Should I completely avoid wholesalers? Being new and trying to put together a network of individuals I found a Real Estate Broker/Investor on Craig’s list and gave him a call. He told me that wholesalers are very bad and all they want to do is take your money. He also said I should get a real estate license.
Any thoughts?
Yeah Don’t call that guy back!! That is my thoughts!
I enjoy the wholesalers I work with and they charge less then the Realtors that is for sure!!! Work with everyone it is not if they are a Realtor, bird dog, Butcher, Baker, or candle stick maker it is all about the deal not where you find it!
Also let me guess he wanted you to sign under him after you got your licences!!!
I am not going to start the licences war again but I am 11 years strong without one and counting!!
Well we didn’t get that far but I am sure he would have loved to bring me on as one of his! 
Robb, you seem to have tons of experience and I read your book, which also inspired me. I have been looking at foreclosures and wholesalers as a possible deal but I am just not sure how to go about that first deal. I have only been thinking about REI for about two weeks now but at this point I think it’s time to go for it. Do you think that working with a wholesaler is a good idea for a first deal? There seems to be a good wholesaler in the area that shows comps, ARV and LTV so it makes it easy to see the possibilty. Do you think it is ok to have some trust in them?
Thanks!
Until you sign a contract you are not locked into anything! I have done deals with all walks of people you know the whole " Hey my sisters,brothers, cousins, aunt’s, ex-husbands, daughter’s, sisters brother is trying to sell a house and one of them is a loan officer and two of them bought that infomercial program one late night and the other is an appraiser!!!
To Which I would say great Three questions
How do I get in touch with the owner? Realtor, Cousin handling it whatever!!
And oh yeah that appraiser involved how much did he say it was worth?
What does your distant relative want for the house if I were to close this month?
Don’t over analyze anything. If someone is wholesaling a deal to you and even after their cut the deal makes you tons of money, it makes sense to do it. I agree with Robb that taking a look at deal regardless of who brings it to you is worth it.
Maybe the guy from Craigslist didn’t think it would be wise to ONLY use wholesalers or whatnot, but that’s just a business plan. Even if you have an extremely sound business plan, there will be times that opportunities arise that you may need to deviate. That’s ok.
The numbers are what matter.
So I can write up a contract with whatever escape clauses I need to get out. Now that I have that signed contract do I have the right to sell the house on contingency that I buy it? Do you typically find someone with enough imagination that they can see the finished product when I am done rehabbing it? Or do I need to either get a loan or find someone that can help me with the purchase, then rehab then find a buyer?
hollinmb-
I’m not 100% sure about what you’re asking. If you have a signed contract to buy the house you can either a) buy it under the terms of the contract b) assign that contract to another buyer if that’s available within the language of the contract c) or not buy it which may impart some loss on your part (earnest money, etc).
The person that buys from you may be a simultaneous transaction but it is a SEPERATE transaction. You spoke of a wholesaler, but in this example you are the wholesaler. So are you buying it from a wholesaler or selling it to one. I’m confused.
Sorry. I was speaking in generalities in that last post.
Generally speaking, once I have a signed contract I was wondering what I can legally do.
“b) assign that contract to another buyer if that’s available within the language of the contract”
Does this mean if I am buying a $100,000 home at $70,000 and I have a contract then I have the right to sell the contract for whatever price? But I can’t do this with any contract unless I say that is my intention?
If this is true then how do I find a buyer that is willing to pay me that much when the contract says I am getting it for such a deal? As a buyer I would think I was getting hosed.
If it is a rehab then I would really need to purchase the home first then rehab it then sell it, right. There can’t be too many people that would buy the contract from me for the ARV before the repairs. Or does this happen?
Thanks!
If the contract contains language that it is non-transferrable or in some areas it must contain language that it is transferrable (the default would be non) then you would have to do a double closing. You buy the property and sell it to another party at the same time (you actually complete your sale first so that you have the money to complete your purchase, it’s usually done the same day here where I am).
If it’s transferrable then you ‘assign’ the contract to another party for an assignment fee which you agree to at the time you assign it.
The double closing can be more expensive for the middle man because you pay closing costs 2x in many cases, but it is generally favorable to the final buyer because they don’t have to pay the assignment fee before closing.
If it’s non-transferrable am I still allowed to advertise it to buyers then? If I have a contract for the $100,000 house for $70,000 can I start advertising to buyers that I have a house to sell for $100,000? I am sure there are a lot of things I have to disclose but for the most part I can legally sell it almost as if it is mine?
If it’s non-transferrable then you have to buy the house first. You would forfeit your option fee if you did not buy it in the option period and you would forfeit your earnest money if you chose to not buy the house after that point.
You would execute a double closing if you were to wholesale a non-transferrable contract.
“You would execute a double closing if you were to wholesale a non-transferrable contract.”
I understand that in a non-transferrable there must be a double closing. I am trying to understand the “rights” that I have in order to find a buyer. I hear real estate is about putting a buyer and seller together. So if I find the seller and the seller has this great deal as I mentioned above, and I get the contract signed now I need to find a buyer so I can do a double closing.
So, once I have the contract can I go I find a buyer and say," hey mr. buyer, look I have this beautiful house for $100,000 would you like to buy it?" So then do I go get a loan to buy the house close it then walk down the hall 30 minutes later and sell it to my buyer?
Is that legal? Just making sure I understand how this works.
Thanks!
Yes, real estate is about finding a buyer and seller and getting them together.
Some people might have trouble grasping the legalities of a double closing. Since some would argue that you can’t legally sell something you don’t legally own, they argue that the double closing isn’t legal. What they forget is that the contracts are the Rights to Buy. When you execute the contract for the property with the orginal seller you, the buyer, are locking up the Right to Buy the property before the contract expires. You then go out and find a buyer for this property, you are the seller now, who signs a contract that gives them the Right to Buy the property during the life of the contract. It’s perfectly legal to do this.
The stock market is full of people buying and selling securities on margin (i.e. they don’t own them yet).
The only problem in a double closing would be if the orginal seller walked and the person you were selling the house to made a stink. The original seller could be liable to damages to you for breech of contract, but in turn you could be liable for damages to the buyer in your transaction. Is this possible? Sure. Is it likely, not very, particularly if you are upfront with the person you are selling the house to that it’s a double closing.
This is not legal advice of course so take everything with a grain of salt and consult your own professionals on the matter (disclaimer over).
Thank you. That is the clarification I was looking for. The lack of understanding that idea has been pestering me for a while now.
Thanks again!