My husband and I have been getting a lot of education on real estate investing and doing a lot of research for over a year. We have read books and listened to CDs over and over again. We joint a real estate club last week and attended an 8 hour seminar on lease options on saturday and we feel we are ready to get started.
During one of the breaks at the seminar, someone approached us, gave us his cards and asked us to call him about buying houses wholesale. We though it was a good idea and set up an appointment with him today to learn more about it.
He showed us a list of houses owned by the bank for up to 65% off appraisal value and said if we are interested in buying the house we need to put down 10% of $5000 and pay the rest after closing. He took us to about 6 houses in great neighbourhoods and it was unbelievably cheap compared to market value. By the way he said he is also an investor, but he can’t buy all the houses because he gets over 200 houses from the bank every month to sell within 45 days before it is shown to the public.
We are kinda skeptical because it seem too good to be true. Also we don’t have a good exit strategy if we decide to go for it.
Please we need advice on:
what kind of questions to ask him to see if he is for real
should we get a lawyer to sign up a contract between us incase it’s a scam?
Are we on the right track?
Are there any red flags to watch out for?
Please help, we are already falling for the idea, but we want to do it right.
ask him which bank he represents and how is he so priveledged to get access to the homes 45 days before the public?
call the realtor back and inform her of your new friend’s claims. you might want to talk to the owner of the realty company also.
definately hire an attorney before buying multiple homes at one time.
i personally find homes at 70-80% below market value. i am not a finance guy. i am a realtor and bird dog. i cant buy all i find. i work exclusively in cobb. my deals always generate 10-15% profit or 30-60% annualized profit.
I really like the idea of contacting his company to talk to the owner of the realty company. I did a search online about his company but hardly got any information. I’ll be calling BBB to find out too.
As per where he gets the properties, he said his company goes to banks to ask for a list of house they are planing to foreclose. The bank does the appraisals and gives them the value and also the different percentages of discounts depending on how much they buy at once in wholesale.
I’m definitely, not planning to start out buying a lot of properties at once. If we take on his offer, we will start with one house and if we feel we trust him down the road, we might buy more at once. He is offering us about 60% off if we buy 1 of his 11 houses wholesale to start.
We have already contacted 4 attorney we will be interviewing to get their feedback.
In addition to the previous suggestions, I would also suggest asking him for documentation about his company, who they are, how long they’ve been in business, and better yet, ASK FOR REFERENCES. If he is legit and wants to make a sale, these things you ask for should not present a problem. Find out if his company is even licensed to do business in your state. Your Secretary of State should have that info. Also ask the name of the banks he buys the list from and call them to see if they have heard of him or his company. Usually deals that are too good to be true, usually are. Ron LeGrand has great suggestions about building “credibility kits” for just such occassions. If everything checks out, you might want to make that suggestion to him so that he doesn’t go thru those same hassels from other prospects. He sounds like a wholesaler who is in need of more staffing with problems of how to get rid of so many houses. lol But if your guy turns out to be legit, you may have a little goldmine on your hands with him and his, what sounds to be, EXCLUSIVE list - a rarity. Hang onto him tight as he could make you LOTS of money.
As far as the RE Agent is concerned, her “asking” price is one thing. But obviously you can offer whatever you want. It’s up to you to put together an offer that should make everyone happy, including her. Try 60% of ARV and see what happens. Max out at 70%. If they still say no, walk away. Don’t forget to ask how long the house has been on the market, are there any leins and/or assessments, what the repair costs are, etc. It’ll make a BIG difference on your offer and might even make them feel uncomfortable disclosing you the truth about them, which will force them to lower their price. Because of those things, they may just jump at 50-60% ARV or, more preferably and if you’re smart and educated, the original (or lower) asking price of $72,000. Who knows? You might even luck out and get the house for 40% of ARV (or lower still). Remember that banks HATE real estate and they consider themselves very lucky if they can make back the remaining balances of the original mortgages. They’ll do whatever it takes to unload them.
