there is a space on TREC's Third Pary Financing Addendum for how long the contingency is open for. According to the addendum, though, you will have to give written notice to the seller for it to release you of recourse from the seller. This is also true for the option period for termination of contract.

    I personally do not ever put earnest money down with a contract unless a realtor is involved. It is not necessary and only complicates things. I, again, use only a one page purchase contract for when I purchase and a slightly altered one page purchase contract when I am selling. If I am doing an assignment I also have a one page assignment of contract. None of my contracts have any contingencies, but if I am buying I have the experience and resources to buy the property even if I don't flip it by closing, and if I am selling there is no way the buyer is getting out without atleast losing their $1,000 minimum earnest money.

    I would highly recommend networking with a realtor for comps and for doing deals through the MLS and for HUD REO's.

    1Reply
  • B K
    CA · Member since 2008 · 8 posts · 0 votes
    19y
    Ryan Webber wrote:
    "I personally do not ever put earnest money down with a contract unless a realtor is involved. It is not necessary and only complicates things.
    ...if I am selling there is no way the buyer is getting out without at least losing their $1,000 minimum earnest money".

    You mention that you normally never put any deposit with a contract, when you buy.
    At the same time you say you would never sell without a deposit of $1000.

    Very peculiar attitude. Could you comment on that.

    0Reply
  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    19y

    Having earnest money with a contract is always the wisest financial decision for a seller. When I am a buyer I want the lowest price for the least amount of money out of my pocket ($0), when I am a seller I want the highest price with the most out of the buyer's pocket ($1,000 minimum). It's just good business.

    Power is a huge negotiating factor. I know when I am buying I have the control of the situation. I am most likely dealing with a motivated seller who really wants to sell to me. I deal in situations where the seller has a huge problem that they are hoping and possibly praying for a solution to. I provide that solution, but I provide under my terms. It's my money and I have that choice, so I create the terms favorable to myself.

    When I am selling, I have control of the situation. I don't have to sell to anyone. I have developed my business to a point that I know I can wholesale a property to someone else or rehab it myself if I have to. I don't have to sell, so I create the terms favorable to myself.

    Now let me balance this whole discussion with the idea of ethics. I do most of my business with people in desparate situations, so I balance that in my own conscience. If I can help someone and hit my numbers, I do it. There have been times when I know I could get the property for less but the situation led me to offer more than I knew I could get it for.

    A good example of this is a house I bought this month from a recent widow. She was an elderly lady and her sister had driven from 6 hours away to help her deal with it all and to help her move back with her. The widow needed to sell her house very quickly and told me within 5 minutes of me walking into the house that she would take whatever I offered. She was crying talking about her husband, and she just wanted to move back with her sister. She was leaving the next day to go back with her sister. The house was all this old lady had and I knew she would be living off of the sales proceeds. It was paid off and I knew that I could sell it easily for $20,000. I also knew that she would probably take $5,000, maybe even $3,000 if I worked it. I decided to give her $15,000 for it. We closed quickly, and less than a week after buying it I sold it for $20,000 to another investor. I helped the widow out by taking it off of her hands quickly and giving her the money she needed to live on, and I still hit my numbers.

    I still didn't give her any earnest money, though. lol

    4Reply
  • Stephen Moore
    Real Estate Investor · Lake Charles, LA · Member since 2009 · 271 posts · 52 votes
    16y

    Ryan thats a very unique situation where u truly helped someone out and made money as well,nice going man

    0Reply
  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    16y

    I see that you are going through some of the really old stuff, Stephen. I guess you took my advice and started reading the WHOLE Wholesaling Forum.

    There's lots of nuggets in there. It used to frustrate me because when you've been on here even for a couple months you will start seeing newbies ask the same questions over and over again because they don't take the time to go dig first. I eventually got used to the repetition but I firmly think that most people don't realize the absolute gold that they overlook everyday in these forums. You can pay thousands AND thousands of dollars to get it from gurus or you can take a little time and find it here for FREE.

    Acres of Diamonds, right here in your BP backyard.

