Buying from a Wholesaler

[David Begley]

I am a real estate investor with a real estate license. I would like some insight (hopefully from both Wholesalers and those successfully purchasing good deals from Wholesalers) on a couple of questions.

1. Can a standard Georgia GAR Purchase & Sale Agreement work and can a Wholesaler be compelled to use or accept an offer using that document? (I've had Wholesalers try to cram their own PSAs down my throat that afforded the Buyer little or no protection, and some more unscrupulous ones inserting sneaky non-refundable Earnest Money clauses).

2. Speaking of Earnest Money, is there a rule of thumb with respect to the amount a Buyer should include with an offer? As a realtor, can my Broker hold the Earnest Money deposit? If the Seller determines where Earnest Money is deposited, will a clause stating that the EM $ will be deposited within 24 hours after a binding contract reduce the appeal of my cash offer? If Wholesalers are given the Earnest Money, are they required to deposit in an Escrow account that is regulated like all escrow accounts?

3. Contingency Clauses - what works and what doesn't? If I draft an offer with a contingency that provides for me and my "agents" to inspect the interior of the property, how are those typically presented? How many days? I recognize that a cash offer, with a large non-refundable earnest money check attached, with no contingencies will win the bid; however, from the 100s of wholesale deals that I've been presented, none have been such a good deal that a blind offer without inspection would've been prudent. This is especially true considering the number of Wholesalers that have been promised quick riches from gurus and have no earthly clue how to estimate repair costs or ARV.

In other words, how can I address these three issues on an all cash offer when I can close with good funds immediately? An offer that a Seller wouldn't reject for a lower cash price that did not include any contingencies and/or Earnest Money restrictions as noted above?

Any help would be much appreciated!

[Aaron Mazzrillo]

I'll never understand why people insist on making this business SO much more complicated than it should be...

1. If you need a realtor contract with all the escape clauses, contingency periods, etc. you're not a real buyer. At least not a pro. I never have a contract between myself and my buyers. I usually don't have a contract between myself and my sellers! You say you're buying it, it's sold and you close. I don't keep shopping the deal. You don't close, me and you are taking a ride out into the desert and you're not making it home in time for dinner... Or breakfast.

2. I've never asked for earnest money. Your earnest money is your reputation. You don't close, you sold me your rep and I'm dragging it through the mud every chance I get to anyone who will listen. The only earnest money I expect is the full amount you need to close the deal and pay me.

3. See number 1. You should know your numbers and always assume the worst. Trustee sale buyers don't get to inspect so why should you?!  You bought what I bought and I don't want to hear any whining after escrow closes. If you ran your numbers, you'd be prepared (and budgeted) for the surprises that always pop up.

My advice, stop wasting time with people who don't know how to buy. If you find a great buyer, set him/her up with some marketing funds to bring you more deals. I used to do this for certain good buyers. I'd basically become their shopper. You'd be hard pressed to find a wholesaler who wouldn't take some bucks to cover marketing overhead. Have this wholesaler use your preferred contract (and I seriously hope it isn't a realtor one!). Mine is one page and 8 sentences long, but typically it's just a verbal offer. I've got investors handing me cards every time I go out asking to get on my buyers list. Find that wholesaler in your market and you won't want to waste your time with these pretender buyers any longer.