i posted this in the foreclosure forum. it should have been posted here.
there’s a motivated seller who wants to unload their property. the FMV is around $400k. Since they owe close to $300k to the lender, there doesn’t seem to be a big enough spread to sell to an investor.
i believe this could be a wholesale deal for a retail buyer. i know you assign the contract when wholesaling. would anybody like to elaborate on the process and correct any misunderstanding i may have?
i’d like to make an offer to the seller for $300k and find an end buyer for $305 or $310.
do i present a standard contract with “and or assigns” for the $300k?
1.if that is correct what follows next? where do i obtain my buyers?
2.how do i explain to the home owners that i’m not the real buyer and i plan on finding one?
3.will they take my contract seriously?
4.how do i have potential buyers look at the home…do i accompany them or send them to the homeowners directly?
5.what if i cannot find an end buyer?
First thing: I would suggest using an option contract rather than a standard purchase contract; this will give you an equitable interest in the property and allow you to legally market it for an end buyer without acting as an agent. Explain how you have the option to purchase but are not required to do so; also explain how they are free to continue marketing themselves and whoever gets a buyer first, gets the sell.
1–In your situation since you aren’t necessarily looking for investors, you basically need to do everything a FSBO or realtor would do when trying to sell–yard sign, property flyers, free internet sites (craigslist, backpage, etc), and you may even want to spend a little $$ on advertising the place. Make sure the place is worth what you say it is…you don’t want to spend money on something that doesn’t have a chance to sell for what you need it to.
2–Be honest. Tell them you’d like to put the property under option and market to find a buyer. Explain to them you plan to mark up their asking price slightly and that’s how you will make your profit; make sure they know there is NO Cost/fees to them.
3–If you have a good one they will for sure; once they sign it it doesn’t really matter. Make sure to record it at the court house or have it notarized.
4–In my experience I always show the place. Although you can make it a stipulation in the option contract that the optionor cannot go around you and sell to a buyer you present to them, I still like to show the place myself. If it comes up, just tell them you’re helping the home owner sell their place for a fee.
5–If you can not find an end buyer…oh well! Move on to the next one…that’s what’s so great about an option contract. You don’t have to feel stressed about not being able to find an end buyer and worrying about making the sellers being mad with you. You never promised them anything…you said you would do your best to find a buyer. Only thing you lose is time, effort, and whatever money you invested in marketing. You always want to close…but it’s not the end of the world if you can’t find a buyer.
Hope that helps and good luck to you sir! Keep us updated on what happens.
one question i have is your advice to use an option contract. when would it be better to use a standard contract instead of an option? the fact that they can still market the property to find an end buyer could make things a little tougher for the amount of money i would make on the deal…or at least it seems that way.
…to add on further. what if my asking price is $10k above what i have it under the option for, and then a buyers agent has a buyer but wants 2%. how is that factored into the deal?
I’m not completely sure on this one, I’ve never had an agent bring me a buyer. You would let the agent know your intentions and tell them that they will be getting paid their commission through the proceeds of your profit. Not legal advise…but get a good investor friendly attorney who will know the steps involved.
You need to factor the possible commission into your margin. If you sell it, great, more money for you. If an agent helps, then you made your spread.
Just curious. Have you presented the offer to the home owner? If the FMV is 400k, why would he take your low-ball offer? Or did you mean to say ARV of the home?
Why can’t you wholesale it to an end buyer for 350k or 360k and make some real money on that deal. Since its fair market value is 400k, why sell so cheap? This is all assuming you meant FMV and not ARV.
You’re right, that is always one of the biggest things when doing it this way; especially if they’ve had it for sale for a while before they contacted you…especially in the internet age. I’ve seen a house that had 4 different sales prices when I googled the address.
You can change the contract around to where it does not say this but rather you have the exclusive right to market the property. But sellers like the option that they can market too…so you really just have to feel out your seller and what they are and are not willing to do.
I would only use a standard purchase contract when I had a buyer already lined up or it was a true wholesale deal (70 cents or less on the dollar).
I was thinking this too. Why make only 5-10k on a house that has $100,000 in equity? If it’s really worth that much and needs no repairs…you should be able to do more than 10k…Where are you located?
Bullseye if there is a lot of equity to play with than ask for a higher assignment fee. Right now I’m working on a deal that has over $300K in equity so I’m setting my assignment fee at $50K
To be up front and honest I have not done any of these deals. but I am reading, learning and desire to. With that said…
Can a person be a birddog for the original sellers with an agreement of payment for any amount over their asking price to be paid to the bird dog, namely you?
You’re mentioning what the original poster’s situation is.
I.E. you can put an option on a property for a certain price, let’s say 100k. You can find a retail buyer to purchase at 110k. Exercise your option and do a double close to make the 10k spread or if your buyer has deep pockets…assign the option for your profit.
that’s the thing. i’ll know repair costs once i go in the house. from the outside it needs a new roof that extends over the backyard patio. i was thinking $10k to get a quick sale. sheriff sale date is approaching fast so i’m looking for a quick turnover.