Man I’ve been doing a lot of research and self educating myself on wholesaling since the summer of 2010. I know about a couple of distressed properties in my area, I want to start negotiating deals with the owner and putting them under contract.
The only thing that is stopping me is that I keep reading posts about people putting down 20,000, 30,000 to wholesale properties?? this is really confusing me. All I want to do is
1-negotiate deals with the owner
2-put the property under contract
3-Find the end buyer
4-Flip my contract for profit and on to the next…
Also, How do I tell a seller that I’m going to Flip the contract for profit? I don’t think most people would even want me to put their house under contract if that’s the case…
Why would you volunteer that info? All the seller needs to know (or wants to know) is that you can solve their problem. If you still fee compelled to tell them your business you could simply say you have investors who will actually put up the funding or something like that. In either case, they know full well you’re not doing this for charity.
There shouldn’t be any reason to go into that. If pushed, I would just say that you represent a group of investors and have the authority to purchase “subject to” their final approval.
I never put down more than a $1,000 for a wholesale property, especially if you plan on flipping it at closing. Not even if I plan on keeping the property I will put down more than $1,000, no reason to. If you keep it, you would have some type of financing lined up, so you really don’t want to risk your deposit if something goes wrong.
Most wholesale properties are probably distressed properties, so usually the owners are glad that someone wants to take them off their hands, even if only with $100 earnest money deposit.
My other suggestion would be to line up your buyers first before the properties: build a buyers list first, so that you have ready buyers when you put a property under contract. That would also give you a better idea of what type of property your buyers are looking for, so that you can go looking for properties that meet the criteria, therefore minimizing the risk of ending up being stuck with a property that will not sell.
As far as disclosing the flipping scenario to the seller, for your protection, you need to put something on the sale contract, like “Buyer reserve the right to assign the contract or the property to a third party prior to closing.” Also “Subject to investor’s approval within 10 days of acceptance of contact” will give you the chance to back out in case you have no interest or activity from your buyers for that particular property.
Honestly I wouldn’t even do that, although I guess it probably wouldn’t hurt. As long as the contract doesn’t specifically state it’s not assignable then it’s assignable. And you can always back out of a purchase contract…simply don’t purchase! Tell the seller it didn’t work out, here’s your house back. They can’t force you to close. Personally I never give more than $10 for deposit unless it’s an REO and in either case you’ll lose it, but that’s your only risk.
I wouldn’t even bring it up to the seller…just my opinion…