A few questions about wholesaling

Bird Dogs, Wholesaling
1

This is in response to my first wholesaling mission today. I found several houses by driving through low-income areas and looking for houses with overgrown grass.

I am familiar with the property appraiser, is that how I estimate ARV? Which I know can fluctuate very rapidly. What is the BEST and most accurate way?

Also, I called the county comptroller and asked about mortgages on record. They told me that I can find out the name of the lending institution, but cannot find out the amount still owed. Is there any way to find out this information? I wouldn’t trust just asking the owner and taking his word? Should I just estimate from the age of the mortgage on record? Is that really accurate?

2

Redstar,
There you go making things more difficult and complicated than creating fusion from an atomic particle.
You don’t need to know if there is any thing owed on the property or shudnt care.
If seller owes 80K on a 40K junker you offer 30K and walk away. If he has code enforcement liens and a mortgage that amounts to 20K it comes out of his pocket and wont affect what you offer.
Zillow shud give you an estimate of the houses worth and also show houses in the area that sold recently.
If the Zestimate comes in at $74,600 and the house is boarded up and looks like it shud be torn down, your going to offer $20,00 or less and you might go up to 25K
If that same house is rented and looks in great shape your going to offer $52,000 cash
It’s a big guessing game and it depends on the motivation and desperation of the seller or lack of.
What works for me is I go in without a clip board, no suit and tie, and get the seller to spill their guts, let them talk.
Get them nice and friendly before you go for their throats.
Rando

3

Okay I understand how to estimate ARV now.

But what I don’t understand and what seems really important is this…

If the owner owes $80,000 to BB&T, does this mean that I now owe it? And if there are $10,000 in outstanding Code Enforcement fines, do I now owe them? And wouldn’t this affect the amount a flipper would want to pay for the house?

I like to overly prepare on mathematical issues such as this.

4

I really need to get started on this absentee owners list.

It’s easier than you might think since the property appraiser let’s you download everything in MS Excel…

Then send out mass mailing lists…

Good idea!

5

Just looked up the owners to one of the houses I found yesterday…

It is BB&T.

Does that mean I can’t wholesale this house?

6

Can you spell out BB& T for us trailer park okies?

7
Can you spell out BB& T for us trailer park okies?

bee, bee and tea :beer Sorry, i had to do that. :banana

8

Branch Banking & Trust…

Since this is a bank owned house, does that mean I can’t wholesale it?

I’m just trying to make some money here

9

Bank owned properties are a whole different ball game, First of all your dealing with a bank that don’t want you to make a profit, also your dealing with a Realtor and if they knew you wanted to wholesale it you wud be kicked to the curb before you cud say “What Happened”.
Then your going to need proof of funds and to jump thru all their hoops, you want to buy and flip it now, well, they don’t care if it’s 6 months from now. You will probably need at least a $2,000 earnest deposit.
The bank will make you sign a document saying you wont sell this property for 90 days or maybe 120 days, some bank actually put restrictions on how much you can make, I’m serious here.
Oh yea, you will need to do a double closing so the bank and realtor don’t know your wholesaling and how much your making while you illegally flip this house that you signed in blood that you wouldn’t sell for 90 days.
So if you want to experience Real Estate Hell, try to wholesale a bank owned house.
Again Redstar, I’m amazed how you make everything so complicated and difficult. How bout you find some distressed junky homes, negotiate with seller and wholesale them, Is that too easy for you? No Challenge?
Have you considered just taking action and doing it?

10

I just did find one of those houses, and it was a bank owned property.

These are the things you learn by doing…

11

These are the questions that are holding me up and after I get them answered, I will do this…

Do I hire a licensed inspector inspect the house? If so, doesn’t this mean I need a few hundred dollars to get in? If not, how can I accurately calculate the repair costs?

More importantly, the clause in that contract from “Real Estate on Steroids” says that I can back out based on the inspection. However, in wholesaling, isn’t the idea to “back out” if you can’t get it sold? I am “paying” tens of thousands of dollars that I don’t even have, so this would be a very important thing for me to know. A mistake on a technicality would be disastrous for me. Are you saying that I should LIE to the seller and say I am backing out due to an inspection, when in reality, I have backed out because I couldn’t find a buyer fast enough?

