3 Questions books have not cleared up?

Question

1. At first which is better  concentrating on building a buyers list or go straight for sellers? Why?

2. After reading  J Scott's book on "Estimating rehab cost". If I follow the book on every deal is that sufficient or should I be also calling 3 or  4 contractors and getting an estimate on all the parts of the house that needs repair same way a rehaber would  do on every deal? What has worked for you on your deals that ended up with a accurate estimate that your buyer would say you have estimated correctly?

3. If I get a real estate license and try to wholesale deals without  working with a brokerage, will I still be in a better position if someone accuses me of selling real-estate with no license? I would hate to get a license and have to be directed on how to spend my day like a normal job. I'm looking to be a business owner.

4. People who do get in trouble for wholesaling with no RE license, is it because they draw attention from "bandit signs" and the city takes notice and goes after them?

5. How has knocking on doors worked out for you?

May God reward you.

J Scott · Answer

Btw, my answers to 3 and 4 lead to me to recommend that you get your license.  If you're serious about real estate, and expect to be in this business long-term, there's a very good chance you'll be glad you went down that road.  I don't know many (if any) investors who got their license and were upset that they did.

Floyd Orr · Answer

No way! The last person I thought that would take time to answer my questions is you Mr Scott. I loved your book and I will follow your advise. Thank you for your time sir.

J Scott · Answer

1.  Definitely start with sellers.  Buyers are very easy find these days, and if you can find a great deal, you'll have no problem finding a buyer.  Sellers are much harder to find these days, so that's where you attention needs to be.

2.  As the book recommends, you'll want to find out specific prices for your area, the types of contractors you'll be dealing with and the types of houses you'll be working with -- the book is just a methodology to do that with general ranges of prices.  So, if you want accurate estimates, you should follow the methodology in the book, get contractor bids for the first few projects, and once you have the data from those bids/projects, you should start to be able to generate accurate estimates without as much help from contractors (though obviously, real bids are always better than numbers you come up with).

3.  No, you'll likely be in a worse position.  You won't have access to any agent tools, you won't be able to collect a commission and you won't have more control over your deals; what you will have is proof that you are basically a professional real estate investor, and if you break the rules, the law is likely to come down on you harder than if you were just some guy who didn't really know what he was doing.  The benefit of having your license is the stuff you get when you actually hang it with a broker and can call yourself an agent.

4.  People who get in trouble for brokering real estate without a license get in trouble because they are brokering real estate without a license.  If you aren't well versed in what constitutes brokering real estate, check out your local/state statutes or consult a local attorney.  There's a fine line between acting as a principal in your transactions and brokering -- and the lines are going to be different in different areas.  Get familiar with your laws.

5.  I've never tried it...

J Scott · Answer

Any earnest money with the seller is negotiated as part of the original contract.  Some sellers will want some (or even a lot), and some won't care -- especially if they are truly motivated.  If you're confident that you will close the deal, you should be willing to give them some money upfront so that if you back out they don't get completely screwed.

The earnest money is to ensure the buyer has a vested interest in actually closing -- so he doesn't walk away.  When you give the earnest money to the title company, they are only allowed to do with it what the contract tell them.  That generally means to put it in an escrow account and not touch it until the sale is completed or terminated.

You won't typically pay the title company for their work until closing.  If the deal doesn't close, the title company typically will eat the cost -- though they have to eat the cost with you too often, they may not want to work with you in the future without being paid upfront.

That's typically how it works.  Though personally, I would think it would be good form for you to be at closing to handle any issues that might come up.

First, title companies and closing attorneys won't (in my experience) try to sell you anything that you don't absolutely need.  Though they may throw some junk fees on the bill that raise the costs a bit.

More importantly, there are no fees for you as the wholesaler -- all fees are paid by the buyer and the seller, as per the contract and how things are typically done in your area.  So, this isn't something you'd need to worry about.

Justin Fernandez · Answer

As far as your EMD from the buyer, that's what keeps them from backing out on you. It should be 20-30%  of assignment or 1k,2k,3k, 4k,5k, just depends on your spread.  Some ask for all of it upfront, some wait until closing.  It has to hurt, or else you have a higher chance of them backing out. The money needs to go hard after their DD period.

Yes, you should have instructions for escrow for Rest of Assignment + EMD to sent to you. Rarely is the EMD  given directly to the wholesaler, (Unless you know the buyer or have a relationship) which doesn't allow you to pay for closing fees.

You should speak with a closing company or attorney first, so that way you know the fee structure up front.

This is just general information meant to guide you, not implicit truth. You need to speak with your team (title company, attorney, re agents, brokerage, etc.) first so you know what's suppose to happen and when.

Try to get a mentor or JV a few deals.  That will also give you good structure in how to do it, specific to your situation and specific to your market.

EMD-Earnest Money Deposit

DD- Due Diligence

Floyd Orr · Answer

Thank you Mr Scott. I can't wait for the next book you write to come out.

Justin Fernandez · Answer

Thanks bud. It's what I love about these forums! I'll gladly help anyone because people gladly help me!

Floyd Orr · Answer

I really appreciate your time Mr Fernandez that cleared up a lot for me. Best of success to you and your lovely family.

Floyd Orr · Answer

I know these may sound like dumb questions maybe even funny, but if I don't ask I just won't know. When I assign the contract with the seller do I have to give the seller earnest money if they didn't ask for it?

And far as the buyer goes am I just asking for enough earnest money from him/her to cover the title and paper work ($250 or so) because when I give the buyers earnest money to  the title company they use it to pay for the title search and cover any additional fee's, then they will call the buyer and the seller and tell them to come down to the office and have the buyer pay at that time and close?

After the close and the buyer and the seller have physically met  at the title office and get/pay what was laid out on the assignment (seller gets x amount for house, and buyer paid  x amount in earnest money)? Will the title company will  handle all the money and simply send any remaining amount to me in the mail and I really don't have to be there (extra earnest money more then the cost of the paper work, difference between buy price and sell price)?

If it is a law office that will be handling the assignment do I need to be aware of any sales techniques they  will try on me when I bring them the paper work (I imagine the  lawyer puffing a cigar sitting back in his chair staring at me with a bright white suite on looking like colonel sanders and  saying with a serious look on his face "son , I do believe you need to get x and x insurance because there are lot's of scams out there, protect yourself and don't be another  statistic, while you're at it you need to buy Advance Contract Performance Processing so your paper work does not get lost or something, it really is the smart thing to do in my professional opinion. Sign right here and here I have to catch a flight in 20 minutes!")?

Floyd Orr · Answer

Okay. Thank you.

​3 Questions books have not cleared up?

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3 Questions books have not cleared up?