Tips for a wholesaling contract?

[Daniel Silvernail]

Hello fellow investors! My name is Daniel and a friend of mine and I are looking to get into real estate. We have been reading, studying, and researching in our off time. Right now, we are currently interested in wholesaling and have started driving for dollars. We are wanting to know as much about wholesaling contracts as possible and would love an experienced investors help. I know that you should make it as detailed yet simple as possible but also have an exit strategy for if it falls through. Some questions of ours are:

1. What is absolutely required on the contract?

2. What should not be on the contract?

3. Can we make the contract ourselves or should we go to someone to do that for us?

4. What makes a contract legal?

Thanks to everyone who can help!

[Ed Brancheau]

I hate to say it but... it depends.

With that lame answer out of the way, I highly encourage you to move forward right now WITHOUT the contract.

But not in the way you think!

First, find your LOCAL buyers.

Most newbies think they need the deals first and that just takes more time and energy. This is the best place to start because you can find out what they want and then go find it.

Think of yourself as a commercial fisherman.

If all of your customers say they want tuna, you'd be stupid to go fishing in Kentucky Lake with a bunch of chum.

And, at this time, just talk to local investors because you're going to ask them what they want in a property AND a contract.

I want deals in TN but out of state investors like myself are not a good source for contracts. While I've done a few deals in WV, I haven't done one in TN. So, my contract might not be totally valid in TN.

To find them, use software like Propstream or Freedomsoft to find people in your area that own five or more properties AND have bought a property with CASH within the last six to nine months.

If you like (or anyone reading this anywhere in the country), PM me and I'll do a search for you and send you a list of buyers in your area for free. Hopefully, you'll bring me some deals in the future.

======SIDE NOTE====== If you're working in a larger city like Memphis, you might come across some rude a-holes because they might be getting called by a lot of wholesalers that never do jack-diddly-squat.

But if you do get an a-hole, reach out to them via writing to show you're serious.

Investors in smaller cities don't get bugged as much.

And in larger cities, you might focus on a smaller area. I find an area with around 50K people works well. Here in the San Diego City area, that's a 1-3 mile radius. In Koreatown LA, it's like 1/4 mile. And out in Joshua Tree, it's like a 50 mile radius. ============

That will give you a good list of active buyers to call and also follow up with a text. And another bonus to local buyers is that you can ask them to refer you to their attorney which you're going to need anyway.

When they tell you, ask them if they would mind sending you a contract that you can use as a template. Play to their sympathies like, "I'm sure you remember starting out broke and needing a little help."

To tell if you have a bad contract, look for typos or bad grammar. If you don't see any, it doesn't mean the contract is totally legal, but there's a good chance that it's a solid contract.

And if you think it's solid and don't have money, you might roll the dice with that contract. Remember that contracts are really only to protect you when problems occur. If you're just wholesaling right now, there's not much that can go wrong for you.

Yeah, it's possible that you could somehow get screwed out of a wholesale fee but it's unlikely. Investors want wholesalers that bring them deals. Screwing you out of your cut would be like biting the hand that feeds them.

I had to roll the dice the first time because I didn't know what I'm telling you now. It was no big deal other than the house was $500K. But as soon as I got paid, I hired a lawyer. Not a big deal when you have a get a check for $10K+ which, in my opinion, is the minimum you should factor in as your fee.

Now, if there are typos, I guarantee that it wasn't written by an attorney. Attorneys know that a misspelled word or misplaced comma can change the meaning of the contract and/or validity. So, they just do not let them happen... ever.

If I get contracts with typos... I'm out. Never going to work with those people because they're either not serious, don't pay attention to details, they're sketchy, or all of the above.

And if they don't have one or refuse to give it to you (never had that happen yet), they're not worth your time.

THEN go after deals, negotiate them over the phone and when they say "Yes", call up that attorney and send them a retainer.

If you don't have the money for a retainer, call the buyer and ask them to have their attorney to draw up a contract in which the buyer pays the attorney fees and retainers for this first deal and takes it out of your part of the deal.

Hope all of this helps.