    5Reply
  • Stephen Moore
    Real Estate Investor · Lake Charles, LA · Member since 2009 · 271 posts · 52 votes
    16y

    yea i have ryan,this forum is better than a 1k ebook could ever be,thats just my opinion and i've formed a few relationships with some people on here as well,i've looked throug tons of your posts,nick johnson,justin s,and a few others,im on here literally everyday,for hours man,and also trying to get things done as well,taking action,i havent been able to crack any deals,but i know i will,its only a matter of time...i do have a few ebooks but i didnt pay for them,i've gotten them for free,and quite frankly they just dont discuss everything that u need to know

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    I strongly recommned you get out into the field and practice some of the knowledge you have obtained here on BP. Experience is the best educator.

    Make some "test runs" and protect yourself with "out clauses"

    Before you know it, you will be locking and loading great deals to wholesale or even take down yourself.

    Podcast Guest on Show #130
    1Reply
  • Stephen Moore
    Real Estate Investor · Lake Charles, LA · Member since 2009 · 271 posts · 52 votes
    16y

    Will actually,i'm doing some test runs right now as we speak,i didnt want to mention anything at all but im marketing a another wholesalers 2 properties,and may have found a buyer,the guy is going to look over the properties this weekend....so i'll see how that goes.....

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Hope it works out for you, good luck.

    Podcast Guest on Show #130
    0Reply
  • Stephen Moore
    Real Estate Investor · Lake Charles, LA · Member since 2009 · 271 posts · 52 votes
    16y

    thanks Will i've somewhat changing what im going after..

    0Reply
  • Daniel Fernandez
    Real Estate Investor · San Diego, CA · Member since 2010 · 47 posts · 2 votes
    16y

    I use a simple one page contract that the seller can read and understand in less than five minutes.

    Hey Ryan I was wondering if you had a sample of the contract you use when wholesaling with the seller. Ive been having problems finding a fairly simple 1 pager. Any help is appreciated. Thank You

    0Reply
  • Doug Haisten
    Mobile, AL · Member since 2010 · 238 posts · 44 votes
    16y

    I have been making dry runs, going through locating, determining ARV, visting the properties, estimating work to be done, getting POF letters etc. I am at the point or submitting an offer letter. Anyone have suggestions on how I format/word an offer letter?

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Yes, simpy use the standard CA purchase and slaes agreement which yuou can obtain from any RE agent.
    Podcast Guest on Show #130
    0Reply
  • Terry Giancaterino
    Houston · Member since 2012 · 26 posts · 6 votes
    14y

    So Bird dogging is simply finding a deal for an investor and there's no contract for me to sign with seller to hold the property until I find a serious investor? I assume you would have the serius investor ahead of time. Okay, I got it. I've seen the term "bird dog" but didn't really know the difference between it and a wholesaler.

    0Reply
  • Michael Pilarski
    Investor · Murfreesboro, TN · Member since 2011 · 113 posts · 16 votes
    14y

    [url]Terry Giancaterino what the guru described is bird dogging and bird dogs usually get paid for just finding a property and generally not having to analyze it. A wholesaler will analyze and put it under contract if they figure the numbers and can make more than a finders fee. I know some wholesalers can make $5,000 and up on a deal but thats because they put it under contract for, as an example, $25,000 and then turn around and sell it to a rehabber for $30,000 who will then fix it and flip with an After Repair Value of $50,000. This is a very simplied version but I hope it helps. One of the problems with bird dogging is making sure the person you give the property info to is reputable and will pay you, when you wholesale a property you get paid at the closing.

    0Reply
  • Terry Giancaterino
    Houston · Member since 2012 · 26 posts · 6 votes
    14y

    Seems in bird dogging, you have the end buyer before you find the house and with wholesaling it's the opposite most times. Right?

    0Reply
  • Rob Gillespie
    Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
    14y

    Just a quick simple way to do it.

    1. sign a 1 page purchase agreement for all cash and a 60 business day close, your name/and or assigns. Put a clause in that you have access to show your partner investors and if they don't like it, you can back out. Give 10 bucks earnest money.

    2. Market the home with tons of pics and require a 1k non refundable earnest money deposit from you buyer. If their are repairs needed, have a couple of written quotes ready to show as well as real comps in the area.

    3. Assign the contract for a fee at your local title company. to find a good one, find a local real estate club and ask who they recommend.

    It is really that simple. don't get paralysis of analysis, you will figure it our along the way.

    Good Luck!

