Wholesale Contract/Offer Next steps - HELP!

Wholesaling
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Wholesale Contract/Offer Next steps - HELP!

Evan Parker
Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes

Okay, let me start by saying I'm fairly new, I've only placed 1 offer so far and it turned out not to be too great of a decision. 

But there is something I don't entirely understand about wholesaling that I feel gets overlooked in a lot of conversation. Which is exactly HOW to market the deal you're trying to get someone to buy. 

Let me Explain: 

As I understand it, it is not best practice to find what you think to be a good deal, get it under contract, and THEN commence to shop it around. Due to the fact that you have locked up a property without the certainty that someone will purchase the contract, thus wasting everyone's time should no one actually bite on it(makes sense). 

I also understand that it doesn't make sense to shop deals around with your buyers that you don't actually have under contract yet, because.....well it's not even under contract so you're offering an asset that technically doesn't even exist at the time of your offering. Baaaad business practice 101 in my opinion. 

BUT, here's the kicker. If you're unlicensed, it's my understanding that  if you do have something under contract you can't market the deal with pictures because you're then brokering a property illegally...so it begs me to ask the questions..

1. What is the proper "most effective" way to market a deal...? I want to remain as ethical and efficient as possible. But if I shouldn't secure a contract and THEN shop it around, while simultaneously not shopping deals before they're under contract and gauging interest,  how is it possible to ever market/get a deal? 

2. If I can't market with pictures, okay I can get ways around that with just text and projected ARVs etc. But how can I expect someone to be even remotely interested in buying a home that they can't see? Assuming this is the first time this person is doing business with me, so they have absolutely 0 reasons to just "take me on my word" about what's being offered. 

Any and ALL advice is truly appreciated! 

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
9y

@Chance Waddle Thank you for the kind comment. I will reply to a few things. 

First let me say that the answers to some of these questions are a moving target. Also I will say there are some very credible people here on BP that have very strong opinions on both sides of the issue. Whether or not Wholesaling is Legal, depends on specific state laws and the exact circumstances of the transaction 

Let me also say contrary to what many teach, Wholesaling is NOT easy, it is NOT risk free, it CAN'T be done consistently without money. (yes a deal can be done with little money but building a consistent business cannot be done without money)

@Nick Bryant wrote

If you have the property under contract, in most states and circumstances, yes you could legally "assign" your contract. If you do not have the property under contact, that is what most people call "Bird Dogging" and as far as i know is illegal in all 50 states. 

Now the devil is in the details. Was there any fraud or coercion in getting the contract? In getting the property under contract did you tell or imply to the seller you would "Help them find a buyer" Doing those things moves you back into likely an Illegal area.

@Brendan Bruno wrote

Well I don't believe that is true in most areas. Only a foolish buyer will trust a wholesalers numbers. The reason to provide numbers is for the buyer to pre-screen the deal. If he thinks it may fit his or her criteria the buyer will go take a look. Very few buyers buy without looking.  Regarding Foreclosure auctions, buyers are buying assuming the worst case scenario.  If you as a wholesaler price a property low enough that is is a deal as a worst case scenario then yes someone very experienced may buy without looking. 

@Evan Parker  Wrote

You bring up the paradox of wholesaling.   My answer when starting and I still think the appropriate answer is 

A) Have enough money to close on the deal in case you cannot assign the contract quickly enough. 

B) Know With Certainty that you Can find a buyer. 

I never do deals i think are good deals. I do deals that I KNOW are good deals. This is not about guessing, or hopping values will go up. This is about Knowing what the market will pay, Knowing what repairs will be Knowing what rents are, Knowing what other investors will buy and pay. 

You have to decide what your personal morals will allow and how much risk you are willing to take regarding the law. Bird Dogging is illegal as I defined above. However there is no "Bird Dog Police". Speeding in your car is illegal too. However lots of people do it. But just because a lot of people do it does not make it right or legal.  In most areas, getting a property under contract and then assigning that contract is legal.  

Now let me go back to my first point above. This is a moving target.  We are all only one bureaucrat, legislator or liberal activist judge from wholesaling being deemed illegal. So however you chose to structure you business or deals make sure you deal fairly and ethically, and honestly with all parties. You don't want to be the poster child for why wholesaling becomes illegal in your state.

