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?
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y
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.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y
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.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
6y
Great thorough response from Erik already. I'll add on a few points.
1 & 2) You can ask for whatever you want. Doesn't mean the wholesaler is or can accept it. Keep in mind most wholesalers are flipping paper and don't own the house so some of your requests (like a 4hr home inspection) are not possible without the seller being on board. Often the seller has no clue what's going on, thinking the buyer is showing contractors and financial partners so to accommodate your requests may be a challenge. I close on all my wholesales so have no time constraint. I probably wouldn't accommodate any crazy requests and I only use my purchase agreement or the state realtors contract if it's from an agent. It's not that I'm being a jack, but because I have buyers that will take it under the terms I want. Regarding the inspection, I would skip it and bring a contractor through the property. I say that because you'll pay someone $500 to tell you the property is bad and needs work- but they wont be able to tell you what it'll take to fix it. A contractor can spot the same obvious stuff an inspector does but at least be able to give you a ball park on what it'll take to fix it.
3) Most wholesalers have stupid high non refundable EMDs. I do as well and it's $2500 payable to the title company. If you like the house enough to make an offer, stand behind it with EMD. It doesn't sound like you're at a stage yet where you should be buying from a wholesaler. If you need inspections and other accommodations, it's probably better to stick with traditional sales. You're less likely to get burnt since a large portion of wholesalers have no clue about rehab costs, ARV, ethics, etc.
4) Best way is with an agent. Attend a REIA in your area and network with some local agents. If they know they'll get the listing when you sell, it's easier for them to work with you.
5) Sure- but the wholesaler may not want to have an agent involved. I work with a lot of agents who bring buyers. I still use my contracts but I'll pay the agent 2% (to basically show the house and get out of the way so it closes smoothly). Keep in mind, that person's offer is automatically lower than the same offer with someone not using an agent so compensate your offer accordingly.
Good luck- go shadow a person renovating houses. There's a ton of hidden expenses that you don't realize till you have some experience under your belt.
Thanks for the great advice. Your responses are much appreciated. I'm working with a Realtor to get MLS props but he isn't very responsive which leads me to lose out on even getting a chance to bid on the deal. I guess I need to speak to some other realtors that are less busy. :) Thanks again.
@Adrien S, do wholesale deals typically bypass the inspection and associated contingencies? I had considered looking for wholesalers for my first purchase but now I'm wondering if that's best. Thanks!
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
6y
@Steven C Hazel yes most wholesale deals bypass the normal contingencies. Keep in mind that they don’t own the house so have to lie to get you and the inspector back in the house. In my case where I close on everything first before i send it out to investors, I have so many buyers that will take it after walking through with their contractor that i don’t have to deal with someone who wants an inspection.