    1Reply
  • Dave Stinnett
    Lynchburg, VA · Member since 2012 · 12 posts · 2 votes
    14y
    Originally posted by Terry Giancaterino:
    Seems in bird dogging, you have the end buyer before you find the house and with wholesaling it's the opposite most times. Right?

    I'm a newbie myself, but from my understanding the bird dog bascially finds the properties or "leads" for the wholesaler for a much smaller fee or sometimes a split of the assignment fee. Whereas the wholesaler does all the leg work, negotiations and such and closes the deal with an end buyer. In both cases it would be your best bet to know the investment criteria for whomever your finding property for before you find the property.

    0Reply
  • Ramon Jenkins
    Real Estate Agent · Milwaukee County, WI · Member since 2009 · 3k+ posts · 525 votes
    14y

    It might be a stupid question

    I thought quick flips were not available in Texas

    I thought you have to hold unto property for
    6 mos or year before it could be resold ?

    Just wondering

    0Reply
  • Michael Pilarski
    Investor · Murfreesboro, TN · Member since 2011 · 113 posts · 16 votes
    14y

    [url]Terry Giancaterino Partly right. Bird dogging and wholesaling is all about your end buyer. Bird dogging its about your buyer who is either going to analyze the deal and wholesale it to their end buyer or you wholesale to your end buyer, whether it be a rehabber or someone wanting to rent it. The hardest part of wholesaling is finding sellers to sell their property to you so you can find a buyer. Alot of wholesalers spend a ton on advertising and finding sellers. Building a buyers list for yourself will take time, but if you're going to REI meetings, talking with agents, and networking you should already have a decent buyers list and building trust with those you meet. If the deal is there, you'll always find a buyer. Bird dogging you may have your buyers list but you may not have a buyer. If you bird dog, your buyer then has to analyze the deal and if the numbers don't work, they don't buy and you don't get your $1000 fee (or whatever amount you set).

    0Reply
  • Michael Pilarski
    Investor · Murfreesboro, TN · Member since 2011 · 113 posts · 16 votes
    14y

    Good Lord! I went to reply and everyone else has jumped in and Rob Gillespie is right on the money. Listen to what he has to say, he is a huge vat of knowledge.

    Jenkins Ramon I could be wrong, but I believe what you are referring to are the HUD home flips. If there are bank owned and FNMA isn't involved or individual sellers quick flips can still occur. Even with the HUD and FNMA homes there are ways around the holding times and I'll let someone with actual experience with that chime in. It has to do with setting up an entity and selling the entity.

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y
    Originally posted by Jenkins Ramon:
    It might be a stupid question

    I thought quick flips were not available in Texas

    I thought you have to hold unto property for
    6 mos or year before it could be resold ?

    Just wondering

    What you are referring to is a specific deed restriction and typically, only placed by certain banks on certain deals such as short sales, Hud, Fannie Mae, etc. On a sale between a standard homeowner direct to you as the investor, there are no deed restrictions, you could sell the very same day in some cases, netx day in most other cases.
    Podcast Guest on Show #130
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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    14y

    Will Barnard is right on, but I haven't seen any deed restrictions on HUD's, yet. Fannie Mae's commonly have a 90 day resale/refinancing restriction but not always. I'm not sure what the trigger is for when they put that in there, but I've had several with it and several without it.

    That's the only restriction directly on reselling a property. Now there are some lender imposed restrictions that are put on buyers using traditional style financing (conventional and FHA), but you won't run into that unless you are retailing properties.

    I haven't kept up with where FHA is at with their restrictions. They used to have a 90 day no resell restriction and then 90-180 days with two appraisals and documentation of updates by the seller. Then they took off the 90 day restriction for a year but I don't know what happened after that. Someone else on here can chime in for that.

    Conventional financing is not as cut and dry and it depends on the lender, but I've seen several with similar restrictions as FHA.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    I have never bought a Hud home, so i too am unaware of deed restrictions, I put that in my comment simply because someone else pointed it out, I have no idea if it is true or not.

    As far as FHA like Ryan stated, there rule on re-selling is if inside 90 days, then it must not be for more than a 20% increase. If it is, then 2 appraisals must be done. So while FHA lenders will have some restrictions before funding, there are means to get it sold.

    Podcast Guest on Show #130
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