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  • Account Closed
    New York City, NY · Member since 2016 · 420 posts · 172 votes
    9y
    I strongly recommend you read a good wholesale book before starting.
    1Reply
  • Evan Parker
    OP
    Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
    9y
    Originally posted by @Account Closed:

    I strongly recommend you read a good wholesale book before starting.

    Thanks Scott, 

    Do you have a particular recommendation? I've checked out a few but I've found that a lot of them speak very generally and don't really get into the nitty gritty of stuff.  

    0Reply
  • Account Closed
    New York City, NY · Member since 2016 · 420 posts · 172 votes
    9y

    @Evan Parker best one I've read is The Wholesaling Bible by Than Merrill. 

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    Purchase and then resell. Problems solved.

    1Reply
  • Evan Parker
    OP
    Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
    9y

    @John Thedford 

    Potentially, but with trying to build up capital and experience in the area, would it be more wise for me not to jump into owning properties like that? 

    I may be completely off the mark here, but it feels more reasonable to have my trial by fire be in the less risky way as my initial venture(s). I'd hate to purchase, have it be in my name and then become unable to find a buyer so now I have a property on my hands, that's in need of a rehab using capital that I don't have. 

    And that still wouldn't really help the question I asked about how to actually market the deal. 

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    One you own it you can legally market is any way you want. Marketing without owning it sounds like unlicensed brokering which is illegal.

    0Reply
  • Evan Parker
    OP
    Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
    9y

    @John Thedford

    Exactly! Which is where I have a loss of understanding because wholesaling is a thing, and people do it everyday without closing on the property themselves, but I haven't been able to fill in the gap of how they acquire and solicit those deals. 

    Hmmm

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y
    Originally posted by @Evan Parker:

    @John Thedford

    Exactly! Which is where I have a loss of understanding because wholesaling is a thing, and people do it everyday without closing on the property themselves, but I haven't been able to fill in the gap of how they acquire and solicit those deals. 

    Hmmm

     Many operate illegally. I cannot state specific laws in your state regarding these actions.

    0Reply
  • Nick Bryant
    Griffin, GA · Member since 2016 · 4 posts · 1 vote
    9y

    Now I'm confused after reading your post... I am thinking that we should build a buyers list (network and find cash buyers) and ask what they are looking for. Then when we find deals we simply take it straight to them. That's not illegal right? You aren't really marketing the property... more like telling a friend... this is just what I am thinking. Hopefully somebody can help out here. I'm new to wholesaling. 

    1Reply
  • Evan Parker
    OP
    Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
    9y

    @Nick Bryant

    Yes this is true, once you have a buyers list you know who you want to sell to. But there's a huge gap in between acquiring the property and getting it to them. 

    For example let's say buyer A wants a 1 bd 1 bath renovation. Boom. You know what to look for and you find it. BUT what no one really talks about is how exactly to A. get that property under the proper contract and B. Market it to your buyer(s) WITHOUT marketing the HOUSE, you can only market the contract *for* the house. Meaning you can't show your buyers pictures of the property and say this house will cost $xyz. You definitely can't show the property. 

    So without even getting into individual state legal levels, I'm trying to gather a general understanding of how someone can even theoretically market a contract to buyers without the buyer even really knowing what's on the other end of that contract. 

    2Reply
  • Joe Hughes
    Investor · Triadelphia, WV · Member since 2014 · 46 posts · 11 votes
    9y

    As a follow-up, and to add to the confusion, I have a question about viewing. I have been a RE investor for 4+ years now, and do a lot of rehab/flips and just started doing seller financing projects earlier this year. I have "dipped my toe" into wholesaling a few times, but the roadblock that I have run into every time is that the buyer/investor wants an address and to schedule a viewing. 100% of the time. I have tried to meet that objection with the talktrack of we should review the financials, and the ROI, etc. It has always circled back to the buyer wants to inspect/view the subject property. Thoughts?

    1Reply
  • Evan Parker
    OP
    Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
    9y

    @Joe Hughes

    GREAT question. I've had the same response from buyers before and I felt like a deer caught in headlights. I'd hate to soil my reputation before I even start so I've slowed down on my aggressiveness with this until I figure this out

    Curious to see replies

    1Reply
  • Nick Bryant
    Griffin, GA · Member since 2016 · 4 posts · 1 vote
    9y

    I'm going to figure this out guys. Will report back soon.