I have a list of 13 buyers that I want to start calling…

12

Redstar, you don’t need to hire an inspector, your the inspector, your buyers are the inspectors. You don’t need to calculate repair costs, let your buyers do that.
Why lie to sellers? Tell them you cant sell it cuz the price is too high.
If they wont lower their price then tear up the contract and say later days.
The beauty of Wholesaling is there is no Risk, these people are not going to force you to buy their house. I put a 21 day inspection clause in my contracts but I usually know in 10 days if anybody wants it. The great deals are sold in 2 hours, mediocre deals in a few days or a week.
Did you ask tons of questions about sex before you jumped on Peggy Ann? Hell no, you learned by doing, lots of mistakes, but your passion and desire carried you thru.
You ask any more questions without taking action I got a cattle prod with your name on it.
Rando

13

I wonder how many more questions and excuses can this guy come up with.
It would be really comical if it wasn’t so pitiful. It’s been about 6 months since he got on this forum and started ranting on and asking questions and making every excuse known to man. He could of had some profitable deals by now.
I got a feeling there is nothing you can say or do to get this guy in gear. If he ever does get going he will be defeated by the first obstacle.
Can you imagine Thomas Edison having this attitude, how many things wud he have invested?
I shud save all his questions to give to my students and bird dogs to show how you can destroy your endeavor by over thinking, questioning every little thing and never getting started.
My problems is I always jumped before I looked, but, then again, it works. I heard of a book called Ready Fire Aim, I’m gonna have to order it, since it fits my belief perfectly.

14

Here’s where I got today. I spent about an hour driving and got 4 house.

I called one of the buyers I had on my list even though I knew I was getting ahead of myself… they said I need to come back to them with exact numbers.

Now, I have to get in touch with the owners of these houses. I need a firm way of estimating ARV and estimating repairs needed.

I’ll even give you one of the addresses… 1282 Depugh St. Altamonte Springs, FL

http://www.zillow.com/homedetails/1282-Depugh-St-Altamonte-Springs-FL-32701/47675991_zpid/?fromHowMuchMyHomeWorth=true

Zestimate of $70,644.

http://parceldetail.scpafl.org/ParcelDetailInfo.aspx?PID=1821305020D000190

Appraised value of $28,380.

Maybe I don’t understand the Zestimate, but is that supposed to be the ARV? I could call the people at Zillow to find out.

Either way, I now need to work on getting in touch with the owners by mailing their address on file on the property appraiser or leaving something on the door.

I will be doing this full time once I have these few last questions ironed out.

I’m not exactly a professional home inspector, but maybe I could wing it. I just wouldn’t want to “wing it” so much that I show my buyers that I have no idea what I’m doing.

Moving forward step by step… you will see that I will have wholesaled at least 20 houses by the end of this year.

Once the process is down, I can repeat it like robot.

15

By the way, I think I should say THANKS.

I foresee myself making a lot of money doing this once I iron out these last few hiccups.

16

Al these questions and now I’m confused, I thought I had the logistics down, now I’m starting to question my training, my motives and even my purpose in life, why was I born, what wud I be doing now if I hadn’t been born, if I was born in the future what wud I be doing till then.
If I ask insane questions will I go insane? If I get any more questions I will go insane.
I have answered ever one of this guy’s questions, I sent him the most simplistic book on the planet.
I wonder if there is a serious problem with the Universe, Is black matter affecting his common sense?

I have a buddy with ADD, he’s smart, but you give him a simple job to do, between smoke breaks, phone calls and crazy questions I wud have to go help him finish the job. I learned a long time ago not to pay him by the hour.
He can turn the easiest job into a cluster flub, and it’s never his fault.
Is there anybody out there that can put up with this guys endless questions?
PLEASE HELP

17

Well at this point, I have to wait to hear back from the home owners to see if they’re even interested in selling the house.

All the “We Buy Houses,” people I’ve called have said they would want to look at it themselves to estimate their own repair cost.

And I’m still pretty sure I’m lying to the seller by telling them I have to back out pending inspection when in fact I would be backing out if I don’t find a buyer.

