What to do once a property is under contract

Question

Hi All - I have some questions about wholesaling, more specifically what to do once a property is under contract. I feel like I understand the basic steps and process of a wholesale deal (Advertise, get properties under contract, market/find a buyer, assign contract, close the deal), where I get hung up are the details of Marketing and Assigning phase.  These may seem to be trivial questions, but sometimes having answers to simple questions helps the most.

1. When we're advertising a property to wholesale, do we disclose the address? or just the repair costs/ARV/CapRt/pics/etc? at what point do you advertise the address?

2. Do you typically do walk-throughs with a buyer? or will they buy based on pics alone?

3. Is the seller there when you do a walk-through?

4. Should you give a buyer the sellers name/contact info at any point throughout the process? even once assigned, or do you always act as a liaison.

5. If it is a Section 8 property, should that be included in your marketing?

6. Does the seller find out how much you're making on the deal at any point?

Basically, I'm looking for a more step-by-step, methodical approach for finding a buyer and assigning a contract. Thanks!

Dev Horn · Answer

1) If you have it under contract, you can disclose the address to your buyers.  They must have it to look at county appraisal and run comps, etc. so you won't get far without telling them the address.

2) Yes, we meet the buyers at the property and walk it with them.  I took 77 pictures of a house I looked at yesterday so my buyers can see everything possible before going there.  We've gotten deals from the pics before they even saw the actual house.

3) Seller is generally there, to let you in.  But once it's under contract, put a lockbox on the door so you can access the house when the seller is not there.

4) Sellers name and contact info are available to buyer because we are assigning them our contract, but we like to continue to act as liaison because the seller knows us.  But really, the title company takes charge of the process.

5) Yes, of course, you must disclose Section 8 status.

6) The seller can see what you made at closing if it disclosed on the HUD statement, which it usually is because you get paid at closing.

Ibrahim Hughes · Answer

Great answers by Dev. We tend to do a few things differently so I'll answer from our perspective.

1. We do NOT email, text blast or 'advertise' our contracts (properties). There are too many posers out there who don't perform. Not to mention the scumbags who will go right to your seller, contract or no contract, and try to steal or undermine your deal. And let's not talk about the clowns who will go and disturb the tenant without anyone's permission just to get inside and look at the house. Like REO listing agents back in the day, We sell to a very exclusive list of already-vetted and proven buyers. When they say they want a deal, they usually do so right on the spot after looking at it and they close on time. So take my advice and establish a list of REAL and SERIOUS cash buyers. POF usually separates the players from the posers.

2. We or someone on our team usually does a walk-through with the buyer. We do however take very thorough pics (electric panel box, boilers, exterior, walls, windows etc.) so that anyone who really rehabs knows whether it's a good deal or not. The physical walk-through is really just to confirm that we or they didn't miss anything.

3. The seller is sometimes there but we try to avoid it if possible. If it's a vacant house, we have a clause in the contract that gives us the keys to the premises for contractor and municipal inspections. Then we're able to set up a lockbox where, once again, our proven buyers get access to the house. Can't imagine given keys to just any Joe Shmoe off of craigslist.

4. We're an attorney state so our end buyer's attorney will have the seller's attorney's contact info once our assignment contract is signed.  However, our buyers know to never contact the actual seller and that we are the liaison. Anything they need from the seller, they go through us. This ensures that we maintain control of the deal.

5.  Section 8 is usually a plus in certain markets like stable inner cities (here only stable areas, and not true war zones, attract section 8 tenants as they are considered the creme de la creme).

6. Yes but our fee always shows up on the buyer's side of the HUD (it's actually in our assignment contract that it must be this way). Therefore the seller's attorney or the title co. will only show the seller what's on their side of the HUD.

Hope this helps!

Dwight W. · Answer

Hi Dev!

The Memorandum of Agreement is commonly used in commercial real estate transactions but comes in handy for residential transactions also.  It helps lock yourself into the deal and prevents the buyer from going behind your back and selling to someone else.  The advantage to using this form and having it recorded is that should the seller try to go around you and sell to someone else you will be contacted and that seller's back-door maneuver with the other buyer can not be processed until you release the lien on his property.  If that situation arises you could then offer to be paid to release the "lien" on the property for a fee.  This way you still make money even if the seller doesn't want to sell it to you.  He's stuck! There is a form for this that requires the following steps, in summary:

1. Your information as the buyer, i.e. your DBA name, entity, etc.

2. The seller's name and property address

3. Seller's signature witnessed by a notary public (seller takes care of this or you can walk them through it to ensure it gets done but get the form back as soon as possible!)

4. Your signature is then witnessed by a notary public

5. Record the document at your local courthouse ASAP before beginning your due diligence.

Dev Horn · Answer

I'm not clear on that either (the memorandum) - a signed Purchase & Sale Agreement with the seller is contractually sufficient.   And in contract law, you don't want to have two instruments - especially if they use different language that could result in a conflict.  Maybe i misunderstand what you mean by a "memorandum" with the "seller".

Patrick Britton · Answer

could you guys elaborate on this memorandum please?  what is it, what does it do, etc.?

Dwight W. · Answer

@Kris- Hi! Good point about the memorandum.  I just want to add that the memorandum should be recorded IMMEDIATELY!  You have to be extra cautious these days, even with sellers.

Kris Haskins · Answer

If u wanna pre-screen buyers, u could ask them for a POF.  You may offend some real cash buyers but you will know if they have the money.  I would like to give you one tip.  To make sure your seller won't back out of your signed contract and try to sell to another buyer for more money,  Make sure you get the seller to sign a memorandum.  I call it "deal insurance".  good luck..

Shvonne C. · Answer

@Dev Horn this is a great list!  Do you mind if I PM you for that info?

One questions I have about getting buyers into the property is, do you screen potential end buyers when they call/email?  Are their specific questions you ask them before deciding to go meet them at the property?

Matt Faix · Answer

Dev, this is great information. Thanks for taking the time to respond! I'll PM you with my information.

Patrick Britton · Answer

great list Dev.  I am in a similar situation to Matt and greatly appreciate the detail you've provided.

What to do once a property is under contract

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