    0Reply
  • Chance Waddle
    Chantilly, VA · Member since 2017 · 5 posts · 2 votes
    9y

    @Ned Carey You seem to be one of the most ethical/professional members of this community. Could you possibly weigh in on this post? Thanks in advance for any help you may be able to provide. 

    1Reply
  • Brendan Bruno
    Puyallup, WA · Member since 2017 · 38 posts · 8 votes
    9y

    I am a still a newbie, but here is my 2 cents from what I've learned so far about the business:

    Marketing an unseen property (or the contract for one) is something that normally occurs at least in the Fix n Flip industry (I'm still unsure and learning about rental properties). What a buyer I assume wants to see are the numbers that will allow them the ability to turn a profit. Take Auctions for example - people buy properties from auctions all the time site unseen without a solid idea of exactly how much it is going to cost to renovate.

    With wholesalers, the buyers can get a better idea about what exactly is going on inside the property from the numbers that the wholesaler *should* give them (take a look at BP's wholesale report maker for an idea of what I'm talking about - you can report exactly the categories and costs of rehab and projected profits).

    Thus I think is how you can remain an ethical wholesaler if you aren't a licensed agent since your buyer can simply check out Google Street view to "view" it with your numbers right next to them.

    **Please keep in mind I have not made any wholesale deals yet and I am still trying to wrap my head around this subject as well, but this is how it comes across to me. I welcome feedback!

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    9y

    @Chance Waddle Thank you for the kind comment. I will reply to a few things. 

    First let me say that the answers to some of these questions are a moving target. Also I will say there are some very credible people here on BP that have very strong opinions on both sides of the issue. Whether or not Wholesaling is Legal, depends on specific state laws and the exact circumstances of the transaction 

    Let me also say contrary to what many teach, Wholesaling is NOT easy, it is NOT risk free, it CAN'T be done consistently without money. (yes a deal can be done with little money but building a consistent business cannot be done without money)

    @Nick Bryant wrote

    If you have the property under contract, in most states and circumstances, yes you could legally "assign" your contract. If you do not have the property under contact, that is what most people call "Bird Dogging" and as far as i know is illegal in all 50 states. 

    Now the devil is in the details. Was there any fraud or coercion in getting the contract? In getting the property under contract did you tell or imply to the seller you would "Help them find a buyer" Doing those things moves you back into likely an Illegal area.

    @Brendan Bruno wrote

    Well I don't believe that is true in most areas. Only a foolish buyer will trust a wholesalers numbers. The reason to provide numbers is for the buyer to pre-screen the deal. If he thinks it may fit his or her criteria the buyer will go take a look. Very few buyers buy without looking.  Regarding Foreclosure auctions, buyers are buying assuming the worst case scenario.  If you as a wholesaler price a property low enough that is is a deal as a worst case scenario then yes someone very experienced may buy without looking. 

    @Evan Parker  Wrote

    You bring up the paradox of wholesaling.   My answer when starting and I still think the appropriate answer is 

    A) Have enough money to close on the deal in case you cannot assign the contract quickly enough. 

    B) Know With Certainty that you Can find a buyer. 

    I never do deals i think are good deals. I do deals that I KNOW are good deals. This is not about guessing, or hopping values will go up. This is about Knowing what the market will pay, Knowing what repairs will be Knowing what rents are, Knowing what other investors will buy and pay. 

    You have to decide what your personal morals will allow and how much risk you are willing to take regarding the law. Bird Dogging is illegal as I defined above. However there is no "Bird Dog Police". Speeding in your car is illegal too. However lots of people do it. But just because a lot of people do it does not make it right or legal.  In most areas, getting a property under contract and then assigning that contract is legal.  

    Now let me go back to my first point above. This is a moving target.  We are all only one bureaucrat, legislator or liberal activist judge from wholesaling being deemed illegal. So however you chose to structure you business or deals make sure you deal fairly and ethically, and honestly with all parties. You don't want to be the poster child for why wholesaling becomes illegal in your state.

    3Reply
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