I think you said that your contract has an escape clause that says if you don’t find a buyer within 21 days, but it also says that I shouldn’t notify the seller that I am reselling the house. These two things can’t exist at the same time.

Offering someone $50,000 for their house and then getting stuck having to pay for it when I don’t have the cash to do so is no laughing matter.

And what about the fact that I don’t know how to look at a roof and tell if it needs to be replaced. Or that I don’t know how to identify structural problems with masonry walls and I would have no idea if it is good or if it needs to be torn down completely. Or I don’t know how to identify outdated and illegal polybutylene plumbing to know if it needs to be completely replaced.

You’re making this sound easier than it is, but I will get there.

Am I correct in assuming that the Zestimate is the after repair value and that’s what accounts for the discrepancy between the $70,000 Zestimate and the $28,000 just market value from the property appraiser?

You say you’ve made over $100,000/year doing this and I believe you, but I think you’re greatly exaggerating when you say it’s as easy as sitting around watching Judge Judy. But then again, you’ve been doing this for years.

Do your buyers inspect the house or do they just “take your word for it,” for the repair costs?

18

What about back taxes? Do I have to check for that?

19

Okay I just printed out 100 fliers that say “I am interested in buying your house cash,”…

I won’t post again until I have given them all out…

But the one main thing that I still don’t get is the escape clause… you’re saying that I am not supposed to tell the sellers that I am planning to resell the house… the escape clause from the contract in the book says “contingent upon inspection,”…

I can’t make an intelligent offer on the house until I perform my own completely amateur and most like incompetent inspection… if this house had mold issues all throughout, I probably would not notice and definitely wouldn’t notice if I didn’t rip up the walls, which I would not be allowed to do… therefore, how can I calculate the repair costs? and also, what is my escape once my “inspection” is done… and the only real reason I would want to escape is that I can’t find a buyer with a certain number of days…

The buyer I talked to today told me that he needs to see the house personally… and he would do his own calculation of repair costs…

These are not insignificant questions… this is important stuff…

If I sign a contract saying I will pay someone $50,000 for their house and then have no escape… what am I going to do seeing as I don’t have $50,000.

I believe it can be done since you say you have done it… but you can these are COMMON SENSE questions that I’m seeking answers to…

And I can foresee the future once I get a call back from one of these potential sellers… I will say “sure, I’ll come check out the house,”…

Does it need a new roof? Maybe. I can’t tell by looking at it, but the flipper I will try to sell to will definitely know…
Is the plumbing outdated? I don’t know.
Does the electrical work? I can probably manage that one.
Are there major structural issues with the walls? Probably. But are they so bad that they will need to be a complete tear down? I wouldn’t be able to tell you…hence why I am not a competent home inspector YET…

So according to the formula ARV * .7 - repair costs - $5,000… the answer is… I have no idea…

Then, I will call a buyer and he will assume that I already own the house, which if all went well I would have under contract that I would HOPE that that escape clause actually means something even though I already did my inspection and gave it my okay…

I can’t know what price to offer before I do my “inspection,” and the contract says “contingent upon inspection,” meaning that that escape clause is of no use…

I could add my own escape clause that says “this contract is void if I don’t resell it within 21 days,” but that is exactly what I was told not to do in the book…

These are very good questions… do you know the answer to them?

If I was going to jump off a cliff with a parachute… I would make sure I knew everything about how to parachute worked… include all backup plans, etc.

And even if I just take the shortcut and use the per square footage estimate of estimating repair cost… that still leaves me with the problem that that escape clause makes no sense… you acknowledge that, right?

That being said, I can buy a 2005 Lamborghini Murcielago and paint it burnt orange or possibly wrap it in gold chrome for about $2,000/month including loan and insurance payments… and that is easily made if I can do one successful wholesale deal per month… I already make everything I need managing the RV park… so the rest is just spending money…

20

Nevermind, I found the answer on BiggerPockets… I need to include a clause that says…

“This contract is contingent upon the Buyer obtaining financing by (a certain date)”…

The contract was wrong, not me…

Now comes the problem of turning myself into a competent home inspector… I should be able to do that in a short time… they even offer courses for under $500… but I think I can just do it myself by looking online…