I have come across a few deals in my area but I’m hesitant to make an offer because 9 out of 10 require EM in certified checks, Money orders etc. I’m just starting and I’m finacially embarassed to say the least. Any idea on how i can get around this requirement besides going after FSBO?
Here’s a tip I borrowed from Steve C.
When Wholesaling, we’re making a lot
of offers, and for many, we have to
write a lot of checks.
Here is a tip for those of you who
do not want to cut an earnest money
deposit check for every one of those
offers that you make. I simply add
a clause to my contract which states
that I will deposit my earnest money
with the title company upon acceptance
of my offer.
Instead of writing a bunch of checks
when I make offers, I simply write a
check only for my offers that get
accepted. The book keeping nightmare
goes away.
Blessings,
Steve
Thanks for the info. But what happens if the deal gets accepted and the bank/seller wants an EM of $2500 which is the case on some of the multi-family unit REO’s?
You shouldn’t make the offer if you don’t have the funds to back up the offer. If you offer on three properties and only have enough to get one, then take the first one that eccepts your offer and cancell the other two quick.
Real quick. As a wholesaler the object of the game is to get in and out of a transaction with the least risk possible. If you have to put over 10 bucks down to get the contract signed, you may be putting yourself at risk. No, I am not stressing over the 10 bucks, the point I am trying to make here is, most motivated sellers will care less about how much money you are giving them to tie up their property. They want it sold and are willing to work on your terms! There are plenty of risk free deals out here. You just have to know how to play the game.
If you can get them to call your phone number this is always a bonus. Do some marketing for sellers and you will find life a lot easier as a wholesaler.
In my contract I have a clause that states that the EM is to be held by the closing agent and not to be deposited until all written contigencies are removed. I could write a check for the amount and have my end buyer put up the same amount in EM and assign the contract or double close without worry of insufficient funds in my account because it cannot be deposited. my problem is that most bank owned properties require certified funds, so my strategy isn’t going to work to well.
You obviously will have to come up with the money. If the deal is good enough you should have no problem either bringing in a silent partner to put up the money or a borrow from a person you know who has money and give them a reason to lend you the money and explain how they can’t lose. Offer them a handsome interest rate maybe with a point or a prepay penalty. Givce them a good reason to give you the money.
As I am buying I make an offer on every house I want to buy. I have up to 20 offers out at any given time. My real estate agent has a blank check of mine. It is made out for $100 with my signature on it. He makes a copy adds in the title company name and date to the copy of that check to send in with my offers. After he calls me and says I got the offer my first question is always “on which house” because I have no idea which one took the offer. All my offers dictate that I get 10 days to inspect the house before my earnest money goes “hard”. If the house doe not pass my inspection and appraisal I rescind the offer. If it passes I then send my earnest money in certified funds. I always send them $100 no matter how much they ask for. The earnest money is always consumed in the deal. They don’t give it back it is like additional down payment. It doesn’t help anybody and even if they ask for $2,000 in earnest money I have only had 1 deal not close because my earnest money was lower than what they asked for. They had a lot of people not close because there were problems with passing inspection and people were backing out of the deal and they wanted more leverage. They later called me back to see if I would buy the house with the lower earnest money because they could not get the house sold. I bought it at a much lower price because it needed a lot of plumbing work. This was as it turned out a seller that resisted turning on the utilities for the inspection and I found out why. It needed a lot of plumbing to be done.
how about submitting a note to the title company for the EMD. The purchase contract should state, EMD to be held by title company…let’s say $1,000 is the EMD, you can attach a check to your offer ( made out to title company of course), then when you take your contract to your title company, have a standard note agreement to pay the 1,000 at closing. The note is contingent upon successful closing of property. At that time the 1,000 is payable from your profit. If for some reason you dont close, the EMD note becomes void.
Bluemoon,
That’s rather savvy my friend. I dig it. You and your agent must have a good relationship. That is what I am trying to help the noobs to see, a relationship with a good Realtor will constant money. Its not hard to find one, you just have to have a little swagger. lol :dance2
This is a reason why you should have a strong buyer’s list first and know of a buyer who would want the property.
Think about it. How much time does a typical realtor spend trying to sell a house. He looks on MLS. Looks at several houses calls the buyer take the buyer to the houses and then if the buyer likes one of the houses the realtor fills out the papers. With me all he has to do is the last part…fill out the papers and if I get one of the deals he gets the commission. Why do I care, I don’t because the seller pays him his commission. This is win-win.
There are a lot of great ideas floating around. I think that finding someone to loan the EM and also the note will work well in theory. Getting past the EM fear and building the buyers list has been my number one problem. I’m progressing just not as fast as I had planned.
dwilliams,
You are getting bombarded with tons of good information here. How are you taking it all in? :biggrin
Delondon,
I’m taking it in the sameway I’d eat an elephant, slowly one bite at a time! :biggrin
dwilliams,
Have you ever though about marketing for motivated sellers? I’ve done a ton of bank owned deals and I prefer buying from a motivated seller hands down. I can tell you I NEVER put an EMD down when buying from a motivated seller.
Once you have done several deals and get some cash in the bank you can open up the offers on REO’s.
Finding motivated sellers is as easy as finding cash buyers, just put out hand written bandit signs with a local eVoice number. Put 50 to 100 out every weekend and watch the pone ring.
Hope this helps 
Sean
Gotta love them bandit signs. Who ever said they were dead. They are very much still an effective marketing method. Plus you can stay private. :anon