All Forum Posts by: Lydia R.

 First of all, this is why its best to wait until you have clear title before you start marketing a deal. Because the situation can get tricky if the title isnt clear. If you cant deliver clear title you will have to release your end buyer and refund their earnest money. 

This is my opinion, not legal advice, you should be talking to the seller to get the title issues worked out. Someone has to step in and get things under control so the deal can get closed and thats you. Wholesalers are basically running a three ring circus until closing day. You arent engaged in unlicensed brokering because you are a party to the original contract. You might need to consider using a better worded assignment agreement because mine gives me the unrestricted right to renegotiate price and terms with the seller. In my opinion you are fine to negotiate and communicate with the seller and get the title issues resolved. I dont see an issue here. But Im not an attorney. 

Interesting! Texas standard EMD is 1% and also in Michigan. Those are the only 2 states where I have purchased/sold property and in both of them the standard EMD is 1%. Obviously sellers can ask for whatever they feel is appropriate. Makes total sense that West Coast has different (higher) EMD standards. But $5,000 on a $219,000 purchase price still seems high.

I know you said you dont want to pay them hourly and Im guessing its because thats not within the budget, but remember that if they are only getting paid based on deals that you close it can be unfair to them because they are putting in the work and if you cant close the deals then essentially they are doing your grunt work for free. I think to make it fair for them you need a hybrid of hourly pay and some kind of percentage or bonus for closed deals. The other option is to create an LLC and make them a part owner (like 10%) but that opens a whole other can of worms. My best advice would be some kind of 30-60 day trial period to make sure the 2 of you can work together well. I have learned the hard way that just because you are friends with someone, or even in a relationship with someone, doesnt mean that you will work together effectively. A trial period will give you both the opportunity to see if you work well together and it also makes it easy for either one of you or both of you to decide this isnt the right fit and walk away without any financial consequences or hard feelings.

Look into the legality of paying a commission because I dont think you can legally pay him a commission based salary because he is not a licensed agent. 

Tricky situation. Typically in an off market deals these terms would be easily negotiable, but in this case it sounds like the agent is being...well an agent lol. My advice, first make sure that $219K is a good price that has room for your fee and still profit for your end buyer. There are lots of hard money lending companies that offer POF. Straightline funding is a good one but there are others. You might have to explain to the agent what hard money is because when you say you are making a cash offer agents expect to see a bank statement with the cash in an account. Also, 5K EMD seems very high. Standard EMD is 1% of the purchase price, so also make sure you arent dealing with a wholesaler. 5K EMD is the standard amount for an end buyer in a wholesale transaction so make sure you've correctly identified this situation. You could possibly be dealing with an agent who is wholesaling an off market deal.

If you really are dealing with an agent then I would negotiate on the EMD and tell them that $2,000 is more reasonable. Remember, as the buyer in this situation you dont have to just accept the seller's terms. You can counter. My response would be something like: "(agent name) I understand you want a reasonable amount of earnest money. $5,000 is far beyond what is reasonable in this case, especially with a $219,000 purchase price. Can we agree on $2,000? And I will put some down at the time of contract signing and the rest to be deposited after title clears. As an investor we make at least 10 offers a month. If I was to put $5,000 on each of those contracts that would be $50,000 of cash just floating around in escrow instead of being used to BUY HOUSES which is what I do." If you can get the agent to agree to some money now and the rest later, it gives you time to find your buyer and then get an EM deposit from them and use a portion of that EMD as EMD for the seller. The one drawback of this strategy that no one talks about, if the deal falls apart and you have to return the buyer's EMD but the seller gets to keep your EMD then you are in a tight spot because you dont actually have the funds to do both of those things. So if you are going to engage in this strategy, make sure the deal doesnt fall apart. And make sure there is language in your purchase agreement with the seller that protects your EMD

 Excellent question! You are ready to start making offers when you can answer yes to the following questions:

!. Do you have a wholesale friendly title company (or title attorney) who is able to close your deals? They should have experience closing assignments and double closes. 

2. Do you have a suitable purchase agreement that you know how to fill out and has been reviewed and approved by your title company/title attorney?

3. Do you feel confident in your ability to analyze a deal? Can you use comps to accurately determine ARV for a property as well as reasonably estimate repairs (or have a contractor that will do it for you) as well as determine the offer range you need to be in?

4. Do you have a marketing plan and budget? Have you determined how you will locate and identify motivated sellers as well as how much money you will dedicate each month to marketing? 

5. Do you feel reasonably confident speaking with potentially motivated sellers? Do you know what information you need to get from each potential seller in order to make an accurate assessment of the level of motivation and ultimately the viability of a deal? 

6. Do you have a buyers list or feel confident in your knowledge of where/how to find buyers so that when you have a property under contract you can get it assigned quickly?

7. Do you have an assignment of contract that you feel comfortable filling out? Do you have some EMD guidelines for your end buyers?

8. Do you have enough money for EMD on all your contracts? You know EMD is required when you sign a purchase agreement with your seller?

In my opinion, if you answer yes to all these questions then you are absolutely ready to start talking to motivated sellers. I would advise against making offers. When you make the first offer it weakens your position. You should be getting the seller to tell you how much they want for the property and THEN you negotiate from there. 

Hope this helps you! 

 You are so very welcome! Ive been where you are and I know how it goes to try and find deals on a shoestring budget. If you ever want some inexpensive deal finding ideas send me a PM

Personally I dont market or wholesale on market deals, for lots of reasons. In your case, when it comes to on market deals you will need to negotiate with the real estate agent because they typically expect 1%-2% of the purchase price to be deposited for EMD within 3 days of the contract being signed by all parties. Agents are not going to allow you to get EMD from your end buyer. They are viewing you as the actual end buyer and they have to look out for the best interests of their clients. Also, when you are just starting out if you dont have a solid buyers list a 10 day inspection period might not be long enough to find a buyer, qualify them and get them into the property to view it and secure an assignment agreement. With on market deals you can negotiate who pays for the title search, but if I was the agent I would want you to pay for it if you terminated. Personally I say stick to off market deals but Ive learned that everyone has to learn the hard way that on market deals are not as easy as the Youtube Gurus make it seem.

 Wholesaling is not the get rich quick scheme its marketed to be. You are absolutely right about the amount of industry knowledge required to be successful and the low barrier to entry. Anyone can wake up tomorrow and decide they are a wholesaler. But as quick as they get in they quit because its hard work. 

I think with the amount of construction knowledge you have you should be flipping houses because you have the knowledge and the skill set to do it. You can always wholesale the deals that dont fit your criteria but there is no reason you couldnt be flipping houses since you have the know-how! Dont sell yourself short! 

 Inspector gets paid when they complete the work. 

 It depends on what state you are in. For example, here in TX the large title companies dont charge you for doing a title search. If the deal falls apart then it falls apart and title company eats the cost. But every market is different, and also every title company is different. Usually the smaller companies cannot afford to take a loss on title searches for deals that dont close. Maybe call a few different companies and find out what the cost is. If its $100-$200 and you cant cover that then you might want to wait to get started until you are better capitalized. One of the biggest reasons that wholesalers quit is because they start with only a few hundred dollars and arent able to keep going when they discover they need more than that to get started. I think having at least $1000 saved up should be the bare minimum before you get started. More than that if you are in an expensive market.