How do you know when you truly can trust your cashbuyer ?

Question

I am starting out and I do submit lots of good deals to one of my cash buyer.  I probably submit 4 a day One was a 5 unit which owner cash flowed 308,000 from tenants which I told him every day to call make a offer.  I would ask about my deals dailey he would say he had lots of properties to take care of. I am new at this and was with maybe 2 weeks so I need to move on. I noticed yesterday when I was looking at deals I submitted 4 were sold.  I sent 3 in his area he wanted 2 days ago and he said I knew about these we are already making offers on them. A couple went for 103,000 foreclosure zestimate was like 140,000 near the water. As of yesterday I have 5 more new cashbuyers. How do I not know they are just taking my deals without paying me anything?

Heath Ryans · Answer

@Lynne Garris if your trying to wholesale, that's not how it works. YOU have to go make deals and get them under contract yourself. Then you send the deal to your cash buyers if it meets their metrics. If you flood their inbox with every listing on the market that they can already see and probably already get from a zillow email, your causing them more work than anything. It's your job to make those calls.

To wholesale. You find deals. You negotiate deals. You place great deals under contract. Then you mark up the price slightly and present it. If the buyer likes it, he/she will fill out an Assignment of Contract with you. That;s where your fee comes in. If the deal closes, you get the difference between what you put the property under contract for and the price your cash buyer paid.

Otherwise you are not owed anything.

Lynne Garris · Answer

@Heath Ryans thank you now I understand very much.  Very nicely put with much clarity . I appreciate your words of wisdom.

Lynne Garris · Answer

@Brian Van Pelt thank you for all your input. Very useful. I will keep this in mind.

Heath Ryans · Answer

@Lynne Garris

Brief summary of wholesaling

1) You do some marketing to a predetermined group of home owners who, for whatever reason, you believe would be in a situation in which they would sell their home for a significant discount

2) When you receive a reply from an interested party, you do a walk through of the property and make note of it's condition and any needed repairs.

3) You determine the After Repair Value (ARV) of the home. Essentially its expected market price at resell.

4) Take 70% of the ARV, subtract the cost of repairs, subtract a small Assignment Fee (your finders fee) for yourself.

5) That number is now your MAX offer. Make an offer to the owner below that number in order to give yourself a bit of wiggle room.

6) if the owner accepts, you will fill out a Purchase and Sell agreement between the two of you.

7) Market the deal to your cash buyers

8) if one of them likes the deal, you will fill out an Assignment of Contract for a price that includes your assignment fee. That assigns the full rights of the contract to them.

9) Do everything you can to ensure the deal closes so that you get paid.

Example:

You market to Jim because his house looks terrible. Jim gets your letter and calls you back. You do a walkthough of jim's house and note that it needs 20k in repairs. Your research indicates that Jim's house is worth 100k.

100,000 x 70% =70,000 - Repairs of 20,000 = 50,000 - Assignment fee of 2,000 = $48,000

You now know that the max you can offer is 48k for the home. You offer Jim 45k to be safe. Jim negotiates a bit but you come to agreement at 48k (good thing you gave yourself some slack). so you fill out a Purchase and Sell Agreement.

Now you go to your cash buyer and say "Hey, I have this deal for 50k (48k contract plus your 2k fee)." Your buyer agrees so you fill out an Assignment of Contract.

The deal closes smoothly and you pocket 2k.

Brian Van Pelt · Answer

@Lynne Garris

You have to learn:

. to qualify your Buyers. know the ratios that they purchase for. Hold them to some sort of written agency so they won't submarine you on a deal.. Trust, but verify EVERYTHING !

Lynne Garris · Answer

@Heath Ryans okay thank you I am new here and trying to understand all this. Not all cash buyers tell me this before hand. I appreciate all your feed back and your knowledge.

Heath Ryans · Answer

@Lynne Garris also, 103k for a 140k property is NOT a good deal unless it was in perfect shape and ready to resell or would make a good rental with zero work. Make sure to understand what your buyers are looking for in a deal.

How do you know when you truly can trust your cashbuyer ?

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