As a wholesaler building up my buyers list, how can I differentiate a real buyer from another wholesaler? An in case I do pass a deal to another wholesaler, how would that work? Please help, I think I might have one or two of my buyers list as wholesalers.
Thank you,
OMI
It shouldn’t matter if your buyer is a wholesaler, a rehabber, a landlord or a Owner Occupant. What matters is if they will buy the property you are selling for a price you are willing to sell it at. The procedure is pretty much the same for all. I’ve read about deals where the property was wholesaled 3 or 4 times before finally ending up in a rehabber’s hand.
I don’t want to derail the thread… However I do have a question somewhat related to the original question…
If you know you are wholesaling to another wholesaler, even though you may be getting what you want from the deal, would reconsider the deal and feel you are maybe leaving to much on the table? I guess the question is - if another wholesaler is willing to buy your property for what you asked it probably means he feels he can sell to someone else for even more money. Would you then not sell to the wholesaler and try to sell it for more?
And the other side to this is that the other wholesaler may be way off with his numbers and if this is the case, he may not be able to close and you may end up losing the deal. Am I thinking about this right?
Thanks.
O.k, so here is a question that I have about this strategy, wholesale to a wholesaler.
If you wholesale your deal to another wholesaler, when does your seller actually get to closing?
By the time a wholesale deal reaches your rehabber, what good of a deal really is it if 3 or 4 people already took a chunk of the pie?
Now, I haven’t done a deal yet. I’m marketing like hell to probate leads (hopefully I get something to happen soon). So maybe someone in here that has been around the block a few times and might have done this can put a little light into this so I can better understand the ethicality with this strategy. Thanks.
This is a good reason why you should take $500 in earnest money up front on the signing of the assignment. If down the line, the 3rd wholesaler can’t move the contract and the deal falls through, you’re not at a full lose. Most likely, a wholesaler will not want to pay earnest money, so you can filter them out, but a true investor will have no problem agreeing upon your terms.
ASSIGNING TO WHOLESALERS
As someone who has completed over 250 transactions in four states here is the rule on assigning to another wholesaler.
As a corporation we assigned approximately 20% of our properties to other wholesalers.
To answer your question as to whether you are selling the property too cheap, it depends. If you have twelve other buyers interested, maybe, but selling to other wholesalers gives you access to buyers on their list that you may not have access to.
Their buyer may live in the neighborhood or have a relative that they are trying to move into the neighborhood. They are willing to pay a sub-retail more than wholesale price for the property.
As long as your wholesaler fits a G.R.E.A.T. buyer description they will often be much easier to work with than the ‘Rehabber’. See description of G.R.E.A.T.
There are three critical elements that you need to have in place in order to do this.
1. As much money as humanly possible up front. Their greed glands will usually put all of the assignment fee in your pocket if they truly have a buyer. Your assignment makes all deposits non-refundable.
2. An ‘Escrow Agreement’ that makes any monies put into escrow fully earned unless you cannot provide clear title.
3. An ‘Affidavit of Interest’ which prevents the title of the property from changing hands without you notarizing a specific release form at closing.
In addition to these three items the secondary wholesaler is given the option of giving you all of the ‘Assignment Fee’ up front or closing with your title company. Regardless of who you are selling to…you always want to use your title company. There are just too many things that can go wrong when you are using a company (and individuals) that you are unfamiliar with.
Talk to your title company about drafting an Escrow Agreement for you. It should run less than $400. One or two of the people selling info out there offer them as bonuses. We developed ours out of necessity having been burned for $5k deposits three or four times.
How can you get burned by another wholesaler?
1. They go directly to the seller and negotiate a price that is $3k above your contract price. If your assignment fee is $20k they will leave their $5k in escrow and fight you in court over it. You might be thinking, “they will lose, they circumvented my deal”. True, if it is them that circumvents. Usually it will be a business partner or an end buyer that does the dirty work for them.
2. They can’t find a buyer to take it off their hands. They got excited because the deal looked good and when they blasted it to their list their was zero takers.
3. Their buyer cannot close, for whatever reason. Generally they will carry the closing out to the very last day and then drop the property back in your lap. Unless you are really well financed AND the property can absorb a double closing.
If you need help putting together a buyers list, please search for the post for Finding G.R.E.A.T. Buyers
Hope this helps,
Matt Gerchow
Currently Touring South America for the next 4-months