Buyer Wants to Talk with Seller...What Do I Do?

22 Replies

I have an investor that is very interested in a mixed use building that my friend owns. The investor wants to speak with the owner to "get more details". I want to make this is great deal for everyone, but am concerned my friend (the owner) will want to do the deal directly with the buyer, find out the desired sale price, etc. Do I just get the property under contract first, then find an investor? I do not want to ruin my reputation (esp. my friend who is very skeptical of my REI endeavors) and have to back out of the contract.

Your feedback would be great.

Unless you position yourself to be the seller then prepare to get squeezed out of this and other deals like it. Might be better to focus on deals that don't involve friends... or get licensed and represent them.

The investor is aware of my position and mentioned he would like to make sure I get something out of it as far as the contract assignment fee.  I am more concerned about the seller wanting to skip me and go to the investor.

Would you be concerned about putting it under contract if you have limited investors interested in the area?  (The numbers make sense for a buy and hold rental, assuming 15% vacancy rate and other conservative numbers.)

Does your friend know Exactly what you’re trying to do.

Yes, he knows what "wholesaling" is.  I explained I would either buy it with financing or assign it.  I would love this deal for myself, but I do not have the funds for a down payment currently.

Originally posted by @Michael DeVowe :

The investor is aware of my position and mentioned he would like to make sure I get something out of it as far as the contract assignment fee.  I am more concerned about the seller wanting to skip me and go to the investor.

Would you be concerned about putting it under contract if you have limited investors interested in the area?  (The numbers make sense for a buy and hold rental, assuming 15% vacancy rate and other conservative numbers.)

If there is no contract to assign, there is no assignment fee to be made.

Under the circumstances best course might be to partner with the buyer. Either way if you are getting into deals you need to learn how to protect your interests.

Originally posted by @Michael DeVowe :

Yes, he knows what "wholesaling" is.  I explained I would either buy it with financing or assign it.  I would love this deal for myself, but I do not have the funds for a down payment currently.

 well you have no downpayment code for no money;.. so you can't buy it.. so your just trying to make a commission selling it..

this becomes the issue with being a wholesaler and trying to get paid like a licensed agent who would just get a buyers broker agreement or a listing agreement and off you go.. but here you are worry about how your going to get cut out.. which you could easily have happen to you.. so your instinct is correct.

So you are partnering with an investor to purchase and feel that you will get skipped out of the equation? Why don't you just get a hard money lender and cut him out of the equation first? OR am I reading this wrong?

I would just ask him what specs and details he wants to know and translate it across for him. But he'll probably look to skip you out of the equation anyhow. Unfortunately you're probably better off to get your real estate license and like the gentleman above said, figure out how to protect your interests. Usually people will try to skip the middleman , it happens with realtors as well. Some people find realtors to do the leg work and then get familiarized with another realtor to give them money back on closing costs etc.

@Joshua Feasel Using hard money would put the property at ~$100/mo cash flow after all expenses and 15% vacancy.  I am not comfortable with that.

@Jay Hinrichs   "so your just trying to make a commission selling it"  I would not actually own the property, I would be assigning a contract.  I know a lot of people have beef with people assigning contracts, but there is nothing wrong with it.  As a newer investor, I actually am not too concerned about getting "cut out of the deal".  I want to build my reputation.  Either way, the investor is serious about it and would do good whatever the outcome (whether that means an assignment fee for me, or simply a "finders fee" if he buys it under contract directly from my friend).

@Tom Gimer   Thank you for your professional feedback.  How would you partner with the buyer?  I understand 50/50 profits for flips, but I am not quite sure how that would work with a rental.

Originally posted by @Michael DeVowe :

@Joshua Feasel Using hard money would put the property at ~$100/mo cash flow after all expenses and 15% vacancy.  I am not comfortable with that.

@Jay Hinrichs   "so your just trying to make a commission selling it"  I would not actually own the property, I would be assigning a contract.  I know a lot of people have beef with people assigning contracts, but there is nothing wrong with it.  As a newer investor, I actually am not too concerned about getting "cut out of the deal".  I want to build my reputation.  Either way, the investor is serious about it and would do good whatever the outcome (whether that means an assignment fee for me, or simply a "finders fee" if he buys it under contract directly from my friend).

