Few questions

[Tom Jones]

I currently have a few questions regarding wholesaling properties. Any help, advice, etc would be appreciated.

1. I understand how to determine what to offer a potential seller for their property (ARV x X% - repair) - your wholesale fee. Now obviously the figure I come up with after computing the (ARV x X% - repair) is what I offer to the seller. However, what I would like to know, is when I put the property up for sale once under contract, do I include my assignment fee in the sales price, or just simply tell the buyer what my assignment fee? What works best for you?

2. What works best for you when estimating the repairs needed on a home? Luckily for me, I have a friend who is a construction contractor and has already agreed to do estimates for me if and when I need them, and I can settle up with him once I sell the property. However, I am curious to see what other wholesalers do.

3. One of the main things I have not found yet, but currently working towards is finding an investor friendly title company. What questions should I ask them, or how should I approach them to determine if they would be good to do business with?

4. Regarding making an earnest deposit on a property I am wholesaling, I have read and heard a few wholesalers that say they always do this, and I have heard some say that they never do an earnest deposit. Can anyone confirm which is it? For the ones that I have heard that do an earnest deposit, they say they do between $1 to $100 and never more than that. However, what sense would it make to do a $1 deposit at a title/escrow company?

5. When it comes time to go to escrow once I have an end buyer, who opens up the title/escrow account? Is it me, or the end buyer? Also, what cost is involved to open it, or is everything paid at the end?

6. Just about every wholesaler that I have been reading, have all stated that they make their end buyers put up a non refundable earnest deposit when buying a property from them. Now, this does make sense, and not a bad idea, to ensure the buyer won't back out, and if he does, you get to keep the earnest deposit. However, the question is, what is the normal amount to request, or just it depend?

I believe that is all. I do apologize for the MILLION questions, but I didn't want to flood the forum with multiple threads. Again, thanks to anyone in advance who can shed some light onto all of this for me!

[Ryan Webber]

Originally posted by Tom Jones:

1. I understand how to determine what to offer a potential seller for their property (ARV x X% - repair) - your wholesale fee. Now obviously the figure I come up with after computing the (ARV x X% - repair) is what I offer to the seller. However, what I would like to know, is when I put the property up for sale once under contract, do I include my assignment fee in the sales price, or just simply tell the buyer what my assignment fee? What works best for you?

Advertize to your buyers the total price including your fee. If you separate your fee (especially as a newbie) you just gave your buyer a target to negotiate. Its like painting a big bulls-eye on your forehead. I've only seen one wholesaler that openly advertized their assignment fee. It worked for her but she was very experienced and well established with her buyers.

Originally posted by Tom Jones:

2. What works best for you when estimating the repairs needed on a home? Luckily for me, I have a friend who is a construction contractor and has already agreed to do estimates for me if and when I need them, and I can settle up with him once I sell the property. However, I am curious to see what other wholesalers do.

As for me personally, I used to do contracting and learned how to bid jobs. As a new wholesaler learning how to ballpark estimate repairs is essential to knowing if its a good deal or not. If you don't know how to figure repair estimates then you need to learn. It doesn't have to be exact, but you definitely need to learn to ballpark it. Your contractor buddy is going to get real sick of making up bids on 100 houses for you to only buy one. You need to pay close attention to his bids and start to figure it out yourself.

Originally posted by Tom Jones:

3. One of the main things I have not found yet, but currently working towards is finding an investor friendly title company. What questions should I ask them, or how should I approach them to determine if they would be good to do business with?

As David shared, ask them if they will do double closings. That will give you your best indicator. Assignments aren't a big deal for a title company, but double closings are a different story. You are looking for a title agent that already understands what one is and knows the ins and outs of them. Now understand that they may be investor friendly and still suck. You need to find one that is good at what they do and is open to doing double closings.

Originally posted by Tom Jones:

4. Regarding making an earnest deposit on a property I am wholesaling, I have read and heard a few wholesalers that say they always do this, and I have heard some say that they never do an earnest deposit. Can anyone confirm which is it? For the ones that I have heard that do an earnest deposit, they say they do between $1 to $100 and never more than that. However, what sense would it make to do a $1 deposit at a title/escrow company?

I give $0 earnest money unless I need to give some to make the deal work (as with listed properties).

The people that think they must give earnest money quote the need for "consideration" to make a contract valid, but "consideration" does not have to be money. A "promise" to buy a property has been determined to be "consideration" enough to make a contract valid. Each state could be different, but I haven't seen one that is, but you should always check legal questions with a QUALIFIED attorney in YOUR state, which I am neither.

If you decide to give earnest money then set up your contract to deposit it AFTER your contingency period is up, and make it a small amount ($100 or less).

Originally posted by Tom Jones:

5. When it comes time to go to escrow once I have an end buyer, who opens up the title/escrow account? Is it me, or the end buyer? Also, what cost is involved to open it, or is everything paid at the end?

I would recommend that you do. Its your baby. Its your paycheck. Babysit the thing until you get paid. There is not normally an upfront cost to open up title/escrow. Normally costs for all this are paid at closing.

Originally posted by Tom Jones:

6. Just about every wholesaler that I have been reading, have all stated that they make their end buyers put up a non refundable earnest deposit when buying a property from them. Now, this does make sense, and not a bad idea, to ensure the buyer won't back out, and if he does, you get to keep the earnest deposit. However, the question is, what is the normal amount to request, or just it depend?

I always do $1,000, which is pretty common. Now I normally deal with houses under $50,000 ARV. I think I would lean more towards 1% of ARV if I dealt with houses in the $100K+ range more often.

My experience is that many cash buyers will NOT want to give you earnest money. They are natural negotiators, and many of them would prefer to give you nothing if you will accept it. Just set it up as a requirement of your business, and communicate it like that to them. If you get a recurring buyer that you trust then maybe you can slide on it, but it'll only take you getting burned by your buyer on the day of closing one time and then you will ALWAYS require non-refundable earnest money.

Originally posted by Tom Jones:

I forgot, one last question.

What happens if the end buyer, seller, or I, or all 3 are unable to make it to the closing table for any reason at all. How does the closing happen then? I have heard different versions about this, and would like to make it clear, so if I am asked, I can answer.

If your question is in reference to an unwilling party, like a Seller or Buyer getting cold feet then:

If the Seller won't sell, you pressure him with legal repercussions. If they still won't then you have to make a judgment call about the risks/rewards with moving forward legally (consult an attorney). Normally you just move on.

If you don't show up, then you are an idiot. Unless of course you are doing an assignment, in which you don't need to show up (other than maybe to pick up your check).

If your Buyer won't or can't close then you keep his earnest money and either back out of the contract with the Seller using your contingency or you sell the house again to someone else.

Other than you being an idiot, you really should have a heads up on the other two before the day of closing. If you get blindsided on the day of closing by an unwilling Seller or Buyer then you probably weren't babysitting the deal well enough.

Now if your question was referring to someone not actually being ABLE to get to the closing table (like an out of town or imprisoned seller) then documents are normally emailed/mailed to them, executed and notarized (they do have notaries in jail), and then over-nighted back.