Use EBay to assign wholesale contracts?
MI · Member since 2009 · 289 posts · 14 votes
Has anyone ever done this? Successfully? Can anyone think of how the assignment process would work using EBay as a wholesale tool? Thanks, Dan
I'm also interested.
I would make the bid my assignment fee. Minimum bid would simply be the minimum amount of profit you're willing to take.
In the ad would be:
A lot of pictures
Description
contract information (closing date, purchase price, etc)
A list of needed repairs, with 2 or 3 contractor estimates maybe?
Rent prices
It's an interesting idea. I see a lot of homes advertised where you are bidding on the down payment instead of the purchase price, so I wouldn't think it's much different then that.
Please do update us on how this turns out.
Deborah: How does selling on Ebay "Buy it Now" differ from selling on EBay auctions?
"buy it now" is a fixed price. You really don't want to use that format to sell real estate. People that sell products use that format alot.
You would use the "auction" format or run a classified ad in the real estate category. Ebay charges a flat fee to list real estate. Using the auction format I think it starts at $150 (price goes up,depends how long you want to run your listing) I have used the 10 day auction and the 30 day auction. Running a classified ad is alot less but not as successful.
You will have more success by using the "auction" format. You can put the listing as "bidding on down payment", "bidding on assignment fee", or bidding on "purchase price" at the top of your description. Once you have decided what is best for you, be sure to put it in bold letters at the top and bottom of your description so the bidders will know exactly what they are bidding on, ie: down payment, assignment fee or purchase price. You don't want to confuse the bidders.
Be sure to start your auction at a "very low price". This is key and many don't use. Folks are not going to bid on your listing if it starts out too high. I would suggest starting at $1.00.
It's also important to have a good title.
Go to Ebay and look at the real estate for sale and see what other folks are doing. Then you can see for yourself.
I typed my description in a word document and then copy & paste it into the description box.
You'll be able to see how many people have looked at your auction and also how many "watchers" you have. People like to watch a listing and then go in at the last minute to place a bid (so don't get discouraged).
Ebay has the best "built-in" buyers list online. Millions of people visit Ebay each and every day. I use to have a store and was fortunate enough to gain powerseller status within 3 months. I no longer have the store (lost interest) but I'm keeping the name of the store on ebay so I don't lose all my good feedbacks. Folks really take a good look at your feedbacks, this tells if you're a good ebayer or a not so good ebayer. So keep that in mind.
Let me know if you have any other questions and will help if I can. Good Luck
Forgot to mention about payment arrangements. I don't think it's a good idea to use paypal for real estate transactions.
You should handle the transaction the same as you would for someone local, except that all documents will be via overnite mail.
You should have the winning bidder send you his full name, address and phone number right after the auction ends. You will need to know the exact name(s) to put on purchase contract.
You send the buyer your contract to be signed via overnite mail and buyer is to return signed contract with deposit monies back to you via overnite mail. Buyer needs to send back within 24 hours.
The deposit needs to be in the form of a cashiers check. This is to be deposited with your title company or attorney.
Once you receive the contract from the buyer along with the deposit, it's just a normal real estate transaction.
You should have everything that you request in your listing description. If your winning bidder backs out, you can go back to the other bidders to see if they still have interest.
Hi, OK, let's do this. You have an existing contract to purchase a property.
On EBay, list this Option to Purchase the Assignment. Say you want 5K out of the contract.
Sell the Option for a Grand and you can enter the 1,000 as the first bid, you can start the bid at whatever price you want and have a buy it now price, say at 2K, or just let them bid on it.
When the Option sells, they pay through Paypal.
In you description of the Option, you need to provide the Agreement or tewrms under which they have the right to purchase the contract. You need to provide terms that include the winning of the bid, the irrevocable right to purchase the contract at XXX dollars within, whatever term you like.
Now, if they buy the Option, you are committed to sell the contract or make the assignment withing that time frame upon full payment at the execution of the contract assignment. If you fail to sell the contract (assign it) then they have a record of purchasing the Option with the agreed terms.
So, they then buy the contract and pay you 5K, you make the 5 plus the bid amount......OR
You can credit the Option Price toward the Assignment Fee and make 5K....OR
You could sell the Option with a set price, credit the set price, say 1K, if anyone bids higher than 1K, that amount is a premium that would not be credited to the purchase of the contract...so, you earn 5K plus any additional amount bidded as a premium.
In the auction, you only sell an Option and the terms are set and THAT SALE is governed by Ebay, they get a commission on the sale of the Option, NOT the contract.....
because, the Option only gives the buyer the right to purchase within a set time, if they fail to show up and go through the Assignment, they lose the Option Price.
OK, Send me a commission! Good luck, Bill
I mean, you all did know you can sell (assign) a contract using an option, right?
What would be the benefit of selling an option over an assignment?
Reading Bill's post, I'm totally lost. But would really like to explore it more.
Bill - do you generally use Options to buy and sell properties wholesale? Would you be willing to share a little more on the subject?
I'm familair with Options, but would like to learn how you use them.
Options are simply agreements allowing someone the right to purchase somethin, anything, at a set price over a period of time and under any conditions agreed to with consideration paid for the right to do so.
I just answered on thread about changing any real estate sale contract into an option by eliminating penalties regarding performance of the buyer, without ever using the word "Option".
What I suggested he was to sell an option to buy the contract. I think it's laid out above. Your option is what is sold on ebay, once the bid is accomplished, the option is sold, at a lower dollar amount to address any Ebay fees.
As Deborah explained, you can close the contract assignment by mail or in escrow and credit the option price to the assignment fee.