Thank you guys for your much needed responses. I took your advice and drilled him on a lot of questions.
After doing some research, and asking him some specific questions, i found out that he is a wholesaler, who is looking to recruit investors willing to buy houses from him for about 65 cents on the dollar.
He refused to disclose the name of the company that gives him “the list” of houses. The reasons he gave was that he has been burnt in the past with people who go behind him and try to get either the same deals that he is getting or try to sell the houses on his list without his knowledge for their own profit.
He got the hint that I was not willing to jump into something until i was well informed. He offered to mentor us and assist us with the process and he hopes our first deal will be a good experience for us so we will be more motivated to make it big in real estate. I guess he hopes that will make us trust him more and make us feel more comfortable with the idea.
He said he will make us sign a non disclosure agreement with him, before we start so we don’t share his list for our benefits and if we meet people that are interested in being investors, we should bring them to him rather than take matters into our hands for our profit.
I asked him for references and he said he has a lot and does not have a problem sharing.
By the way after our first meeting he showed us his house and this time offered to take us to his office and show us deals he has done in the past.
He has been in this business for over a decade and he is now trying to do wholesale exclusively. He said he is low profile and the asset management company he gets his list from is a small company and has only a few people working for them and they want it that way.
I will call the SOS on monday to find out if his company is legit. We asked about him in our RE club, some people knew about him and mentioned seing him come by for an event, but not what he did.
We are still trying to out the pieces together and we hope you guys can help us with this too.
Well in my humble opinion, I would call ALL of his bluffs. NEVER EVER take his word for it. Get the references. Check him out. Don’t be afraid to let him know that he DOES sound too good to be true. Grill him why his prices are so low. If he is a wholesaler, as he says, who has been around for a decade, then he sould already have a huge list of buyers to unload all of his houses on, rather than have him lurking around seminars, looking for suckers to buy his houses. Why doesn’t his other buyers want them? Hmmmmm…
It also sounds like HE is the one who wants to be in control of your relationship, rather than YOU. He needs you worse than you need him. However, if it makes him feel more comfortable, have him sign a non-circumvent (temporary) contract with you so you can check him out with his sources. That way, he can rest a little easier, knowing that you aren’t going to do an end-run around him (or circumvent him) to make your own deal with them. Tell him the exact reason WHY you want to do that - because you want to check him out to see if he is legit. “No list disclosure. No deal” Simple as that. Tell him it’s a deal breaker and that you HAVE to check him out more thouroughly because his deals sound “too good to be true”. Another suggestion might be to have him meet you at the location where he gets the list from. That way, he can make sure you don’t make a deal like he got with them and you can also see that they really do know him and can give you a good reference in person. That might satisfy both issues from both parties - a “win/win” situation, which is what we ALL want in business dealings, right?
As fara as the SOS is concerned, it’s always a good idea to check them out there, because you only deal with legit businesses, right? If he is not a legit business, then you may have a problem. Do you still deal with him or do you not and risk losing money? I wish I could tell you. I am still a bit fuzzy how you write off his referral fees for your taxes or what your laws are in your state for that. That is something you will have to look into on your own there. Get a lawyer. Tell your guy you are getting one too. Maybe it will scare him. Maybe it won’t.
If he is legit and wants to make a sale, these things you ask for should not present a problem. Find out if his company is even licensed to do business in your state. Your Secretary of State should have that info. Also ask the name of the banks he buys the list from and call them to see if they have heard of him or his company. Usually deals that are too good to be true, usually are. Ron LeGrand has great suggestions about building “credibility kits” for just such occassions. If everything checks out, you might want to make that suggestion to him so that he doesn’t go thru those same hassels from other prospects. He sounds like a wholesaler who is in need of more staffing with problems of how to get rid of so many houses. lol But if your guy turns out to be legit, you may have a little goldmine on your hands with him and his, what sounds to be, EXCLUSIVE list - a rarity. Hang onto him tight as he could make you LOTS of money.