@Tom Gimer  Thank you for your professional feedback.  How would you partner with the buyer?  I understand 50/50 profits for flips, but I am not quite sure how that would work with a rental.

The beauty of contracts is you can get as creative as you want. If your partner sells within 1 year, you get X% of the profit... If he holds for more than 1 year you get X% of the gross rent... If he wants an early buyout he can pay you $X in the first 3 months... you get the idea (and remember, all you did was find the property)

Working as an unlicensed broker is a tough way to make millions:) Get licensed, take listings, and you don't have to worry about not getting paid.

What value are you brining to this deal as a wholesaler? I understand that you want to be a part of the deal, but if you have little experience and no money, what have you done to earn a place at the table? This might be a great learning experience and you can use it to build your skillset.

It really depends on the relationships but most likely you would want to be the one asking the questions.

@Michael DeVowe , you must not consider this "friend" to be a very good friend.  I would not want to scam my friends out of money.  Any profit I might make would not be worth risking the friendship.  And let's not mince words -- you would be risking the friendship.  That's clear because you're worried your "friend" might learn too much about how the deal is structured (meaning, he might learn how much of his sale price is going to you) and decide it is too much.

Secondly, if this "friend" was a good friend, you would want to tell him all the facts AND he would be okay with you getting a very small percentage as a finder's fee.  Likely not as much of a fee as you want, but something the "friend" considers fair.

My advice is choose the friend over the sneaky end-around to get his money.

Hopefully, you can keep the friendship and make some money.

@Michael DeVowe a friend wouldn't screw another friend over money. I would just connect the buyer and with your friend and ask them to pay you a referral fee if the deal goes through. If he is your friend, he will pay you fairly. 

This thread seems to have gained some attention.  It also appears some contributors have voiced their opinion without reading thoroughly.  

@John Thedford "Working as an unlicensed broker is a tough way to make millions:)" 

One must start somewhere.  :)  I definitely do not want to do "wholesaling" as it is a job, not cash flow.  But as I network more and help people out, I expect others to compensate my time somehow because I value my time.  This particular potential deal I describe in this thread may be structured as I outline at the end of my post, not necessarily as a stereotypical "wholesale" deal most people think of.  In fact, because of the stigma assigning contracts gets, I perhaps would have been better posting this in one of the feedback forums.


@Corby Goade "What value are you brining to this deal as a wholesaler?" 

That's just it.  I am bringing the deal.


@Ian Walsh "It really depends on the relationships but most likely you would want to be the one asking the questions."

Good point.  I will definitely put that into practice.


@Randy E. "you must not consider this "friend" to be a very good friend."

I am not sure where you came to this conclusion.  What does bringing my friend and my investor together have to do with scamming my friend out of money? I am not going to respond to all your points, simply because explaining my friendship with this person is not necessary nor beneficial to this conversation.  I will just take your post with a grain of salt as it appears you did not take the time to read the previous posts thoroughly.

@Joe Splitrock "a friend wouldn't screw another friend over money."

I am going to assume you read Randy's response above and based the entire thread off of what he said.  I really have no idea where this "sneaky" "screwing a friend" and "scam" came from.  It is like everyone is playing the game Telephone.

So to go back to the original conversation, I intend to take @Tom Gimer 's advice and partner with the investor.  My goal is to create a win, win, win situation for all of us.  (Spoiler alert: No "sneaky" "scams" involved!)  I will update this thread whatever the outcome.

Originally posted by @Tom Gimer :

Unless you position yourself to be the seller then prepare to get squeezed out of this and other deals like it. Might be better to focus on deals that don't involve friends... or get licensed and represent them.

 That’s it...

Hi!

I’m an unlicensed wholesaler.

3/10 leads I just refer the buyer directly to the seller if both are pretty REI savvy. I never EXPECT to be compensated for time and efforts especially if I add no value to the transaction. I get that some of the responses here might feel like jabs, but at the end of the day it is your aforementioned reputation you need to protect yes? So I would add selflessness to the reputation. My worst deals or those that have fallen apart have been I've either chased the cash or I've tried to wedge myself in there.