I used Options extensively in business arrangements and real estate. And, by the way, using an option to buy the contract rights under a sale contract...well, I can't see where financing that option price constitutes an installment purchase agreement for real estate as viewed under the FAST Act, anyone catching that?
Wholesaling is nothing more than selling a property to an investor to be resold rather than to someone who intends to use the property. It is nothing unique, other than pricing the property at a lower amount to allow a profit for the next investor. The marketing approach is different, only to the extent of looking for investors instead of homeowners to use the property. You're still selling real estate, I think the concept must have been born by some guru to sell startegies because selling fixer-uppers to other investors is not new.
Marc, I see advantages here because of Ebay.
1. The contract is marketed on an auction, Ebay is great IMO, by using it you certainly open the market.
2. Selling an option, you are keeping the price very low for any comission to be paid for the sale.
3. You use Paypal, a secured payment mode to receive your money within say 24 hours. If they fail to pay, you have the right to give the next bidder a second chance and offer it someone else. If that doesn't work, re-list it and don't forget to give feed back to the bidder who defaulted!
3. The terms of your option are on the Ebay site. In the description of the item, you spell out the option terms to purchase the contract. By doing so, you form a legally binding agreement, the buyer needs to pay for the Option and you need to deliver or sell the Option.
It's very clean.
4. Now, you have secured a buyer for your contract at a very low cost.
5. And, as I mentioned above, you could end up having a premium on your Option, making more than you originally anticipated!
6. You have many marketing options as well. There are various ways to list your item, with your bidding starting at 99 cents (which is a free listing on Ebay) or up to any price you like. You can leave the listing open for a bidding war or set a buy it now price. Say you only receive a bid for 200 dollars on your option.....so what, it is credited to the contract purchase price and you have a potential buyer for your contract!
7. You also get an accounting from Ebay on your sales and an audit trail for your records and taxes.
8. After the Option sale, you simply move on with money in hand toward the assignment of your contract. Your contract is simply assigned and endorsed. It's probably best to do this in escrow, the buyer sends certified funds for your Assignment Fee, less the credits allowed under the paid Option to an independent closing agent, an attorney or a title company can do this, andsend them the assigned contract. It is then up to the Holder of the Contract to continue with the real estate purchase.....and this can also be done at the time of the real estate closing as is customary.
So, what is the down side of using Ebay like this?
First I see that the market might be limited to more sophisticated buyers who catch on and understand what is going on, but the learning curve, IMO, would be very short. It's probably not been done in this manner and "teaching" people what is going on is important. I think that experienced buyers will understand what's going on real quick.
Another might be default sales, there are people who bid on stuff and never pay, but you simply zap them, report them and move on, relisting the item.
Another is pulling the listing, which you can do if you have a buyer in hand off Ebay, but when bidding starts you can't pull it, so you may have say three days up to two weeks of down time, the time line is selected by you as to how long the auction is run.
That's about it, I don't think there is any other "down side" to it.
I have bought cars, boats, motorcycles and all kinds of stuff off Ebay, never a hitch (except I got carried away a few times and paid too much, LOL)
Oh, another point, you can put other sites on you listings as well, so you can direct bidders to your sight where you have extensive pictures of the property, copies of inspections, appraisals, etc. so you don't have to load up the description page on your listing.
If nothing else, it would probably increase traffic to your site. There ya go! Good luck....
has anyone considered kijiji? thought that was primarily for real estate but i could be wrong...
Bill; Or anyone. Would using an option this way be the same as having a stock option? Where the buyer buys an option and has a right but is not obligated to follow through on the purchase? From what i understand you can offer just about anything for sale and offer an option on that item. Dan
Yes Dan, while Stock Options are governed by the SEC and regulations, they are basically the same thing. As I said above, you can seel an option to sell or buy anything, gas, oil, wheat, soy beans, corn, steel, coal, etc. Just a short list. I can give you an option to buy my boat....wanna buy a boat?
RE Investors are just use to hearing about real estate options, like the second part of the lease arrangement, but you can have an option to rent, buy a sale contract, or be the first to plow my fields! That's why I keep harping on real estate basics first, then strategies. Understanding the tools in the box makes the job alot easier.
Like Deborah, I've also bought and sold on ebay and I agree with the low starting bid of 99 cents. For a nominal fee, you can set a reserve price (not visible to the buyers) to insure that you get your price.
Also, pictures are key in selling anything on ebay. Some listings have links to offsite video tours but I prefer to keep my buyers on my auction page with tons of pictures.
Ebay charges extra for pictures so a little html knowledge comes in handy so you can add images for free. You can host the pictures on your own website or on a free site like photobucket. When entering the description on ebay you can toggle between the visual display and html. When in html mode simply paste the codes for the images. I like 600 - 900 pixel width.
Also, when you look at MLS photos the interior shots are usually dark and bare bedroom walls are not visually appealing. I've yet to figure out why they take pictures of the toilet from the floor level. Even though you're targeting investors, they still like to see what they are bidding on. Might even pick up some retail buyers.
My favorite quick photo fix program (besides photoshop) is a free image viewer from http://faststone.org that allows for easy cropping, resizing and brightening up dark photos.
Even though we're all about the numbers, don't forget the sizzle!
Bill do you use a standard option contract or a flex option contract?
I have drafted all of my contracts and notes over the years and blessed by attorneys, forged by the fire of battle in business and modified on a case by case basis to address each and every deal. I just don't need no stink'n standard contract...lol.
I'm considering going through many contracts and breaking them down paragraph by paragraph with footnotes for each paragraph or even sentence. I think by doing this anyone could then use the information to draft various contracts to use....after having legal water blessed by thier attorney....it should save a tone in attorney fees.
But, really I have second thoughts as to all the trouble, considering