Need sign the contract?

Question

Hey everyone!

Alright so I have been building my list of buyers for awhile and the other day while driving through my neighborhood I spot a fire damaged home with a for sale by owner sign in the yard. I call the guy ask a few questions and check out the house.  I make a call to an investor who buys fire damaged homes and asks if he is interested. Of course he says yes.

Now the problem is, I don't know how to "tie up" the property. I haven't told the investor the address or phone number of the guy just so I don't get scammed.  I

I want to wholesale this house but I'm not sure what contracts I need to have.

Do I sign a contract with my name on it but with clauses that are in my favor?

How do I prepare the purchase agreements?

I'm totally lost!

Ryan Webber · Answer

Well, I personally am biased towards wholesaling.  $800 is a bone compared to the meat you can get with just signing a couple contracts.  Birddog contracts are not legally enforceable either, since they violate most states real estate licensing laws.  That is unless you are a licensed real estate agent.

Ryan Webber · Answer

You don't need a license for anything you have an equitable interest in (i.e. a contractual interest or actual title).  You need a license to buy, sell, list, or lease a property that you are not in contract for or in title with.  There are exceptions usually for doing it for family members and if you are an employee of the person with equitable title.

If you are committing loan fraud, you are going to jail, license or not.   :D

Account Closed · Answer

This last one--the buyer adds that? Interesting.
What are some other contingencies?

Tom McGiveron · Answer

jlperdue,

being up front and honest is the best policy.

how are things working out for you?

Jack Perdue · Answer

So. noobdog and Ryan, what contingencies do you use in writing a contract with a motivated seller? Ryan you mentioned some. You have to have something in there that at least will allow you to assign the contract, right? To be honest with the seller, don't you have to mention that you want to assign the contract or you simply don't mention that at all? Would that likely spoil the deal?

Ryan Webber · Answer

oft, I'm guessing your joking.  Maybe not, either way the last one was my feeble attempt at disclosure humor.

Tom McGiveron · Answer

those contingencies are red flags for a good attorney -

what i mean by this is if a seller brings a contract to his/her attorney - they'll see those contingencies and then won't sign the contract.  most sellers don't want their property "tied up" while you try and "find a buyer".

wholesalers who are reputable and good at what they do - market their services like any other and have a track record (reputable).

there's more to wholesaling than what most people talk about when they use the term "wholesaling".

you can't expect to go into a persons home, fill a contract with these contingencies, brushing over all of them - or even going over each one with great detail, and expect to have a seller agree (or a sellers attorney) to a contract to sell their home to someone who

has no reputation in the business.

has no buyers list.

doesn't understand exactly what it is you want to do.

the problem with wholesaling is there are many people out there who take advantage of sellers.

in order for wholesaling to work, it must be a win win situation for all.

now, the thing with wholesaling is you MUST buy below market.   there are MANY ways to find properites under market value - part of this is marketing.  the wholesaler must market his/her service as "serving a need" -

DO YOU NEED TO SELL YOUR HOME...etc.

part of rei is convincing the average person to think something is a good deal.  in order to be successful at wholesaling, you can't be a scumbag.  you've got to be a salesman who can sell his business and do it ethically and efficiently.  the business of wholesaling is being able to MOVE PROPERTIES FAST.  if i'm a seller and i "need" to sell, whether you helped create that mentality in my mind or i did so on my own, you, the wholesaler, MUST be able to sell my property.

you're "helping" sellers in bad spots.  you're also buying properties in many different ways, pre foreclosures, foreclosures, tax lien sales, etc.  if you don't have a buyers list, reputation (or a good starting network) and overall good intentions, then you will be laughed at by most sellers (with common sense and a good attorney) as you should be.

sellers want to sell their homes, they don't want to play around with little kids with stupid contingencies "trying to learn" the business of real estate.

ryan is right about the contingencies, even an experienced wholesaler will have them in a contract, but they will be explained and probably 99.9% of the time, totally not used.  they're there to protect the buyer AND THE SELLER - for instance, those 30 days, protect the wholesaler AND the seller.

Ryan Webber · Answer

I actually very rarely use contingencies when buying a property.  I think I've actually only put a contingency into a contract twice in the last year.  It is part of my sales pitch though.  I will buy your property at this ridiculous low price, but you can count on the money if you say yes.

Now starting out I would recommend using at least one contingency just to protect yourself, and I wouldn't worry too much about a seller's attorney.  Motivated sellers don't have attorneys.  I've actually only had one or two sellers actually want their attorney to look over the contract.  
That's why I use a simple and short contract.

I also try to sell houses at prices that I don't have to convince anyone its a good deal.  I sell them cheaper than any realtor sells them for on the MLS and cheaper than someone can find in the newspaper or cheap classifieds, and most importantly cheaper than other wholesalers.  No doubt there is salesmanship involved, but the key to my business is not convincing someone the house is a good deal.  The key is buying at such a discount that even a moron will see that they are a good deal.

Some of my local competition "sell" newbies quite a bit that a property is a "good" deal when it is far from it.  The new investor ends up getting burned and normally gets out of the business after a couple deals.  Its sad to see, but the wholesaler just keeps finding more newbies to sell to.

Chanel Realegeno · Answer

So what if you formed an LLC, do you sign the contract under your LLC's name to protect yourself?

N/A N/A · Answer

can you please elaborate when you say "I would recommend having a contingency in there for 30 days or so with your seller"
just an example? pls Thanks.