Originally posted by @Michael DeVowe :

This thread seems to have gained some attention.  It also appears some contributors have voiced their opinion without reading thoroughly.  

@John Thedford "Working as an unlicensed broker is a tough way to make millions:)" 

One must start somewhere.  :)  I definitely do not want to do "wholesaling" as it is a job, not cash flow.  But as I network more and help people out, I expect others to compensate my time somehow because I value my time.  This particular potential deal I describe in this thread may be structured as I outline at the end of my post, not necessarily as a stereotypical "wholesale" deal most people think of.  In fact, because of the stigma assigning contracts gets, I perhaps would have been better posting this in one of the feedback forums.


@Corby Goade "What value are you brining to this deal as a wholesaler?" 

That's just it.  I am bringing the deal.


@Ian Walsh "It really depends on the relationships but most likely you would want to be the one asking the questions."

Good point.  I will definitely put that into practice.


@Randy E. "you must not consider this "friend" to be a very good friend."

I am not sure where you came to this conclusion.  What does bringing my friend and my investor together have to do with scamming my friend out of money? I am not going to respond to all your points, simply because explaining my friendship with this person is not necessary nor beneficial to this conversation.  I will just take your post with a grain of salt as it appears you did not take the time to read the previous posts thoroughly.

@Joe Splitrock "a friend wouldn't screw another friend over money."

I am going to assume you read Randy's response above and based the entire thread off of what he said.  I really have no idea where this "sneaky" "screwing a friend" and "scam" came from.  It is like everyone is playing the game Telephone.

So to go back to the original conversation, I intend to take @Tom Gimer 's advice and partner with the investor.  My goal is to create a win, win, win situation for all of us.  (Spoiler alert: No "sneaky" "scams" involved!)  I will update this thread whatever the outcome.

 I never said anything about you being sneaky or screwing your friend. Read what I posted before you go into attack mode. I read what YOU posted. You are the one paranoid your friend will cut you out of the deal. My point was if this person is your friend, they won't cut you out of the deal (meaning your friend won't screw you, not the other way around). Slow down and comprehend before you react.

Originally posted by @Michael DeVowe :

@Randy E. "you must not consider this "friend" to be a very good friend."

I am not sure where you came to this conclusion.  What does bringing my friend and my investor together have to do with scamming my friend out of money? I am not going to respond to all your points, simply because explaining my friendship with this person is not necessary nor beneficial to this conversation.  I will just take your post with a grain of salt as it appears you did not take the time to read the previous posts thoroughly.

 Michael, I'm not trying to insult you.  I was just trying to put things in better perspective.

For comparison, I look at this as if a friend told me he wanted to sell his car.  If I knew of someone who wanted to buy a car, I would put the buyer in touch with my friend and let them work out a deal.  I wouldn't expect my friend to compensate me for doing that.  In my singular opinion, that's simply what friends do for friends.  If my friend decided to offer me $50 or take me out for drinks, I'd take it but I would not expect it.  That's what I see this situation as.

A couple of years ago, a friend's mother died leaving her a rental property in disrepair, but it was in an up-and-coming area.  She asked if I wanted to buy it, but I was not in a financial position to do so.  The family trusted me enough that while her mother was alive but ailing, they asked me to aid them with renting and managing it.  Though I knew I could talk my friend into signing an assignable contract that would allow me to wholesale it and make a lot of money, I couldn't do that to someone I considered a friend.  I told her what I thought the house was really worth and they ended up selling it for a lot more than I could have offered at the time.  She was a friend and it didn't feel right to me to take money from her that I felt should have been hers.  Especially when I was bringing nothing to the table.  It would seem to me like an abuse of trust, an abuse of a friendship.

Then again, I'm not in the wholesaling business.  Maybe I'm not hard enough to do a deal like that.  Not trying to insult anyone who sees nothing wrong with doing those type of deals ... it's just not for me.

Or .... network and find another investor to JV with, buy it from your friend on the up and up with new investor backing. Then resell it to the current interested investor and split the yield with your new moneybags investor friend. If it is that good of a deal, the money will knock you over trying to get into it. Lots of investors are happy with a quick buck. For you 'half a lunch is better than no lunch'.

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