Steps in a Wholesale Deal?

Question

So I got my first lead call today asking me to call them back after 5pm today.
I'm looking for the correct steps in this process.
Here is what I plan to do:

1)  Call them back and fill out my lead sheet with info about their situation, the home, mortgages etc.

2)  Drive by the home and check out the condition, take a look at the neighborhood, etc.

3)  Determine an ARV by looking up comps.  I plan to use some of the online sites as well as MLS listings of homes that sold recently.

What about determining the repair costs?  Do I need to view the interior of the house?  Or do I make an estimate by what I'm told needs repaired during the phone call?  Do I let the investor/"inspector" walk through and determine the repair costs?

4)  Once I have come up with the ARV, figured in the % the investor is going to want, subtract the repair costs and my assignment fee...then I would make an offer to the seller using a state approved offer contract.

Anyone know where I can get an offer contract?
Is there where I have the contigency clause stating that it must pass inspection?
Do I set the inspection period here?  The longer the better?

5)  If the offer is accepted I would then market the property until I find an interested buyer within the inspection period.  If for some reason I can not find a buyer during this period I can then back out of the offer based on the contigency clause.

When I find a buyer, do I let them know that I have an offer contract with the buyer and let them "inspect" the property?
Do I let them know that I am a wholesaler or do I simply say that I am facilitating the transaction for the buyer?
Is the offer contract enough to prevent the buyer from trying to go around me?

6)  When I find a buyer I would then sign a purchase and sale with the seller which would have the "and/or assigns" clause on it.  I would also have the buyer sign an assignement of contract form.

7)  At the closing is where I collect my assignment fee.

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Do I have the correct steps?  In the right order?  Am I missing anything else?

Thanks,

Chris

Andre Scott · Answer

SHORT SALE!

Chris Coughlan · Answer

she just wants to sell the condo.  she said that she had bad tennants that did't pay rent, then it wen unoccupied for 10 months.  now she finally has tennants in there starting last month, but she just wants out of the whole situation.

Chris Coughlan · Answer

thanks,  i'll look in to that.
i was under the impression that you had to miss a few payments and be in "pre-foreclosure" in order to work a short sale.

so basically she would have to write a hardship letter to her lender and then i would negotiate a price with them?

thanks,

chris

Andre Scott · Answer

CMC,

You will have to negotiate a short sale in order to purchase the property for less than what she owes.  After that is negotiated, the bank will determine what they want her to do with the balance.  Lately they have been just washing their hands if the debt.

Jon Holdman · Answer

Short sale will be tougher for an investment property than an owner occupied property.  Banks are more sympathetic to a homeowner that's lost their job than an investor that made a bad investment.

You need to find some recent sales to figure out the ARV.  Do not trust those automated valuation engines like zillow.  They're handy for finding comps, though not as thorough as a title company or the MLS.  If you're going to be a wholesaler, you need to find a source for good comps.  A realtor friend, county records if they're complete (sales, not assessments, which are just as useless as zillow), or a title company.

What is her hardship?  Has she had some change in circumstances that are forcing the sale?

How much is the rent?  That's a driver of the value just as much as comps.  More, in fact, if then intention is to hold it as a rental.  Lots of properties have values determined by comps that don't come close to making it a good rental.

Nicole Starnes · Answer

Out of curiosity, is she in foreclosure or just wanting to sell the home?

Chris Coughlan · Answer

Thanks for the info.

Here's what I've come up with:
She owes 217K
She says the least she'll take is 200K
zillow says it's worth 220K
cyberhomes says it's worth 216K
I couldn't find the TAV anywhere on the county website.

She says it needs no repairs and has tenants in the unit right now.  Are condos not worth it?

So say the ARV is 220K, investors want to pay $0.70 on the dollar and repair costs are 2K.  So that is 152K minus my assignment fee.  Say I take 5K assignment fee that would leave the offer at 147K which is way below the "least" she says she will take.

Is it insulting to make an offer that low?  Should I just call her and say that I ran the numbers with my partners and our offer is well below your bottom price?

Thanks,

Chris

Chris Coughlan · Answer

I guess the main problem with this scenario is that she owes just about what the property is worth.  No matter what I offer her she is going to still owe money on it.

How would that work?  She owes 217K, I offer her 150K.  How does she pay off the additional 67K?  Does she have to take out another loan?

Chris

Jason Cummins · Answer

1. Call them back, find out if they are truly motivated.  Get all the information you need from them. Tell them you have to research the house a bit, and will call them back asap.

2. Run some online comps to get a feel for an approximate ARV.  You do not need to be exact here. If it looks like you have a motivated seller, and a good spread on what they are looking for and the Approximate ARV, go to the next step.

3.  Set up a time to visit the house.  Do not just drive by.  You need to see the entire house and take as many pictures as possible.

4. Figure your offer price and make the offer, if they accept go to the next step.

5. Start your marketing to the end buyer.

6.  Assign the purchase agreement to the end buyer

7. Set up closing

8. Collect your check

There is obviously a lot more work involved than just these words, but this is the basics.  I would have to write an entire book to answer every question correctly.

When you are talking to the buyer you do let them know that you are a wholesaler and that you have the house under contract and that you will be assigning the contract if they like the price of the house.

Your number 6 with the and/or assigns is backwards.  You want to have a purchase agreement contract with the seller that states and/or assigns.  You are assigning the contract between you and the seller, to the end buyer.

The inspection period is set on the contract with the seller.

I hope this answered most of your questions.  It really would take me all night to answer everything to it's fullest.

Mike H · Answer

Good questions, I would also like to know!