Purchasing from Wholesalers or Off Market

[Darren Nichols]

New to RE investing. Been studying for a few months and just recently attended a local REI club. Ive been looking at SFH for a while and I have not really seen any deals from the listings I've found on the MLS the meet my requirements. I have recently connected with some wholesalers and looking for off-market deals to BRRRR. My questions are as follows.

1. Can I write my own offers?  I'm aware that a title company can help with this and also a RE attorney or Realtor but just wondering if I can just write my own offers and if so, what contingencies are others using? (Inspection, title issues, timeframes ect.)

2. Is having an inspection a good practice and acceptable for all wholesale and off-market offers?

3.  What amount of earnest money is acceptable and is this held by the title company?  How would this be done if you write your own offer? (If the answer to 1 is yes) 

4.  What're the best ways to get comps for wholesale properties if you are not working with an agent?

5.  is it acceptable to ask the help of a Realtor with wholesale properties that I find for a fee?  If so, is there a standard fee or percentage for something like this?

Thanks in advance for the help.

Darren

[Erik W.]

1.  Yes.  You can ask for any contingencies you want that you think the Seller/wholesaler/contract flipper will agree to.  That said, more contingencies =  less odds the Seller will take your offer.  Most off market purchases are "all cash, no inspections, close in 5-10 days".  Marketable title (i.e. Warranty Deed) is a must until you get experienced with how to identify title issues that can be resolved quickly and cheaply.

2. See #1.  I would get inspections this time and compensate for that with a more attractive offer price. You don't know enough yet to just look at it and say, "Yeah it's worth that."  Learn first.  That said, true wholesalers are often in a time crunch and won't mess with you regardless of your offer because they only have 30 days to flip their contract to you or they lose the deal or have to purchase it themselves.  You'll have to get your work done immediately, and odds are you won't get any repairs since there simply isn't time to do them before they must close out or lose their contract with the owner.

3. As little as possible.  I won't tie up more than $100 in earnest money unless the purchase is over $100,000.  Most wholesalers try to tie up contracts for next to nothing too, so don't feel too bad about looking cheap.  I had one guy who wanted to wholesale my property for me and offered $25 earnest money.  Needless to say, I didn't take his offer.  It was a low ball anyway.

4. Look on Zillow for actual sales.  Not the Zestimates.  You want the Yellow Dots that have real sale prices with them.  Only a handful in my area do.  90% are Zestimate only, and those are rarely accurate.  It's a wild west out here!  

5. Maybe if you or the agent have a good relationship with the Broker.  Most agents are compensated for their efforts via a commission that is typically 3%, and you're bypassing that and asking them to do the lion's share of what is important with wholesaling for you.  Also, you need a good, experienced agent, not someone fresh out of license school.  I wouldn't take anyone's word for the value of a house unless they CLOSED 50+ sales last year.  What kind of compensation do you think is appropriate for a seasoned professional to spend their time pulling comps for you when there's no chance of a commission?

Good luck!

P.S.  In case it wasn't obvious with these replies, wholesaling is not as easy as the gurus and podcasts make it sound.  In my area, most of them last for about 2-3 months before giving up.  Keep that in mind.  Many of them offer their overpriced  "Deals" to suckers who don't know any better in hopes they can find someone to pay them a crazy high fee, and/or they themselves are terribly inexperienced and end up screwing up the deals when the tiniest thing goes wrong.  I'm not anti-wholesaler, but it's hard to find a good one.  There are 3-4 I would trust in my town, out of a population of 250,000 in the metro area.