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Advice need in Maryland for wholesale property!
Hi, I'm a new investor and believe I have a good potential. Listed at 120k, comps are solid at $250k. Problem is haven't seen the property, owner is still in property and it's been listed for 1 day. What are the risk if I offer full ask sight unseen? It's a 1100sq ft home, imagining Reno can't be too excessive especially if owner occupied. I don't want to loose a good deal because I'm nervous I haven't seen yet. Any advise?
Thanks!
How old is the house? What does MLS say about the last renovation done? What does the exterior condition show when you did a drive by? You can at least calculate the exterior repairs and if roof and other parts will require replacement. Does it leave an impression does a good job with upkeep? Think to yourself why the owner is doing a wholesale vs. retail sale of his property. If the property is in such good condition, why wouldnt he just list to to get top dollar? There is a chance he does not want to do the interior updates needed to sell retail and the wholesaler gave him a good pitch about being able to sell in as-is condition. If you havent seen it, you have to assume worst case, so 40-100k could be possible. Maybe there are major foundation issues, or plumbing, or its still knob and tube and needs a complete re-wiring. Would you be good if the reno cost you 100k and make only 5k profit, because that is the risk you are taking not knowing interior upgrades needed. Good luck.
Jeff, thank u for the perspective. I'm going to wait to view!
Good Advice Jeff! With many years of experience, I highly suggest never to buy a property sight unseen. Pictures rarely if ever tell the story. While there are always exceptions for an experienced investor that has covered their bases as much as possible, this philosophy will serve you well and ensure you don't buy a mistake. There are no guarantees in real estate investing, and my philosophy is to minimize risks. As a new investor, it would be advised to take your time and cover all your bases before placing an offer on a prospective property purchase.
Michael - thank you. Noted!
Leah Taylor
It sound like to me that you are asking about making an offer just to tie up the property. I would never recommend buying a property "sight unseen" but I personally do not hesitate to make an offer. Always make sure your offer is contingent on your own personal inspection! I make sure the seller knows it is me inspecting it and not a typical inspection. If it was me and it looked like a deal, I would get it under contract before anyone else does.
You could put the property under contract then do your thorough inspection after.
Just put a contingency about home inspection so that way you have a way out if the property needs major repairs.
If there are no inside photos I will wait until I walked in. The sellers are just nervous about buyers walking out and I expect some inspection rpts. I am in SF Bay Area one of the hottest cities and people want to estimate their share of rehabilitation cost before making an offer. Just it is listed LOW means they try to get your attention. After enough interest sellers will quickly raise their price to tell the buyers that they want more than market price. Listing price means nothing.
Sam Shueh
Campbell, CA
If you are going to put it under contract with an inspection contingency, you might want to hire a home inspector after your initial walk through. If there are serious issues with the property, they will turn up during the inspection. The inspection report can also give you a to-do list for the property.
thank you all for your responsiveness. This is all very helpful!
Is it a FISBO? Ask the owner what the condition is. If it is not what he/she says, you can nullify the contract on non-disclosure. That said, make your inspection clause valid until closing. If you get in and it's worse, you can easily either cancel the deal or renegotiate. Don't hesitate to write the offer. You want to control it, right away.
Dont be stupid, complacency cots money. Go see the house and make an appropriate offer...or don't. The less you know, the more risk you incur....why incur risk if it can be prevented?
Your profile job says you are a real estate agent....so my advice is to not participate in wholesaling, unless you plan on taking ownership of the property and then reselling it.
@ Russell Brazil - why do you say not to participate in wholesaling as a real estate agent? I would be conducting the wholesaling aspect as an investor.
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@Leah Taylor it sounds like there are a lot assumptions. Check out the property in person, and make sure it fits in with your buying criteria.
You would be surprised how much the definition of the word "house" varies. I have driven to a FSBO property advertised as a "handy man special special house" on craigslist it was super cheap compared to every other home for sale within 10 miles. It turned out the house had burned to the ground and all that left was was the foundation and a burned out shell haha
Check it out in person
@Brandon L. oh wow!
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@Leah Taylor yea...learned my lesson. Get pictures before i waste time driving haha
Originally posted by @Leah Taylor:
@ Russell Brazil - why do you say not to participate in wholesaling as a real estate agent? I would be conducting the wholesaling aspect as an investor.
If you are a licensed agent in the state of Maryland (as well as DC), who is your first duty to? Is it your client? No. Is it to yourself? No. Your first duty in those states is to the public. So if you misrepresent the value of a sellers home to them, then you have broken the law. So I'd highly suggest then that while you are attempting to wholesale that you tell the seller I'll find a buyer for your house at X, but if I list it on the open market and I could sell it for Y.
Also does your broker know that you are wholesaling? If they do, then you have shifted much of the risk onto them. If they do not, then you are in violation of the law. Your broker (or manager in multI site brokerages) needs to be aware of all of your real estate activities, and approve of them. The brokers act requires their supervision of all your real estate activities.
Also does your e&o insurance cover you for wholesaling?
When you get your license you subject yourself to the terms of the brokers act, and all related avenues of law assosciates with it. (Guidance memos for example)
Note, I'm not commenting on whether wholesaling is legal or not, but rather I am saying in this state I do not believe it to be prudent for licensed individuals to participate in it.
So definitely talk to your broker about it. If they say you can not do it, you can't as you are under their supervision. If they say you can, most of the risk shifts to them, but not all. If they do say yes, I'd suggest contacting the real estate commission to just be sure.
@Russell Brazil thank u for the advice!!! I'll be looking more into this.
Leah, what did you end up doing? Did you decide to wholesale as a REA???