All Forum Posts by: Danielle C.

Hello!

I need to ensure that I understand the different main contracts that wholesalers use. I have quite a few questions about them, so I apologize in advance for the length. I have been searching BP for answers on contracts, however that only tends to bring up more questions!

Also, if anyone has any straight option, flex option or assignment contracts that they would be kind enough to share, I would be grateful to take a look at them. I have a few and would love to see a few more. Once I fully understand this topic, I can have a lawyer take a look and edit so that I have a solid standard, flex and assignment contract.

It’s important to note that I appreciate any and all feedback that I receive. Really :D

Here goes:

Flex Option Contract – Allows you to place home under contract with seller for a predetermined amount of time. This contract allows you to locate another buyer and have them “purchase†this contract. –ALSO – Allows seller to continue marketing house and allows them to sell to another buyer if they give better offer / close first. Can put in contract right of first refusal.

Straight Option Contract – Allows you to place home under contract with seller for a predetermined amount of time. This contract allows you to locate another buyer and have them “purchase†this contract. Under this contract, the seller cannot market or sell to another buyer without your express written consent.

Assignment contract – This is between the wholesaler and purchaser of the home. The addendum (?) allows the wholesaler and person who entered into contract with the seller to assign that particular contract to a new buyer.

Questions:

1. Am I understanding the definitions for flex, straight and assignment contracts correctly?

2. I know the assignment contract is used with the straight option. Is it also used with the flex option?

3. By adding the phrase "and/or assigns" to the buyer name section, you are adding a contingency allowing you to assign on a standard PSA, correct?

4. Should both the flex and standard option contracts have the right to assign clause or is this assumed due to the nature of the contract?

5. Is it correct to say that the option contract and contingency in a PSA allow you to do the same thing – market the house as a wholesaler?

6. When working a deal that is listed with an RE agent, they will require the standard PSA. Will they allow the and/ or assigns clause? I can’t see why they would.

7. In this instance, I assume that if you can’t find a buyer by the end of the inspection period, then you have to back out. Is there any other clause or time frame past the inspection period on a standard PSA in which you can legally back out of the contract without any legal detriment? I’m not so concerned with EMD. Well, I am, but that is not the end of the world if it’s $100 or so. My main concern is any legal issues, etc.

If you've made it this far, thank you! Any suggestions, answers or tips you have on any of this will prevent me from asking these questions again...! Seriously, thanks.

Danielle

I have been considering doing this as well. I don't intend on using an agent as I will assign my contracts. Until I am 100% comfortable with my farm area however, I will need assistance with values.

What would anyone here suggest is a good starting $ offer... how much per hour or per comp? This could really add up because when starting out, making many offers is key.

Thanks!
Danielle C

Thanks James :) The questions you posed yesterday and suggestions from others got me out of nervous mode and into assessing the reality of the deal. All very much appreciated!

I tend to agree with Will on this. I think that there are far too many if's on this deal, all stemming from a possible bad location. Because it's my first deal, I need to take out as many variables as possible and finding the right buyer for this location could blow up in my face.

Thank you everyone who gave advice on this situation. Being newer, it's always extremely helpful to have a more experienced "steady hand" giving solid suggestions.

Danielle

Hey Will,

That's what I am thinking. I am a bit disappointed that the agent didn't advise me of this initially. It was only after I requested to actually see the comps and pulled up their locations that I noticed the location disparity.

Because the values have fallen so low, a home buyer in this area has a decent but not excellent selection to choose from. This area in particular does tend to still be desirable, however, to me, I think that the tracks drain enough equity out to make this deal questionable.

That is, unless the bank is willing to drop low enough. There are those who have done enough deals to where they can sell an ice cube to an eskimo, however I'm not at that point - yet :)

By the way, this site has been absolutely fantastic. I have spend about 5 hours a day just reading old posts and researching things. It's like every new thread that I read gives me an "aha" moment. So thanks everyone for your replies and suggestions.

Thanks,
Danielle Cage

Hello James,

I appreciate the offer of help! I've read many of your posts in my research (mainly for straight wholesales and not SS's).

1) Do you have any Buyers that might desire this property?

No. I am newer to this and have only now just begun building my buyers list. My intention with this property was to sell straight to retail through local advertising and an agent if necessary. This was before I found out the comps provided were in a two block radius, however had a much better location, i.e. no train tracks behind those homes.

2) Are you able to get complete control of the negotiations with the Lender(s)?

I was planning on going to see the home tomorrow and meet the sellers. I am hoping they have not requested their agent to do the negotiations or if they have, the agent is willing to give this up. I do know that they have not yet made an offer to the bank, however I do not know where they are in the process of the SS. (Have they gotten a packet yet, tried a loan mod, or even spoken to the bank at all?) Also, I am uncertain how familiar with SS they are, specifically the fact that Illinois IS a state that allows deficiency judgments.

3) Are you prepared to close the property IF your offer is accepted? And How?

I will use an HML for an A to B B to C transaction. I had previously spent some time pre-qualifying companies who do this and have selected two for this particular situation.

4) What other exits do you have in mind if you can't get rid of it quickly?

To be honest, I don't. The only one I have in mind is selling to an end buyer. I don’t believe there is enough equity to sell to another wholesaler to make it worth their time. I also don’t see this as a rent. If the bank were to allow it to go low enough, it’s possible.

I am not in a position to hold at all. This is why I need to pre-qualify this deal so well. I understand that there is always a huge uncertainty when doing any deal and there is a fair amount of excitement about a potential first deal. With that, I am only concerned if I can make the numbers work. If I can’t, if it doesn’t make sense, then I can easily walk away. So, right now if the deal doesn't sell? I am in trouble.

My main exit strategy until I build better capital is to work FSBO's and assign the contracts. So this is where I built my main base of knowledge. This SS opportunity kind of just popped up. Eventually, I have to say, I would love to work SS’s.

Thanks again for your time and offered assistance!

Danielle Cage

Ok, I was able to view the comps of the homes that sold in the area and I think I may have a problem. All three of the comps back to a park, two blocks over. This is the only house that backs to a train. And there are three tracks, pretty wide. I'm assuming there is significant traffic.

Does anyone know what amount I would take off of offer price because a house backs to a train? There are no other comps on this block within the last three years. Yikes. So my best bet is to go off of the most recent comps, since the home models are the same, however reduce value for location. I am thinking at least 30k. Really, who wants to live by a train if they don't have to?

....Just thinking like a buyer :)

Thanks!!
Danielle

And a very good 2 cents Andrew... thanks for the feedback!

I do know that until I contact them, I won't know their contract preference, however I was looking for feedback from others who might have found that in contacting buyers there seems to be a general preference.

Anyone else?

Thanks,
Danielle

Hi,

I have contact information for several local potential buyers. They are larger wholesalers. I am ready to begin building my buyers list, starting with contacting those who info I have pick up along the way, via various methods.

Should I call them personally or email them? It doesn't matter much to me, however if buyers would prefer email, I don't want call and vice versa. Any suggestions?

Thanks!

Hey Ryan,

No, the comps were not distressed homes. These were regular retail sales, move in ready.

Thanks for the suggestion on price. I am trying to get in to see the property and meet the owners today.

If they haven't agreed to an agent doing their negotiations, then I think I will use an experience negotiator.

I appreciate everyone's replies. I'll just have to see what happens with an offer, if I do offer.

Danielle Cage