Unclear on Wholesaling Details

[Kole Kingslien]

Hello BP community!

I am post this thread in hopes to get some helpful insight on the Wholesaling details! My goal with Wholesaling is to raise capital, to fund my buy and hold purchases. I am familiar with the wholesaling concept, and generally how it works. I have already sent out a marketing campaign, and am ready to give it my best shot. I understand that Wholesaling is not easy, but I know it can produce some of the best leads. The following are some areas that I am a little confused about:

• Most of the incoming call scripts I have viewed, always include lines like " If I were to offer you cash, and I can close next Friday, what is the bottom offer you would accept?" or " We are a company that buys houses all around in your area for cash". I understand that these statements puts us in a position of power, building our credibility, and cash buying power, however my concern lies with the fact that I can do not have the power to purchase a property for all cash, as I am on a budget; I also do not buy houses all around the area yet. I have a small amount of money saved up for a reserve on my currant buy and hold (about $4,000), and I have a small amount in my savings that I plan on using towards Yellow Letter Marketing. Can I/Should I still make these statements that every script I come across is including? Is there anyone out there who can elaborate on these concerns a little bit?

• I am also curious about what contract I should use; Should I use a purchase with the option to assign? Are there any legal implications I should worry about?

• If/when it works out, and I get a Wholesaling check, how do I file taxes on this income, I am very confused about this, so feel free to spell it out!

• Should I expect to give sellers an earnest money deposit? If I do, where does this check go, and how do I proceed with the entire wholesaling process after I have an accepted contract?

• Phone calls: How do you guys screen for motivation (I don't want to look at 50 houses a month)? What are some common things you say, or some objections you have to face? I have watched a lot of YouTube videos, and read a lot of scripts, and most people are saying things like "Before seeing the property, we would have to be in the ballpark of X purchase price, if that's a number you could work with, I would be interested in scheduling a time to look at your property", they usually ask this after they've already asked the seller what they want to get for their home. How are they coming up with these numbers, especially if they are answering their calls live, and don't have ARV comps sitting in front of them?

I know a lot of people hate the script idea, but I think it really helps beginners to keep on track, and remember what information to ask, along with helping with confidence in the beginning. 

• I know the double closing idea is favored by a lot of people, because there is little legal controversy, since you are taking title on the property, however, in this case you would actually need the cash to close, correct?

• I want to make sure the seller is prepared for what to expect in this process, does anyone know what kind of closing costs, or anything else that both parties can expect, during a Wholesale transaction? 

Hey BP community, you guys have been extraordinarily helpful thus far, and I appreciate all of your help! Once I gain experience, I really look forward to giving back to this community and helping others out there!!!  

[Cara Lonsdale]

There is ALOT to unpack here.  However, you seem to have done alot of research, and are picking up alot, so I think you are on the right track.  Let me see if I can help fill in some of the holes for you....

Regarding your scripts.  I agree that you should be accurately portraying your abilities in order to eliminate any skepticism from potential Sellers.  Instead of saying that YOU have the cash and YOU buy the homes, I would adjust that to say that you have a network of cash Buyers, and that you facilitate quick cash sales.  By just tweaking those 2 statements slightly, you eliminate any questions later when you have to do an assignment.  The Seller doesn't think you are doing something shifty, but rather, they expect the action.

Regarding the structure of your contract, unless you will be purchasing yourself (which you already said you will not be doing), then you need to have an assignment clause.  Additionally, you should have terms that allow for an extension in case you need more time to get your cash buyer in place.  You should also have a clause that allows you to market the property for sale to others.

When you are ready to execute the contract and secure it with Earnest money, you take it to a title company (or closing attorney if that is your state's practice).  The title company holds the earnest $$.

If you are doing an assisgnment, then you should never have to take title of the property yourself.  You would be "Assigning" your interest in the property to another person.  Then, the other person pays you a fee as the wholesaler.

In terms of taxes, this is your business.  You need to keep track of your income and expenses just like any business.  How you file is up to you.  you may choose to let the income from your buisness pass through your personal taxes, or you may choose to get a tax ID for your business and file it separately.  That is up to you, and something you should consult with an accountant about.

Hope that helps.